In 2011, the national personal injury firm Jacoby & Meyers sparked debate by filing lawsuits in three states that challenged bans to nonattorney investment and ownership in law firms. The idea was to infuse new financial blood into what some saw as an outdated business model.
But after the original wave of publicity, little was heard of the cases. Now comes word that Jacoby & Meyers has decided to drop its challenge to New Jersey’s ban on nonattorney ownership and focus on lawsuits filed in Connecticut and New York.
Each of the initial suits sought a declaration that rules of professional conduct forbidding lawyers from practicing in any for-profit law firm that is owned by a nonlawyer were unconstitutional, primarily under claims that the rule limited public access to affordable legal services.
The New Jersey case was voluntarily dismissed by Jacoby & Meyers on July 28, leaving the New York and Connecticut lawsuits alive. Although the New York case had been previously dismissed for a lack of jurisdiction, the U.S. Court of Appeals for the Second Circuit reinstated it in November 2012.
The firm continues to pursue its battle to overturn bans on nonlawyer investment in law firms through its federal litigation in Connecticut as well.
“We are proceeding,” said Andrew Finkelstein, the Newburgh, N.Y.-based managing partner of the firm.
In the Connecticut suit, lawyers for Jacoby & Meyers and the Connecticut attorney general have been awaiting a decision for about two years on a motion to dismiss that was filed by the attorney general’s office on behalf of the defendants, the Judicial Branch’s Judges of the Superior Court.
James Bergenn, a Shipman & Goodwin partner, is one of the lawyers who prepared an amicus brief in support of upholding Rule 5.4 of Connecticut’s Rules of Professional Conduct on behalf of the Connecticut Trial Lawyers Association. Bergenn, whose amicus claimed that Jacoby & Meyers did not speak for Connecticut’s 1,500 CTLA members, argued that allowing nonlawyers to own law firms might benefit those individual owners, but no one else.
Among other things, opponents of allowing nonlawyer investment have expressed concerns that law firms would become so profit-oriented that decisions would be made for business reasons and not for the benefit of clients, and that pressure might be put on lawyers to commit unethical acts.
“Some form of Rule 5.4 is followed in every U.S. state, and the restriction on non-attorney ownership of law practices has governed attorney conduct in Connecticut for nearly 40 years,” the CTLA brief states. “The rule provides important ethical protections for consumers of legal services, the loss of which would drive a wedge into the attorney-client relationship and undermine key ethical safeguards.”
Finkelstein declined to discuss the litigation in depth, but indicated there were “tremendous procedural roadblocks” in the way of getting a decision on the merits in New Jersey.
He said the firm is now pinning its efforts on the New York and Connecticut cases. Fink­elstein indicated that if the courts don’t rule in Jacoby & Meyers’ favor in those states, the firm will appeal. He also told the New York Law Journal, a sister publication of the Connecticut Law Tribune, that whatever happens in New York, or Connecticut, will be binding on the other states, “as our entire action is based on federal constitutional grounds.”
In the New Jersey lawsuit, U.S. District Judge Peter Sheridan in March 2012 denied a motion by the state to dismiss the case. Sheridan said Jacoby & Meyers’ bid to “legitimize an alternate business structure” should be referred to the New Jersey Supreme Court for review and analysis. He retained jurisdiction over the federal constitutional issues, but ordered a stay on the case until a party sought reopening.
In mid-July, Jacoby & Meyers indicated during a status conference it was still contemplating whether to seek an opinion from the New Jersey Supreme Court’s Advisory Committee on Professional Ethics. Shortly after, one of Finkelstein’s partners asked to voluntarily dismiss the case without prejudice.
Finkelstein said the law firm of Finkelstein, Blankinship, Frei-Pearson & Garber, of which he is also managing partner, is representing the firm in both the New York and Connecticut cases. The firm was previously represented by Denlea & Carton in White Plains, N.Y.
In the Connecticut lawsuit, Jacoby & Meyers Law Offices v. Judges of the Connecticut Superior Court, the firm has argued before U.S. District Judge Robert Chatigny that critical sources of funding are unavailable to lawyers, which dramatically impedes access to legal services for those unable to afford lawyers. Another argument Jacoby & Meyers has made is that the law interferes with interstate commerce.
“The Connecticut Rules of Professional Conduct, as currently enacted, prohibits Jacoby & Meyers from obtaining the necessary capital infusion from non-lawyer investors required to fund and expand its operations,” the firm claims. “The deprivation of this investment opportunity discriminates against interstate commerce and/or excessively burdens interstate commerce relative to any putative local benefit it might otherwise advance.”
Jacoby & Meyers, which has an office in New Haven, has said in court documents that it wishes to expand its operations, hire more attorneys and staff, and improve its infrastructure to better serve clients.
In its motion to dismiss, the Connecticut attorney general said Rule 5.4 was first enacted in 1972 and serves the important purpose of ensuring “that those individuals who control the conduct and practice of attorneys are themselves governed by—and subject to discipline under—the Rules of Professional Conduct.”
It further argues the claims raised by Jacoby & Meyers fail on lack of standing and lack of jurisdiction.
Jacoby & Meyers has 30 offices and employs more than 300 lawyers firmwide. Finkelstein declined to share any possible expansion plans for Connecticut, in the event the firm prevails in its lawsuit.•