In its Nov. 21 order, the Second Circuit said there also was no need for the district court to abstain from hearing the case under the abstention doctrine outlined in Railroad Commission v. Pullman, 312 U.S.496 (1941), in part because of Shin's statement the laws were "crystal clear."
"Because the district court and appellees agree that Judiciary Law §495 and LLC §201, as authoritatively interpreted by the state courts, unambiguously prohibit non-lawyer investment in law firms, Pullman abstention is unnecessary, and the district court can proceed to adjudicate the parties' disputes as to whether those statutes, and Rule 5.4, are constitutional," the Second Circuit said.
Outside equity investment is allowed in England and Australia. In the United States, only the District of Columbia allows it, but it places a cap on that investment at 25 percent. North Carolina is considering changing its law on outside investment.
Denlea in an interview said there are as many as five provisions of state law that Jacoby & Meyers will now be challenging below.
"The multiplicity of these laws is less important than the underlying constitutional issues," Denlea said. "This is a significant decision. It's very satisfying the court found that there was no need for abstention."
The circuit ruling came less than a week after the New York State Bar Association affirmed its opposition to the ownership of law firms by non-lawyers.
@|Mark Hamblett can be contacted at mhamblett@alm.com.
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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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