Firm Ownership Debate Rages Amid ABA Innovation Leader Change-Up

The new leaders of the American Bar Association’s innovation unit are outspoken critics of moves to loosen law firm ownership rules, a hot-button issue for the legal industry.

New York lawyer Stephen Younger and Illinois attorney John Thies in August took the top two roles at ABA’s Center for Innovation. The pair support rules banning non-lawyers from owning firms, which proponents say would reduce the cost of legal services and spur much-needed technological advancement.

“The ABA has been historically hostile to innovation as a concept, and that’s hamstrung the center from fulfilling its mission,” said Tom Gordon, executive director of the consumer legal group Responsive Law, which has argued for ownership rule changes. The selection of Younger and Thies is “outrageous but sadly not surprising,” he said.

Younger, a senior counsel with Nixon Peabody in New York, declined to comment directly on that criticism. He has previously argued that opening up law firms to outside investors would threaten the independent judgment crucial to the practice of law.

The ABA has long opposed non-lawyer ownership, even as moves in Arizona and Utah to scrap or loosen the rules were cheered by access to justice and legal innovation advocates. Although the center’s previous leaders backed overhauling the rules, the ABA’s House of Delegates reaffirmed its opposition in a resolution last year.

“ABA policy couldn’t be clearer,” Thies, a partner at Webber & Thies in Champaign-Urbana, Ill, said in an interview. “But that doesn’t put a damper on our interest in innovation.” Thies said he was speaking in his personal capacity, not on behalf of the center or the ABA.

Younger said in a statement that the center will play a leading role in an ABA initiative to tackle the top technological issue currently facing the legal industry: the rise of artificial intelligence.

‘Innovation’ in Eye of Beholder

The innovation center was established in 2016 in to create “more accessible, efficient, and effective legal services,” according to its website.

For access to justice advocates, that means making legal services cheaper. They argue that giving tech companies and other outsiders direct stakes in legal operations would lower the costs for those in need of legal services.

Most states have adopted a decades-old ABA model rule that forbids fee-sharing between lawyers and non-lawyers, prohibiting the latter from co-owning legal operations. That shields lawyers and law firms from outside competition from the Big Four accountancies and others.

Supporters say opening up the system—inviting new players to the space and allowing firms to turn to private equity and litigation funders for cash—would elevate profit motives, threaten lawyer independence, and put consumers at risk.

Younger, a former president of the New York State Bar Association, has written extensively on his opposition to non-lawyer ownership. He and Thies both say their stance does not mean that they are against innovation.

Thies said he has particular interest in innovations that help stem the access to justice gap. He touted the success of several access-related programs, including a rural practice initiative in Illinois, where he was the state’s bar association leader. The program seeks to alleviate hardships for legal consumers in “legal deserts” who have little practical access to lawyers.

Shrinking Budget

The center has set up a variety of programs to promote or support innovation over the last several years, such as an initiative to provide free technology products to legal aid offices serving low-income Americans.

A committee housed within the center also has sponsored extensive surveys on the use of legal incubators, designed to help lawyers develop and launch law practices while expanding access to underserved populations.

Yet critics have suggested that the center has yet to live up to its potential.

When he stepped down as the center’s chair in 2020, Daniel Rodriguez, a professor with Northwestern Pritzker School of Law, wrote on social media that other people or organizations may be better suited than the ABA to pursue legal innovation.

“I believe that the present state of our profession, our A2J crisis, and myriad problems that plague the ways in which legal services are delivered requires an urgency & imagination that calls for other organizations & individual efforts emerging organically,” Rodriguez wrote.

ABA belt-tightening could make progress more difficult. The center’s annual budget recently was cut from about $400,000 to roughly $300,000, according to two sources familiar with the situation who spoke on condition of anonymity.

The ABA declined to comment on the Center’s budget.

Fostering Dialogue

Younger and Thies were selected to their posts earlier this month by new ABA president, Mary Smith. The pair replaced former center chair Don Bivens and co-vice-chair Patrick Palace, both staunch regulatory reform advocates whose terms expired.

Quentin Brogdon, a past president of the Texas Trial Lawyers Association, is among the prominent lawyers backing Younger.

“Putting in a person such as Mr. Younger is entirely consistent with the ABA’s mission,” he said. “It’s something that should’ve happened a long time ago.”

Neither Bivens nor Palace could be reached for comment. Other longtime ABA insiders who could be reached, including regulatory reform proponents, were reluctant to talk about the center’s role within the ABA.

Concerns about the new leadership coincide with a recent report of a proposed op-ed column the center was slated to run, which advocated for regulatory reform. The column reportedly was spiked because of what the center’s director termed as “political challenges” brewing within the ABA.

The ABA says the account is misleading, and that the op-ed was never slated for publication.

ABA members have “very different views” on the non-lawyer ownership issue, Smith said in an interview. The organization will continue to foster dialogue on the topic, she said.

The center, meanwhile, will turn its attention to new technology already grabbing the legal industry’s attention. Artificial intelligence promises to change the practice of law while creating a complicated web of legal and ethical questions.

“I am very heartened that the center is going to be taking an active role on artificial intelligence because that is one of the probably most important legal issues of our time,” Smith said.

—With reporting by Tatyana Monnay.