Non-lawyer equity investment in law firms continues, in our view, to be a perilous notion which our profession should strenuously avoid. If recent history, such as the myriad of examples from the near death experience of the world’s economy at the hand of the “credit crisis,” is any indicator, permitting such investment is truly a “deal with the devil”1 which should be given extraordinary wide berth. This financial hazard is greatly exacerbated in a law firm by the risk of conflicts of interest and the impact on the day-to-day practice of law inherent in such investments.
Last week, U.S. District Judge Lewis Kaplan dismissed a complaint by the law firm of Jacoby & Meyers, LLP which sought to challenge the prohibition on non-lawyer ownership of law firms.2 While the basis for the decision was lack of jurisdiction, based upon a finding that Jacoby & Meyers was seeking an advisory opinion, the memorandum opinion provides insight into some of the substantive arguments for and against non-lawyer equity ownership of law firms.
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