When Jacoby & Meyers began, it was supposed to be the People’s law firm, solid lawyering at prices regular folks could afford. Some wags might argue that this was merely a marketing stance, as they wanted money as much as any other law firm. When they didn’t get it, they pivoted to a personal injury firm.
There was a structural argument with the concept of low prices that doomed it to failure: if you don’t make enough money, then there’s no point in running a business. If your intention is to run a charity, that’s a different story. J&M was no charity. Their lawyers want to get paid, and paid enough to enjoy the comfortable lifestyle their mommies promised would be theirs if they just hunkered down, went to law school and became professionals. There is nothing wrong with that, even if the nice folks who want cheap lawyers fail to grasp that their cheap comes at the lawyers’ expense.
Same goes with the advocates of Access 2 Justice, all of whom get paychecks from somebody else while telling lawyers to work for pennies for the good of the poor and downtrodden. People need inexpensive legal assistance. Lawyers need to feed their kids. Do the math.
But to Jacoby & Meyers’ credit, they pushed their failed business model in the right direction, unlike the alt-legal businesses which basically are continuing criminal enterprises that no prosecutor seems to give a hoot about. The firm challenged, head on, one of the primary canons of legal ethics, non-lawyer ownership of law firms.
The pitch was pretty much the same flowery nonsense that works well among the terminally clueless and the deeply passionate. The Second Circuit was not amused.
The J&M Firms allege that, if they were allowed to accept outside investment, they would be able to—and would—improve their infrastructure and efficiency and as a result reduce their fees and serve more clients, including clients who might otherwise be unable to afford their services. By impeding them from reaching this goal, the J&M Firms contend, the state has unconstitutionally infringed their rights as lawyers to associate with clients and to access the courts—rights that are grounded, they argue, in the First Amendment.
It’s for the poor clients, they say. Of course they do. Southern District Judge Lewis Kaplan may have gotten a good laugh out of that one. Or maybe he just cringed, wondering why they thought he was stupid enough to buy this crap.
The irony here is that Jacoby & Meyers is a law firm. Yet, they were represented by Douglas Blankinship of Finkelstein, Blankinship, Frei‐Pearson & Garber*. Maybe they didn’t want a fool for a client. Maybe they realized they lacked the chops. But whatever their purpose, the J&M firm retained counsel to represent them. Because law is hard, and for all the malarkey J&M was trying to spread, it knew better than to rely on crappy lawyering when its own interests were at stake.
Belying the claim that if a law firm could only enjoy the infusion of cash from non-lawyers, it would have the money it needed to use magic voodoo technology to perform law in cheap minutes at rock-bottom prices, is basic economics. Non-lawyers aren’t giving lawyers big money because they’re great humanitarians, but because they want a return on their investment. The firm has to make money to make it worth the investment. The only way law firms make money is to charge clients.
The question then shifts to volume. If a law firm can do a thousand wills for $100, versus 100 wills for $1,000, in the same period of time, it can generate the same revenue. Can tech make this happen? Of course it can. It can do that now, by putting a form will on the computer with some fill in the blanks.
But the problem is that the work product will be garbage, because filling in the blanks is the easy part. The hard part is knowing what to fill in the blanks, and that requires a depth of understanding of each testator’s needs, family circumstances, situation. To learn that is what distinguishes a lawyer from the guy who sells legal forms. That blows the deal, as each client either takes up lawyer time despite technology or gets inadequate representation.
Tech may be able to cut a little time off the lawyer’s work at the fringes, but as long as a lawyer’s time and advice are what he’s selling, it will never touch the primary cost of legal services. Plus, the tech costs money too, vitiating the tiny benefit it offers in time savings. It’s a wash at best. Any practicing lawyer who gives a damn about competence knows how the numbers work out.
But that’s not what makes this infusion of non-lawyer cash unethical. The management of a law firm should be predicated upon the performance of zealous representation and fulfillment of professional responsibility. What it should not be about is maximizing a return on investment, which is the only thing a non-lawyer investor cares about. You can’t blame the non-lawyer investor. That’s why people invest.
When a non-lawyer is the owner, the obvious solution to earning more money is doing less lawyering, spending less time, thinking less hard, caring less about the client than the cash. Putting that pretty pink “what about the poor clients” bow on top of this mutt doesn’t make judges incapable of seeing the bullshit through their sad tears. This is about money, which is a perfectly fine thing but for the fact that it’s a law firm whose only justification for monopolistic existence is to practice law for its clients’ benefit.
And yet, what of the First Amendment? Why do I hate the First Amendment so much?
That’s a red herring, as should be obvious. When we stand up in that fancy courthouse to swear our oath of fealty to the law, we do so voluntarily and in exchange for the right to be that guy in the well. We knowingly give up some rights, like the right to do whatever we want despite the Code of Professional Responsibility. This is the profession we chose, and we knew what the rules were. Yet, we took the oath anyway. Volenti non fit injuria.
Is it really that lawyers (and judges) just hate technology? Nope. Not at all.
It’s not that lawyers are anti-technology, it’s that they are anti-bullshit.
The Second Circuit wasn’t fond of bullshit either. Good decision.
*As Turk informs me, the managing partner of Jacoby & Meyers NY is Andrew Finkelstein. He’s also the principal of Finkelstein and Partners. And he’s also the Finkelstein in Finkelstein, Blankinship, Frei‐Pearson & Garber, LLP. So, one might say that J&M did go kinda pro se, although others might say that’s not really possible since a lawyer can’t be in three firms at once. But one thing is clear: Andrew Finkelstein isn’t lazy.
H/T Keith Kaplan
On the law, the court is undoubtedly correct. This would be quite an expansion of free speech rights.
On the policy, I’m not so sure. Does it really matter if the co-owners of a firm happen to be lawyers or not? Consider your typical big corporate law firm with offices across the country. Every partner there cares about the ethics of their own representation, but when it comes to other lawyers in unrelated representation, money is money. No Wills & Trusts partner in San Francisco ever called up the Litigation partner in Miami to tell them they’d prefer ethics over income. They called to ask them why their revenue-per-lawyer is sagging.
We already have a system where people can own an interest in law firms and profit without having any ethical responsibility to the underlying clients. If the Litigation partner in Miami makes double the normal revenue (which they share back with the other partners), then gets disbarred the next year because that revenue came from gambling with IOLTA funds, then, well, that’s their problem, not the problem of the Wills & Trusts partner in San Francisco, who benefited from it.
Of course, we’d never dream about making partners in a law firm jointly liable (from a licensing/discipline standpoint) for ethical violations by any of them. Yet, because we don’t, lawyer co-owners have no greater responsibility than do non-lawyer co-owners.
And they implicitly expect the same of every other lawyer in the firm, because they’re all lawyers and expect each other to behave ethically without having to say so or micromanage each other. If a biglaw firm has a partner who commits an ethical breach, it reflects on the firm (and, in addition to making all lawyers at the firm look bad, may also affect their revenue). They all know this, they conduct themselves accordingly and presume every other lawyer at the firms will do the same.
Ideally, yes. In single-office firms, sure. In firms with under 20 lawyers, likely.
But all of the assumptions in that argument break down when we think of the large firms. Lawyers in a different department in a different city have no incentive to care the slightest about what happens in other offices so long as (1) they produce income and (2) they don’t get caught. Nobody at DLA Piper or Skadden really thinks much about what happens in the other parts of the firm so long as they’re making mint. When it comes to lawyers in other offices or departments, their incentives and disincentives are just the same as if they weren’t lawyers at all.
Consider Dreier, LLP. The whole thing was a Ponzi scheme, and yet under its umbrella it had dozens of talented, upstanding, ethical lawyers. The presence of lawyer ownership did nothing to prevent a massive fraud.
These stories happen all the time. The head of Jenkens & Gilchrist’s Chicago office was sentenced in 2014 for orchestrating fraudulent tax shelter schemes for wealthy clients. Martin Shkreli’s lawyer, formerly of Katten Muchin Rosenman LLP and Kaye Scholer LLP, is indicted alongside him. The list goes on and on of lawyers behaving badly despite the presence of dozens, sometimes hundreds, of other lawyers around them in the same firm.
I’m not saying we should prohibit large firms or that non-lawyer ownership is an awesome idea. I’m just pointing out that the objections raised against non-lawyer ownership aren’t any different from the situation that already exists at large firms.
Some lawyers behave badly, therefore there’s no justification for ethics. No, Max. Some people murder, therefore there’s no justification for criminalizing murder. Not that either, Max. I (and I assume everyone else who read your comment) got your point the first time, before you murdered all these additional words. It’s still wrong.
You dream your dreams. Let me dream mine.
This is getting icky.
Does it really matter if the co-owners of a firm happen to be lawyers or not?
Yup, it does. One the PI front, it allows non-lawyers to chase cases without regard to ethics and then “refer” them to their preferred firm, where they just happen to have an ownership interest.
The line between owner/marketer/chaser becomes non-existentent.
The lawyers simply turn a blind eye as to how that phone call came in to the firm.
Max gonna Max.
“Of course, we’d never dream about making partners in a law firm jointly liable (from a licensing/discipline standpoint) for ethical violations by any of them. Yet, because we don’t, lawyer co-owners have no greater responsibility than do non-lawyer co-owners.”
This just isn’t true..If they’re making managerial or policy decisions they absolutely can bear responsibility. If another attorney institutes unethical policies or directs attorneys under their authority to act unethically, it can fall on them. I if you had some kind of non-lawyer ownership system where they’re somehow completely insulated from decision making, I suppose that you could avoid additional ethical problems, but it’s not clear how it would work or why anyone would invest under those circumstances.
No one thinks that lawyer-only ownership somehow magically protects you from unethical behavior but (A) I think it helps on the margins and (B) I don’t see any real advantage to getting rid of it.
What a great idea. Why don’t I also hire a hip 20 something who swears his latest tech wiz company can make me a ton of money with a new investment scheme that gets around all those outmoded SEC rules.
Maybe I’m just too old fashioned, but as a legal client I have a strong aversion to being thrown to the lions for someone else’s ROI.
My cynical side thinks J&M wasn’t smart enough to come up with an acceptable financing structure that would allow outside investment without violating the rules against outside ownership.
It’s amusing to read in the Court of Appeals decision the J&M claim that non-ownership funding sources, like bank loans, come with onerous interest rates and difficult provisions. Do they think that ownership investments would be any different? I would also be interested in hearing just how they would deal with the myriad of conflict of interest issues that would surely arise with outside ownership.
Well, everybody knows judges are a buncha dopes and know nothing about such high finance things like loans and investments.
This non-lawyer ownership will be rammed through by ABA and those it serves, during our lifetimes.
Because greed.
If so, another reason to be thankful for the ABA’s irrelevance to the practice of law.
Irrelevance, except for their continuing ability to threaten it with destruction.
I could eliminate everything about lawyers and law in that post and then not have to write the post I’ve been thinking about for a year on why corporations are a bad business model for promoting good decision making, ethics and long-term strategic thinking. What’s your policy on being plagiarized?
By long term, do you mean quarterly or is that way too long?
It’s terribly difficult to authenticate the imponderable, the hypothetical or the strategic, trust it. Just try it and see where it gets you!
More like “after lunch.”