Ban On Non-Lawyer Investment In Law Firms, 2nd Circuit Rules It Doesn’t Violate Right Of Association

By Nethani Palmani | Mar 29, 2017 12:17 PM EDT

Ban on outside investment in law firms doesn't violate lawyers' First Amendment right to freedom of association, a federal appeals court has ruled. The New York-based 2nd U.S. Circuit Court of Appeals ruled Friday in an appeal by Jacoby & Meyers.

The New York Law Journal reported that Jacoby & Meyers had argued it needed outside investment from non-lawyers in order to expand and increase efficiency. Apparently, this would lead to lower legal fees among law firms and the ability to represent more clients of limited means.

The law firm claimed the ban infringed their rights to associate with clients and to petition the government with grievances in the courts on their clients' behalf. Judge Susan Carney, who wrote the opinion for the three-judge panel, however, said that the U.S. Supreme Court has never held that lawyers have their own First Amendment right to associate with current or potential clients, or their own right to petition the government with clients' grievances.

The Supreme Court has recognized First Amendment rights of lawyers acting as part of an advocacy group, such as the American Civil Liberties Union. The court also distinguishes the associational rights of lawyers who are litigating for their own commercial rewards, according to ABA Journal.

"The regulations at issue here are adequately supported by state interests and have too little effect on the attorney‐client relationship to be viewed as imposing an unlawful burden on the J&M Firms' constitutional interests," Carney wrote. This is "given the evolving nature of commercial speech protections" at which Jacoby & Meyers law firm possesses some First Amendment interests.

Ban on non-lawyer investment in law firms and on the splitting of fees between lawyers and non-lawyers is perhaps crucial for the legal ethics. In fact, it balances regulations that promote ethical lawyering and lawyer independence against the necessary increase in the cost of practicing law.

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