by Michael Djavaherian

On January 1, 2021, changes that could drastically impact the practice of law came into effect in Arizona. First, Arizona now allows lawyers to share fees with non-lawyers. However, to do so, lawyers must create a firm with an Alternative Business Structure (“ABS”) and those will be heavily regulated and go through a “rigorous application process”. Second, Arizona has redesigned how paralegals can practice – and created two different types of paralegals, each with different licensing requirements and authorized types of legal assistance.

What having an ABS means is that lawyers can team up with non-lawyers who invest in or work with a law firm to share in the law firm’s profits. Supporters of the proposal argued that eliminating the prohibition on non-lawyer investment in law firms would ” likely pave the way for capital supporting the invention of new technology… Permitting alternative business structures also would strengthen access to justice by promoting free market competition …”

A law firm in Arizona can now be run like any other business. It can hire accountants, managers, IT specialists, perhaps even medical staff, and those employees can have shares in the company or take part in the profits generated. A firm, like any other company, can seek investors for business capital, and those investors will also be allowed to own an interest in the firm and partake in the fees generated.

Arizona has also created two new categories of paralegals. One type, called a Legal Paraprofessional, or LP, can practice as affiliate members of the state bar, subject to the same rules of ethics and discipline as lawyers. LPs will be required to meet specific education and experience requirements and pass an exam. They may practice in administrative law, family law, debt collection, and landlord-tenant disputes, with limited jurisdiction in civil and criminal matters, and may appear in court.  The second type is the legal document preparer, or LDP. LDPs can assist clients with preparing routine and relatively uncomplicated legal documents, but may not appear in court or represent clients.

While these reforms are only operative in Arizona, they are the leading edge of a movement to modernize the business of law and also to improve access to justice. It is likely that the types of changes made by Arizona will spread to other states. Some states, such as Utah, have already enacted similar measures, using the “sandbox” approach, which allows alternative approaches to traditional legal structures to operate temporarily under the close watch of the Utah Supreme Court. California, too, is in the process of approving a number of reforms designed to increase access to justice. So, whether you are an Arizona attorney or not, it behooves you to be aware of these changes, and be ready for them to arrive in your state.  For the first time in what seems like centuries, the legal profession is rethinking old ways and outdated rules.

Technology companies like XIRA will be at the forefront of these changes as they continue. XIRA is already working on an update to allow paralegals to be listed on XIRA. In states like California, they would be listed as available to provide services for lawyers. XIRA’s technology will allow lawyers to create virtual law firms, hiring paralegals or associates on an ad hoc basis for specific matters. In Arizona, paralegals would be able to offer their services to the public in connection with the kinds of legal assistance they are now authorized to provide.  Technology and new ways of doing business improve efficiency, reduce costs to consumers, and at the same time, improve the lives of lawyers. It’s a win/win/win, and we at XIRA are proud to be a part of it.