'NO SALE' on NY suit for non-lawyer ownership of firms

March 13, 2012 A federal judge in New York has dismissed the suit brought by plaintiff firm Jacoby & Meyers which challenged a state rule prohibiting nonlawyer investment in law firms. The ruling found that the federal court lacked jurisdiction to hear the case, which involved state rules, and indicated that the suit fell short in any case by challenging only one of a number of rules banning outside investors. The judgment did not address the merits of the case, but did expres the opinion that allowing investors to take a stake in law firms was akin to making "a deal with the devil."

The firm claims that allowing outside investment in law firms will allow smaller law firms compete with larger rivals, and will enhance access to justice by enhancing fims’ capacity to offer low cost legal services. It further claims that without reform "the practice of law in the United States is at serious risk of falling behind the rest of the world," citing the rise of alternative business structures in Australia and the United Kingdom. In addition, Jacoby & Myers claims that current state rules are unconstitutional.

The firm has instituted similar actions in two other jurisdictions: New Jersey and Connecticut.

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