The Office of Legal Services Innovation (“Innovation Office”), directed by the Legal Services Innovation Committee of the Utah Supreme Court, regulates non-traditional legal businesses (alternative business structures, or “ABSs”) and legal service providers (alternative legal providers, or “ALPs”) in Utah’s legal regulatory sandbox (the “Sandbox”). The Utah State Bar houses the Innovation Office and oversees its day-to-day operations.
The Regulatory Objective of the Sandbox is to ensure consumers have access to a well-developed, high-quality, innovative, affordable, and competitive market for legal services.
The Innovation Office reviews applications to participate in the Sandbox for innovative methods of creating and delivering legal services to those underserved by the current legal market. If an entity is authorized to participate in the Sandbox, the Innovation Office collects data and monitors providers for consumer harms and benefits. The Innovation Office has the authority to enforce regulatory requirements and suspend authorization when there is confirmed evidence of consumer harm.
Entities apply to the Sandbox if they have an entity or service method that would not have been permitted under the traditional rules governing law practice. 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 Utah Supreme Court may authorize the following types of entities or services :
- firms, companies, or organizations using ALPs (nonlawyers or software) to practice law
- traditional law firms taking on nonlawyer investment or ownership
- traditional law firms and lawyers entering into profit-sharing relationships with nonlawyers
- nonlawyer-owned entities employing lawyers to practice law
- lawyers or firms entering joint ventures or other forms of business partnerships with nonlawyer entities or individuals to practice law
- entities providing intermediary services to connect lawyers to consumers in new ways
- other innovative methods or services not permitted under the traditional rules.
The Innovation Office assesses entity applications for the scope of service, legal area, and innovativeness and recommends qualifying entities to the Legal Services Innovation Committee (“the Committee”). If the Committee votes to advance the applicant, the Supreme Court will authorize or deny the entity.
The Innovation Office uses a “risk-based” regulatory framework 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 regularly. The reporting frequency and required reportable data vary based on the risk of consumer harm posed by the entity’s service method. Data is analyzed to monitor and respond to potential signs of the three consumer harms described above. If an entity’s data indicates a risk of consumer harm, the Innovation Office gathers and evaluates additional qualitative and quantitative information to guide a risk response plan. If subsequent findings support possible actualized harm, the Innovation 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.
After completing a year in the Sandbox, while remaining in satisfactory status and completing a certain number of services based on innovation level, an entity may be granted an annual license with less frequent data reporting requirements.
Criteria thresholds for satisfactory performance are measured by the duration and scope of appropriate service delivery as specified in the Innovation Office Manual. The Innovation Office makes recommendations to the Court regarding entities eligible for licensure.
*Please note: as of December 10, 2020, 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 considering applications in which fee sharing is one component of a more comprehensive innovative proposal