What We Do
The Office of Legal Services Innovation (“Innovation Office”) oversees Utah’s legal regulatory Sandbox, through which entities may use new models for legal businesses and offer new kinds of legal services to Utah’s public.
Brief History of Legal Regulatory Reform in Utah
The Office and Sandbox are the result of two years of research into legal regulatory reform led by the Utah Supreme Court. In August 2018, the Court established a Work Group on Regulatory Reform, led by Justice Deno Himonas and former Utah State Bar President John Lund. In August 2019, the Work Group submitted a report, “Narrowing the Access to Justice Gap by Reimagining Regulation.” The report recommended implementation of a legal regulatory sandbox to allow new legal business models and services to operate in Utah. The Court approved the report and formed a Task Force to implement the recommendation. In August 2020, the Utah Supreme Court issued Standing Order No. 15 which launched the Innovation Office and the legal Sandbox.
What is a sandbox?
A regulatory sandbox is a policy tool through which new models or services can be offered and tested to assess marketability and impact and inform future policy-making. The sandbox tool was first put to use in the financial services industry, in which a highly regulated market was grappling with significant technological advances that did not fit under the traditional regulations (think cryptocurrency). The sandbox model offers similar advantages in the legal space, a traditionally highly restricted market in which the market, and particularly services driven by technology, are outstripping the traditional regulatory approach. In the sandbox, regulations can be relaxed, data gathered, and policy improved.
What the Innovation Office Does
The Office has a singular regulatory objective guiding our work:
To ensure consumers have access to a well-developed, high-quality, innovative, affordable, and competitive market for legal services.
We strive to reach this goal through authorizing entities with innovative legal service models, monitoring those entities for evidence of consumer harm, and intervening when necessary to protect consumers. The Office is independent from the Utah State Bar and reports directly to the Utah Supreme Court on the activities of entities authorized in the Sandbox.
Entities apply to the Sandbox if they have a business or service model that would not have been permitted under the traditional rules governing the practice of law. The traditional rules limited ownership of all legal practice entities (i.e. law firms) to lawyers and limited all practice of law activities (i.e. legal advice, negotiation, representation) to lawyers. In the Sandbox, the following types of entities or services may be authorized:
- traditional law firms taking on nonlawyer investment or ownership;
- traditional law firms and lawyers entering into fee sharing relationships with nonlawyers*;
- nonlawyer-owned or corporate entities employing Utah-licensed lawyers to practice law;
- firms or companies using technology platforms or nonlawyer service providers to practice law; or
- lawyers or firms entering joint ventures or other forms of business partnerships with nonlawyer entities or individuals to practice law.
The above list is not exhaustive and we welcome other proposals. There may be other innovative models or services not permitted under the traditional rules that will apply to the Sandbox.
The Innovation Office assesses entity applications, makes recommendations to the Utah Supreme Court regarding entity authorization (including scope of service), and monitors authorized entities provision of service for potential consumer harm.
The Office uses a regulatory framework called “risk-based regulation” to assess legal service entities. We have identified three categories of consumer harm:
- Consumer achieves an inaccurate or inappropriate legal result.
- Consumer fails to exercise legal rights through ignorance or bad advice.
- Consumer purchases an unnecessary or inappropriate legal service.
Sandbox authorized entities submit de-identified service-level data on a quarterly or monthly basis to the Office. The frequency of reporting and the required reportable data elements vary based on the risk of consumer harm posed by the entity’s model of service. Data are analyzed to monitor and respond to potential signs of the three consumer harms described above. In the event that an entity’s data indicates risk of consumer harm, the Office gathers and evaluates additional qualitative and quantitative information to guide a risk response plan. If subsequent findings support possible actualized harm, the Office implements risk mitigation strategies. An entity’s authorization can be suspended or terminated due to substantial evidence of consumer harm or an entity’s (or its principals) noncompliance with regulatory requirements.
Entities can apply to “exit” the Sandbox based on satisfactory performance. Criteria thresholds for satisfactory performance are measured by the duration and scope of appropriate service delivery as specified in the Innovation Office Manual. The Office makes recommendations to the Court regarding entities seeking to exit the Sandbox. Entities that have exited the Sandbox are not unregulated. They remain under the oversight authority of the Court and the Office and are required to make quarterly reports on consumer complaints to the Office.
*Please note: as of the Court’s December 10, 2020 statement on referral fees, the Innovation Office will not consider applications setting forth bare referral fee arrangements between lawyers and nonlawyers. Bare referral fees are compensation paid to nonlawyers for the sole purpose of ensuring the referral of legal work. The Innovation Office will continue to consider applications in which fee sharing is one component in a more comprehensive innovative proposal.