ABS is the New Crop in the Legal Industry After ALSP

“In business, organization is an absolute necessity, not an alternative.” ~ Larry Burkett

The word “alternative” is frequently used in law. There was little trade in the legal media and law schools as ‘alternative business structures’ and ‘alternative legal service providers’ gained popularity.

A study by Thomson Reuters, Georgetown Law’s Center for Ethics and the Legal Profession, Oxford University’s Said Business School, and Acritas found that revenues for ALSPs grew from $8.4 billion in 2015 to $10.7 billion in 2017. The report also states “more than one-third of companies, and more than 50 percent of law firms, report that they are currently using at least one of the top five functions typically performed by ALSPs”. 

According to a 2018 report from Altman Weil, “competition from non-traditional services providers will be a permanent trend going forward in the legal services market.”

Recently in October 2021, the Arizona Supreme Court has awarded LegalZoom an Alternative Business Structure (ABS) license. LegalZoom, a well-known online marketplace for legal and compliance solutions, has acquired regulatory approval to expand its efforts to democratise the law.

What is an ABS?

The Rule 31.1(c) - Authorized Practice of Law, of the Arizona Revised Statutes Annotated, Rules of the Supreme Court of Arizona, defines the alternative business structure (ABS) – an entity that includes nonlawyers who have an economic interest or decision-making authority as defined in ACJA 7-209 may employ, associate with, or engage a lawyer or lawyers to provide legal services to third parties only if:

(1) It employs at least one person who is an active member in good standing of the State Bar of Arizona under Rule 32 who supervises the practice of law under ER 5.3

(2) It is licensed pursuant to ACJA § 7-209

(3) Legal services are only provided by persons authorized to do so and in compliance with the Rules of Supreme Court

Further, the Canadian Legal Information Institute defines ABS as “any means through which legal services are delivered to the public, other than the traditional lawyer-owned practice that provides legal services only. 

Australia recognises “Incorporated Legal Practices” (ILP) an organisation structure, through which legal and other services may be provided. Within the ILP structure, lawyers and other service providers may practice together. The legal services provided by an ILP must not be limited to either or both:

• In-house legal services for the corporation or a related entity
• Services that need not be provided by an Australian legal practitioner are provided by an officer or employee who is not an Australian legal practitioner

Different countries are taking steps to democratise law, the ABS model is a step in the same direction and will benefit everyone, including small businesses and consumers. Some of the pros and cons of the model include:

Pros 

• ABS offers several benefits to the end-user. End-user: A person seeking legal assistance might anticipate spending less money if they choose an ABS-style business. If a customer has a broad range of requirements, they may find all the services they want under one roofing one location.
• Organisation: Choosing an ABS structure for one company might be the difference between them and your competition. Customers will enjoy the breadth of services you provide. As a result, investors will be able to participate in your growth.
• Firms: It is well known that ABS businesses may provide a wide range of services. As an all-encompassing service provider, a firm may promote itself to a broader range of customers.
• Investment and Control: Non-lawyers are not allowed in a standard business form like a professional limited liability corporation. Only lawyers may invest in a corporate law company. ABS, however, is unique. Non-lawyers may have an interest in the firm. It may enhance the working atmosphere and employee retention.

Cons

• Competitive threat: Some say ABS has too many potential downsides to utilise. However, many do not notice the disadvantages. Some worry that smaller competitors may be forced out as more ABS firms develop, leaving consumers with fewer options.
• Geographical limitation: ABS-designated businesses may have challenges expanding or providing services beyond the US. Other countries have yet to adopt ABS. It may be an issue for a consumer who desires to continue with a firm while overseas.
• Legal jobs: If a law firm becomes an ABS, there may be several downsides. Some worry that if non-lawyers run a firm, non-lawyers will undertake the legal job. It is already happening in several areas of law. Non-lawyers, for example, do a significant percentage of the work involved in property transfers and assignments. But ABS businesses kept certain legal functions in-house.

Focus on the end-client

ABS, apart from providing the robust processes catering to the needs of client of all sizes, has democratised law, benefiting everyone. Tools providing lifecycle management, lifecycle management, electronic-discovery, legal marketplace, IP management, matter management, e-billing, knowledge management etc. are changing the service delivery landscape. ABS despite its geographical restraint, it is still gaining recognition worldwide, picking up momentum and is here to stay.