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New York Bar bans lawyers from working in firms owned by non-lawyers

22 March 2012 | By Joshua Freedman

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The New York Bar has banned lawyers in the state from becoming an employee of a firm in which non-lawyers hold a stake, effectively preventing UK firms with New York bases from seeking external investment.

The ruling by New York State Bar Association (NYSBA), issued yesterday, applies to law firms in other states or outside the US that have non-lawyer partners, including those based in jurisdictions such as the UK where non-lawyer ownership is allowed.

The NYSBA opinion cited one of the New York Rules of Professional Conduct, which prohibits a lawyer from sharing fees with a non-lawyer or practising law for profit in a firm that has non-lawyer members.

The American Bar Association is currently considering dropping the ban on non-lawyer ownership of law firms in the 50 states where the prohibition exists.

The UK, Australia and Washington DC all allow non-lawyer ownership of law firms, with the British market opening up to external investment last year.

A number of UK firms have already capitalised on the liberalisation of the market, with Parabis Group taking investment from private equity house Duke Street (6 February 2012) and Irwin Mitchell announcing its intention to float (20 April 2011).

Senator Fletcher Hartsell tabled a bill in North Carolina last year to try and allow external investment for law firms in the US (10 March 2011).

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Readers' comments (6)

  • Anonymous | 22-Mar-2012 11:27 am

    So what does this mean for DLA? Will the firm's separate LLPs provide a get-out clause?

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  • Anonymous | 22-Mar-2012 11:53 am

    Excellent. The whole sell out idea is no good for the profession

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  • Anon | 22-Mar-2012 12:27 pm

    A desperate attempt to keep fees artifically high and maintain super-normal profits.
    It wont work, the tide has turned.

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  • Anonymous | 22-Mar-2012 2:49 pm

    In my view, It is the right decision in the best interests of the public - lawyers are required by international and national law to be independent, amongst other obligations. This is why it will be interesting to see how the new ABS's in England will be able to illustrate their compliance with this requirement. Lack of independence can lead to lack of trust by the client and ultimately by the public.

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  • NY Lawyer | 22-Mar-2012 4:27 pm

    But note this comment, from the New York Law Journal:
    The state bar, however, said that a New York-licensed lawyer who principally practices in another jurisdiction, such as the District of Columbia, where non-lawyers can share ownership of law firms —would not face a similar ban.

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  • Dragonfly | 23-Mar-2012 4:49 am

    I wonder how the US (an other) anti-competition frameworks will deal with this blatant closed shop. What happened to the free movement of goods and services in the land of the free?

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