Back to the Future: Designing and Improving a System of Proactive Management-Based Regulation to Help Lawyers and Protect the Public

Abstract

Increasingly, lawyers and decision-makers are recognizing the limitations and consequences of current approaches to attorney regulation. Inspired by developments in other countries, regulators in the United States and Canada have started the process of exploring innovative approaches, including proactive management-based regulation. The term, proactive-management regulation (PMBR), was first used by Professor Ted Schneyer to refer to a regulatory approach designed to promote ethical law practice by assisting lawyers with practice management.

The seed for PMBR was first planted in the Australian state of New South Wales (NSW). It grew out of the legislation that allowed limited liability and non-lawyer ownership of incorporated law practices (ILPs) without restrictions on percentages owned by nonlawyers. Intending to address concerns related to non-lawyer ownership and limited liability, the statute imposed requirements related to management and controls. Specifically, the statute required the ILP appoint a legal practitioner director to be generally responsible for the management of legal services provided by the ILP. In addition, the statute required that the legal practitioner director must ensure that “appropriate management systems” are implemented and maintained to enable the provision of legal services in accordance with obligations imposed by law.

Following the implementation of the new regulatory regime in NSW, Dr. Christine Parker conducted an empirical study to assess the impact of PMBR. The 2008 study found that complaints rates for ILPs went down by two thirds after the ILP completed their initial self-assessments. In addition, the study determined that the complaints rate for ILPs that completed the self-assessment process was one-third of the number of complaints filed against non-incorporated legal practices that had not completed the self-assessment process.

Although the 2008 study was very noteworthy in pointing to the impact on complaints rates, the study did not seek to address the reasons why the complaints rates dramatically went down for practitioners who went through the self-assessment process. To address that question, I conducted a mixed method study in 2012. Using a survey and interviews, that study sought to obtain more data on the impact of AMS and the self-assessment process. It also sought to identify possible measures to improve management-based regulation of firms. Another article discusses survey findings related the effects of the self-assessment process and the AMS requirement. A second article examines how management-based approaches might be incrementally integrated into current disciplinary systems. This article focuses on information obtained in the interviews and survey findings that relate to designing and improving PMBR systems.

After describing the study’s hypotheses and methodology, Part I briefly describes select study findings related to effects of the AMS and self-assessment process in NSW. Drawing on data obtained in the study, Part II discusses respondents’ concerns related to the self-assessment process. Part III outlines recommendations for regulators interested in improving and designing PMBR systems. The conclusion discusses the steps that jurisdictions have taken in exploring PMBR. It harkens back to the McKay Commission’s call to action, urging regulators and practitioners to work together to implement PMBR as a system that protects the public by assisting lawyers.

Keywords: Professional Responsibility, Legal Ethics, Lawyer Discipline

JEL Classification: K39, K42