Law Firm Sues to Have Non-Lawyer Ownership

On May 18, 2011, Jacoby & Meyers Law Offices LLP filed lawsuits challenging state professional rules in New York, New Jersey and Connecticut that prohibit non-lawyers from having an ownership interest in law firms.  The New York lawsuit was filed in the United States District Court for the Southern District of New York and alleges that Rule 5.4 of New York’s Rules of Professional Conduct — which precludes a lawyer from practicing law with an entity where a non-lawyer owns any interest therein — causes “critical sources of funding (to be) unavailable to a majority of lawyers in New York (and elsewhere) which dramatically impedes access to legal services for those otherwise unable to afford them.” See Complaint at Paragraph 2.

In contrast to the well-thought out plan executed in the UK that will soon allow UK law firms to take on non-lawyer equity owners and managers, Jacoby & Meyers is doing what most plaintiffs’ counsel resort to when they don’t get their way, namely the filing of a lawsuit.  There is nothing new in the Complaint regarding this longstanding debate and certainly nothing that has not been argued before by law firms looking to combat a stagnating book of business. 

The gist of the Complaint turns on the purported need for law firms to have access to outside capital.  Specifically, the Complaint alleges that without such access firms like Jacoby & Meyers are unable to pay for necessary improvements in technology and infrastructure.  And, without such improvements, the disenfranchised will not have adequate legal services available to them.

Although it is unlikely that the three filed lawsuits will survive very long or directly change longstanding ethical requirements, there is certainly nothing wrong in having this issue come up for discussion.   And, it may be very timely given the American Bar Association ethics committee is now taking comments on whether to change its model ethics rules to allow for the joint ownership of law firms.  In fact, this ABA initiative may have actually precipitated the Jacoby & Meyers lawsuit given it is cited in the Complaint.