Small Law Firms, Solo Practitioners

Why Solos & Smalls May Need Non-Lawyer Ownership To Survive

The legal landscape is changing, and it's time the profession changed with it.

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For many years, I opposed non-lawyer ownership of law firms for a variety of reasons. For starters, I never bought the argument that non-lawyer ownership is necessary to raise capital to drive innovation — which always seemed like lazy thinking by the mediocre minds. After all, plenty of law firms — most recently Justin Kan’s startup Atrium — devised creative business models to attract outside investment — to the tune of $10 milliion, in Kan’s case — while operating within the parameters of existing ethics rules. Because I didn’t view non-lawyer ownership as necessary, I feared that a dark ulterior motive lurked behind the calls for outside investment — such as the creation of corporate-owned “law shops” jeopardizing the future of independent lawyers by making them beholden to outside shareholders rather than clients.

Truth be told, putting law firms in the hands of outsiders troubles me as much as putting medical decisions in the hands of HMO’s run by bean-counters rather than doctors. But doctors have still found a way to maintain independence and I suspect that the same would hold true for lawyers if individual services are eventually provided by PriceWaterhouseCoopers or H&R Block. What scares me more, however — and what’s brought me around to outside ownership — are the loss of opportunities for solo and small firm lawyers if we don’t tear down the ethics walls that block non-lawyer ownership, at least on a small scale.

Here’s what I mean. Increasingly, law is becoming more complicated, necessitating the involvement of non-lawyers — not just as experts — but as an integral part of a legal team. For example, many large firms looking to beef up cybersecurity practices are onboarding non lawyers — such as forensics experts or former CIO’s to round out their team. Makes sense — a CIO can undertake a preventative assessment, with the firm making legal recommendations based on the findings. Or, a firm retained in the aftermath of a data breach can advise on liability with the forensic expert can figure out how to plug the holes.

These types of inter-professional partnerships aren’t limited to cybersecurity. Family law and estate cases may require the involvement of financial planners and mental health counselors; startups need CPAs and HR experts and marketing or PR. Yet unlike Biglaw, solo and small firms may not have the resources to hire these other professionals — which is the easiest way to work together on an ongoing basis. By contrast, if solos could form a partnership with other professionals, the solo wouldn’t have to pay the other professional a salary; instead, the professional could share in the profits. The lawyer and professional could also develop uniform service packages for each client and charge one flat rate instead of sending out multiple invoices.

Moreover, as tech becomes more complex, lawyers won’t be able to solve legal issues alone but, instead, will need geneticists, engineers, computer scientists and other professionals as part of the team. By eliminating rules on outside ownership and fee splitting, solo and small law firms won’t be at a disadvantage to Biglaw in delivering these hybrid services to clients. If we need to change ethics rules to make this happen, let’s just do it.

Carolyn ElefantCarolyn Elefant has been blogging about solo and small firm practice at MyShingle.comsince 2002 and operated her firm, the Law Offices of Carolyn Elefant PLLC, even longer than that. She’s also authored a bunch of books on topics like starting a law practice, social media, and 21st century lawyer representation agreements (affiliate links). If you’re really that interested in learning more about Carolyn, just Google her. The Internet never lies, right? You can contact Carolyn by email at elefant@myshingle.comor follow her on Twitter at @carolynelefant.

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