Ban on nonlawyer investment in law firms doesn’t violate right of association, 2nd Circuit rules

A federal appeals court has ruled that ban on outside investment in law firms doesn’t violate lawyers’ First Amendment right to freedom of association.

The New York-based 2nd U.S. Circuit Court of Appeals ruled Friday in an appeal by Jacoby & Meyers, report the New York Law Journal (sub. req.) and the Wall Street Journal Law Blog and the Legal Profession Blog.

Jacoby & Meyers had argued it needed outside investment from nonlaywers to expand and increase efficiency, leading to reduced legal fees 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 wrote the opinion for the three-judge panel. The U.S. Supreme Court, she wrote, 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.

While the Supreme Court has recognized First Amendment rights of lawyers acting as part of an advocacy group such as the American Civil Liberties Union, it has distinguished the associational rights of lawyers who are litigating for their own commercial rewards, she said.

“Even were we to assume, given the evolving nature of commercial speech protections, that [the Jacoby & Meyers law firms] possess some such First Amendment interests,” Carney wrote, “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.”

Bans on nonlawyer investment in law firms and on lawyers splitting fees with nonlawyers balance regulations that promote ethical lawyering and lawyer independence against the necessary increase in the cost of practicing law, Carney said.