SDNY Rejects Jacoby’s Suit Challenging Rule 5.4’s Prohibition on Outside Investment & Nonlawyer Partners

As the ABA Journal reports, the U.S. District Court for the Southern District of New York has dismissed a complaint brought by law firm Jacoby & Myers challenging Rule 5.4’s ban on nonlawyer partnership & outside investment in law firms.  This follows a remand from the Second Circuit. Lawyers for the plaintiffs have said they plan to appeal the decision to the Second Circuit.  The suit, which raises 1st and 14th Amendment arguments, cited ideas discussed by casebook author Renee Knake.

Outside investment in law firms, which is sometimes referred to as alternative business structures or ABS, is available in England and Wales and Australia (and is under consideration in parts of Canada) but remains controversial.  For example, the ABA Commission on Ethics 20/20 circulated a discussion paper on the topic, but in the face of negative reaction announced that it would not consider the issue further.   (See here for my article on the work of the Ethics 20/20 Commission).

CCBE wins case against the Dutch State on surveillance of lawyers

The CCBE, which represents the bars and law societies of Europe, issued a press release today announcing that “The District Court of The Hague has ruled that surveillance of lawyers by intelligence agencies constitutes an infringement of fundamental rights and orders the State to stop.”  The press release includes links to a number of CCBE and other documents on this topic, which has been an issue of great concern in Europe.

Canada’s largest legal province creates task force to consider more proactive lawyer regulation

During its June 25, 2015 meeting, the governing body of The Law Society of Upper Canada, which regulates Ontario lawyers, approved the creation of a task force to study compliance-based entity regulation (and another Task Force to promote wellness and address mental health and addiction issues.)  The LSUC action was based on a report found here which was prepared by the Law Society’s Policy Secretariat and contains useful background information and a proposed structure for each task force.

The information about the task force on compliance-based entity regulation starts on p. 8. The Report explains at paragraphs 30-31 that “Compliance based regulation shifts regulatory emphasis from responding to complaints and enforcement through discipline to a proactive approach in which goals, expectations and tools for licensees are established. This means that licensees can themselves ensure that they have appropriate systems and processes in place to achieve regulatory compliance. Compliance-based regulation has been generally been implemented together with entity regulation. The goal is the improvement of regulatory results through a set of defined objectives that all legal services providers seek to achieve, on the basis that practice processes and systems are most effectively addressed at the firm or entity level.” See here.

 The LSUC press release about the new Task Force is found here.  For information showing US interest in proactive lawyer regulation, see the Session 1 materials from the ABA CPR’s 40th National Conference on Professional Responsibility held in Long Beach and a forthcoming Entity Regulation FAQ document that will be posted on the National Organization of Bar Counsel’s NOBC webpage.

APRL’s Advertising Committee Issues Report

Relevant to Chapter 3: see ASSOCIATION OF PROFESSIONAL RESPONSIBILITY LAWYERS 2015 REPORT OF THE REGULATION OF LAWYER ADVERTISING COMMITTEE . The opening paragraph of the Executive Summary states: “The rules of professional conduct governing lawyer advertising in effect in most jurisdictions are outdated and unworkable in the current legal environment and fail to achieve their stated objectives. The trend toward greater regulation in response to diverse forms of electronic media advertising too often results in overly restrictive and inconsistent rules that are under-enforced and, in some cases, are constitutionally unsustainable under the Supreme Court’s Central Hudson test. Moreover, anticompetitive concerns, as well as First Amendment issues, globalization of the practice of law, and rapid technology changes compel a realignment of the balance between the professional responsibility rules and the constitutional right of lawyers to communicate with the public.  ……

Based on the survey results, anecdotal information from regulators, ethics opinions, and case law, the Committee concludes that the practical and constitutional problems with current state regulation of lawyer advertising far exceed any perceived benefits associated with protecting the public or maintaining the integrity of the legal profession, and that a practical solution to these problems is best achieved by having a single rule that prohibits false and misleading communications about a lawyer or the lawyer’s services. The Committee believes that state regulators should establish procedures for responding to complaints regarding lawyer advertising through non-disciplinary means. Professional discipline should be reserved for violations that constitute misconduct under ABA Model Rule 8.4(c).3 The Committee recommends that violations of an advertising rule that do not involve dishonesty, fraud, deceit, or misrepresentation under Rule 8.4(c) should be handled in the first instance through non-disciplinary means, including the use of advisories or warnings and the use of civil remedies where there is demonstrable and present harm to consumers.