Professional Responsibility Lawyers Call on ABA to Modernize Model Rule 5.4 to Allow Fee Sharing with Non-Lawyers

Saying there is a critical need for changes to the ethics rule, the Association of Professional Responsibility Lawyers has submitted a letter to the president of the American Bar Association urging significant revisions to Model Rule 5.4, the long-standing prohibition on lawyers sharing fees with non-lawyers.

The Dec. 12 letter conveys a report written by APRL’s Future of Lawyering Subcommittee which calls for reforms to accommodate the evolving legal market while maintaining ethical safeguards that protect clients. The letter was sent to ABA President William R. Bay by San Francisco lawyer Kendra L. Basner, APRL’s current president.

• Read the full letter and report.

In the report, APRL, a national organization of over 450 legal professionals focused on ethics and professional responsibility, argues that the existing rule hinders innovation and restricts access to justice.

Its proposed revisions aim to strike a balance between enabling lawyers to collaborate with non-lawyers and ensuring professional independence.

“We face a new set of challenges that require a different approach,” Basner wrote in her letter, quoting Bay’s own statement, delivered during the 2024 ABA annual meeting, on the legal profession’s need for change.

“APRL believes that there is a critical need for changes to this ethics rule to address the continued, inevitable involvement of non-lawyers in legal delivery systems while maintaining regulations that protect consumers,” Basner wrote.

Key Proposed Changes

APRL’s proposed revisions to Rule 5.4 would allow lawyers to share fees with non-lawyers under specific conditions. They include:

• Maintaining professional judgment. Lawyers would be required to retain independent professional judgment, as is already required by existing Rule 2.1.
• Supervision of non-lawyers. Lawyers would be required to supervise non-lawyer contributions in compliance with Rule 5.3.
• Reasonable fees. Shared fees would be required to remain reasonable, adhering to Rule 1.5 standards.
• Client consent. Lawyers would be required to obtain client consent, in writing, when sharing fees with external non-lawyer entities.

The APRL report acknowledges developments regarding the regulation and licensing of alternative business structures in Arizona, Utah and Washington, which have tested similar reforms with promising results. APRL says its proposal provides flexibility for states to adopt jurisdiction-specific registration requirements.

Growing Calls for Change

The ban on sharing fees with non-lawyers, enshrined in the ABA’s Model Rule 5.4 since 1983, was originally intended to protect lawyer independence. However, APRL’s report traces the rule’s roots to outdated concerns over unauthorized practice of law and economic competition dating back to the 19th century.

Despite the persistence of Rule 5.4, exceptions to it already exist, the report notes, such as profit-sharing with non-lawyer employees and fee-sharing with nonprofits

Critics of the prohibition argue that it stifles innovation in legal service delivery. APRL cites examples like the now-defunct Avvo Legal Services platform, which state bar ethics opinions condemned under fee-sharing restrictions despite the platform’s success in connecting consumers with affordable lawyers.

“These ethics opinions relied primarily on the theory that by sharing fees with a nonlawyer (Avvo), the arrangement jeopardized the lawyers’ ability to exercise their independent professional judgment in advising and representing their clients,” the report says. “No known data supports this assumption.”

The Sky Has Not Fallen

APRL’s report points to jurisdictions that have relaxed fee-sharing restrictions without experiencing adverse effects. Key examples include:

• Washington, D.C. Non-lawyer ownership in law firms has been permitted since 1991 under limited conditions, without an increase in ethics violations.
• Arizona. The state eliminated Rule 5.4 in 2021, licensing over 100 ABS entities where non-lawyers may hold ownership stakes.
• Utah. A regulatory sandbox created in 2020 allows innovative fee-sharing models under strict oversight, with no evidence of harm to consumers.
• International models. Countries like England, Wales, and Australia have allowed non-lawyer ownership of law firms for over a decade, demonstrating that such reforms can coexist with professional independence.

“Defenders of Rule 5.4 restrictions tend to approach the rule from a perspective that the rule is so critical that any relaxation of the rule will be catastrophic, that the sky will surely fall and repercussions of sharing fees with nonlawyers will be impossible to control,” the report says.

“A review of the jurisdictions that have experimented with nonlawyer fee sharing reveals no such doomsday scenario.” 

Access to Justice and Innovation

APRL emphasizes the potential benefits of its proposal for consumers and the legal profession. By enabling lawyers to collaborate with non-lawyers — including technology experts, marketers, and financial specialists — law firms could deliver services more efficiently and affordably.

Innovations like subscription-based legal services, AI-powered legal tools, and tech-driven platforms could address gaps in access to justice.

“A significant disconnect exists in the United States between people needing legal assistance and the availability or affordability of lawyers,” the report says, underscoring the opportunity to better serve underserved communities.

A Clarion Call for Change

While APRL’s proposal aligns with successful experiments in several jurisdictions, the ABA has historically resisted changes to Rule 5.4. The association reaffirmed its support for the prohibition in 2022 through Resolution 402, which took the position that innovation can occur without changing the prohibition on fee sharing by lawyers.

Nevertheless, in this letter to Bay and the accompanying report, APRL encourages the ABA and state regulators to reconsider their positions and embrace reforms that align with the modern legal marketplace.

“APRL encourages the ABA to lead, rather than obstruct, significant regulatory reform that will benefit both lawyers and consumers of legal services, and importantly, do no harm,” APRL’s report concludes.

In her letter, Basner said that APRL hopes to garner support for its proposal not only by the ABA but also by individual U.S. jurisdictions willing to consider changes to their own versions of the rule.

“Whether the ABA will be as receptive to a clarion call for change does not alter the fact that change is needed,” the report says.