The American Bar Association appears to be warming to the idea of allowing non-lawyers to hold a stake in law firms. A rule change is still a long way off, but the ABA recorded a baby step late last week, when its ethics commission published a proposal for comment.
The proposal has the support of an ABA working group tasked with investigating the issue. After the comment period, the ethics commission would have to decide to make a formal proposal to the ABA House of Delegates, the main policy-making body. That wouldn’t happen until February 2013. And then the individual states would have to approve the change. So, like we said, baby steps.
The proposal is a far cry from a new U.K. law that allows banks, supermarkets and the like to offer legal services to consumers. Let’s start with what it would not allow:
- publicly traded law firms
- passive, outside nonlawyer investment or ownership in law firms
- law firms that offer both legal and non-legal services separately in a single entity
Under the proposal, lawyers would still have to maintain a controlling financial interest and voting rights in the firm, and nonlawyers couldn’t have their own clients or offer nonlegal services to clients. In other words, law firms with nonlawyer ownership would have to stick to practicing law.
This model already exists in D.C, and the ABA working group said it heard anecdotal evidence that law firms – small firms in particular — are increasingly interested in having nonlawyer partners.
For instance, intellectual property boutiques could share a roof with scientists and engineers; personal injury law firms could team with nurses and investigators; family practices could be with social workers and financial planners; and so on.
About 20 years ago, the ABA rejected a similar proposal spurred by consumer groups, on the grounds that it threatened professionalism.
WilmerHale partner Jamie Gorelick, who co-chairs the ethics committee, said she hasn’t “heard a big outcry on this one way or another.” At least not yet.
“I’m quite interested in hearing whether there is a need or desire for this,” she said.
As the ABA process grinds on, plaintiffs’ firm Jacoby & Meyers is pressing lawsuits against New York, New Jersey and Connecticut claiming that their state laws prohibiting nonlawyers from owning a stake in law firms unconstitutionally restrict interstate commerce. The bars on outside ownership, the firm contends, has hampered it from raising the capital it needs to serve consumers.
Jeffrey Carton, the law firm’s counsel, said his clients would like to see the proposal go further. ”They took the D.C. model and made it a bit more cumbersome” by requiring that lawyers maintain controlling interests over nonlawyers, said Carton, an attorney with Meiselman, Denlea, Packman, Carton & Eberz.
The ABA Journal has a story on the proposal here, and AmLaw Daily has more here.
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