Jacoby & Meyers got some breathing room on Nov. 21 in its uphill attempt to overturn New York state's ban on outside investments in law firms.
The U.S. Court of Appeals for the Second Circuit vacated a lower court's order dismissing the firm's challenge to Rule 5.4 of New York's Rules of Professional Conduct on standing grounds.
Jacoby & Meyers had lost before Southern District Judge Lewis Kaplan (See Profile) because the judge said the firm had no redressable injury—there was no indication it had an outside non-lawyer investor ready to buy a share of the firm (NYLJ, March 9).
Kaplan also said that, even if the firm successfully attacked Rule 5.4, there were a number of other provisions of New York law barring firms from taking on non-lawyer equity partners.
On Nov. 21, the circuit by summary order vacated that ruling and remanded to Kaplan to allow Jacoby & Meyers to amend its complaint to challenge those other provisions.
The decision in Jacoby & Meyers v. Presiding Justices, 12-1377-cv, came after Oct. 5 oral arguments before Judges John Walker Jr. (See Profile), Gerard Lynch (See Profile) and Eastern District Judge John Gleeson (See Profile), sitting by designation.
At the argument, Lynch called the merits of the case "probably pretty easy," adding, "It's kind of a mystery to me why we are debating these rather arcane issues of standing" (NYLJ Oct. 9).
The remand was a win for Jeffrey Carton and James Denlea of Meiselman, Denlea, Packman, Carton & Eberz, who got from the circuit the question they wanted when Walker asked about a remand to cure the standing defect.
"That would be more than acceptable, your honor," Denlea responded.
Before Kaplan, the lawyers had argued the ban on outside investment violated the First Amendment and hurt the ability of small firms to expand and compete against larger firms.
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This issue is going to be keep coming back to the courts especially if the world economy stays stagnant. While some may feel this mattered is settled, the real world consequences of small firms being outspent by big firms is having an effect on the justice system and may lead to a critical mass of complaints about the unfairness the system embodies.
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