California Bar Task Force Sketches Out Radical Future, Also Tech Regulation

The State Bar of California’s Task Force On Access Through Innovation of Legal Services (ATILS) is maintaining its focus on radical proposals for deregulation, but also potentially on clamping down on what legal tech companies and those that use their software can do without regulation.

The next step in ATILS’ journey will be a meeting on 6 November to ‘discuss and possibly act’ upon a series of recommendations following an open consultation process with market stakeholders this summer.

Some of the more significant recommendations they will be exploring in November include:

  • ‘Nonlawyers will be authorized to provide specified legal advice and services as an exemption to UPL (unauthorised practice of law) with appropriate regulation.’
  • ‘Entities that provide legal or law-related services can be composed of lawyers, nonlawyers or a combination of the two, however, regulation would be required and may differ depending on the structure of the entity.’
  • ‘State-certified/registered/approved entities using technology-driven legal services delivery systems should not be limited or restrained by any concept or definition of “artificial intelligence.” Instead, regulation should be limited to technologies that perform the analytical functions of an attorney.’

If California did eventually approve the above it would have some very important implications. For starters, multi-disciplinary partnerships would, in theory, be able to start operating legal services in the State. This is because entities could ‘be composed of lawyers, nonlawyers or a combination of the two’, or at least that’s AL’s reading of the text.

And the Big Four? On paper it seems to allow them too – in theory. But they still have the Sarbanes-Oxley Act to contend with, so any changes in the State rules may be moot. We’ll have to see.

Naturally, the exact terms are very far from being set out, and getting the support of the Bar’s members is even more distant. Not to mention the inevitable legal challenges that will appear if it gets that far.

But, it is a radical step forward, at least in planning.

The other radical aspect – and one that this site has highlighted previously as a risk to the legal tech sector – is the point about regulating software ‘that performs the analytical functions of an attorney’. 

This is very dangerous ground and needs to be handled with a delicate touch, otherwise California could end up creating a worse environment for legal tech companies than elsewhere in the US. As we have seen recently in Germany with the attack on document automation/contract self-service systems, deciding what tech is allowed to do is a can of worms.

The problem with trying to define and then regulate tech that ‘performs the analytical functions’ of a lawyer is that this is an incredibly subjective area.

There is no definition as such that this site knows of that anyone has ever stood up in terms of actual law before. This then means someone will have to define it, and in doing so locks a lot of businesses into a new set of regulations, and presumably penalties if not compliant. 

For example, let’s go to the German example, where lawyers objected to a tech company, in this case Wolters Kluwer, allowing people to make documents themselves on the basis that legal reasoning, in the shape of checking responses, is needed to make a secure legal document. The argument is that people need a lawyer to make sure they are putting the right facts into the right parts of the document.

So, in California would the above thinking also one day mean a Q&A interface that was guiding a person through a document completion task was ‘analysing’ like a lawyer? The software is ‘reading’ responses, deciding if they can be inserted into certain parts of the document, and then asking further questions. Is that ‘analysing like a lawyer’? Could be, if you have a very wide definition of the terms.

Or, what about an AI doc review system that uses trained algorithms to sift through text and in effect ‘makes decisions’ based on statistical probability, about what is a legally risky clause in a document? Is that analysing like a lawyer? Maybe.

Or, what about litigation prediction systems, which look for patterns in judges’ rulings? Is that analysing like a lawyer? Maybe it is.

And, would DoNotPay, for example, which guides people via software though the small claims system, also be considered to be ‘analysing like a lawyer’? Again, could be, if you have a very wide definition of the terms. Many would say it’s not. But then….well, get a room full of lawyers together and who knows where we would end up.

As said, it’s a can of worms.

The idea of regulating software that is literally telling a member of the public who has no lawyer to go and do X or Y in a legal matter seems like a sensible thing to consider. But, how this is all worded is going to be a very tricky job if it ever came to pass.

So, there you go. Plenty to consider. It would be tragic if one of the most innovation-focused places on the planet created regulation that hemmed in legal tech to the detriment of the people it’s meant to serve.

Below are some key parts of the 6 November agenda.

B. DISCUSSION AND POSSIBLE ACTION ON RECOMMENDATIONS ISSUED FOR PUBLIC COMMENT CONCERNING EXCEPTIONS TO THE UNAUTHORIZED PRACTICE OF LAW, INCLUDING CONSIDERATION OF CONCEPTS FOR REGULATION

1. Recommendation 1.0: The Task Force does not recommend defining the practice of law.
2. Recommendation 1.1: The models being proposed would include individuals and entities working for profit and would not be limited to not for profits.
3. Recommendation 2.0: Nonlawyers will be authorized to provide specified legal advice and services as an exemption to UPL with appropriate regulation.
4. Recommendation 2.1: Entities that provide legal or law-related services can be composed of lawyers, nonlawyers or a combination of the two, however, regulation would be required and may differ depending on the structure of the entity.
5. Recommendation 2.2: Add an exception to the prohibition against the unauthorized practice of law permitting State-certified/registered/approved entities to use technology-driven legal services delivery systems to engage in authorized practice of law activities.
6. Recommendation 2.3: State-certified/registered/approved entities using technology-driven legal services delivery systems should not be limited or restrained by any concept or definition of “artificial intelligence.” Instead, regulation should be limited to technologies that perform the analytical functions of an attorney.
7. Recommendation 2.4: The Regulator of State-certified/registered/approved entities using technology-driven legal services delivery systems must establish adequate ethical standards that regulate both the provider and the technology itself.
8. Recommendation 2.5: Client communications with technology-driven legal services delivery systems that engage in authorized practice of law activities should receive equivalent protections afforded by the attorney-client privilege and a lawyer’s ethical duty of confidentiality.

C. DISCUSSION AND POSSIBLE ACTION ON RECOMMENDATIONS ISSUED FOR PUBLIC COMMENT CONCERNING FEE SHARING AND NON-LAWYER OWNERSHIP, INCLUDING CONSIDERATION OF CONCEPTS FOR REGULATION

1. Recommendation 3.1: Adoption of Proposed Rule 5.4 [Alternative 1]
2. Recommendation 3.2: Adoption of Proposed Rule 5.4 [Alternative 2]
3. Recommendation 3.3: Adoption of a version of ABA Model Rule 5.7 that fosters investment in, and development of, technology-driven delivery systems including associations with nonlawyers and nonlawyer entities

D. DISCUSSION AND POSSIBLE ACTION ON GENERAL RECOMMENDATIONS ISSUED FOR PUBLIC COMMENT AND OTHER CONCEPTS RAISED BY THE PUBLIC COMMENTS RECEIVED AND THE TESTIMONY FROM THE AUGUST 10, 2019 PUBLIC HEARING

1. Recommendation 1.2: Lawyers in traditional practice and law firms may perform legal and law-related services under the current regulatory framework but should strive to expand access to justice through innovation with the use of technology and modifications in relationships with nonlawyers.
2. Recommendation 1.3: The implementation body shall: (1) identify, develop, and/or commission objective and diverse methods, metrics, and empirical data sources to assess the impact of the ATILS reforms on the delivery of legal services, including access to justice; and (2) establish reporting requirements for ongoing monitoring and analysis.
3. Recommendation 2.6: The regulatory process contemplated by Recommendation 2.2 should be funded by application and renewal fees. The fee structure may be scaled based on multiple factors.
4. Recommendation 3.0: Adoption of a new Comment [1] to rule 1.1 “Competence” stating that the duty of competence includes a duty to keep abreast of the changes in the law and its practice, including the benefits and risks associated with relevant technology
5. Recommendation 3.4: Adoption of revised California Rules of Professional Conduct 7.1–7.5 to improve communication regarding availability of legal services using technology in consideration of: (1) the versions of Model Rules 7.1–7.3 adopted by the ABA in 2018; (2) the 2015 and 2016 Association of Professional Responsibility Lawyers reports on advertising rules; and (3) advertising rules adopted in other jurisdictions.
6. Comments received on concepts not considered by the Task Force.

Committee Members: Andrew Arruda, Simon Boehme, Tara Burd, Hon. Wendy Chang, Abhijeet Chavan, Jean Clauson, Johann Drolshagen, Margie Estrada, Lori Gonzalez, Bridget Gramme, Andrew Kucera, Kevin Mohr, Heather Morse, Joyce Raby, Allen Rodriguez, Toby Rothschild, Daniel Rubins, Mark Tuft, Angelina Valverde, Joshua Walker.
[Photo: by Richard Tromans, bronze statue, Getty Center, Los Angeles, California.]

2 Comments

  1. It is in lawyers’ interests to make sure tech is regulated in their favour.
    To non lawyers with an interest in the legal tech space: seriously how hard is it to get yourself a law degree and otherwise qualify as a lawyer?
    Let’s not make the same mistake with other industries which tech has deciminated,

  2. Not sure I’m clear on the point being made by Angryvince, but, just to address his question with regard to getting a law degree and qualifying, it’s so easy to get a degree in California that the State Bar has made it more difficult (supposedly) to qualify there (which, at least, is supported by statistics as CA has a very low pass rate, though one might argue that is more to do with the caliber of education being offered there and a result of the former part of this statement – that it’s easier in CA to get a law degree). Regardless, there is little risk of CA regulating legaltech out of existence in the state given how adversely it would impact an otherwise tech-heavy economy in certain areas.

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