Rule barring nonlawyers from investing was key

Enforced in all 50 states, rule made it impossible for a venture capital firm to play white knight and save Dewey.

, The National Law Journal


Enforced in all 50 states, rule made it impossible for a venture capital firm to play white knight and save Dewey.

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What's being said

  • Old Bailey

    I could not agree more with Jim’s analysis. The prohibition against non-attorney investors in law firms is nothing less than outdated, shameless protectionism without any basis in fact. As Jim points out, there is no evidence to suggest that lawyers working at a firm with outside investors would abandon their professional duties under pressure from the investors or be any less competent. Private hospitals employ physicians and own medical practices. Do doctors ignore what is in the best interest of a patient because of non-physician ownership? Accountancy regulations permit a minority ownership interest in CPA firms. Are accountants any less objective, independent or thorough as a result? Airlines are publically traded companies. Are pilots more inclined to be sloppy and compromise safety? Further, outside investors may actually bring the business discipline that law firms have been sorely lacking, and make law firm management something more than a hobby. The failure of the ABA to revise Rule 5.4 is a major blow to the future of the legal profession which is already besieged with more problems than it may be able to resolve on its own.

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