The New York State Bar Association has continued its long-standing opposition to nonlawyer ownership of law firms by approving a report that concluded that nonlawyer ownership should not be permitted in New York State at this time.
The Association's House of Delegates, at its November 17 meeting, approved the recommendations contained in a 115-page report issued by the Task Force on Nonlawyer Ownership. Former State Bar President Stephen P. Younger of New York City (Patterson Belknap Webb & Tyler) chaired the task force.
"Clients, attorneys and the legal community are best served when the financial interests of lawyers and nonlawyers remain separate," said State Bar President Seymour W. James, Jr. (The Legal Aid Society in New York City). "After careful consideration of this issue, the State Bar Association continues to believe that, at this time, nonlawyer ownership of law firms would have a negative impact on the practice of law in New York state."
The State Bar Association historically has opposed nonlawyer ownership of law firms, citing the need to protect firms against undue influence by nonlawyers over the delivery of legal services.
However, in response to new proposals put forth by a commission of the American Bar Association (ABA), then-State Bar President Vincent E. Doyle III of Buffalo (Connors & Vilardo) in February appointed the task force to re-examine the issue.
Specifically, the task force considered a draft proposal by the ABA's Commission on Ethics 20/20 that would have allowed a limited form of nonlawyer ownership. The proposal, which the Commission ultimately withdrew in April, would have permitted nonlawyers employed by a law firm to hold a minority financial interest in the firm and to share in its profits.
The 31-member task force-comprised of practicing attorneys, retired judges, ethics scholars and educators-continued to study the issues after Ethics 20/20 withdrew its proposals.
The task force recommended that the Bar Association should remain opposed to the nonlawyer ownership of law firms, and also should oppose the sharing of fees with nonlawyer owners in an office of the same firm located in a jurisdiction or nation where nonlawyer ownership is permitted.
However, it approved allowing a New York firm to share a client fee with a firm in a jurisdiction that permits nonlawyer owners and, in fact, has nonlawyer owners, unless a lawyer knows that a nonlawyer owner is directing or controlling any lawyer's professional judgment.
The report kept open the possibility of further review of proposals based on studies from jurisdictions where nonlawyer ownership is currently allowed. Factors to be considered in any reassessment of the Bar Association's position would include "a sufficient demonstration that change is in the best interest of clients and society, and does not undermine or dilute the integrity of the legal profession," according to the resolution approved by the House of Delegates.
In the United States, the District of Columbia permits a limited form of nonlawyer ownership of law firms while the 50 states prohibit it. Law firms in the United Kingdom, Australia and Canada can opt to have nonlawyer owners.
The New York State Bar Association is the largest voluntary state bar association in the country, with 77,000 members. It was founded in 1876.
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