As states play with reform, Legal Tech Cos. fills the gaps in justice

By Sarah Martinson | July 8, 2022, 3:30 p.m. EDT

More than 100 legal technology companies have formed over the past 10 years to provide legal assistance to millions of Americans who cannot afford an attorney, helping to close a gap in access justice, while fewer than a handful of states have taken steps to develop the practice of law.

According to the Legal Services Corporation’s 2022 Justice Gap Study, low-income Americans do not receive adequate legal help for 92% of their significant civil legal issues, and the cost of legal aid is a barrier.

One way to reduce the cost of legal aid would be to open up the practice of law to non-lawyers. However, according to the American Bar Association Center for Innovation’s Legal Innovation Regulation Survey, Utah and Minnesota are the only states that allow non-lawyers to provide limited legal advice through regulatory reform programs.

David Engstrom, a professor at Stanford Law School and a member of the California Bar’s “Closing the Justice Gap Working Group,” told Law360 Pulse in a recent interview that state bars and regulators are slow to implement regulatory reform. due to inertia and protectionism.

David Engstrom

Stanford Law School

“Welcome new suppliers to the [legal] threatens the bottom line…of lawyers,” Engstrom said.

Utah became a pioneer in legal innovation during the COVID-19 pandemic in August 2020 when it launched a regulatory sandbox to expand the practice of law in the state. The sandbox allows entities to practice law that traditionally would not be permitted under state legal rules. These include law firms owned by non-lawyers, companies employing lawyers to provide legal advice to consumers, and technology platforms offering legal advice.

Meanwhile, Minnesota launched a statewide, two-year pilot program in March 2021 that allows licensed legal paraprofessionals to represent and advise clients in certain housing and family law matters under supervision of a state-licensed attorney.

In the Southwest, Arizona took a different approach by formally changing its legal rules to allow alternative business structures, such as nonlawyer-owned law firms, to practice in the state. Utah allows these entities to participate in its regulatory sandbox.

According to the Legal Innovation Regulatory Survey, states considering similar regulatory reform to close the access to justice gap in the United States include California, Washington, Oregon, Nevada, New Mexico, Indiana, Connecticut and New York.

Engstrom said the legal industry is at a pivotal time, with states considering ways to open up space for innovation and technology that can deliver legal services.

“The question is, will all of this come together in time and soon enough to help alleviate and fix some of these really terrible access issues at the state level,” he said.

Many justice tech companies aren’t waiting for states to implement regulatory reform to close the access to justice gap in the United States, startup founders and CEOs told Law360 Pulse.

Over the past 10 years, the justice tech market has grown from a handful of startups to a booming industry, according to a 2022 report titled “Justice Tech for All: How Technology Can Ethically Disrupt the US Justice System published by Village Capital and the American Family Insurance Institute for Corporate and Social Impact.

Investors have poured nearly $80 million into more than 100 early-stage justice tech startups over the past 10 years or so, according to the report.

Recognizing the growth of the justice tech sector, four justice tech startup CEOs in December founded the Justice Technology Association, the first trade association dedicated to companies using technology to bridge the access to justice gap. .

Lawyer Camila Lopez, who is co-founder and CEO of small claims court assistance provider People Clerk and founding member of JTA, said regulations in any space can prevent companies from moving forward quickly. , but it is not the case that legal regulations are preventing companies from innovating completely.

If innovation were inhibited, there would be no growth of justice technology companies.

Camille Lopez

People clerk

“If innovation was inhibited, there would be no growth of justice tech companies,” Lopez said.

Navigating existing legal regulations when trying to launch a justice tech business is tricky, however, according to startup founders and CEOs.

Often, founders of justice tech startups must limit the services they offer so as not to violate state rules against the unauthorized practice of law, they said.

Lawyer Erin Levine, founder and CEO of the online platform Hello Divorce and founding member of JTA, said she would like to hire lawyers who work for her company and offer legal advice to consumers, but this is prohibited in the most states. Hello Divorce is a member of the Utah sandbox program.

Hello Divorce offers consumers in California, Colorado, New York, Texas and Utah tiered plans with prices ranging from $99 to $3,600, according to its website. The company’s most basic plan allows consumers to use their software to get all the documents needed to file for a divorce, and consumers can pay more money to get help from an attorney.

“Lawyers who work directly with consumers don’t work for Hello Divorce…and that doesn’t seem fair to those lawyers because they don’t have the ability to get an equity stake or stock in Hello Divorce,” Levine said.

As the justice tech sector continues to grow, if states don’t enact regulatory reform themselves, they could be forced to change by startups challenging them in court, as Upsolve Inc has done. . At New York.

In January, Upsolve hit New York Attorney General Letitia James with a federal lawsuit, hard the state’s ban on free legal advice from non-lawyers is unconstitutional.

A federal court in New York Posted a preliminary injunction in May allowing Upsolve to give legal advice to low-income debtors without fear of prosecution for practicing the law without a license, ruling that the organization’s activity is speech protected by the First Amendment.

Sonja Ebron, co-founder and CEO of professional litigation platform Courtroom5 and founding member of JTA, said the Upsolve case proves states aren’t implementing regulatory reform fast enough for tech companies. legal.

“If states moved fast enough, they would have already adopted the First Amendment argument used by Upsolve,” Ebron said.

Upsolve declined to be interviewed for this story.

–Edited by Emily Kokoll.