The New York State Bar Association Committee on Professional Ethics was asked whether lawyers may enter into a business relationship with a United Kingdom entity under the following circumstances. The U.K. entity would be formed as an Alternative Business Structure under the U.K.’s Legal Services Act, which permits entities with non-lawyer supervisors and owners to render legal services. The entity would include U.K. non-lawyers in supervisory and ownership positions, raise capital in private equity financing, and have a professional management team. The New York lawyers would establish a New York office, where they would represent New York clients. They would be employees of the U.K. entity and would hold stock options and, in some cases, vested shares in the U.K. entity. Lawyers in the New York office would adhere to confidentiality rules and would not share confidences with U.K. non-lawyer managers. The entity would adhere to U.K. rules as well.
On March 14, the committee said in Opinion 911 that New York lawyers could not work at such firms (whether from the U.K. or elsewhere).
While New York’s professional conduct rules may have compelled that answer, it creates further issues both for lawyers and the bar generally. Imagine a conversation between a third year New York University School of Law student searching for a job in a tough market and her legal ethics teacher.
Q: I’m a 3L. I got an offer from a large U.K. firm to work in its New York office. The firm has a couple of London-based economists and a scientist as partners. I just read New York Opinion 911. Does it mean I can’t take the job?
A: Yes, sorry. You can’t work for a law firm if any of its partners or investors are not lawyers even if the rules of the firm’s home jurisdiction allow it.
Q: Is the opinion binding on the courts?
A: No. It’s just the opinion of a private bar group, but it is influential.
Q: But what’s the concern?
A: Non-lawyers are not governed by ethical rules or subject to professional discipline. So there’s fear that they may sacrifice client interests for profits and pressure lawyers to go along.
Q: What’s the empirical support for that?
A: None that I’m aware of. The Washington, D.C., rules have allowed non-lawyers to be law firm partners since 1991 without a problem.
Q: Don’t the courts need evidence before they forbid this conduct?
Q: But this is my only offer. Is there any room to maneuver?
A: Yes. See if you can spot it. The opinion says: “A New York lawyer may not practice law principally in New York as an employee of an out-of-state entity that has non-lawyer owners or managers.”
Q: It must depend on the meaning of “principally in New York.”
A: Very good. Begin with “principally.” The opinion offers no definition but the dictionary says it means “mainly.” So I think you’re safe if more than half your work time is outside New York.
Q: Then if I work 300 days a year, I need work outside New York 151 days?
A: Yes, as long your other location allows it. You can work in New York the other 149 days.
Q: That makes no sense. Non-lawyers can pressure lawyers to put profits ahead of clients during the 149 days, too.
A: I can’t defend it. I can only try to explain it.
Q: Well, then, what does it mean to practice “in” New York? What if I’m principally based outside New York but communicate with New York clients by phone, email and videoconferencing?
A: We don’t know if “in” New York means physically in New York. Maybe virtual presence in New York via phone and email also counts.
Q: What does the opinion say about that?
Q: So instead of counting days, I may have to count the minutes that I’m either physically or virtually in New York?
A: I recommend keeping records.
Q: Do you think other states will agree with this opinion?
A: Other states may see an economic opportunity here. After all, lawyers have money and pay taxes. Some states may find that attractive in tough budgetary times. Other states could become for law practice what Delaware is to corporate law. That would be a natural for D.C. given its rules.
Q: Will that solution work for UK firms?
A: The U.K.firms could establish offices in a friendly U.S. jurisdiction and rotate lawyers into New York as needed so long as no New York lawyer practices there more than half the year.
Q: What about the U.K. Do you think it will now create barriers to New York lawyers?
A: Interesting question. Two things may happen. The U.K. regulators might adopt a reciprocity provision that makes life hard for New York lawyers. A lot of U.S. firms have offices in both New York and London. New York might then back down.
Q: Trade barriers in legal services.
Q: What’s the other thing?
A: U.K. lawyers may be delighted with the U.S. rules. It gives them a competitive advantage. The U.K. publication Legal Week quoted the reaction of Matthew Hudson, a senior partner at the U.K. law firm MJ Hudson: “UK and US law are both significant export businesses. Every day, all round the world, the two legal systems battle it out to be the governing law, for example on commercial contracts. So any advantages that UK law has to win against US law, the better. Arguably this is good news for UK law, to see the US being so backward.”
Q: I’m only a 3L, but it seems to me that regulating lawyers based exclusively on geography doesn’t make total sense in the wake of globalization and modern technology. Isn’t there a way to recognize the changing world while preserving the bar’s core values?
A: It can be hard for older lawyers to put aside the assumptions that shaped them even if those assumptions lack empirical support. While that may seem odd for a profession that prizes proof, it means that many reforms will fall to your generation, just as mine reformed the rules that governed our predecessors, sometimes nudged along by the courts. To help you, I offer a blueprint. See “A Profession, If You Can Keep It: How Information Technology and Fading Borders Are Reshaping the Law Marketplace and What We Should Do About It, 63 Hastings L.J. ____ (2012) (forthcoming) (available at http://ssrn.com/abstract=2026052).
Good luck finding a job.
Stephen Gillers teaches legal ethics at New York University School of Law. He is a member of the ABA Ethics 20/20 Commission. The views expressed here are his own.