An
in-depth
investigation
by
The
Arizona
Republic
has
found
that
Arizona’s
pioneering
program
allowing
nonlawyers
to
own
law
firms
—
a
reform
long
championed
by
access-to-justice
advocates
—
has
become
riddled
with
consumer
complaints,
legal
loopholes,
financial
conflicts
of
interest
and
inadequate
oversight.
In
a
series
of
investigative
articles,
Republic
journalist
Laura
Gersony
paints
a
troubling
picture
of
the
state’s
Alternative
Business
Structures
program,
which
the
Arizona
Supreme
Court
approved
in
2021
to
allow
nonlawyers
to
own
law
firms.
The
program
was
intended
to
make
legal
services
cheaper
and
more
accessible
for
Arizona
residents.
Instead,
the
Republic
found,
it
has
in
many
cases
attracted
profit-focused
investors
whose
firms
have
generated
a
trail
of
consumer
complaints
across
the
country.
Related
LawNext
episode:
Supreme
Court
Justice
Ann
Timmer
on
Arizona’s
Sweeping
Regulatory
Reforms.
The
findings
present
a
sharp
contrast
to
a
comprehensive
Stanford
Law
School
study
I
reported
on
last
June,
which
found
“remarkably
little
evidence
of
consumer
harm”
from
the
Arizona
reforms
and
similar
reforms
in
Utah.
That
study,
by
the
Stanford
Center
on
the
Legal
Profession,
reported
that
through
April
2025,
Utah
had
only
20
consumer
complaints
across
all
sandbox
entities,
and
that
the
two
Arizona
ABS
entities
that
faced
formal
disciplinary
action
involved
procedural
and
oversight
issues
rather
than
systematic
consumer
harm.
The
Republic
investigation,
however,
tells
a
different
story,
one
focused
on
specific
firms
and
the
on-the-ground
experiences
of
consumers
rather
than
aggregate
data.
Consumer
Complaints
and
Misconduct
In
the
first
installment
of
the
series,
“Arizona
lets
investors
own
law
firms.
Consumers
pay
the
price,”
Gersony
reports
that
the
ABS
program
has
become
an
epicenter
for
consumer
complaints,
with
clients
across
the
United
States
saying
they
were
mistreated,
misled,
or
—
in
the
words
of
a
lawsuit
against
one
firm
—
outright
“scammed.”
The
investigation
found
that
more
than
a
dozen
licensees
have
been
accused
of
harming
their
clients
or
violating
consumer
protction
laws.
Several
licensees
are
accused
of
targeting
vulnerable
people,
such
as
those
in
financial
distress.
Allegations
range
from
illegal
robo-calling
to
what
Alabama
prosecutors
have
called
a
deceptive
scheme
that
“commoditized”
car
accident
victims
in
one
of
the
poorest
states
in
the
country.
The
Republic
also
found
significant
conflicts
of
interest
within
the
program’s
oversight
structure.
Several
members
of
the
committee
that
advises
the
Supreme
Court
on
each
licensing
decision
also
make
money
counseling
the
firms
applying
for
the
program.
An
ethics
expert
told
the
Republic’s
reporter
that
they
should
step
down.
Despite
these
issues,
just
two
firms
have
received
mild
discipline,
according
to
the
Republic.
One
firm
may
lose
its
license,
though
the
decision
is
not
yet
final,
the
Republic
said.
Arizona
Supreme
Court
Chief
Justice
Ann
Timmer
stood
by
the
program,
Gersony
reports,
asserting
that
any
reform
will
have
both
benefits
and
costs.
She
took
issue
with
any
suggestion
that
the
court
should
do
more
to
police
misconduct
by
licensees.
“It’s
unrealistic
to
think
that
we
can
monitor
people
all
the
time,”
Timmer
told
the
Republic.
“We
don’t
have
the
capacity
to
do
that.”
Out-of-State
Spillover
In
a
second
article,
“Loopholes
let
Arizona
law
firm
experiment
spread
nationwide,”
Gersony
reports
on
how
the
ABS
program,
which
was
intended
to
benefit
Arizona
residents,
has
effectively
spread
nationwide.
At
least
half
of
the
Arizona
licensees
do
business
in
other
states,
according
to
the
Republic’s
review.
Only
one-tenth
of
the
firms
specifically
emphasize
Arizona
on
their
website
or
marketing
materials.
According
to
the
Republic,
firms
are
using
their
Arizona
licenses
to
operate
what
are
essentially
nationwide
practices,
including
some
that
function
more
like
call
centers,
farming
out
cases
across
the
country
while
doing
little
legal
work
themselves.
The
article
profiles
reality
TV
star
Joe
Gorga
of
“Real
Housewives
of
New
Jersey,”
who
owns
an
Arizona-licensed
personal
injury
firm
that
operates
nationwide
through
billboards
and
advertising
—
despite
having
no
connection
to
Arizona
and
not
being
a
lawyer
himself.
In
Alabama,
prosecutors
are
probing
an
Arizona-licensed
firm’s
connection
with
what
they
have
called
a
deceptive
scheme.
In
Texas,
a
woman
settled
with
another
Arizona
firm
she
accused
of
clogging
up
her
personal
cell
phone
with
illegal
robo-calls
and
automated
text
messages.
And
in
California,
a
federal
judge
accused
a
third
licensed
firm
of
trying
to
make
a
“quick
buck”
by
luring
authors
out
of
a
class-action
settlement
under
misleading
conditions.
Regulatory
Response
In
a
third
article,
“Arizona
Supreme
Court
may
change
law
license
rules
after
Republic
investigation,”
Gersony
reports
that
the
court
is
now
moving
to
tighten
rules
in
response
to
the
investigation.
At
a
Feb.
10
meeting,
court
regulators
backed
changes
that
would
tighten
the
ABS
program.
The
proposed
rules
would
restrict
firms
that
operate
as
call
centers
and
would
clarify
that
the
licenses
are
meant
to
benefit
Arizona
residents
and
companies.
Arizona
Attorney
General
Kris
Mayes
called
the
allegations
in
the
Republic
report
“serious
questions”
that
“warrant
a
greater
conversation
about
oversight
of
the
program
so
that
Arizonans
are
not
taken
advantage
of
or
otherwise
defrauded
by
bad
actors.”
Chief
Justice
Timmer
acknowledged
the
program’s
large
out-of-state
spillover
and
said
she
was
uncomfortable
with
the
way
some
firms
have
used
their
licenses.
She
also
said
she
had
already
directed
the
court
to
consider
whether
the
program
should
change
its
rules.
The
chair
of
the
oversight
committee
also
proposed
a
new,
draft
rule
that
would
require
the
licensees
to
“at
least
in
part”
benefit
Arizona
people
and
companies.
The
Stanford
Study:
A
Different
Lens
The
Republic’s
findings
seem
at
odds
with
the
Stanford
study
I
covered
last
June, Legal
Innovation
After
Reform:
Five
Years
of
Data
on
Regulatory
Change.
That
study,
authored
by
David
Freeman
Engstrom,
Natalie
A.
Knowlton
and
Lucy
Ricca,
represented
the
most
comprehensive
empirical
analysis
to
date
of
Arizona’s
and
Utah’s
legal
regulatory
reforms.
It
found
remarkably
low
rates
of
consumer
complaints
and
concluded
that
concerns
about
nonlawyer
ownership
compromising
legal
quality
or
professional
standards
had
not
materialized
in
any
systematic
way.
The
Stanford
researchers
reported
a
harm-to-service
ratio
in
Utah
of
approximately
1:5,869
based
on
reported
legal
services
delivered.
In
Arizona,
the
two
ABS
entities
that
faced
formal
disciplinary
action
involved
procedural
and
oversight
issues,
not
systematic
consumer
harm.
One
explanation
for
these
seemingly
conflicting
findings
is
that
the
Stanford
study
focused
primarily
on
formal
complaints
filed
through
official
channels
and
aggregate
data,
while
the
Republic
investigation
used
more
traditional
“shoe
leather”
techniques
of
interviewing
affected
consumers,
reviewing
court
records
and
examining
business
practices
in
detail.
Asked
about
the
Republic
series,
Natalie
Knowlton,
one
of
the
Stanford
researchers,
said
this:
“Our
methodology
in
the
Legal
Innovation
After
Reform
research
series
involved
reviews
of
initial
application
materials
(from
the
Arizona
ABS
program
and
Utah
regulatory
sandbox)
along
with
–
specific
to
the
consumer
harm
piece
–
publicly
available
information
from
regulators
in
the
two
states.
In
Arizona,
that
available
information
is
published
disciplinary
orders
against
ABS
entities
and
ABS
compliance
lawyers.
As
we
note
in
our
latest
report,
published
in
June
2025,
an
important
empirical
question
is
whether
these
innovations
are
resulting
in
unacceptable
harm
to
legal
consumers.
Allegations
of
consumer
harm
should
be
taken
seriously,
whether
resulting
from
actions
of
ABS
law
firms
and
their
lawyers
or
non-ABS
law
firms
and
their
lawyers.
But
I
have
yet
to
see
any
data
on
the
question
of
whether
consumers
experience
harm
by
ABS
law
firms
at
a
higher
rate
than
they
do
by
non-ABS
law
firms.”
It
is,
of
course,
also
possible
that
both
accounts
are
simultaneously
true
—
that
the
overall
rate
of
formal
complaints
remains
low
relative
to
the
total
volume
of
services,
while
at
the
same
time
specific
firms
are
engaging
in
practices
that
cause
real
harm
to
individual
consumers.
Notably,
the
Stanford
study
flagged
the
concentration
of
Arizona
ABS
entities
in
personal
injury
and
mass
tort
practice
areas
as
an
emerging
concern
—
precisely
the
area
where
the
Republic
found
the
most
troubling
behavior.
A
Crucial
Moment
for
Legal
Reform
Still,
the
Republic
investigation
arrives
at
a
time
when
the
topic
of
legal
regulatory
reform
is
being
debated
nationwide.
As
the
Stanford
study
documented,
Arizona’s
program
has
grown
significantly
from
19
authorized
entities
in
2022
to
136
as
of
April
2025.
Other
states
have
been
watching
Arizona
closely
as
they
consider
their
own
reform
efforts.
The
investigation
does
not
necessarily
argue
against
regulatory
reform,
but
it
raises
important
questions
about
the
adequacy
of
oversight
mechanisms,
the
need
for
consumer
protections,
and
whether
Arizona’s
particular
approach
—
with
its
lack
of
geographic
restrictions
on
where
licensed
firms
can
operate
—
is
best
model.