Should Law Firms be able to Go Public?

There are currently no publicly-held law firms in the U.S. It isn't that there isn't a market, it is that the legal profession, one of the most heavily self-regulatory in existence, has decided that answering to non-lawyers and shareholders could create conflicts for lawyers. This should be a familiar line of reasoning to lawyers; most every state bar has adopted language into its regulations limiting this type of practice.

Similar rules prevent lawyers from combining with accountants, social justice advocates, financial advisors and others who could help to create some interesting synergies within individual offices. For example, it is likely that clients could benefit from their accountant and attorney being located in the same office, or from the community group helping them with their asylum case also representing them in legal proceedings.

However, despite the potential for benefits to be created by outside ownership and business combinations, it is also true that such situations could create conflicts for the parties involved. And, with the frequency that lawyers find themselves in conflict now, it is probably well that the legal profession works hard to nip potential conflicts in the bud at a stage before they even have a chance to manifest.

Additionally, one would have to imagine that, in addition to creating conflicts, being answerable to shareholders would potentially lead to some of the behavior that the American public finds so abhorrent about the legal profession; namely that the constant need to increase profits quarter over quarter would lead to the frivolity of lawsuits becoming even more pronounced.

On the other hand, if lawsuits are going to occur anyway, why not allow those who are most likely to impacted by them, the investor class, to profit from them as well? Also on the plus side, it is not cheap to run any office, never mind one panelled in rich mahogany housing shelves full of leather-bound texts. Could opening up the legal profession to public, rather than partner, ownership help to overcome some of the high barriers to entry that can exist? Would this allow lawyers hoping to assist the under served?

It is undeniable that despite being a 'litigious society' that the heavy volume of lawsuits does not equate to any function of social justice. In other words, just because there are a lot of lawsuits, doesn't mean that those who are in need of legal remedies have the legal system opened to them. You still have to pay to play, and many who are most actually in need of services can simply not afford them. Perhaps if social justice or community advocacy rights groups could own law offices, it would help alleviate some of the unfairness promulgated by the growing income gap that is noted almost ad nauseum by social commentators.

At last count, we are already up to social justice, investor rights, the annoyance of the American public and  corporate interests, and there are clearly many other parties who could have something to say about public or non-partner ownership of law firms. This is obviously a situation where both sides of the coin present some interesting, valid, and solid arguments. It also seems as if some strange bedfellows could be created by this topic.

Some of these new bunk mates might have an opportunity to express their differing opinions in a legal forum as a New York firm Jacoby & Meyers has filed a suit to challenge the current practice of only allowing partners to own firms. Freakonomics has a piece on this development, quoting heavily from The Wall St. Journal, here.

No comments:

Post a Comment