Ethics Corner
In light of the financial difficulties facing law firms, is it time to allow these firms to be owned by non-lawyers?
Oregon, along with most other American states, prohibits non-lawyers from owning or investing in law firms. The
District of Columbia Bar permits ownership by non-lawyers in limited circumstances. (England and Australia also now permit investment in their private law firms.) The concept has gained more attention in certain circles this year because the legal industry happens to be one of the few profitable industries during the Great Recession. It can certainly be tempting to try to attract investors by floating an IPO or at the very least make a non-lawyer CEO a partner in the firm. I foresee three disturbing alternatives. First, an investor might insert himself or herself into the case files to ensure that the law firm is only handling cases within an efficient profit margin. Second, the business relationship might involve a contract with the law firm that would override recovery of fees to a client. Finally, such an investment relationship might present a personal conflict of interest to the lawyers in question. A lawyer cannot place accountability to the investor above his or her duty to the client. Earlier this year, the American Bar Association floated the idea of a model rule permitting a non-lawyer working at a law firm to own up to 25 percent of the firm. It weighed the short-term benefits of infusions of cash into law firms against the concerns listed above. It did not proceed, and the proposal gained little attention outside the small cadre of ethics lawyers. (The ethics bar, by the way, took opposite sides of the debate; some gasped at the idea of outside investors, while others firmly felt that transparency and good intentions were all necessary to provide a wall against potential violations of the ethics rules.) — Judith A. Parker JD’06
14 | Willamette Lawyer