An in-depth investigation by The Arizona Republic has discovered that Arizona’s pioneering program permitting nonlawyers to personal regulation companies — a reform lengthy championed by access-to-justice advocates — has grow to be riddled with shopper complaints, authorized loopholes, monetary conflicts of curiosity and insufficient oversight.
In a collection of investigative articles, Republic journalist Laura Gersony paints a troubling image of the state’s Different Enterprise Buildings program, which the Arizona Supreme Court approved in 2021 to permit nonlawyers to personal regulation companies. This system was supposed to make authorized companies cheaper and extra accessible for Arizona residents. As a substitute, the Republic discovered, it has in lots of instances attracted profit-focused buyers whose companies have generated a path of shopper complaints throughout the nation.
Associated LawNext episode: Supreme Court Justice Ann Timmer on Arizona’s Sweeping Regulatory Reforms.
The findings current a pointy distinction to a complete Stanford Legislation Faculty study I reported on last June, which discovered “remarkably little proof of shopper hurt” from the Arizona reforms and related reforms in Utah.
That examine, by the Stanford Middle on the Authorized Career, reported that by April 2025, Utah had solely 20 shopper complaints throughout all sandbox entities, and that the 2 Arizona ABS entities that confronted formal disciplinary motion concerned procedural and oversight points quite than systematic shopper hurt.
The Republic investigation, nonetheless, tells a unique story, one centered on particular companies and the on-the-ground experiences of shoppers quite than mixture knowledge.
Shopper Complaints and Misconduct
Within the first installment of the collection, “Arizona lets investors own law firms. Consumers pay the price,” Gersony stories that the ABS program has grow to be an epicenter for shopper complaints, with purchasers throughout the US saying they have been mistreated, misled, or — within the phrases of a lawsuit in opposition to one agency — outright “scammed.”
The investigation discovered that greater than a dozen licensees have been accused of harming their purchasers or violating shopper protction legal guidelines. A number of licensees are accused of focusing on weak individuals, reminiscent of these in monetary misery. Allegations vary from unlawful robo-calling to what Alabama prosecutors have referred to as a misleading scheme that “commoditized” automobile accident victims in one of many poorest states within the nation.
The Republic additionally discovered vital conflicts of curiosity inside the program’s oversight construction. A number of members of the committee that advises the Supreme Court docket on every licensing resolution additionally earn cash counseling the companies making use of for this system. An ethics skilled instructed the Republic’s reporter that they need to step down.
Regardless of these points, simply two companies have acquired gentle self-discipline, in accordance with the Republic. One agency might lose its license, although the choice isn’t but closing, the Republic stated.
Arizona Supreme Court docket Chief Justice Ann Timmer stood by this system, Gersony stories, asserting that any reform can have each advantages and prices. She took concern with any suggestion that the courtroom ought to do extra to police misconduct by licensees.
“It’s unrealistic to suppose that we are able to monitor individuals on a regular basis,” Timmer instructed the Republic. “We don’t have the capability to try this.”
Out-of-State Spillover
In a second article, “Loopholes let Arizona law firm experiment spread nationwide,” Gersony stories on how the ABS program, which was supposed to learn Arizona residents, has successfully unfold nationwide.
At the least half of the Arizona licensees do enterprise in different states, in accordance with the Republic’s evaluation. Just one-tenth of the companies particularly emphasize Arizona on their web site or advertising and marketing supplies. In keeping with the Republic, companies are utilizing their Arizona licenses to function what are basically nationwide practices, together with some that operate extra like name facilities, farming out instances throughout the nation whereas doing little authorized work themselves.
The article profiles actuality TV star Joe Gorga of “Actual Housewives of New Jersey,” who owns an Arizona-licensed private harm agency that operates nationwide by billboards and promoting — regardless of having no connection to Arizona and never being a lawyer himself.
In Alabama, prosecutors are probing an Arizona-licensed agency’s reference to what they’ve referred to as a misleading scheme. In Texas, a girl settled with one other Arizona agency she accused of clogging up her private cellular phone with unlawful robo-calls and automatic textual content messages. And in California, a federal decide accused a 3rd licensed agency of making an attempt to make a “fast buck” by luring authors out of a class-action settlement below deceptive situations.
Regulatory Response
In a 3rd article, “Arizona Supreme Court may change law license rules after Republic investigation,” Gersony stories that the courtroom is now transferring to tighten guidelines in response to the investigation.
At a Feb. 10 assembly, courtroom regulators backed modifications that may tighten the ABS program. The proposed guidelines would limit companies that function as name facilities and would make clear that the licenses are supposed to profit Arizona residents and firms.
Arizona Lawyer Normal Kris Mayes referred to as the allegations within the Republic report “severe questions” that “warrant a larger dialog about oversight of this system in order that Arizonans aren’t taken benefit of or in any other case defrauded by dangerous actors.”
Chief Justice Timmer acknowledged this system’s massive out-of-state spillover and stated she was uncomfortable with the best way some companies have used their licenses. She additionally stated she had already directed the courtroom to contemplate whether or not this system ought to change its guidelines.
The chair of the oversight committee additionally proposed a brand new, draft rule that may require the licensees to “at the very least partially” profit Arizona individuals and firms.
The Stanford Examine: A Totally different Lens
The Republic’s findings appear at odds with the Stanford examine I lined final June, Legal Innovation After Reform: Five Years of Data on Regulatory Change.
That examine, authored by David Freeman Engstrom, Natalie A. Knowlton and Lucy Ricca, represented essentially the most complete empirical evaluation so far of Arizona’s and Utah’s authorized regulatory reforms. It discovered remarkably low charges of shopper complaints and concluded that issues about nonlawyer possession compromising authorized high quality or skilled requirements had not materialized in any systematic means.
The Stanford researchers reported a harm-to-service ratio in Utah of roughly 1:5,869 based mostly on reported authorized companies delivered. In Arizona, the 2 ABS entities that confronted formal disciplinary motion concerned procedural and oversight points, not systematic shopper hurt.
One clarification for these seemingly conflicting findings is that the Stanford examine centered totally on formal complaints filed by official channels and mixture knowledge, whereas the Republic investigation used extra conventional “shoe leather-based” methods of interviewing affected shoppers, reviewing courtroom data and inspecting enterprise practices intimately.
Requested in regards to the Republic collection, Natalie Knowlton, one of many Stanford researchers, stated this:
“Our methodology within the Authorized Innovation After Reform analysis collection concerned opinions of preliminary software supplies (from the Arizona ABS program and Utah regulatory sandbox) together with – particular to the patron hurt piece – publicly obtainable info from regulators within the two states. In Arizona, that obtainable info is revealed disciplinary orders in opposition to ABS entities and ABS compliance legal professionals. As we observe in our newest report, revealed in June 2025, an essential empirical query is whether or not these improvements are leading to unacceptable hurt to authorized shoppers. Allegations of shopper hurt needs to be taken severely, whether or not ensuing from actions of ABS regulation companies and their legal professionals or non-ABS regulation companies and their legal professionals. However I’ve but to see any knowledge on the query of whether or not shoppers expertise hurt by ABS regulation companies at a better charge than they do by non-ABS regulation companies.”
It’s, in fact, additionally doable that each accounts are concurrently true — that the general charge of formal complaints stays low relative to the whole quantity of companies, whereas on the similar time particular companies are participating in practices that trigger actual hurt to particular person shoppers. Notably, the Stanford examine flagged the focus of Arizona ABS entities in private harm and mass tort observe areas as an rising concern — exactly the world the place the Republic discovered essentially the most troubling habits.
A Essential Second for Authorized Reform
Nonetheless, the Republic investigation arrives at a time when the subject of authorized regulatory reform is being debated nationwide. Because the Stanford examine documented, Arizona’s program has grown considerably from 19 licensed entities in 2022 to 136 as of April 2025. Different states have been watching Arizona carefully as they take into account their very own reform efforts.
The investigation doesn’t essentially argue in opposition to regulatory reform, nevertheless it raises essential questions in regards to the adequacy of oversight mechanisms, the necessity for shopper protections, and whether or not Arizona’s specific method — with its lack of geographic restrictions on the place licensed companies can function — is finest mannequin.
