The ABA’s Ideas About Admitting Nonlawyers to Law Firm Partnerships; “Alternative Law Practice Structures”

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  • 1. Kowalski&Associates The latest from our blog: Much Ado About Nothing: The ABA’s Ideas About Admitting Nonlawyers to Law Firm Partnerships; “Alternative Law Practice Structures” Jerome Kowalski Kowalski & Associates December, 2011The American Bar Association’s opinion by comparing him to an ostrich forCommission on Ethics 20/20 just released its ignoring an obvious case which the courtlong awaited “Discussion Paper on felt controlled in the matter sub judice. MyAlternative Law Practice Structures.” The take is that the Commission simply ignoredreport immediately brought to mind Judge facts already on the ground and, morePosner’s recent decision in which he bench significantly, completely sidestepped theslapped a lawyer in a written and illustrated more urgent question, namely whether thePage | 1
  • 2. United States would follow the lead of theUnited Kingdom and permit non lawyer These recommendations are,ownership and equity investments in law frankly, superfluous and add nothing to thefirms. Our cousins across the pond call this current marketplace. . More significantly,model “Alternative Business Structures” or market forces and realities have alreadysometimes the “Tesco” model (the latter pushed the envelope way beyond thebased on the ubiquitous retailer of that Commission’s shortsighted For example, the Commission noted that many proponents argued that in order to attract the highest quality management and support staff that today’s legal market demands, law firms should have the The essence of the Commission’s opportunity to provide these personnel withreport, predicated on the notion that lawyers an equity kicker. But, the fact is that thein the United States some current ethical market long successfully dealt with thisstrictures relaxed so that they can effectively issue by simply paying top qualitycompete on the global stage, mandate the nonlawyer support personnel partner levelfollowing changes which would permit compensation and bonuses. Famednonlawyers to hold equity in a law firm, comedian Jackie Mason does a great riff onsubject to the following strictures: how some people just want to be called partners for bragging rights, but the fact is that as Jerry McGuire said, “just show meproviding legal services; the money.” And as we well know, law firm partners are nothing more or less than employees at the firm, providing services that support thedelivery of legal services by the lawyers (i.e.,the firm cannot be a multidisciplinarypractice);would be restricted by a percentage capsufficient to ensure that lawyers retain controlof the firm;agree in writing to conduct themselves in amanner consistent with the Rules ofProfessional Conduct for lawyers; and Second, the purported extant strictures limiting the services a law firm can offer to the delivery of legal servicesboth ensuring that the nonlawyer owners in have long been ignored and circumventedtheir firm were of good character and through the creation of law firm subsidiariessupervising the nonlawyers in regard tocompliance with the Rules of Professional that offer a plethora of services, some notConduct. even law related.Page | 2
  • 3. Moreover, substantial nonlawyercontrol currently exists in that many law The Commission has ruled out certain formsfirms are rather tightly controlled by their of nonlawyer ownership that currently exist inlenders. It is often said that Citibank owns other countries. In particular, the Commissionmore law firms in the world than anybody. rejected: (a) publicly traded law firms, (b)And banks can exercise the ultimate control: passive, outside nonlawyer investment orthey can force a law firm to shut its doors. ownership in law firms, and (c) multidisciplinary practices (i.e., law firms that offer both legal and non-legal services The final piece of what is to me separately in a single entity).plain silliness are the peculiar requirementsthat nonlawyer partners need to be vetted to But whether you are a believer or abe assured that they have the character and doubter concerning the Alternative Businessfitness required for bar admission and their Structures, it is a topic that demandsconduct must be monitored by lawyer immediate attention and public debate. But aspartners to assure that they are in full with so much else that Commissions do, itcompliance with the Rules of Professional simply kicked the can down the road andResponsibility. Who is going to do this agreed to continue to study the issue.vetting? And should a nonlawyer partnerviolate one of the Rules, who is going to be As that can goes rolling down the roadsubject to discipline? As I said before, top beyond any visible horizon, the Unitednotch professionals just want to be “shown Kingdom, bent on the home to the world’sthe money” and treated with professionalism great law firms, will take robust advantage of its substantial head start, legal services will beand respect. Having a business card that increasingly be provided by nonlawyer ownedcontains the word “partner” is no assurance and unregulated Internet providers of legalof financial reward, job security or being services and offshore LPO’s will continue totreated with respect or dignity. take larger market share, again in an environment where they are not owned by lawyers, not regulated and often under insured. The tonier topic, is of course privateequity investment in law firms. As for that My expectation is that the next stepissue, the Commission blithely said in the evolution of law firms will largelyPage | 3
  • 4. continue to evolve and form significant jointventures with non-traditional providers oflegal services. In one of the next belated iterationsof the Commission’s discussion papers, theCommission and the bar will arise from itslong slumber and look around at a brandnew world and perhaps even wonder “howdid all of this happen; who was asleep at theswitch?”© Jerome Kowalski, December, 2011. AllRights Reserved.Jerry Kowalski, who provides consultingservices to law firms, is also a dynamic(and often humorous) speaker on topicsof interest to the profession and can bereached atjkowalski@kowalskiassociates.comPage | 4
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