Who Wins with Non-Lawyer Ownership? Just the Bankers (Part 2)

Part 2 of 2 in my series regarding non-lawyer ownership of law firms. Click here to read Part 1.

3) Non-lawyer ownership will not cause society to pay less for legal services.

Seriously, can you imagine making this pitch to some investment bankers?

“So we have this law firm, but we think it costs too much for the public to use our services. So we want to charge less, and make less money.” Well, that’s what the argument is making, but on a macro, industry-wide level.

In order to argue that non-lawyer ownership is a solution to society paying too much for legal services, you rely on the premise that by allowing non-lawyers to own law firms, the total amount that society will spend on legal services will decrease. I’ve heard of the concept of making the pie bigger (the “rising tide lifts all boats” concept), I’ve heard gaining a bigger slice of the pie (i.e. the competitive advantage concept), but I’ve never heard anyone involved in business who successfully pitched the idea to REDUCE the size of the pie.

It’s logically incompatible to argue that we should make the practice of law more responsive to market forces by allowing non-lawyer investors, while simultaneously arguing that by allowing such investment, we will decrease the overall amount of money our society spends on legal services. The opposite will happen.

4) Innovations don’t “trickle down.”

The reason you innovate is to make your firm “bigger, stronger, faster.” You use those competitive advantages to beat the other firms. Walmart and Best Buy have both been pioneers in streamlining competitive processes in their respective industries. Ask Circuit City if the “innovative” competitive advantages trickled down to them.

Introduction of non-lawyer ownership will not create an innovative boom in the practice of law. Small firms will not benefit by the big firm in town getting an influx of cash in order to buy all new software and equipment. They’ll be forced out of business. You don’t take your competitive advantage and use it to help your competitors.

5) The only real beneficiaries of non-lawyer ownership of law firms: Investment Bankers.

Thank God, I know we were all worried about whether investment bankers would survive this terrible climate. I’m concerned. So it’s important to me that we sacrifice the entire nature of the practice of law so that big banks and major corporations can pad their bottom lines a little by investing in law firms.

Seriously, read all the arguments in support of non-lawyer ownership. After each argument they make, ask yourself this question: How? They all seem quite brief on that point. They state that there will be benefits in efficiency and cost, but don’t say how. They say that overall legal services will be cheaper, but don’t say how.

Then think about what you REALLY know about corporate ownership. Sure, you might see some technological innovation on the front end, along with unbundling of legal services and significant investment for a few firms. But over time, you’ll see a smaller and smaller number of actual attorneys with a financial interest in their own law firm. Instead, you’ll see corporate boards and shareholder groups just like today’s major corporations.

Right now, the attorney’s SOLE responsibility is to his client. What about the law firm CEO that now has a fiduciary duty to the firm’s shareholders on the open market? How do rules prohibiting conflicts of interest address the new tangled web of investor interests? How does attorney-client privilege survive corporate ownership of confidential information?

As Sam Glover postulated in the Lawyerist: “Underneath the shiny-new-business-model rhetoric seems to be a simple idea: cheaper legal services, probably delivered by less-well-compensated lawyers, primarily to the benefit of non-lawyer CEOs and shareholders (on both sides of the transaction, when it comes to corporations representing other corporations).”

Can you imagine your law firm giving a golden parachute to a CEO who drove the company into the ground? How about investors who prefer to see short term profits over capital reinvestment? Wait, didn’t we start this by saying that non-lawyer ownership will allow firms to invest in the future? How many major corporations today are faltering because they’d rather buy back stock or pay out dividends than invest in their own human capital?


Most of the people asking for non-lawyer ownership in law firms have a vested interest in the deregulation of the practice of law. Whether they want to be the law’s version of Turbo Tax, or whether they simply want to earn profitable returns out of a law firm’s revenue, how many of them really and truly want to create a better, cheaper, and more accessible law firm? How many of them really want to improve access to justice? How many of them just want more ways to make more money?

Ask yourself, is “so that investment bankers can make more money” a reason to fundamentally and irrevocably change the practice of law? I say no.