October 20, 2017 Top Story

Challenge Fails Seeking to Ban Nonlawyer Investment in Law Firms

Federal court finds either state bar advisory opinion or state court action “preferable”

Candice A. Garcia-Rodrigo

iStockphoto by Getty Images

Following prior decisions rejecting challenges to state rules of professional conduct prohibiting nonlawyers from investing in law firms, the U.S. District Court for the District of Connecticut dismissed challenges to Connecticut's rule. Some ABA Section of Litigation leaders find the plaintiff's argument against the rule to be unpersuasive to override the rule's ethical rationale.

State's Overriding Interest to Regulate Attorney Conduct

The contested state bar rule restricts lawyers from sharing fees or creating partnerships with nonlawyers. The rule makes no exception even if only a part of the business includes the practice of law. The plaintiff objected to rule, which is in line with all states' rule, because it prevents the firm from raising capital.

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