Sunday, October 30, 2011

Snowfall in October and a Law Firm at Wal-Mart ... Stange Things are Afoot

Imagine an afternoon trip to a Wal-Mart: You pick up socks, a flat-screen television and a microwave meal. After checking out, you stop in the photo studio for a family portrait, and then shift one booth over to a lawyer, who drafts your will or real estate contract.
The concept may not be that far-fetched.  (The New York Times, October 29, 2011)

Please, do explain.

One reason that it is difficult to imagine a law firm at Wal-Mart is that the existing rules of professional ethics make such an arrangement impractical if not impossible.

In Virginia (as in 48 other states), non-lawyers are prohibited from sharing legal fees with lawyers. 

In other words: an administrative assistant, paralegal, accountant, real estate broker, or any other "non-lawyer" is not allowed to own an equity stake in a law firm and thereby share legal fees with the firm's partners. 

This also means that outsiders could not invest the capital into a law firm that would (presumably) be a pre-requisite to opening storefront offices in retail outlets like Wal-Mart.

The Virginia rule is set forth in VSB Rule of Professional Conduct 5.4 (the full text is here). 


Among the rationales for Rule 5.4 is concern that an attorney's independence -- and his commitment to the client's best interest -- might be compromised if he were also considering the interests of non-attorney shareholders.


John Eligon writes in yesterday's New York Times (here) about a potential game-changing shift in the "lawyer // non-lawyer" ownership paradigm.

First, Eligon cites to England's new law that permits individuals other than lawyers to own a piece of a law firm. Second, he reports that the ABA will soon release a draft rule of similar import:
An ethics commission of the American Bar Association is expected to circulate by early November a draft proposal recommending that ethics rules be amended to allow other professional service providers — like accountants, economists and social workers — to partner with lawyers and own up to 25 percent of a law firm.
Advocates of the new model believe that a benefit of allowing non-lawyer ownership could be better-capitalized law firms capable of offering cheaper legal services to more people.

In the same way that H&R Block offers accounting and tax preparation services at low-cost, "chain" law firms could increase people's access to legal advice and services.

It will be interesting to track the receptivity of the Virginia State Bar to the alternative rule. I anticipate that there will be lawyers arguing both sides (aren't there always?!) as to whether non-lawyer ownership is an idea whose time has come.

Hope you enjoyed yesterday's surprising dose of winter weather!  The photo is by Todd Heisler, from this morning's Times.