Why Can't Law Firms Go Public?
The personal injury law firm Jacoby & Meyers (known for its TV commercials) is suing to overturn state laws in New York, New Jersey and Connecticut that prohibit non-attorneys from owning stakes in law firms. From The Wall Street Journal:
The firm, which has more than 60 lawyers and specializes in personal-injury cases, claims that the restrictions have hurt its ability to raise capital to cover technology and expansion costs, and have hampered it in providing affordable legal services to its working-class clients.
U.S. law firms typically are owned by their senior-most lawyers, called partners. The structure was designed to ensure that all the principals of the business were accountable for the firm’s work and that of their fellow partners.
The ban on law firms accepting nonlawyer investors is nationwide, with the exception of Washington, D.C., under ethics rules established largely by state supreme courts. Violations of the rules can lead to disbarment.
The restriction on investors is decades old and stems from even older strictures against lawyers sharing fees with nonlawyers, for fear that might compromise their professional independence.
So, should non-lawyers be allowed to hold shares in a law firm?