New York State Bar Association Task Force on Nonlawyer Ownership.

• Position: I. Introduction through VI. Task Force Survey Results, p. 868-912

Table of Contents I. INTRODUCTION II. HISTORY OF THE DEBATE ON NONLAWYER OWNERSHIP IN NEW YORK A. The MacCrate Report Addresses Nonlawyer Investment in Law Firms B. NYSBA's House of Delegates Votes Against Nonlawyer Ownership C. The ABA Rejects a Proposal to Allow "Lawyer Controlled" Multidisciplinarry Practice D. The Appellate Divisions of the New York State Supreme Court Adopt Rules Addressing a Lawyer's Provision of Nonlegal Services and Contractual Relations Between Lawyers and Nonlegal Professionals E. The COSAC Report and the Appellate Divisions' Enactment of the New York Rules of Professional Conduct, effective April 1, 2009 F. New York State Bar Opinions 889 and 911 III. THE ABA's ETHICS 20/20 COMMISSION PROPOSALS AND THE NLO TASK FORCE'S MISSION IV. NONLAWYER OWNERSHIP IN OTHER JURISDICTIONS A. Australia B. United Kingdom C. District of Columbia V. SPEAKERS AND PRESENTATIONS AT TASK FORCE MEETINGS VI. TASK FORCE SURVEY RESULTS A. Demographics B. Questions Presented C. Survey Results VII. POSITIONS OF OTHER STATES AND COMMITTEES A. Opinions in Opposition 1. New Jersey 2. Illinois State Bar Association 3. NYSBA Trusts and Estates Section B. Opinions in Favor 1. NYSBA International Studies 2. NYSBA Commercial and Federal Litigation Section 3. New York City Bar Association Committee on Professional Responsibility 4. NYSBA Committee on Standards of Attorney Conduct VIII. TASK FORCE OBSERVATIONS AND RECOMMENDATIONS A. Task Force Observations 1. Nonlawyer Ownership as an Alternative Structure for Legal Practice 2. No Compelling Need 3. No Empirical Data 4. No External Pressures for Change 5. Concerns About Professionalism 6. Choice of Law Problems and Opinions 889 and 911 B. Recommendations APPENDIX A A. The Ethics 20/20 Commission B. United Kingdom C. Australia D. District of Columbia E. David Udell F. Gary Munneke G. Paul Saunders APPENDIX B I. INTRODUCTION

New York State, one of the world's most significant legal centers, has traditionally played a prominent role in the evolution of the law governing lawyers. In particular, New York has been influential in developing the law applicable to the structure and operation of law firms. Law firms are the vehicles through which essential legal services are provided to the public, and the integrity of their ownership and organization is indispensable to maintaining the effective delivery of those services.

At the turn of the twenty-first century, the New York State Bar Association ("NYSBA") established the MacCrate Committee and charged it with studying the existing law governing law firm structure and considering whether there was a need for any changes in the law. In 2000, that Committee issued the MacCrate Report, a seminal and expansive document that contained an appraisal of the American legal profession as of 2000 and discussed in detail nonlawyer involvement in the practice of law. The MacCrate Report opposed the adoption of a 1999 American Bar Association ("ABA") proposal that would have permitted nonlawyer ownership of law firms. NYSBA subsequently adopted a resolution that nonlawyer investment in law firms should continue to be prohibited and joined several other state bar associations in a successful effort to oppose nonlawyer ownership proposals that came before the ABA's House of Delegates.

On December 2, 2011, the ABA's Commission on Ethics 20/20 ("Ethics 20/20 Commission") released for comment a discussion draft proposing a limited form of nonlawyer ownership of law firms (the "ABA NLO Proposal"). The draft proposed to allow certain nonlawyers employed by a law firm to have a minority financial interest in the firm and share in its profits. At the same time, the Ethics 20/20 Commission issued, as an initial proposal for comment, a "conflicts of law" paper to address how to deal with sharing of fees between separate firms (inter firm) or among offices of the same firm (intra firm) where one of the firms or offices is located in a jurisdiction where nonlawyer ownership is permissible (both inter firm and intra firm proposals are together referred to as the "ABA Conflicts of Law Proposal"). (1)

In February 2012, Vincent E. Doyle III, then President of NYSBA, gave testimony at a hearing conducted by the Ethics 20/20 Commission. He tracked the history of proposals that would have allowed nonlawyer ownership in New York in particular and the U.S. generally. He observed that after extensive study and debate, our State has consistently refused to allow nonlawyer ownership in law firms. Nonetheless, in recognition of the considerable thought that the Ethics 20/20 Commission had given to the issue of nonlawyer ownership, the fact that the current proposal was more limited than the ABA's prior proposal, and that more than ten years had passed since the last ABA proposals, President Doyle announced the creation of a new Task Force on Nonlawyer Ownership ("Task Force") chaired by NYSBA Past President Stephen P. Younger.

The Task Force is comprised of leading practitioners, academics, legal ethicists, retired jurists and other attorneys representing a broad spectrum of the legal profession. It was charged with thoroughly and objectively considering the nonlawyer ownership proposals made by the Ethics 20/20 Commission, evaluating whether the proposed changes will advance the core values of the profession--loyalty, independence and confidentiality--and reporting back to NYSBA. (2)

The Task Force conducted several meetings between February and November 2012, at which it debated the merits of the Ethics 20/20 Commission's discussion draft and subsequent proposals solicited the input, views, and experiences of a variety of individuals from various jurisdictions whose professional work has involved, either directly or indirectly, nonlawyer ownership issues. The list of speakers, and a summary of their presentations, is contained in Appendix A of this Task Force Report. The Task Force also reviewed an extensive collection of scholarship on the subject of nonlawyer ownership and discussed these writings at Task Force meetings. A bibliography of these writings is set out in Appendix B to this Task Force Report. To solicit the views of a broad section of attorneys licensed in New York, the Task Force also disseminated surveys to lawyers broken into three groups: Small Firm Practitioners; Large Firm Practitioners; and Corporate Counsel. The results of those surveys are summarized in this Task Force Report.

In April 2012, while the Task Force was in the middle of its work, the Ethics 20/20 Commission announced that it had decided not to continue to pursue the ABA NLO Proposal, which would have changed ABA policy prohibiting nonlawyer ownership of law firms. The Commission noted that it would, however, continue to consider how to provide practical guidance about choice of law problems that arise because some jurisdictions, including the District of Columbia and a growing number of foreign jurisdictions, permit nonlawyer ownership of law firms.

Despite the withdrawal of the ABA NLO Proposal, the Task Force decided to continue with its study and complete the charge assigned to it by President Doyle. This Task Force Report documents the Task Force's findings and recommendations.

The Task Force Report begins with a history of the debate regarding nonlawyer ownership in New York from the 1999 ABA proposals recommending such ownership up through the present. It then describes the Ethics 20/20 Commission's proposals on nonlawyer ownership and the Task Force's mission. The Task Force Report continues with an examination of the nonlawyer ownership experience in other jurisdictions.

Next, the Task Force Report summarizes the opinions and reports of various bar associations from other jurisdictions and sections of NYSBA prepared in response to the ABA's proposals concerning nonlawyer ownership and choice of law.

Finally, this Task Force Report concludes with the Task Force's observations and recommendations on nonlawyer ownership and choice of law concerns. The Task Force observed that the absence of compelling need, empirical data, or pressure for change, combined with professionalism concerns, all militated against changing New York's position on nonlawyer ownership and against adopting either of the ABA's nonlawyer ownership proposals. As a result, the Task Forced voted to oppose adopting any form of nonlawyer ownership in New York, noting that further studies were necessary before any such change should be advocated. The Task Force also voted in opposition to adopting the ABA's proposals on choice of law, except to endorse a proposal on inter firm fee sharing.

The Committee wishes to recognize Bob Emery, Research Librarian at Albany Law School, for his invaluable research assistance throughout this project. In addition, Albany Law School students Mackenzie Keane and Jessica Clemente reviewed drafts of the Task Force Report and provided several helpful suggestions.

The opinions expressed herein are those of the Task Force preparing this Task Force Report and do not represent those of NYSBA unless and until this Task Force Report has been adopted by the Association's House of Delegates or Executive Committee. (3)

2. HISTORY OF THE DEBATE ON NONLAWYER OWNERSHIP IN NEW YORK

   1. The MacCrate Report Addresses Nonlawyer Investment in Law Firms

      In 1999, the ABA Commission on Multidisciplinary Practice issued a report proposing, among other things, that lawyers be permitted to form business relations with nonlawyers and to allow entities owned or controlled by nonlawyers to engage in multidisciplinary practice ("MDP") with lawyers. (4) That report was rejected by the ABA House of Delegates at the ABA's Annual Meeting on August 9-10, 1999. (5)

      On June 26, 1999, NYSBA's House of Delegates adopted a resolution:

      (1) opposing any changes in existing regulations prohibiting attorneys from practicing law in MDPs in the absence of a sufficient demonstration that such changes are in the...