In a surprise move, the ethics arm of the American Bar Association (ABA) has decided not to propose to the wider body any changes to current regulations prohibiting non-lawyer ownership of law firms. The decision, reached during an ABA Commission on Ethics 20/20 meeting of 12 to 13 April, effectively shuts down the path towards liberalisation in the US legal sector that some practitioners had pushed for following the relaxation of ownership rules in the UK and Australia.
Founded in 2009, the Commission was given the specific task of conducting a thorough review of the ABA Model Rules of Professional Conduct. One of those rules – Rule 5.4 – prevents non-lawyers from participating in the ownership structures of law firms in order to maintain a separation between the world of business and that of traditional lawyers. By June 2011, the Commission had already rejected some forms of non-lawyer ownership that other countries permit, such as multidisciplinary practices; publicly traded law firms; and passive, external non-lawyer ownership or investment.
Following further consideration and study, the Commission released a discussion paper in December 2011 that described a limited form of court-regulated, non-lawyer ownership of law firms. Under that suggested framework, non-lawyers who were employed by law firms and assisted their lawyers in the provision of legal services would have been permitted to hold minority financial interests in those firms and share in their profits. The framework took a similar, but more restrictive, approach to a structure that has been permitted in the District of Columbia for more than 20 years.
However, in announcing the decision taken at the April meeting, Ethics 20/20 co-chairs Jamie S Gorelick and Michael Traynor said: ‘Since its creation, the Commission has undertaken a careful study of alternative law-practice structures. Based on the Commission’s extensive outreach, research, consultation, and the response of the profession, there does not appear to be a sufficient basis for recommending a change to ABA policy on non-lawyer ownership of law firms.’
They added: ‘The Commission considered the pros and cons – including thoughtful comments that the changes recommended in the discussion draft were both too modest and too expansive – and concluded that the case had not been made for proceeding, even with a form of non-lawyer ownership that is more limited than the DC model.’
