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FEDERAL JUDGE DISMISSES LAWSUIT CHALLENGING BAN ON NON-LAWYER OWNERSHIP


On Thursday, March 8, 2012, U.S. District Judge Lewis Kaplan tossed a lawsuit brought in Manhattan by prominent personal injury law firm Jacoby & Meyers. The firm's suit challenged the constitutionality of a New York state ethics rule that prohibits non-lawyers from having a financial stake law firms. The case was closely watched because every jurisdiction in the United States besides the District of Columbia currently maintains similar restrictions on non-lawyer ownership of law businesses. Conversely, the United Kingdom and Australia have recently reversed their own rules on the subject and now permit non-lawyers to be financially involved with law firms.

Ethics rules against non-lawyer ownership exist because of concerns that the profit motive of non-lawyer investors or managers might undermine the law firm's duty to its clients. However, Judge Kaplan did not rule on this issue. The judge found that Jacoby & Meyers lacked standing to bring their suit. Jacoby & Meyers contended that the firm had several investors interested in putting substantial sums of money into the firm, but Judge Kaplan found that Jacoby & Meyers had not proved that it had been harmed by the ethics rule. In the absence of harm to the plaintiff, the court's decision on the constitutionality of the ethics rule would be purely advisory and therefore not permitted according to court practice.

Jacoby & Meyers has filed two similar cases in New Jersey and Connecticut.

(Source: http://www.reuters.com/article/2012/03/08/jacobymeyers-idUSL2E8E8EHF20120308)