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State Bar Affirms Its Opposition to Non-Lawyer Ownership of Firms
New York Law Journal
ALBANY - The New York State Bar Association has reaffirmed its opposition to the ownership of law firms by nonlawyers. A resolution approved by the organization's House of Delegates in a voice vote said its continuing opposition was "in the absence of a sufficient demonstration that change is in the best interest of clients and society, and does not undermine or dilute the integrity of the legal profession."
The Nov. 17 action approved a recommendation of a task force appointed in February to assess whether changes in the profession justified a shift in the position taken by the group in 2000.
The chairman of the task force, former state bar president Stephen Younger, said pressures on the legal industry, such as adoption of nonlawyer ownership of firms in the United Kingdom, Canada and Australia, plus the globalization of the profession made it necessary to revisit the issue.
Washington, D.C., now is the only jurisdiction in the United States that allows nonlawyers to own pieces of law firms. Nonlawyers can own up to 25 percent of law firms in the District of Columbia.
Younger also noted that the 2000 study which led to the state bar's stance against nonlawyer ownership was done during the rise of so-called multi-disciplinary practices, where lawyers were also performing the duties of accountants or investment advisers to some clients.
The American Bar Association has also discussed changes to its policy in opposition to nonlawyer ownership of firms, including a limited form of nonlawyer ownership, but has cancelled formal votes on the issue amid controversy among ABA members (NYLJ, April 18).
Younger, of Patterson Belknap Webb & Tyler, said now is the time for the state bar to have its voice heard on the issue, as the debate plays out nationally.
"The issue is not dead within the ABA, it is still going to be considered by their standing Committee on Ethics and Professional Responsibility," Younger told members of the House of Delegates. "We think that the state bar ought to keep considering this issue as it evolves."
Younger said the issue transcends the question of who has an ownership stake in a law firm because it touches on independence of law practices and the delivery of services to clients.
Critics argue that nonlawyer owners could exert influence over the decisions made by lawyers that would be in the financial interest of owners but not the firms' clients.
"We should not change the current approach unless there is a sufficient demonstration that change is in the best interests of our clients and society and it does not undermine the integrity of the legal profession," Younger said.
No one disagreed with the position taken by the House of Delegates, which also referred the matter to its Committee on Standards of Attorney Conduct (COSAC), chaired by Joseph Neuhaus of Sullivan & Cromwell, for continued study. Former state bar president Robert Ostertag told his colleagues that was contrary to normal procedures.
The House of Delegates serves as the state bar's "court of last resort" in making final determinations on endorsing policies that have been recommended to the members by various sections, committees and task forces, Ostertag said.
"We don't do things like this in the house as a general rule," Ostertag, of Ostertag, O'Leary & Barrett in Poughkeepsie, told the house. "We don't ask the house to pass a resolution and then submit that resolution to a division of the association and consider a report back."
But members overwhelmingly rejected his proposal to table the resolution for now and await a report from the committee, which he said will inevitably make changes that the house will have to consider again.
Richard Cahill Jr. of Ryan, Roach & Ryan in Kingston, said he considered the ownership question as among the most important ethical issues facing lawyers.
"We have all had to endure countless lawyer jokes and Hollywood portrays us on television and in the movies as slick-talking shysters who are dishonest," Cahill said. "I take great pride in being an attorney and I am sick and tired of seeing that and hearing that."
Cahill proposed to shorten the statement of purpose to an affirmation of the state bar's "opposition to any form of nonlawyer ownership of law firms" without promising to revisit the issue unless circumstances change. Cahill's proposal was defeated.
According to the resolution, the Standards of Attorney Conduct committee will go back to the House of Delegates on the issue of sharing fees between firms in New York and allied firms working on the same cases in jurisdictions that allow nonlawyer ownership of firms.
Meanwhile, Rule 5.4 of the state's Rules of Professional Conduct, which contains the ban against nonlawyer ownership is under review in the courts.
The U.S. Court of Appeals for the Second Circuit on Nov. 23vacated a lower court's order dismissing Jacoby & Meyers' challenge to the rule, saying the firm should be given an opportunity to amend its complaint.
@|Joel Stashenko can be contacted at firstname.lastname@example.org.