ABSTRACT. Whether nonlawyers should have ownership roles in law firms has been and remains a hotly debated topic. The debate concerns potential reforms to Rule 5.4 of the American Bar Association’s Model Rules of Professional Conduct, which sets guidelines for maintaining the professional independence of lawyers, as well as the impact of those revisions on the legal profession. Although advocates for such reform argue that nonlawyers must be allowed ownership roles in law firms in order to foster innovation and increase access to legal services, many lawyers have raised significant concerns about the impact that nonlawyer ownership would have on the independence of lawyers. Lawyers have concerns about allowing nonlawyers—who have not sworn to uphold the ethical obligations that attorneys promise to uphold when becoming members of the bar—to have decision-making authority in the day-to-day practice of law. There is also no evidence that nonlawyer ownership actually improves access to justice for the needy. This Essay argues against rewriting Rule 5.4 to allow nonlawyer ownership of law firms. It concludes that nonlawyer ownership not only fails to solve the problems that advocates of reform promise it will address but in fact creates meaningful risks for the legal profession.
Nonlawyer ownership of law firms (NLO) has been a hotly debated issue in the legal profession for years. The debate concerns potential reforms to Rule 5.4 of the American Bar Association’s (ABA) Model Rules of Professional Conduct, which sets guidelines for maintaining the professional independence of lawyers. One of Rule 5.4’s key provisions prohibits lawyers from forming business entities with nonlawyers in order to practice law and forbids entities owned or controlled by nonlawyers from having ownership stakes in law firms.1 Rule 5.4 also forbids lawyers from sharing fees with nonlawyers.2 Rule 5.4 has long served as an effective method of preventing ethical concerns about the professional independence of members of the bar, and its continued vitality was recently reaffirmed by the ABA’s House of Delegates.3
Nonetheless, some individuals and businesses—although not many lawyers—are seeking to revise Rule 5.4 to allow for increased possibilities for NLO. Advocates for such reform, such as Ralph Baxter,4 claim that reforming Rule 5.4 and similar restrictions on nonlawyer involvement in the practice of law is the only viable option for increasing access to justice and fostering innovation in the legal field.5 Baxter goes further and asserts that by refusing to reform Rule 5.4, lawyers have ignored their duty to solve the access-to-justice crisis in the United States, arguing that the profession has some undefined duty to ensure “legal service for all.”6 As discussed below, these assertions are unpersuasive, and NLO has not proven to be effective in addressing the access-to-justice crisis.
This Essay argues against rewriting Rule 5.4 to allow nonlawyer ownership of law firms. It concludes that NLO not only fails to solve the problems that advocates of reform promise it will address, but in fact creates meaningful risks for the legal profession. Part I provides a brief overview of Rule 5.4 and the current state of the NLO debate. Part II discusses the bar’s historical opposition to reforming Rule 5.4 and explains the concerns raised about nonlawyers increasing their involvement in the legal profession. Part III responds to arguments raised by Baxter and others in favor of easing Rule 5.4’s restrictions, including the failure of NLO to increase access to justice and the myth that NLO is required to foster innovation in the legal profession.
I. THE CURRENT STATE OF THE NLO DEBATE
A. Overview of Rule 5.4
The Model Rules of Professional Conduct are a set of model legal-ethics rules promulgated by the ABA that states typically follow, with modifications made to reflect local practice in each state.7 Model Rule 5.4 addresses the professional independence of lawyers.8 Rule 5.4, which has been adopted in some form by virtually every state, prohibits lawyers from forming a partnership with nonlawyers if any of the partnership’s activities consist of the practice of law and limits the circumstances under which a lawyer may form a professional corporation or association authorized to practice law for profit.9 Rule 5.4 also generally prohibits lawyers from sharing legal fees with nonlawyers.10
The purpose of Rule 5.4—which the Comments to the Rule expressly state—is to prevent nonlawyers from interfering with lawyers’ independent professional judgment and to uphold the obligation of lawyers to maintain their independent professional judgment.11 The restrictions imposed by the Rule aim to address the concern that if nonlawyers, who are not bound by the Rules of Professional Conduct, have a financial interest in a lawyer’s profits, they might prioritize profit over the duties the lawyer owes to clients and adversely influence a lawyer’s conduct.