Legal Ethics, Partner Issues

New York Says ‘No’ (For Now) to Non-Lawyer Firm Ownership

Back in May 2011, we informed our readers about a lawsuit brought forward by Jacoby & Meyers, a personal injury and litigation firm made famous by its ridiculous television commercials. In that suit, the PI magnates contested an ethics rule which barred non-lawyers from being able to stake a claim in the ownership of law firms. They want lawyers to be able to run their firms like real businesses, outside investors and all.

After all, that pesky ethics rule no longer exists down under in Australia, and in England, people can now add “legal services” to their grocery lists. But as we noted in Morning Docket, “America’s Most Familiar Law Firm” took a bit of a blow in New York yesterday when one of its lawsuits challenging the ban was dismissed.

Let’s take a look at what happened….

In the underlying suit filed in New York, New Jersey, and Connecticut, Jacoby & Meyers claimed that the ethics rule prohibiting non-lawyers from having law firm ownership rights was not only unconstitutional, but it also hindered the firm’s ability to take on working-class clients.

Really? This purported “budget law firm” is having trouble offering affordable legal services to working-class clients? Maybe we really do need Wal-Mart Law. But even though Jacoby & Meyers has wealthy bankers and used car salesmen lining up to start investing, that’s not going to be happening in New York anytime soon. The Wall Street Journal (sub. req.) has more information on the dismissal:

The firm argued that the rule—Rule of Professional Conduct 5.4—violated its First Amendment freedom-of-association rights, among several other constitutional provisions.

But Judge Kaplan didn’t reach the constitutional questions. Rather, he found that even if he were to strike down rule 5.4 as unconstitutional, other New York laws would still restrict Jacoby & Meyers’s ability to raise money from nonlawyers. Therefore, the suit was improper.

Well, there goes that pipe dream. So much for that “economic inequity” argument, eh? But not to worry, because Jacoby & Meyers may still have hope in New Jersey and Connecticut. Last week, New Jersey denied a motion to dismiss the firm’s claim, and we’re still waiting for Connecticut to rule on a similar motion.

The judge presiding over the New York case, Lewis Kaplan, said that inviting outsiders to invest in law firms could be tantamount to making “a deal with the devil.” A deal with the devil? Please. More like a deal with the dollar. Lawyers are always going to want to make deals like that, so long as the price is right.

Judge Rebuffs Challenge to Ban on Non-Lawyer Firm Ownership [New York Law Journal]
US judge tosses lawsuit on law firm ownership ban [Reuters]
Judge Keeps Rule Limiting Ownership at Law Firms [Wall Street Journal]

Earlier: Because Walmart Really Should Be Allowed To Own A Law Firm

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