monday, 8 october of 2012

Appeals court may revive law firm´s bid for non-attorney owners

Non-attorney owners

Appeals court may revive law firm's bid for non-attorney owners

A federal appeals court judge on Friday appeared to extend a lifeline to personal-injury law firm Jacoby & Meyers to reinstate its case against an ethics rule barring non-lawyers from having ownership of law firms.

Judge Lewis Kaplan in March tossed out the firm's putative class action, finding that Jacoby & Meyers lacked standing to bring the case because it had not proved it had been harmed by the New York state ethics rule.

But at oral argument Thursday at the 2nd U.S. Circuit Court of Appeals in New York, Judge John Walker seemed to indicate that the firm could get a second shot at bringing the lawsuit.

"What if we were to remand it to Judge Kaplan, agreeing that there is no standing, but instructing him to allow you to amend the complaint to include these issues?" Walker asked.

"That would be more than acceptable, your honor," replied James Denlea, who argued for Jacoby & Meyers.

Jacoby's lawsuit, filed in May 2011, asserts that New York Rule of Professional Conduct 5.4 -- which bars non-lawyers from sharing in the ownership of a law firm -- is unconstitutional because it violates the firm's federal First Amendment rights. The firm also says the rule unfairly cuts it off from private-equity funding and other sources of capital and that the rule is too vague.

The defendants in the suit are the presiding justices from the state's appellate division, in the First, Second, Third and Fourth Departments, who adopt and oversee rules governing the conduct of lawyers.

Won Shin, of the New York State Attorney General's Office, argued on Friday that Jacoby had no standing because, aside from Rule 5.4, a host of other statutes prevent outside investment from non-lawyers.

'Crystal clear'

The state argued that Jacoby & Meyers cannot show that the New York state rule alone caused them injury when many other statutes exist that independently bar what they are seeking to do.

"The Judiciary Law and the LLC Law prohibit what they are trying to do," Shin said, referring to New York's Partnership Law. "Those other statutes are absolutely crystal clear."

In addition to Walker, Thursday's appeal was heard by Circuit Judge Gerard Lynch and John Gleeson of Brooklyn federal court, sitting by designation. The panel did not issue an immediate decision.

New York, like the 49 other states, prohibits non-lawyers from holding a stake in law firms. Washington began allowing the practice under certain conditions more than 20 years ago, and many European and other foreign countries, including Australia, permit non-lawyer ownership of law firms.

The case is Jacoby & Meyers Law Offices v. The Presiding Justices of the First, U.S. Court for the 2nd Circuit, No. 12-1377.

For Jacoby: James Denlea of Meiselman, Denlea, Packman, Carton & Eberz.

For the justices: Won Shin, assistant solicitor general, New York State Office of the Attorney General.

(Published by Reuters - October 5, 2012)

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