The justice gap in the United States is striking. It ranks 103rd out of 126 countries in accessibility and affordability of civil legal services, according to a World Justice Project survey. More than 80% of those in poverty, as well as a majority of middle-income Americans, receive inadequate civil legal assistance, the nonprofit Legal Services Corporation found.

The problem goes beyond resources⁠—it is systemic. Most people facing legal problems do not know whether they need lawyers, much less how to find them. According to a 2014 American Bar Association report, less than 20% of people who recognized that they had a legal need even considered consulting an attorney. People far more frequently engaged in self-help (46%), sought help from family and friends (16%) or simply disregarded the matter and did nothing (16%). Most people reported that they don't think of their justice problems as legal problems that may have legal solutions.

Incredibly, despite these unmet legal needs, attorneys continue to spend the vast majority of their time on matters other than those that directly meet their clients' needs. The 2019 Legal Trends Report conducted by the legal tech startup Clio found that the average lawyer spends only two and a half hours a day on billable work. Attorney unemployment and underemployment also remain significant.

This collision of the justice gap and the underutilization of attorney time screams for efficient solutions. Unfortunately, the opportunity to innovate in the legal profession continues to be stifled by archaic interpretations of the ethics rules that have forced potentially novel advancements into path-dependent and suboptimal structures. At the heart of this inefficiency is ABA Model Rule 5.4(a), which states that, apart from a few specific exceptions, "a lawyer or law firm shall not share legal fees with a nonlawyer." Other ethics rules keeping innovations at bay include those relating to the unauthorized practice of law and limited scope representation.

The paradigm contemplated by the relaxation of these rules is loosely referred to as alternative business structures, or ABS, and would allow for, among other possible structures, legal companies backed by outside or nonlawyer capital to deliver legal solutions, perhaps increasingly utilizing technological solutions and nonlawyer employees or owners to help do so.

These rules have been repeatedly challenged by legal innovators. We do not mean to suggest that at heart these rules do not have a valid basis⁠—individuals facing legal problems are often vulnerable and in an unequal position of power vis-à-vis their attorneys. Increased profits must not come at the expense of faithfully serving clients and ABS must not impede the duty attorneys have to their clients. But in recent years, these rules have more often than not been met with formalistic interpretations disconnected from their underlying purposes. For example, in New Jersey, a 2017 ethics opinion prohibited attorneys from signing up with a legal referral service called Avvo because lawyers had to pay a portion of their client fees to the company in exchange for referrals⁠—constituting a technically impermissible fee-sharing arrangement. Per the opinion, "sharing fees with a nonlawyer is prohibited, without qualification." Incredibly, the opinion also found that Avvo did not influence attorney judgment or impede their independence⁠—the very rationales behind the prohibition of fee splitting.

Despite being essentially a referral service and not directly engaged in the practice of law (a kind of ABS lite), Avvo has run into staunch resistance in multiple jurisdictions. It serves as an example that highlights the very significant challenges to even moderate forms of legal innovation. Although there is an increasing and obvious need for work optimization, attorney referral services, directories or search engines prove extremely difficult to establish in a profitable or sustainable matter. As many attorneys know, it can be very challenging to find referrals outside your respective field (how often have you had to tell a friend with a non-Big Law issue that, even as an attorney, you have no idea who they should go to for help?). The Clio survey supports this understanding; the most popular method for potential clients to find a lawyer is a referral from a family or friend. For those searching for a lawyer on their own, most people find one through a search engine or the lawyer's website.

Though referral services have been on the front lines of legal innovation, it is clear that they alone are not the solution to the justice gap. Significant innovation is needed, which has led to a push for a wholesale change to Rule 5.4 that would allow for some type of nonlawyer ownership or outside investment in law firms. At first glance, this idea might seem radical to our fellow attorneys, but a further look at how outside capital has led to innovation and enhanced efficiency in other professional spheres demonstrates much potential. One can complain about bloated hospital bureaucracies, but for anyone who has visited one it is hard to argue that urgent care centers like MedExpress or CityMD and concierge medical services like One Medical have not entirely changed the delivery of routine medical services. For all of their criticisms and controversies, large tax firms like H&R Block and TurboTax have made affordable tax help accessible to the masses. In addition, companies like Betterment and Wealthfront have democratized wealth management services.

Justice Neil Gorsuch observed in his 2019 book, "A Republic, If You Can Keep It," that "market participants with greater access to capital can increase output and lower price," noting optometry, dentistry and tax preparation as examples that have grown less expensive and more ubiquitous thanks to the infusion of capital. "With a restricted capital base (limited to equity and debt of individual partners)," Gorsuch said, "the output of legal services is restricted and the price raised above competitive levels."

An abundance of studies and opinions point in the same direction⁠—a reform of Model Rule 5.4⁠—and that has led to some action.

The California Access Through Innovation of Legal Services task force made sweeping proposals last summer to permit changes to rules governing the practice of law. One proposal would essentially eliminate the fee-sharing prohibition provided a client gives written, informed consent. As the task force explained, "Innovation requires changes in perception, new knowledge and often unexpected occurrences. It requires collaboration, multi-disciplinary participation and funding/investment. … A major shift in the legal field is necessary to disrupt the continuing access to justice crisis."

This and the task force's other proposals have been controversial. More than 2,800 comments have been received and the group had to push back its deadline to submit its report to the state bar. An early analysis of the comments showed more than 90% of respondents opposed the proposals.

California is not the only jurisdiction considering such changes; Utah has already implemented experimentations in a regulatory sandbox. Arizona, Illinois and others are also considering proposals. The ABA's Center for Innovation has also encouraged regulatory innovation, including a reexamination of Rule 5.4.

As of today, many of the changes have been too minor to effectuate actual progress. The Center for Innovation's 2019 survey, for example, noted that despite a high number of jurisdictions with some changes to the ethical or regulatory rules, "few jurisdictions have adopted regulatory innovations that have the potential to drive meaningful changes to how legal services are delivered."

Although some models of change in this area might be radical, others do promise more incremental change. For example, many of the issues faced by individuals are not wholly legal issues, and while a lawyer may play a part in resolving some of these issues, it is not necessarily clear that the lawyer is always the best, or most cost-effective, problem-solver. Permitting lawyers and other professionals or businesspeople to own multidisciplinary practices together would enhance the delivery of legal services. It seems only natural that client value would be enhanced by an architect being in partnership at a firm specializing in real estate and development, or a social worker at a family law firm.

There are some legitimate fears that allowing nonlawyer ownership of law firms will herald a takeover of the profession by the Big Four accounting firms or transform all attorneys into cogs of the gig economy. Large corporate legal departments have already exerted such cost pressure on law firms that alternative legal service providers have flourished despite concerns about ethical lines. In 2008, the ABA issued an ethics opinion that essentially allows ALSPs to skirt prohibitions on unauthorized practice of law and fee sharing by requiring supervision by in-house lawyers or outside counsel. This finding, and the rise of non-law-firm-owned ALSPs, has already allowed a type of nonlawyer ownership and innovation that clients find valuable, but does so at the expense of traditional law firms or legal practices that cannot engage in such innovation and are falling behind every day in the battle for clients.

This moment is not the first time that changes to law firm ownership and fee splitting have been considered. In the late 1990s, with the rise of the then-Big Five accounting firms taking aim at the legal industry, the ABA along with 44 states formed the Commission on Multidisciplinary Practice. The commission recommended permitting multidisciplinary practices, but the ABA House of Delegates eventually rejected two different proposals that would have permitted such practices. The current effort can be traced back at least a decade to the beginning of the ABA's Ethics 20/20 project and its working group on ABS. Each effort and proposal⁠—like California's pending proposals⁠—has been met with resistance from the legal community. In each case, those supporting the proposals focus on the obvious shortfalls in the delivery of legal services and the promise in ABS; meanwhile, those same proposals are often resisted by practicing attorneys seeking to maintain the status quo.

In our view, it is time to seriously engage with the possibility of reforming Model Rule 5.4 and opening up the practice of law to multidisciplinary practices and ABS. We understand and agree that the legal profession must continue to ensure that attorneys adhere to their ethical obligations and that ABS and nonlawyer ownership do not compromise the paramount duty to the client. However, we are also aware that the practice of law already has a strong profit motive, and to think that the introduction of nonlawyer ownership will automatically make that front-and-center at the expense of client service seems to ignore the balance attorneys and other client service providers successfully strike between profit and performance. In addition, the same technology that promises a more efficient delivery of legal services may also help to police wrongdoing. For example, if a legal tech innovator or attorney delivering services through a new model is subject to online complaints or complaints that they can be held accountable to, then perhaps it may be even more efficient than depending on a client to send their complaint to the bar.

There is, of course, no guarantee that ABS will succeed. One need look no further than news surrounding Atrium, a pioneering, venture-backed law firm leveraging technology to meet the needs of startups. Atrium abruptly laid off most of its lawyers and legal staff in recent weeks, but this failure proves a point⁠: Legal innovation is difficult and solving the justice gap will require intensive investment and sustained effort. (Atrium itself operated in an ethical gray area by separating its law firm and legal tech into separate structures.) Unnecessarily compounding significant business risks that legal innovators must take by not providing clear ethical guidance serves no one. The profession as a whole can and should do better and recognize now is a time for forward-thinking innovation.

The views expressed here are personal to the authors and do not represent the opinions of their employers.