California lawmakers pull plug on legal industry reforms

An aerial view of the San Francisco city skyline in California, U.S., October 28, 2021. REUTERS/Carlos Barria

Register now for FREE unlimited access to

  • Projects weighing a regulatory “sandbox” and legal paraprofessionals are on hold at least two years
  • That delay could slow adoption of similar measures elsewhere

Aug 29 – California will not be launching a so-called “sandbox” for experimenting with attorney deregulation or allowing specially trained non-lawyers to offer legal services anytime soon.

State lawmakers this week passed a bill that halts the two closely watched legal innovation and access to justice projects by the State Bar of California. Governor Gavin Newsom had not yet signed the legislation Friday, but chair Ruben Duran of the state bar’s board of trustees said in an interview that his organization is not lobbying Newsom to veto the bill, which also authorizes the bar’s funding.

Lawmakers also made a late amendment to ensure the bill takes effect as soon as it is signed, instead of at the start of 2023 as is typical.

Register now for FREE unlimited access to

State Assemblymember Mark Stone, who co-sponsored the bill, said in a statement that lawmakers are “very concerned” about lapses in the state bar’s attorney discipline system, and that restricting the regulatory sandbox and legal paraprofessionals initiatives will help the bar focus on its “core mission of protecting the public.”

The bar’s mishandling of allegations involving Tom Girardi—the now-disbarred high profile plaintiffs’ lawyer who is accused by a rival law firm of using client settlement funds to fund a lavish lifestyle—has placed a spotlight on longstanding problems within the state bar’s attorney discipline system. Bar leaders say they have already taken numerous steps to improve lawyer oversight.

The state bar in 2020 convened a working group to examine modifying ethics laws to allow non-lawyers to share legal fees or own law firms, as part of a regulatory “sandbox” program, but had yet to issue any recommendations. Bar leaders were also weighing a recommendation to allow specially trained non-lawyers called paraprofessionals to provide limited legal services in areas such as employment and consumer debt.

Both initiatives are now on hold for two years, according to Duran, though Stone said the regulatory sandbox is subject to an “ongoing suspension.”

“What I believe the legislature to be saying is, ‘Now is not the right time,’” Duran said.

But advocates for legal innovation said the state bar can simultaneously improve its attorney discipline system and explore new, more affordable ways to deliver legal services. And they warned that California could find itself behind the curve as other states embrace regulatory changes.

Utah adopted a legal regulatory sandbox in 2020, and Arizona began allowing nonlawyers to co-own legal services businesses the same year. Those states and Washington and Oregon already have legal paraprofessional programs or plan to launch them.

Natalie Anne Knowlton, advisor on regulatory innovation at the Institute for the Advancement of the American Legal System, said audits have raised red flags over lawyer discipline in California for 20 years.

“This is not something that has emerged in the past couple of years, so it seems strange—the urgency with which they are moving forward to shut down [the regulatory reforms],” she said.

Tom Gordon, executive director of Responsive Law, a nonprofit organization that advocates for affordability and accessibility in the legal system, said California hitting the brakes on regulatory innovation could slow adoption in other jurisdictions.

“If California had gone ahead, I expect that other states would have followed much more quickly,” Gordon said. “There will be progress, but it will be slower.”

Read more:

Legal innovation initiatives are on the chopping block in California

California Bar presses lawmakers to save legal innovation push

Register now for FREE unlimited access to

Our Standards: The Thomson Reuters Trust Principles.