Non-lawyer ownership of law firms? Worth serious study says NJ Law Journal

The New Jersey Law Journal Editorial Board has endorsed as worthy of "serious study" the challenge posed by Jacoby & Myers to the ban on non-lawyer ownership of law firms.  The firm filed suit in federal court in Newark and in several other states. - GWC
copyright American Lawyer Media, LLC (2011)
no further reproduction without permission
New Jersey Law Journal, July 8, 2011
Going Public

Jacoby & Myers has been driven for 40 years by a vision — never accomplished — of becoming a major retail brand for the delivery of legal services. They were groundbreakers in the push to permit lawyers to advertise. When the U.S. Supreme Court embraced advertising as a right of commercial free speech in Bates v. State Bar of Arizona , Jacoby & Myers became the first law firm with television advertisements. Despite being first the firm is not a large one. The envisioned efficiencies of scale — e.g., preprinted forms — were not as powerful as they expected. The personal computer made such efficiencies the norm.

But now Jacoby & Myers has launched a new initiative. The firm has filed a federal suit against the Supreme Court of New Jersey, seeking a ruling that Rule of Professional Conduct 5.4's ban on nonlawyer ownership of law firms is unconstitutional. Although the firm cites a dozen theories in a blunderbuss complaint, the strongest argument is doubtless the First Amendment argument. Lawsuits are a means of petitioning for redress of grievances. Corporate rights of free speech to engage in litigation have been recognized since 1963, when the U.S. Supreme Court held in NAACP v. Button that lawsuits are a form of protected free expression.

There is, of course, a difference. Jacoby & Myers is a profit-making enterprise and the clients it serves seek to resolve private differences — a distinction cited by Justice William Brennan Jr. in NAACP v. Button . But in UMWA v. State Bar of Illinois , the Court vindicated the First Amendment right of a miners' union to hire lawyers to advise members on workers' compensation claims. And in United Transportation Union v. State Bar of Michigan , the Court held that "meaningful access to the courts is a fundamental right within the protection of the First Amendment."

Since then, the boundaries of protected commercial free speech have steadily widened. Last year, in Citizens United v. FEC , the Court found that corporations have essentially the same rights of political speech as do individuals. That may provide the wedge needed to have the First Amendment argument in favor of nonlawyer equity in law firms taken seriously. Jacoby & Myers asserts that it is a leader in "legal services for the masses" and has long been in "the vanguard" of the fight against restrictions on attorney advertising. It seeks to build its brand name, which it alleges it cannot do by relying solely on partners equity and bank loans. To develop the reach it seeks, it needs equity partners. Walmart comes to mind as a potential investor.

Our first impulse may be to dismiss such mass-marketing as beneath the dignity of the profession. But we must confront the fact that financing litigation is expensive. The lawyers who brought suit for workers injured in the post-9/11 cleanup paid interest at rates approaching that of credit cards. Equity partners might have eased that burden. We must recognize, too, that England and Australia have eliminated the traditional ban against nonattorney ownership of law firms.

We don't have the answers, and we are dubious about having federal courts rewrite the rules of practice that are a longstanding state prerogative. But we do believe that Jacoby & Myers has raised a serious issue that both bench and bar must attend with serious study.