Fixes typo in paragraph 1

By Sara Merken

March 3 (Reuters) - Utah is scaling back a four-year-old program that loosened rules for delivering legal services in the state, leading nearly 30 businesses and law firms to exit or be eliminated, according to Utah Supreme Court orders and a court official.

It is narrowing the pilot program even as reforms to law firm ownership rules in neighboring Arizona have sparked an influx of legal businesses there, including a new law firm owned by accounting giant KPMG that won approval to launch on Thursday.

Utah is now excluding participants whose only innovation was to allow profit-sharing between lawyers and non-lawyers or have lawyers employed by non-lawyers. Participants must show they are reaching "Utah consumers currently underserved by the legal market," according to new guidelines issued by the state.

At least 27 participants have left or may depart the program through withdrawals or terminations due to the changes, Utah appellate court administrator Nick Stiles told Reuters.

Rocket Lawyer, a national online legal services company that joined the program in 2020, withdrew as the modifications were being adopted late last year.

Jack Rives, president of Rocket Lawyer subsidiary Rocket Legal Professional Services, said in a statement that the company is shifting its focus to Arizona, where it was approved under the state's reforms in September.

TESTING REFORMS

Utah's initiative, which is set to run through August 2027, and Arizona's reforms have been watched closely by advocates and skeptics of changing rules that govern who can deliver legal advice.

Most states allow only lawyers to practice law, own law firms and share legal fees. Supporters of softening those barriers say changes like those in Arizona and Utah can make advice more affordable, drive innovation and expand access to justice.

Similar efforts have stalled in California and elsewhere, however, in part over fears of ethical abuses if providers are not fully bound by professional rules that govern licensed lawyers.

Some attorneys also worry that companies could take business from existing law firms in certain practices, legal experts said.

"There's a measure of anti-competitiveness in some of the opposition that we've seen in some states," said Natalie Anne Knowlton, associate director for legal innovation at the Deborah L. Rhode Center on the Legal Profession at Stanford Law School.

Utah Supreme Court Justice Diana Hagen said in a statement that the state's program was designed to see how reforms could expand access to legal services. Companies participating only because it allowed for non-lawyer ownership or profit-sharing "show less promise than other models in achieving that goal," Hagen said.

The court said in a September 2024 letter to its innovation committee that some unnamed participants misused their authorization "to bolster their credibility or gain access to restricted advertising markets," or "misconstrued their authorizations as permitting them to offer legal services provided by non-Utah-licensed attorneys."

The letter said the court discovered a "sizeable group has no meaningful presence in the Utah legal market," and that some participants used program resources disproportionately.

The dozen or so qualifying participants that remain include companies that use technology to lower consumer costs and organizations that provide legal services by non-lawyers in areas like medical debt and domestic violence, according to state records.

A representative for the Utah State Bar, which oversees part of the program alongside the Utah Supreme Court, declined to comment.

ARIZONA DRAWS NEW ENTRANTS

In Arizona, where reforms took effect in 2021, more than 100 law firms and businesses have been licensed. They include national companies LegalZoom and Axiom, and personal injury law firms partially owned by non-lawyers.

With its approval on Thursday, KPMG became the first of the Big Four accounting firms to launch a law firm in the United States. Aaron Nash, who oversees certification and licensing for the Arizona Supreme Court, said the initiative is continuing to attract new entrants.

"Both Arizona and Utah launched down this road in substantial part in order to improve access to justice," said Lucian Pera, a partner at law firm Adams & Reese who has advised applicants to Arizona's program.

Narrowing Utah's focus to target underserved people fits that goal, Pera said. But he said Arizona's approach is showing how reforms can also expand the state's legal market.