Kaplan had told the lawyers that he might abstain pending state court resolution of the state law issues before him, which Carton said would merely put Jacoby & Meyers right "back to the very body that enacted the rule."
Kaplan also said that, even if he found for the firm on its constitutional claims, with no outside investors on the table, any opinion he issued would merely be an advisory declaration of the sort that courts are barred from delivering under Article III of the U.S. Constitution.
Rule 5.4 states in part that "a lawyer or law firm may not share legal fees with a non-lawyer" and, "A lawyer shall not practice with or in the form of an entity authorized to practice law for profit, if (1) a non-lawyer has an interest therein."
Now that they are free to amend, Carton and Denlea can add a similar claim against the other provisions, including New York Judiciary Law §495 and New York Limited Liability Company Law §201.
Section 495 bars corporations or voluntary associations from practicing or appearing as an attorney-at-law, rendering legal services or providing legal advice.
LLC §201 is a catchall statute that, by reference to other sections, limits the practice of law to lawyers.
Assistant Solicitor General Won Shin argued for the state that the choice of Jacoby & Meyers to challenge only Rule 5.4 and not the other provisions was a strategic one the firm should have to live and die by.
Kaplan, Shin said, had "explicitly warned them about this problem and they ignored that."
Shin also said the other laws blocking non-lawyer equity investment are "crystal clear" so there was no need to certify questions to the New York Court of Appeals.
But Gleeson said he thought the case was perfect for a declaratory judgment, and there was no reason for the firm to risk its livelihood by taking outside investment just to have standing to challenge the rule.
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This issue is going to be keep coming back to the courts especially if the world economy stays stagnant. While some may feel this mattered is settled, the real world consequences of small firms being outspent by big firms is having an effect on the justice system and may lead to a critical mass of complaints about the unfairness the system embodies.
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