How Utah’s Judicial and State Bar Officials Worked Together for Regulatory Reform

Lyle Moran | ABA Journal

When Gillian Hadfield was asked whether she would speak to a spring 2018 gathering of state court leaders about how changing the way the legal profession is regulated could strengthen access to justice, she was initially hesitant.

For years, the economist and law professor, who was then based at the University of Southern California, had unsuccessfully urged bar associations to support ethics rules revisions that would allow alternative business models in the legal industry.

“I’ve been singing this song for a very long time, and nobody is joining in,” Hadfield recalls telling Thomas Clarke, the then-vice president of research and technology at the National Center for State Courts, who invited her to speak.

However, Clarke assured her that this particular group of state supreme court justices and court administrators from the western United States scheduled to gather in May 2018 was “a different group” that was “ready to do something.”

Clarke’s words prompted Hadfield to agree to present at the conference in Vancouver, Washington, but she decided to deviate from her typical ethics rules-focused message in hopes of generating a better response.

Hadfield instead urged supreme courts to form a regulatory body that would license and oversee nontraditional legal services providers, such as those with nonlawyer owners or investors. This approach would not only usher in new business structures that could bring down the high cost of legal assistance, she argued, but also ensure consumer protection.

Hadfield’s presentation resonated strongly with the Utah officials in attendance, according to John Lund, the Utah State Bar’s then-president. He recalls that it caused members of the Utah delegation “to sit around and say: ‘What do we do to deal with this?’”

Utah Supreme Court Justice Constandinos “Deno” Himonas was among those present who joined Lund in voicing support for exploring Hadfield’s recommendations, and Lund says the ensuing conversation “launched the idea of looking at regulatory reform in Utah.”

In the months that followed, the Utah Supreme Court created a working group that produced proposals to overhaul Utah’s regulation of the legal industry, and the court later formed a task force to advise it on implementing those measures.

The work of those two panels culminated in the state’s high court unanimously approving a comprehensive set of regulatory reforms in August that allowed for a significant opening of the legal market to nonlawyers during a two-year pilot period.

Additionally, the court’s actions cemented Utah’s somewhat surprising status as one of the two leaders, along with Arizona, of a growing number of states adopting or considering changes to how they regulate the legal profession.

Those involved say Utah has made such rapid regulatory reform progress due to its supreme court closely collaborating with state bar leadership, bringing in a variety of outside experts to provide guidance and offering consistent support for bold action even in the face of some opposition.

Teaming up

Given its relatively small population and reputation for being politically conservative, Utah wasn’t an obvious choice to blaze a trail for the rest of the country on access to justice.

“I don’t think anyone had Utah on their radar as the state likely to be leading the charge on regulatory reform in the legal space,” says Joanna Mendoza, who served on California’s Task Force on Access Through Innovation of Legal Services, which was formed to study regulatory changes in 2018.

Others, including Clarke from the National Center for State Courts, were less surprised. He points to Utah’s history of embracing access-to-justice innovations, including online dispute resolution for small claims cases and permitting licensed paralegal practitioners to handle some legal tasks.

“There is a culture there of trying new things that was already established long before the regulatory-reform project,” Clarke says.

Plus, there was a clear need for reform. A primary reason Hadfield’s Vancouver talk struck such a chord with Utah officials was that they were already quite concerned about the growing struggle of many members of the public in their state and nationwide to afford legal services.

In 2015, the Utah State Bar’s Futures Commission reported that defendants were self-represented in 98% of the debt collection cases and 97% of the eviction cases filed in Utah in the prior year. Meanwhile, on the national level, the Legal Services Corporation reported in 2017 that low-income Americans receive inadequate or no professional legal help for 86% of the civil legal problems they face annually.

But even though state bars and supreme courts across the nation have been well aware of the increasing justice gap, they frequently have resisted calls to permit nonlawyer ownership or investment in law firms as a way to address the problem. This reluctance has come amid attorneys’ concerns that profit motives would take precedence over the best interests of legal consumers and result in substandard service.

With that history in mind, Lund told Utah Supreme Court leaders at the Vancouver gathering that for lawyers to consider permitting new economic structures in the law, “they need to know that the court is supportive of their willingness to do that.”

In turn, Himonas told Lund that such an initiative would require state bar leadership being on board.

“It seemed important that it be a joint effort to make it work,” says Himonas, noting the two entities had successfully partnered on prior access-to-justice projects.

Both Lund and Himonas pledged support to the cause, prompting Lund’s work to ensure the bar would play a proactive role in the reform efforts being contemplated even after his term as president expired.

This led to H. Dickson Burton, Lund’s replacement as state bar president, requesting in an August 2018 letter that the Utah Supreme Court establish a panel to study regulatory reform.

In response, the court created a 12-member Work Group on Regulatory Reform in the latter stages of 2018 that was co-chaired by Himonas and Lund. The group’s members included Burton, Utah State Bar General Counsel Elizabeth Wright and Heather White, past co-chair of the state bar’s Innovation in Law Practice Committee.Justice Himonas
Justice Deno Himonas.

Outside the box

The panel also featured regulatory reform proponents and access-to-justice experts from across North America.

Hadfield, who transitioned in 2018 to her current role as a professor of law and strategic management at the University of Toronto, was a member of the group, as was Clarke of the NCSC. Other academics included were Margaret Hagan, director of the Legal Design Lab at Stanford University; and Lucy Ricca, a fellow and former executive director of the Stanford Center on the Legal Profession.

“The issue for the task force was not—as it has been with almost every other bar/court task force— ‘Should we do this?’” Hadfield recalls. “It was: ‘How do we do this?’”

One way the group worked to answer that question was through participation in a design lab led by Hagan in which the panel tried to devise ethics rules changes that would allow the legal industry to harness the power of capital and technology while still protecting clients.

The work group also closely studied the regulatory reforms in the United Kingdom brought about by the Legal Services Act of 2007, which paved the way for alternative business structures. As part of that examination, leaders of the Utah group frequently sought the counsel of Crispin Passmore, the former executive director of the Solicitors Regulation Authority in the U.K.

“You want different perspectives at all times,” Himonas says.

After months of intensive efforts, the Utah work group unveiled its recommendations in an August 2019 report, titled Narrowing the Access-to-Justice Gap by Reimagining Regulation.

A primary component of the group’s proposals was the creation of a regulatory sandbox that would allow nontraditional legal services providers, including those with nonlawyer investors or owners, to test new ways of serving legal consumers without the fear of being accused of the unauthorized practice of law. Opening the legal market in this fashion would encourage capital investment in new technologies and service models that might not otherwise be funded, the work group argued.

Overall, the sandbox would provide an environment that “permits innovation to happen in designated areas while addressing risk and generating data to inform the regulatory process,” the report said.

Later in August 2019, the Utah Supreme Court issued a press release saying it had unanimously voted to pursue the work group’s recommended reforms and would create an implementation task force to help do so.

Arizona State University professor Rebecca Sandefur, who has extensively researched access-to-justice issues, joined the implementation group. She says Utah bringing in voices beyond just lawyers and judges played a key role in its regulatory reform progress.

“It is very difficult to do something new or innovative if all you have accessible to you are the perspectives that created the status quo,” says Sandefur, an American Bar Foundation faculty fellow.

Another benefit of utilizing outside advisers was their ability to dedicate extensive time to the reform efforts and secure the funding to do so, according to Utah officials.

Sticking together

Meanwhile, Lund and Himonas also endeavored to keep the state bar engaged with the reform implementation efforts.

Lund says he recommended the bar’s leadership form their own committee to independently assess the reform proposals, a suggestion the bar took.

In July, the bar’s Committee on Regulatory Reform published its findings and recommendations on the measures the supreme court formally released for public comment in April.

The report said bar members supported the court’s goal of increasing access to justice, but there was “a clear majority view that the methods and means proposed by the supreme court to meet this aspiration potentially might miss the mark.”

For example, the committee said there were concerns that the court’s proposals emphasized lowering the cost of legal services and products “without significant regard to the quality of such services and products.”

The committee recommended the court make several changes, such as requiring sandbox applicants to address an access-to-justice need for the poor and demonstrate they will deliver high-quality legal services and products.

In the press release the supreme court issued in August announcing its approval of a sandbox pilot program, the court said it “made a number of important changes” to the initial reform proposals in response to feedback from the bar and others.

These revisions included requiring greater transparency about the sandbox application and approval process, as well as more clearly spelling out the access-to-justice goals of the reforms.

“To their credit, I think they did listen and I think they did appreciate some of our recommendations,” says Erik Christiansen, a Parsons Behle & Latimer shareholder who co-chaired the bar’s regulatory reform committee.

Christiansen is also among those who say Utah’s regulatory reform push has benefited from having a smaller population of lawyers than many other jurisdictions, which has limited the impact of lawyer opposition to such changes.

As of late September, the Utah State Bar had just shy of 10,500 members, according to a bar spokesman.

“Small states are great incubators for innovation,” Christiansen says.

Court leadership

But even with the state bar’s close involvement and significant assistance from outside experts, it was still ultimately up to the five-justice Utah Supreme Court to determine whether any regulatory reforms would be implemented.

Chief Justice Matthew B. Durrant says the court had vigorous debate about the regulatory overhaul proposals, but unanimously determined the concerns raised by some members of the legal community did not outweigh the potential benefits of reform.

“We care very much what lawyers think about it, but we also have an obligation to the public,” Durrant says. “And so many needs are just not being met.”

The chief justice credits Himonas for his yeoman’s work as the court’s point person on regulatory reform, saying his “tirelessness and enthusiasm made him the perfect person to lead the charge.”

Himonas says his interest in the issue was driven by the legal system’s failures to ensure broad access to justice and his belief that “hammering away at the problem with the same tools is Einstein’s very definition of insanity.”

In August, Utah’s court-approved sandbox pilot that permits attorney fee sharing with nonlawyers launched. The supreme court shortly thereafter approved five applicants to begin operating as part of the trial run, and additional entities have been approved for entry in the weeks since.

At the conclusion of the two-year pilot period, the supreme court plans to determine whether the major reforms it adopted should continue based on its review of data collected from entities participating in the sandbox.

“My sincere hope is that we see that a number of these applicants really are advancing the access-to-justice cause,” Himonas says.

As for Hadfield, she is among the regulatory reform proponents who have called what Utah has accomplished to date “historic” and praised the supreme court for its courage to move forward.

“It’s shown the leadership that so many of us kept thinking was going to appear and did not for a very long time,” she says.

When Does a Mechanic’s Lien Go Into Effect?

Kent B. Scott | Babcock Scott & Babcock

The Utah Mechanic’s Liens Act needed some clarification on when exactly a mechanic’s lien goes into effect. That clarification came in February 2015 from the Court of Appeals of Utah. In the case Pentalon Construction, Inc. v. Rymark Properties, LLC the court ruled that “nearly completed excavation constitutes ‘commencement’ under the Act because the excavation was sufficient ‘to put a prudent lender on notice that lienable work was under way.”[1]

What this means for contractors is that to make sure a mechanic’s lien has priority over other liens or mortgages, they need to file their lien with the recorders office and construction needs to be underway on the jobsite to a point where a “reasonable observer” can tell that a mechanic’s lien is sure to be in effect.

The court found that there are easy ways for a jobsite to pass the “work started” test. For example having large piles of dirt from excavation activities helps people know that a construction project is under way.[2] Heavy machinery operating on the jobsite also demonstrates the beginning of a construction project.[3] Adding in construction materials to the excavated portions of the jobsite, and a nearly completed foundation are the final examples from the court that place observers on notice that work has started.[4]

Contractors need to know that two previous rulings regarding preparatory work for a jobsite is still in effect. The ruling in Ketchum, Konkel, Barrett, Nickel & Austin v. Heritage Mountain Development Co. states that architectural work and other site preparation such as surveying, staking, and soil sampling does not always put the “reasonable observer” on notice that work has started on a jobsite.[5]

Similarly, “wetlands delineations, groundwater monitoring, geotechnical testing, and irrigation work” does not place a reasonable observer on notice because the work should demonstrate “impending or ongoing work.”[6]

The important thing to remember is that the more obvious it is to a reasonable observer that construction has started on a jobsite, the more likely that a filed mechanic’s lien has taken effect. A jobsite’s almost completed foundation, large piles of dirt accompanied by heavy machinery, and construction materials onsite provides more than adequate notice of a mechanic’s lien that is in effect.


[1] Pentalon Const., Inc. v. Rymark Properties, LLC, 344 P.3d 180, 186, 2015 UT App 29, ¶ 19 (Utah App., 2015).

[2] Id. at 183.

[3] Id.

[4] Id.

[5] Ketchum, Konkel, Barrett, Nickel & Austin v. Heritage Mountain Development Co., 784 P.2d 1217, 1228 (Utah App., 1989).

[6] EDSA/Cloward, LLC v. Klibanoff, 192 P.3d 296, 300, 2008 UT App 284, ¶ 10 (Utah App., 2008).

Clarifying the Standard for Severance Damages for Condemned Property in Utah

Mark Morris and Tyson Prisbrey | Snell & Wilmer

In UDOT v. Target Corp. et al., 2020 UT 10, the Utah Supreme Court recently clarified the standard by which a property owner is entitled to severance damages in connection with condemnation under Utah Code Ann. § 78B-6-511(1)(b).

The case arose from a UDOT highway construction project in which it condemned a small portion of Target’s property to reconstruct an interchange. Though only a sliver of the new interchange was actually built on the taken property, the new raised interchange interfered with the property’s visibility from the highway and it took away a convenient right-out exit from Target’s property that provided easy access to the north-bound onramp. At trial, the jury awarded Target $2.3 million in severance damages.

Under the severance damages statute, the owner of a partially condemned property is entitled to severance damages caused “by reason of its severance from the portion sought to be condemned and the construction of the improvement in the manner proposed by the [condemning authority].” Courts applying this standard were required to interpret the meaning of “improvement” and what it means for an improvement to be constructed “in the manner proposed” by the condemning authority. This resulted in confusing case law. For example, courts had previously tied their analysis to the construction of “structures” or “projects,” rather than improvements. They also had sent mixed signals about the effect of the original property line on the availability of severance damages, with some cases suggesting that a property owner may be limited to severance damages stemming only from actions taken on the original property, with other cases indicating that severance damages are available if they flow from actions taken outside of the original property line so long as the severance is deemed “essential to the projects as a whole.”

Beginning with the interpretation of improvement, the Utah Supreme Court found an improvement encompasses a broad range of beneficial alterations to land such that any aspect of an improvement is included in the damages analysis “so long as they materially advance the purpose of the condemning authority.” The Court also rejected the “essential to the project as a whole” test because it is contrary to the plain language of the statute. In doing so, the Court found that land owners are entitled to severance damages “by a proposed improvement to the condition of land that (1) is to be completed at or near the time of the taking and (2) serves the same purpose for which the severed property was taken – i.e., damages caused by the construction of the improvement in the manner proposed.”

In sum, the Utah Supreme Court clarified how property owners will be compensated for their partially-condemned land beyond the actual value of the condemned land. By rejecting the “essential to the project as a whole” test, claimants will only have to show that the damages were caused by the construction of the improvement—which includes any alteration to the land that materially advances the purpose of the condemning authority—completed at or near the time of the taking. Thus, property owners should be aware that this clarified standard will likely increase the damages available to them in connection with condemnation of their property.

When Does a Mechanics’ Lien Effect?

Kent Scott | Babcock Scott & Babcock

The Utah Mechanic’s Liens Act needed some clarification on when exactly a mechanic’s lien goes into effect. That clarification came in February 2015 from the Court of Appeals of Utah. In the case Pentalon Construction, Inc. v. Rymark Properties, LLC the court ruled that “nearly completed excavation constitutes ‘commencement’ under the Act because the excavation was sufficient ‘to put a prudent lender on notice that lienable work was under way.”[1]

What this means for contractors is that to make sure a mechanic’s lien has priority over other liens or mortgages, they need to file their lien with the recorders office and construction needs to be underway on the jobsite to a point where a “reasonable observer” can tell that a mechanic’s lien is sure to be in effect.

The court found that there are easy ways for a jobsite to pass the “work started” test. For example having large piles of dirt from excavation activities helps people know that a construction project is under way.[2] Heavy machinery operating on the jobsite also demonstrates the beginning of a construction project.[3] Adding in construction materials to the excavated portions of the jobsite, and a nearly completed foundation are the final examples from the court that place observers on notice that work has started.[4]

Contractors need to know that two previous rulings regarding preparatory work for a jobsite is still in effect. The ruling in Ketchum, Konkel, Barrett, Nickel & Austin v. Heritage Mountain Development Co. states that architectural work and other site preparation such as surveying, staking, and soil sampling does not always put the “reasonable observer” on notice that work has started on a jobsite.[5]

Similarly, “wetlands delineations, groundwater monitoring, geotechnical testing, and irrigation work” does not place a reasonable observer on notice because the work should demonstrate “impending or ongoing work.”[6]

The important thing to remember is that the more obvious it is to a reasonable observer that construction has started on a jobsite, the more likely that a filed mechanic’s lien has taken effect. A jobsite’s almost completed foundation, large piles of dirt accompanied by heavy machinery, and construction materials onsite provides more than adequate notice of a mechanic’s lien that is in effect.


[1] Pentalon Const., Inc. v. Rymark Properties, LLC, 344 P.3d 180, 186, 2015 UT App 29, ¶ 19 (Utah App., 2015).

[2] Id. at 183.

[3] Id.

[4] Id.

[5] Ketchum, Konkel, Barrett, Nickel & Austin v. Heritage Mountain Development Co., 784 P.2d 1217, 1228 (Utah App., 1989).

[6] EDSA/Cloward, LLC v. Klibanoff, 192 P.3d 296, 300, 2008 UT App 284, ¶ 10 (Utah App., 2008).

Contingent Payment Clauses in Utah “Deal or No Deal?”

Kent B. Scott | Babcock Scott & Babcock

Introduction.  Contingent payment clauses provide parties involved in a construction project with a contractual method for determining who will absorb losses that may occur if the owner fails to pay for work performed on the project. In Utah, the law remains unsettled in this area, though some statutes clarify the treatment of contingent payment clauses in certain cases.

Contingent Payment Clauses. One type of contingent payment clause, called a “pay-when-paid” clause, requires a contractor to pay a subcontractor or supplier within a reasonable period of time for work or material furnished to a project. These clauses do not shift the risk of owner nonpayment to the subcontractor or supplier. If the owner fails to pay the prime contractor, the prime contractor is still liable to pay its subcontractors and suppliers.  A pay-when-paid provision might read, “Prime shall pay subcontractor within ten days of receipt of payment from owner.” Pay-when-paid clauses are generally accepted because the risk of loss due to nonpayment is retained by the upper-tier contractor, who the courts view as the party in the best position to evaluate the risk of dealing with a particular owner.

Pay-if-paid clauses, the second type of contingent payment clause, provide more protection to the prime contractor. This type of contingent payment clause conditions the subcontractor’s payment on whether the prime contractor has been paid by the owner. A pay-if-paid clause shifts the risk of loss due to owner nonpayment from the upper-tier contractor to the lower-tier contractor. A pay-if-paid clause may read: “The subcontractor assumes the risk of the owner’s nonpayment to the prime contractor and the subcontract price reflects this risk. Payment to the prime contractor will be a condition precedent to any funds being due the subcontractor.”

Pay-if-paid clauses are not as widely accepted as pay-when-paid clauses. Some courts have interpreted a pay-if-paid clause as if it were a pay-when-paid clause, thereby keeping the risk of nonpayment in the hands of the upper-tier contractor. A limited number of states have prohibited the use of pay-if-paid clauses. In states where pay-if-paid clauses have been enforced, courts will generally enforce only clauses that use specific words or otherwise clearly demonstrate that the contracting parties intended to shift the risk of nonpayment.

While an enforceable pay-if-paid clause prevents a subcontractor from recovering unpaid funds from the prime contractor, the subcontractor may still be able to pursue other means of recovery, such as a mechanic’s lien.

Contingent payment clauses in Utah. Utah has yet to determine many of the legal issues surrounding pay-if-paid and pay-when-paid clauses.  The Utah legislature has enacted some statutes, though, relating to these clauses that provide contracting parties with some direction.

In Utah, contingent payment clauses are generally not enforceable against mechanics’ liens, though they may be enforceable in residential contracts.  The Utah Legislature has enacted Utah Code section 13-8-4(3) which provides, “The existence of a contingent payment contract is not a defense to a claim to enforce a mechanics’ lien [but this section] does not apply to private construction work for the building improvement, repair, or remodeling of residential property…”  According to this statute, in most cases, even though a subcontract agreement may include a contingent payment clause that would otherwise bar the subcontractor or supplier from recovering from the prime contractor, that subcontractor may still pursue a mechanics’ lien claim against the property. This statute does not extend this protection to residential contracts, but the subcontractor or supplier may still have a claim against the Residential Lien Recovery Fund.

Additionally, Utah law states that, when a subcontractor may be entering into a contract that includes a contingent payment clause, the subcontractor may request from the contractor financial information prior to signing the contract that the contractor has received from the owner regarding: (1) the project financing, and (2) the owner’s financial situation. This allows the subcontractor to evaluate the risk that it may be assuming.

Conclusion. Contingent payment clauses are common in the construction industry.  They allow parties to allocate the risk of an owner’s nonpayment as part of the contract.  As the applicability of contingent payment clauses in Utah is generally undecided, members of the construction industry should be aware of the potential vulnerabilities and benefits of entering contracts that include them. A contractor should seek legal counsel when determining the effect of contingent payment clauses that have been or will be included in their contracts.