New York State Bar Association Task Force on Nonlawyer Ownership.

• Position: VII. Positions of Other States and Committees through Appendices, with footnotes, p. 912-959

7. POSITIONS OF OTHER STATES AND COMMITTEES

   In addition to our NLO Task Force, several committees and bar associations from other jurisdictions or from NYSBA sections have issued formal opinions or reports in response to the ABA's nonlawyer ownership proposals. The Task Force has considered each of the positions from these associations, sections and committees of which we are aware, each of which is summarized in this section. In addition, substantial comments were posted on the Ethics 20/20 Commission's website. (156)

   A. Opinions in Opposition

   1. New Jersey

      In a January 2012 Report, the New Jersey State Bar Association's Professional Responsibility and Unlawful Practice Committee recommended that the Association's Board of Trustees oppose the ABA's then-existing proposal on nonlawyer ownership of law firms. (157) The Committee consists of lawyers from various fields of the profession.

      The New Jersey Report concisely stated several bases for opposing the ABA NLO Proposal. The Report noted that the existing system serves the public well and requires personal accountability of lawyers to the judiciary. (158) It emphasized that no Committee member knew of an interest by the local bar, the business community, or general public in allowing nonlawyer ownership. (159) It also noted that the existing rules governing law firm ownership already permit firms to employ nonlawyers and compensate them as they see fit. (160) The New Jersey Report emphasized a general concern about "encroachment on attorneys' accountability and independent professional judgment," and a concern that the proposal "may be tantamount to MDP in sheep's clothing," which New Jersey has long opposed. (161) Overall, the New Jersey Report position can be summarized in its statement that the Committee was "wary of changing the status quo without good reason to do SO." (162)

      The New Jersey Report was adopted by the New Jersey State Bar's Board of Trustees in January 2012.

   2. Illinois State Bar Association

      In March 2012, the Illinois State Bar Association ("ISBA") adopted a resolution opposing the ABA's proposals to change Model Rule 1.5 and Model Rule 5.4(b). (163) The Resolution set forth two ISBA policies: "permitting the sharing of legal fees with non-lawyers or permitting ownership and control of the practice of law by non-lawyers threatens the core values of the legal profession"; and it is ISBA "policy to oppose any effort by the American Bar Association to change the Model Rules of Professional Conduct to permit lawyers to share legal fees with non-lawyers or permit law firms directly or indirectly to transfer ownership or control to non-lawyers over entities practicing law." (164)

      The Illinois Resolution recited that the changes proposed by the Ethics 20/20 Commission would be inconsistent with both prior ABA policy established in July 2000, as well as Illinois Rule of Professional Conduct 5.4. (165) Further, the Resolution noted that "there has been no demonstrated need or demand from the public or profession for such changes in the Model Rules" and that the sharing of legal fees with nonlawyers adversely impacts core values of the profession such as the exercise of independent judgment and regulation by the judiciary. (166) The Illinois Resolution affirmed and proposed that the ABA affirm and re-adopt "the policy adopted by the American Bar Association in July, 2000, to wit:

      The sharing of legal fees with non-lawyers and the ownership or control of the practice of law by non-lawyers are inconsistent with the core values of the legal profession. The law governing lawyers that prohibits lawyers from sharing legal fees with non-lawyers and from directly or indirectly transferring to non-lawyers ownership or control over entities practicing law should not be revised." (167) ISBA further resolved that the ABA should reject all proposals to amend Model Rules 1.5 and 5.4 and to permit publicly traded law firms, nonlawyer ownership of or investment in law firms, and multidisciplinary practice. (168)

      In June 2012, together with the ABA's Senior Lawyers Division, ISBA filed a Report and Resolution (denominated ABA Resolution 10A) with the ABA's House of Delegates urging the ABA to re-adopt its 2000 House of Delegates Resolution "particularly at a time when technological advances and globalization are pressuring the profession to lessen its commitment to the public and to professional independence." (169) The Report reminded the ABA of the core principles and values set forth in the 2000 Resolution. (170) With regard to the Ethics 20/20 Commission's proposed changes to Rules 1.5 and 5.4(a) on choice of law, the Report emphasized that by the House, this would amount to an approval of nonlawyer fee and ownership" which is inconsistent with the policies of all 50 states. (171) The Report urged that because the 20/20 Commission had expressed its intention to continue considering the ABA Choice of Law Proposal (after removing from consideration the ABA NLO Proposal), it was imperative that the House of Delegates give guidance as to how the Commission should proceed. The Report also stressed the importance of reaffirming the ABA policy because wide public distribution of the Commission's nonlawyer ownership proposals had fostered public perception that the profession desires to adopt nonlawyer ownership. (172) The Report urged the ABA to avoid the "evils of fee sharing with nonlawyers" and emphasized that lawyer independence is as important to proclaim and advocate throughout the world as is due process and the rule of law. (173)

      Resolution 10A was supported by the ABA's Young Lawyers Division, the Maryland, Indiana, Mississippi, North Carolina, New Jersey, Oregon, Nevada, Iowa and South Dakota bar associations and the National Conference of Women's Bar Association.

      Prior to its August 2012 meeting, the ABA House of Delegates distributed a "point/counterpoint" discussion regarding Resolution 10A, with contributions from proponents and opponents. John Thies (ISBA) and Richard Thies (ABA Senior Lawyers Division) authored the proponent opinion. Michael Traynor and Jamie Gorelick (on behalf of the Ethics 20/20 Commission) authored the opposition opinion.

      The proponent opinion urged that the Resolution be debated and voted on at the ABA's Annual Meeting in Chicago, citing the same reasons set forth in the Resolution itself. The opposition opinion cited three reasons to oppose Resolution 10A. First, in contrast to the position of the proponents, the Commission is unambiguously not recommending "a change in ABA policy on nonlawyer ownership in law firms." Second, there is "no need for a 'public clarification' regarding ABA policy." Third, "Resolution 10A would foreclose the House of Delegates from even considering related proposals on conflict of rules that the Commission has not yet decided to make and that would not come before the House until February 2013." The opposition position emphasized that it would be "bad practice" to take preemptive action to foreclose consideration of the issue before all views were fully presented. Further, all members of the Ethics 20/20 Commission, even those who voted against altering the prohibition on nonlawyer ownership, felt that the consideration of the choice of law issue should proceed for consideration.

      At the ABA House of Delegates meeting in August 2012, the House passed a motion to postpone indefinitely consideration of Resolution 10A.

   3. NYSBA Trusts and Estates Section

      In response to a request by the Section's Executive Committee and the Task Force's solicitation of comments, in March 2012, the Practice and Ethics Committee of the Trusts and Estates Section issued a report on the ABA's NLO Proposal. (174) The report summarized a survey of members of the Section's Executive Committee, members of the Practice and Ethics Committee and NYSBA's Trusts and Estates listserv. It concluded that this practice area does not favor the ABA's proposal. (175)

      The Committee's main inquiry was to measure the extent of demand for the proposed change among law firms and their clients. To that end, the Committee issued a survey posing four questions:

      (1) In your T&E practice, do you employ non-owner professionals in the delivery of legal services?

      (2) In your T&E practice, would you offer ownership interests to recruit and retain non-lawyer expertise?

      (3) In your T&E practice, would you expect that nonlawyer ownership would increase the accessibility of your legal services to the public?

      (4) Do you support the proposed ABA amendment to Rule

      5.4 of the Rules of Professional Conduct? (176)

      The Committee reported receiving 27 survey responses, which revealed the following: 59.3% of respondents did not employ non-owner professionals; 88.9% of respondents would not offer ownership interests to recruit nonlawyer expertise; 81.5% of respondents would not expect nonlawyer ownership to increase accessibility to legal services; and 74.1% of respondents did not support the ABA NLO Proposal. (177)

      Comments from survey participants included the following: "attracting talent can be achieved through contractual means"; "the ABA [NLO] proposal does not go far enough"; "[t]here is no effective mechanism to enforce non-attorney partner compliance with the Rules of Professional Conduct"; "this change would be contrary to our core values and ethical obligations as attorneys"; and "the ABA should explore options that would allow U.S. firms to compete internationally in a way that does not permit U.S. firms, or the U.S.-based component of a multi-jurisdictional firm, to offer partnerships to non-lawyers or be influence[d] by non-lawyer interests. (178)

      The Committee's report concluded that based on the survey results, NYSBA's existing reservations about commingling business and legal interests, the inability to redress violations of ethical rules by nonlawyers, and the existing ability to contract with nonlegal professionals, the Trusts and Estates...