Non-lawyer ownership of law firms – Let’s stop treating law as a special case

While the ABA Ethics 20/20 Commission is evaluating the taking of baby steps toward non-lawyer ownership of law firms, GCs of 9 large US companies have submitted comments strongly opposed to such a move.  The issue, these legal leaders claim, is that the profit-maximizing mindset of such businesspeople will destroy the professionalism of the law.  While their hearts might be in the right place in wanting to ensure that client interests always come first, their approach and concerns are based on a rather quaint and parochial view of what non-lawyer ownership might mean for the practice of law.  And, indeed, of how the practice of law works in reality today.

First of all, it’s not necessarily a question of whether some “partners” are non-lawyers.  Non-lawyer ownership could take the form of any number of business structures or arrangements.  These could run the gamut from advisers or employees paid in equity, to non-lawyer partners, to minority investors to out-and-out corporate ownership of firms.  It could even lead to enterprises employing lawyers and providing legal services with transparency and scale.  Not every arrangement may be a good idea, but there are many consumer-serving innovations that are impossible to even consider so long as only lawyers can own those entities that provide legal services.

And secondly, the idea that the law is an exceptional case, that it is a profession that “often mandates conduct and practices that are not profit maximizing or optimizing” such that non-lawyer ownership cannot happen is hogwash.  The same argument can be made for business writ large – Sarbanes-Oxley, charitable giving, employee benefits, community involvement and the accounting profession (kidding!) – are all examples of conduct and practices common in business that are not profit maximizing.  Or on a more specific level, with medicine, where doctors make daily non-profit-maximizing decisions in the service of patients, despite non-MD ownership of most large medical groups.

What’s more, the prevalence of non-profit-maximization in the law is less a product of ethical strictures than it is the fact that lawyers and law firms are often horrifically poor businesspeople.  And to double down on this point – many of the instances where clients are harmed by lawyer misbehavior are caused by this lack of business ability.  Ineffective marketing, lackadaisical client development, poor internal controls, shoddy accounting practices – all can lead to cash crunches, blown deadlines, drawing from client trust accounts and the litany of ills that end in attorney discipline and malpractice lawsuits.

Not every lawyer or law firm wants or needs such help, but there’s little question that many lawyers could benefit from some experienced business leadership when it came to running and growing their businesses.  And there’s also little question that consumers in particular are poorly served by the chaotic and opaque U.S. legal market and its antiquated rules.  This isn’t to say that we shouldn’t proceed with care in making any such changes.  But we should start by abandoning the pretense that the practice of law is somehow so much more special than any other profession.