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

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).