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March 21, 2012
NEW YORK LAWYERS CANNOT WORK FOR OUT-OF-STATE
FIRMS
OWNED BY NONLAWYERS, SAYS STATE BAR ETHICS COMMITTEE
The State Bar's Committee on Professional Ethics has determined that
a lawyer who primarily practices in New York cannot be an employee of an
out-of-state or foreign firm owned or managed by nonlawyers, even if
nonlawyer ownership is permitted where the firm is established.
The opinion, issued March 14, cited Rule 5.4 (a) of the New York
Rules of Professional Conduct, “which forbids a lawyer from
sharing fees with a non-lawyer, and Rule 5.4(d), which forbids a lawyer
from practicing law for profit with an entity that includes a non-lawyer
owner or member.” The Opinion 911 is available here.
The ruling affects law firms in such countries as the United Kingdom
and Australia, which permit ownership by nonlawyer investors, and the
District of Columbia, where nonlawyer employees can have an equity
interest in law firms.
New York and 49 other states prohibit nonlawyer ownership of law
firms.
That could change. The Commission on Ethics 20/20 of the American Bar
Association (ABA) is considering whether the prohibition should be
dropped.
It is seeking comments on a measure that would allow nonlawyers who
work at a law firm to own a limited, noncontrolling share of the firm.
Many law firms employ investigators, accountants, nurses, engineers,
social workers and other professionals to assist attorneys.
To review the State Bar’s historical opposition to outside
ownership, President Vincent E. Doyle III of Buffalo (Connors &
Vilardo) has created a Task Force on Nonlawyer Ownership. It is chaired
by former State Bar President Stephen P. Younger of New York (Patterson
Belknap Webb & Tyler).
As the task force deliberates, “The New York State Bar
Association remains opposed to nonlawyer ownership of law firms.”
Doyle told the Ethics 20/20 Commission in February.
He said he recognized that the measure under consideration is more
restrictive than a proposal defeated by the ABA House of Delegates in
2000. The earlier proposal would have authorized the formation of
multi-practice firms that could provide legal and nonlegal services,
such as accounting, financial planning and investment banking.
The Commission on Ethics 20/20 is gathering reactions to its December 2
discussion paper on nonlawyer ownership. Any formal proposal would be
considered by the ABA House of Delegates no sooner than February
2013.
The 77,000-member New York State Bar Association is
the largest voluntary state bar association in the nation. It was
founded in 1876.
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