Friday, May 20, 2011

UPDATE: The next big thing: whether to allow non-lawyers to own shares of law firms

A few months ago, I thought that "the next big thing" in legal ethics was going to be a debate over whether to allow the use of screening to avoid concurrent conflicts of interest in some cases.  I may be wrong.  It is starting to look like the next big thing is going to be a debate about whether nonlawyers should be allow to own equity stakes in law firms.

One reason this has not been allowed up to now is to avoid the possibility that non-lawyers - essentially "investors" in the firm - or the need for investors might compromise the lawyers' independent professional judgment. 

This concern is not trivial in my opinion.  But, as the Wall Street Journal reports today (here and here), pressure is building in the business to let law firms raise capital from nonlaywers. Yesterday, plaintiffs’ firm Jacoby & Meyers filed suits in New York, New Jersey and Connecticut claiming that their state rules barring outsiders from owning stakes in firms unconstitutionally restricts interstate commerce.  For more on the story, go to the Legal Ethics Forum (here)

If successful, this case could lead to the most significant change in which law is practiced in the United States in many years.

The Commission in charge of reviewing and revising the ABA Model Rules just announced it will hold a meeting to discuss this issue during the upcoming annual meeting of the Center for Professional Responsilbity in Memphis, June 1-4.  For information (and to register) for the annual meeting, go here.

UPDATE (5/20): Blogger Eric Turkewitz has a comment on the idea of allowing non-lawyers to acquire shares in law firms here and here (hint: he is against it).

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