NEW YORK, Feb 2 (Reuters) - A New York State Bar Association task force will study whether nonlawyers should be allowed to own equity in law firms, a sign it could consider altering a long-standing position.

The bar's president, Vincent Doyle, made the announcement on Thursday at a conference of the American Bar Association, which is itself weighing whether to support nonlawyer ownership under certain circumstances.

All 50 states currently bar nonlawyers from having a stake in law firms, though Washington, D.C., began allowing it under certain conditions more than two decades ago. The practice is permitted in many foreign countries, including England.

"The concern has always been that having nonlawyers having control of a law firm would affect the core values and teachings that separate us from many other professions: confidentiality, loyalty to our clients above all else," Doyle, a partner at Connors & Vilardo, said in an interview. But, he said, the ABA's decision to reexamine the issue prompted him to do the same, especially in light of increased globalization in the law industry.

In the meantime, the New York bar will remain officially opposed to nonlawyer ownership, Doyle said.

The issue has gained recent attention thanks to the personal injury law firm Jacoby & Meyers, which last year filed federal lawsuits in New York, New Jersey, and Connecticut, arguing that those states' rules against nonlawyer ownership in law firms curtailed its ability to raise funds from outside investors. The New York lawsuit claims the ban is a violation of New York's Judiciary Law and due process, as well as the First Amendment.

U.S. District Judge Lewis Kaplan will hear oral arguments on the New York case next week, and arguments in New Jersey are scheduled for later this month.

ABA PROPOSAL

"The issue here is not one of ethics, but one of economics," said James Denlea, who is representing Jacoby. "I don't know where one derives the idea that the presence of a private equity investor means that clients' secrets are revealed. I own stock in Coca-Cola, and yet they don't give me their secret formula."

Before the Jacoby & Meyers litigation, the subject of nonlawyer ownership had been dormant for more than a decade, since the "Big 5" accounting firms sought to acquire American law firms and create multidisciplinary companies that would offer legal and non-legal services, as they had done in Europe.

An ABA proposal to allow such arrangements was defeated by its house of delegates in 2000, in part because of intense lobbying by the New York bar and other state bars concerned about the ethical implications.

But the ABA's Commission on Ethics 20/20 is once again reviewing the issue, as law firms grow even more international -- although the commission has already ruled out the sort of permissive rule that would allow the creation of multidisciplinary firms.

Instead, the commission has suggested using the D.C. model as a basic framework, noting that it appears to have succeeded there without adverse effects.

Under that proposal, nonlawyers could own pieces of law firms, but lawyers would be required to remain in financial control. Nonlawyers would only be allowed to assist in the delivery of legal services and could not offer non-legal services independently to clients.

SMALL FIRMS 'INCREASINGLY INTERESTED'

In an open letter soliciting comment on the issue, the commission said anecdotal evidence suggested that small law firms are "increasingly interested in having nonlawyer partners." Examples included land-use firms that work with engineers and architects, family-law firms that employ social workers and financial planners, and personal-injury firms that use nurses and investigators to prepare cases.

Offering ownership stakes could also help law firms recruit technology experts, the letter said.

The New York task force will be headed by Stephen Younger of Patterson Belknap Webb & Tyler.

If the task force recommends changing the prohibition, Doyle said, the state bar's house of delegates would vote on a new model regulation. If it passes, the administrative board charged with promulgating the state's rules of ethical conduct for lawyers -- consisting of the state's chief judge, Jonathan Lippman, and the presiding judges for the four Appellate Divisions of the state Supreme Court -- would decide whether to adopt it.

(Reporting by Joseph Ax)

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