North Carolina Legislative Review - Young Lawyers Take the Initiative

Volume 37, Number 4

By

Brian Karpf is an Assistant Editor of The Affiliate and an Associate with the Weston, Florida, firm of Young, Berman, Karpf & Gonzalez. P.A.

Life of Senate Bill 254

North Carolina Senate Bill 254—which would have permitted non-attorneys to own up to 49% of the shares in a law firm’s professional corporation—was introduced to the North Carolina Senate during the North Carolina General Assembly’s long session on March 9, 2011. The North Carolina Bar Association’s (NCBA) Department of Governmental Affairs forwarded a copy of the bill to the North Carolina Bar Association Young Lawyers Division (NCBA YLD) and the NCBA YLD’s Legislative Committee. The committee was co-chaired at the time by Clara Cottrell and Matt Calabria and the duo reviewed the proposed legislation. They then made a recommendation to the NCBA YLD Executive Committee that it oppose the bill.

On March 21, 2011, the NCBA YLD’s Executive Committee voted unanimously to oppose the legislation. At the NCBA Board of Governors meeting in April 2011, the NCBA YLD recommended that the NCBA officially oppose Senate Bill 254. The Board subsequently voted to accept the recommendation of the YLD and oppose the legislation. It took an official stance in opposition to the bill. The NCBA’s Director of Governmental Affairs was then given the go-ahead to lobby against Senate Bill 254 at the General Assembly. In a mass stance, the North Carolina State Bar joined in opposition to the bill. The end result was that Senate Bill 254 did not pass during the 2011 General Assembly session.

Reasons for Opposition

One can think of numerous reasons why it may be detrimental for nonlawyers to own a significant share of a law firm. One particular, and perhaps the primary, criticism of this piece of legislation by the NCBA YLD was that the bill conflicted with multiple Model Rules of Professional Conduct. For example, the proposed legislation was in conflict with Rule 1.8 (Conflict of Interest—“A lawyer shall not enter into a business transaction with a client or knowingly acquire an ownership, possessory, security or other pecuniary interest adverse to a client unless . . . .”) and Rule 5.4 (Professional Independence of a Lawyer—“(a) A lawyer or law firm shall not share legal fees with a nonlawyer, except . . . ”; “(b) A lawyer shall not form a partnership with a non-lawyer if any of the activities of the partnership consist of the practice of law. . . . ”; and “(d) A lawyer shall not practice with or in the form of a professional corporation or association authorized to practice law for a profit, if . . . .”). In sum, the NCBA YLD opposed the legislation to ensure that the professional integrity of law firms would not be compromised, which it feared would occur should the bill pass.

The NCBA YLD noted that, under the proposal, a 49% nonlawyer shareholder would have a significant influence over the firm’s business practices. Because that shareholder would not be an officer of the court, he or she might not necessarily have the best interest of the client in mind or the integrity of the judicial process. Of course, the nonlawyer’s focus and concern would be purely on the business (financial) aspect of the law firm. Further, the bill would have permitted disbarred attorneys to have an ownership interest in a law firm. This could have further ethical implications or, at the very least, give the appearance of impropriety. Finally, the bill would have provided the government with another way to assert control over the legal profession, which would dilute the ability of attorneys to regulate themselves.

Initiative

The NCBA YLD took the initiative last year with its legislative review and lobbying for its state bar association to oppose the bill with the goal of maintaining the integrity of the legal profession. Young lawyers not only have to conduct themselves with exemplary professionalism, but as the legal leaders of the future, it is also their responsibility to continue to maintain and improve the public perception of the legal profession. The NCBA YLD felt strongly that Senate Bill 254 was in direct opposition to actual and perceived professionalism. The NCBA YLD believes that its opposition to this bill served as an example to young and aspiring lawyers nationwide to stand up for what they believe in, to advocate for what is best for their profession, and, of course, to advocate for what is best for their clients.

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