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Jacoby & Meyers May Win Reconsideration of Non-attorney Ownership Issue
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Jacoby & Meyers’ lawsuit to include non-lawyers in law firm ownerships may get a new lifeline as indicated by interaction during oral argument before the 2nd U.S. Circuit Court of Appeals in New York. Jacoby & Meyers had appealed after Judge Lewis Kaplan, in March, dismissed the putative class action brought by the law firm. Kaplan had found that Jacoby & Meyers did not have locus standi to bring the case as it had failed to prove any harm caused to it by the New York state ethics rule.

The lawsuit by Jacoby & Meyers, filed in 2011, alleges that the New York Rule of Professional Conduct 5.4 – the rule that prevents non-lawyers from having ownership in a law firm – violates the law firm’s First Amendment rights, and is therefore unconstitutional.

The firm also mentioned that the rule cuts it off unfairly from private-equity funding and other sources of capital, and also that the said rule is too vague. During oral argument on Thursday, before the 2nd U.S. Circuit Court of Appeals the law firm also raised some other issues.

  
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However, during arguments, Judge John Walker asked the attorney for Jacoby & Meyers, “What if we were to remand it to Judge Kaplan, agreeing that there is no standing, but instructing him to allow you to amend the complaint to include these issues?” James Denlea, who is representing Jacoby & Meyers was quick to comment “That would be more than acceptable, your honor.”

The presiding justices from the state’s appellate division in the First, Second, Third and Fourth Departments, the justices who adopt and oversee rules of professional conduct for lawyers, are defendants in the lawsuit.

On Friday, the New York State Attorney General’s Office, however, argued that Jacoby lacked standing because there were many other statutes that prevented non-lawyer ownership in law firms, besides the Rule 5.4 that has been challenged by Jacoby & Meyers. Won Shin, for the NY Attorney General’s Office said, “The Judiciary law and the LLC Law prohibit what they are trying to do … Those other statutes are absolutely crystal clear.”

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