The Business of Law Will Get Its Day in Court

Jacoby and Meyers was a ground-breaking concept when it first burst onto the legal scene in 1972.  Forget the mahogany paneled rooms and rich blood-red leather chairs. You sat on a milk crate and they charged what “ordinary” people could afford to pay for a lawyer. It was a good idea. Shame it failed.

But that doesn’t mean that the good folks at J&M don’t want to be on the cutting edge again, this time bringing non-lawyer money into their storefronts.  Via Bloomberg :


Jacoby & Meyers LLP, the discount law firm with storefront offices across the U.S., won an appeals court ruling reinstating its legal attack on a New York statute barring nonlawyers from owning an interest in law firms.


Jacoby & Meyers, which wants capital to expand into communities with working-class and immigrant families, has asked federal courts in New Jersey and Connecticut as well as New York to throw out such laws. A judge last year dismissed the New York case citing jurisdictional grounds.


The U.S. Court of Appeals in New York today issued an order modifying a November ruling that reinstated the suit and returned it to the trial court.


Despite overly simplistic assumptions that anyone who doesn’t embrace every new money-making scheme for lawyers is either a Luddite or hater, there are some ideas worthy of pursuit and some not. For example, I like the idea of lawyers having a kiosk in Wal-Mart, much as doctors have doc-in-a-box acute care facilities.  Bring the law to the people, eliminating unnecessary expense so that lawyers can earn a living while clients are provided quality counsel at a reduced cost? Great idea.

What about non-lawyers owning law firms?

They want a cash infusion to expand, and want to go to the capital markets for the money rather than borrow it. Maybe no one will lend it to them. Maybe they would prefer not to pay back the debt, but use profit participation. Fair enough. 

The Brits already allow it, as do the Aussies.  Of course, they do plenty of things differently than we do.

On the other hand, the concern is that non-lawyer investors will compel choices that are inconsistent with the ethical responsibilities of lawyers.  The law doesn’t fit well with typical cost-benefit analyses, often requiring us to do things to serve our clients which are contrary to our own financial self-interest.  It’s not that we don’t like profit. We like profit. We just don’t put profit ahead of obligations.

The  Second Circuit decision remitting the case to Judge Lewis Kaplan clearly anticipates a ruling on the merits, which is good.  It’s time to put this issue to rest, so we can either move forward with investment or put the dreams of law firm IPOs to rest.  The perpetual schemes of futurists for a reimagined profession are confusing a great many new lawyers as to where they should focus their energies and how they should plan their futures.  At some point, the cries for a paradigm shift have to either happen or stop.

Ironically, Jacoby & Meyers was at the forefront of lawyer advertising all those years ago.  Most young lawyers can’t imagine a world without lawyer advertising, whether the cheesy television commercials or their websites promoting how they’re aggressive, caring and offer free consultations. 

Here’s where I say something that is going to make you call me mean names.  Lawyer advertising has been the worst thing to happen to the profession.

Yes, I’m well aware of all the arguments, First Amendment and level the playing field, and all that stuff, in favor. What I’m also aware of is that it started the race to the bottom, with unintended consequences wherever one turns. 

Has it worked for you? Has it made legal representation more available and affordable to the public? Has it made lawyers wealthier and happier?  Well, maybe the few who jumped in early, but it came at the expense of others and bore no relation to the value of legal services or the quality of representation.

But who cares about such crap? It’s all about making money, right, and if it makes you money, then it has to be good.  It just has to.

There is a segment of the profession who argues that law is a business, and I suspect they are right as far as they are concerned.  For others, there is a business component to the practice of law, certainly, but it is not a business in the same way as non-professions. That the perception has changed isn’t a reflection of the future, but a misperception of the present.  They see law as a business because they can’t comprehend what it means for law to be a profession.  They see ethics and competence as the archaic weapons of old men to keep them down, to make them poor, to maintain their hegemony over the machine that cranks out money.

To the extent lawyers have adopted this belief, the step of non-lawyer ownership is hardly a big one.  If anything, it makes perfect sense and is entirely consistent with law being no different than selling laundry detergent.  And if that’s all the legal profession is to you, then there is no real impediment to opening the door to anyone who wants to skim a few points off the top of the law.

And the next step is to rid society of pesky lawyers altogether, and let anyone open a law shop and sell their wares. Would you like a mocha frappucino with your complaint? 

So Jacoby & Meyers, and all those who are certain law is just another business, will finally get the opportunity to pursue wealth.  Hopefully, this will present an opportunity to stop the race to the bottom.








14 thoughts on “The Business of Law Will Get Its Day in Court

  1. David Giacalone

    Hello, Scott, Given my goal these days of avoiding major sources of agita, this was apparently a bad day for me to stop by after years away to see what’s happening at “Simple Justice.” The legal profession has given its “dignity-above-commerce” approach to law practice centuries of opportunity to provide competent and affordable legal services to every person who is in need of legal assistance and it has failed miserably. I think you might be confusing your own dedication to the needs and rights of clients with the existing approach of law firms in general, which appear to value profits first.

    After some quick searching at my old weblog, I see that six years ago this week I wrote: “NYSBA says the new [proposed, highly restrictive] rules will result in ‘more dignity for the profession.’ I continue to believe that better service to clients (who are our bosses and our buyers) and more price and quality competition is the best way to improve the image of the legal profession, and to give it genuine dignity. . . . [T]he profession earns its reputation every day, one lawyer at a time, treating one client at a time. No retentive obsession with a grandiose notion of dignity will produce a reputation for lawyers that is any better than our dedication to our clients and our honesty deserve.”

    That’s about as hard as I am willing/able to think about this topic today. Except, to say that the medical profession claimed half a century ago that it was unethical for any doctor to work for an HMO because the motivation would be to serve the corporate interests or profit motive rather than the best interests of the patient. The AMA etc. also banned advertising as undignified. That approach was anti-competitive, anti-consumer, and contrary to the reality of medical practice in HMOs and other forms of practice not fully owned and controlled by licensed doctors.

    Until the legal profession figures out a way to truly serve the entire population, it should be willing to allow other forms of ownership (as in UK and Australia), and should focus on whether clients are actually receiving good service at reasonable rates from lawyers and law firms of all types.

  2. SHG

    The problem with trying new things to see what works is that the genie never wants to go back into the bottle, and so we keep letting new genies out of the bottle in the hope it will fix the mess. And then that genie won’t go back either. And so on.

    Nice to hear from you, pal.

  3. David Giacalone

    Are you slippery-sloping me, Scott? If we had a regulatory system that actually took the rules on diligence, competence and reasonable fees seriously, we could try new things with some confidence that someone is really looking after the interests of clients.

    We can also look to see what is working (or, what serves clients no worse than our current system) elsewhere, and we could see what happens with experiments in a few states, taking advantage of our otherwise disfunctionally fragmented regulatory system.

    Have a lovely weekend.

    p.s. Should we ban all blawgs because some damage the image of lawyers or seem to be too-focused on gaining business? Or, because they haven’t reached their potential for educating the public?

  4. Thomas Stephenson

    Agreed. The danger of allowing non-lawyer investors can be seen pretty clearly in criminal defense practice.

    From a pure cost-benefit analysis, pleading everything out is more profitable than taking the occasional case to trial. So is taking a down payment and a payment plan, then dumping the client when he stops paying the bills later. Obviously, there are some lawyers who actually do this, but can you imagine what things would look like if lawyers had to concern themselves with interested, non-lawyer shareholders?

    “Look, I really think your case should go to trial because the state’s evidence has holes you could drive a truck through and their plea offer is ridiculous. But it doesn’t maximize shareholder value to take cases like this to trial, so you’re going to have to take the plea.”

  5. SHG

    If I understand the Brits correctly, while the non-lawyer investors enjoy profit participation, they have no say in management, which strikes me as being a bit unfair to the investors. If you’re going to let them invest, then they get a vote. On the other hand, the pressure to maximize profits exists whether they say it out loud or not, and the ethical implications, as you point out, are too obvious to require much discussion.

  6. Thomas Stephenson

    Well, the pressure to maximize profit is there whether non-lawyer investors are involved or not. Lawyers have to eat and all that stuff.

    Difference is that non-lawyer investors don’t have to concern themselves with ethics. They don’t have a law license (and therefore livelihood) on the line.

  7. David Giacalone

    The first dozen years of my legal career (1976 to 1988) was spent at the FTC looking at the anticompetitive behavior of professions. Your excuses for barring nonlawyer ownership of firms — especially worries over “quality”and nonlawyer-lack-of-ethics — are virtually identical to those made by medical doctors, podiatrists, realtors, opticians, etc. Whether acknowledged or not, they reflect the fear of reduced status and income (a guild mentality) much more than a realistic justification for barring innovations and new forms of competition.

    After watching the legal industry, as competition and consumer advocate, in many contexts (from federal regulator, to boutique utility firm, to Main Street general practice, to law clerk, to attorney for children and as “back-up-center” to their lawyers, to mediation pioneer, to blawg pundit), for almost half a century, I believe that nonlawyer shareholders will often have far lower expectations as to the proper rate of return than lawyer partners, and will be far more likely to actually compete with other providers on price and quality and choice.

    Since I can’t give you links to discussions at f/k/a on these topics, here is one quote that sums up many of the themes:

    “[I]t seems that most lawyers expected a very good lifestyle to come automatically with their J.D., along with high social status. They are angry and worried that the marketplace doesn’t value their services as highly as they had expected, and they are bewildered that society doesn’t give them the anticipated respect. Good intentions of any one individual lawyer can be readily overwhelmed by the demands of partners (at work and home) to keep the income stream flowing. The result, as individuals and as a group, is resistance to any change that threatens to further undermine their financial and social position. As stated with refreshing candor in a recent bar association publication, ‘the top concerns of the practicing bar are the economics of the practice and the image of the profession.’ (Illinois State Bar Association Bar News, June 16, 2003)”

    I’ve seen so much incompetence and greed on the part of lawyers that I refuse to believe that the average nonlawyer investor is a greater threat to quality and diligence — especially if their lawyer employees are serious about their individual ethical obligations. And, I’ve seen so little diligence on the part of bar counsel (especially on issues such as firms accepting more work than can be handled diligently and competently, and charging excessive fees, and setting billable hour quotas), that I see our purported ethical obligations to clients as being scant protection against lawyer malfeasance. The legal profession is far more likely to “protect” clients from competition, information, innovation and choice, than to protect them from bad lawyering and bad lawyers.

    At the very least, I suggest actually looking at what has happened in the UK regarding nonlawyer owners before just sayin

  8. David Giacalone

    I’m not much of an investor, Scott, but I am fairly sure that there are many situations where investors have non-voting stock, and where even an investor with significant holdings has no say in managing a firm. As long as you know in advance you will not have a vote or a say in management, there would seem to be no unfairness.

    Also, “too obvious to require much discussion” — like calling something a no-brainer — is not a very persuasive argument. I believe that true competition protects consumers far more than does lip-service to unenforced ethical obligations.

  9. SHG

    Fear of reduced status? Because our status is doing so well that we must struggle to maintain its high level?

    The legal profession is dying, and its chances for survival won’t be improved by an influx of new money from people for whom there is no ethical connection. Lawyers have proven they can’t be trusted with the opportunity to race to the bottom; give them a chance and they’re off to the races. We opened a new path with advertising, and look how wonderful that turned out to be. So do it again and expect it to work out better the next time? The very definition of insanity.

  10. SHG

    It’s not meant to be persuasive (since if it’s obvious, no persuasion is required), but for brevity (hint, hint). 

    I agree with you that the bar has done an awful job enforcing ethical obligations, but I also think the internet has grown the problem beyond anyone’s control. That’s why we need to clean up our own mess rather than wait for the “official people” to do it for us.

Comments are closed.