North Carolina May Allow Non-Attorneys to Invest in Law Firms
A North Carolina legislator has proposed allowing non-lawyers to buy into law firms, giving outside investors a chance to participate in legal profits on a direct basis.
The rules against non-lawyers investing in the business of law parallel similar restrictions on doctors, which were designed to make sure physicians answered only to their patients.
Whenever the intersection of law and the business of law come together like this, ethical concerns often loom around the corner.
The bill introduced March 9 by Fletcher Hartsell, a Republican and lawyer, would allow non-lawyers to buy up to 49% of a firm, leaving it in control of licensed attorneys, Forbes reports.
The bill, which would also allow outside investors to buy into accounting firms, includes language designed to prevent non-lawyers from interfering with the relationships between attorneys and their clients.
Non-lawyer shareholders would be barred from interfering "with the exercise of professional judgment by licensed attorneys," Forbes reports. And in the case of a dispute among lawyers, shareholders and clients it shall be resolved according to the following schedule:
1. The duty to the Court shall prevail over all other duties.
2. The duty to the client shall prevail over the duty to shareholders
That language is designed to allay concerns that lawyers would answer to investors instead of their own clients, or the courts of which they are considered officers.
Ethics expert Larry Ribstein broke it down for Forbes thusly:
"The rules are purportedly based on the notion that nonlawyer owners insufficiently imbued with professional standards would transform law firms from citadels of altruism into profit-hungry businesses."
Several states including California, New York and New Jersey limit or prohibit the so-called corporate practice of medicine, making it illegal for doctors to treat patients unless they are operating in a physician practice or employed by a hospital, according to Forbes.
If North Carolina lawmakers follow Hartsell's lead, Forbes says, perhaps lawyers in that state will soon feel similar pressure to keep an eye on the bottom line.
How this could affect the image of the legal profession and/or ethical concerns remains to be seen.
Related Resources:
- North Carolina Non-Lawyers to Invest In Law Firms? (Forbes)
- Is 'Loser Pays' Coming to Texas? (Wall Street Journal)
- Could the United States Profit from a Loser-Pays-Winner's-Costs Civil Litigation System? (FindLaw's Writ)
- The Tax Man Cometh: DOJ Sues Man for Frivolous Tax Suits (FindLaw's Legally Weird)
