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
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
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.
"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
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
(Reporting by Joseph Ax)
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