Competition Should Decide Paralegal Issue

Posted on May 29, 2002 | Type: Op-Ed | Author: George Leef
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In his 1776 book "The Wealth of Nations," Adam Smith remarked that when businessmen get together, their talk usually turns to means of stifling competition. With even more justice, Smith might have written, "lawyers." The legal profession makes all others look like amateurs when it comes to rigging the market.

Since 1985, it has been legal in Arizona for non-lawyers to engage in the business of preparing legal documents. There is a big demand for such services and many individuals and small businesses have sprung up to meet that demand. Of course, a customer can still go to a law firm for such work, but he will pay considerably more for that service, and the law firm will simply hand the job to a secretary or paralegal in its employ.

Bar associations are notorious for their attempts to protect what they regard as the turf of lawyers, which they see as anything having a connection with the law. Proceeding from the false premise that all legal work is too difficult for people who have not graduated from law school and passed a bar exam, bar associations lobby for laws to make it illegal for outsiders to engage in "the practice of law."

On April 30, the Arizona Bar Association petitioned the state Supreme Court for a declaration that the preparation of legal documents is "the practice of law." If the Supreme Court so rules, the effect would be to stamp out a system of competition that has served many thousands of Arizonans well over the last seven years.

The legislature has rebuffed several attempts by the bar association take back its monopoly. So the bar has now turned to the court instead. But what possible good could come of this action?

The answer given by the bar is the same given by any other trade group that wants to choke off competition: its monopoly will "protect the consumer." After all, people who prepare documents without having legal degrees might make mistakes.

True. But it is also true that lawyers and their employees sometimes make mistakes. Perfection is not of this world. Because some document preparers might make mistakes, does it follow that all of them be regulated out of business? No. Individuals who harm others through incompetence should be held accountable, whatever their credentials. People who do good work should not be kicked out just because they haven't earned an expensive and unnecessary degree.

This is the same fight bar associations have waged against competitors around the country. In 1994 in New Jersey, the state bar sought a declaration from that state's supreme court that "the practice of law" included real estate closings. Bar lawyers had lost their monopoly on that lucrative business and wanted the court to hand it back. They used exactly the same argument the Arizona bar is using, that consumers would be protected against possible harm if legal professionals were the only persons allowed to handle closings.

Much to its credit, the New Jersey Supreme Court refused to go along with the bar's power grab. It ruled that the speculative possibility of harm to consumers did not justify depriving them of a less costly alternative.

The New Jersey court demonstrated a shrewd understanding of the benefits of competition. Without competition, consumers are forced to pay higher prices for services. Not everyone can afford a lawyer to handle mundane legal matters, so if the bar association succeeds in creating a racket for its members, some customers will be compelled to become do-it-yourself document preparers. How would that protect consumers?

Instead of using heavy-handed legal tactics to crush competition, the Arizona Bar Association should allow its members to compete with document preparers. If bar members really do offer higher quality services, then they should have no trouble persuading customers that they are better off going to bar-approved lawyers. If their product is not actually superior, lawyers can cut their fees to match those of their competitors.

Greater competition in legal services would benefit all of Arizona's citizens. But if the bar association gets its way, the only beneficiaries will be a small number of lawyers. The Supreme Court should not just reject the bar's petition. It should denounce it.

George Leef, J.D., is adjunct professor of law and economics at Northwood University in Midland, Mich., and an associate scholar at the Phoenix-based Goldwater Institute.

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