5.4 of the ABA Rules of Professional Responsibility prohibits a non-lawyer from investing in a law firm.
The Rule states:
(a) A lawyer or law firm shall not share legal fees with a nonlawyer…
(4) (b) A lawyer shall not form a partnership with a nonlawyer if any of the activities of the partnership consist of the practice of law.
(d) A lawyer shall not practice with or in the form of a professional corporation or association authorized to practice law for a profit.
If:a nonlawyer owns an interest therein or a nonlawyer has the right to direct or control the professional judgment of a lawyer
The purpose of this prohibition is to avoid in any way with the independence of a lawyer.
All states follow the same rule, except for a limited exception in the District of Columbia.
The United Kingdom and Australia have now enabled private investment in law firms. The rationale for this change in the UK and AU is to increase access to the legal system by individuals who cannot afford high legal fees. In theory innovation will be stimulated by increased investment in the legal sector and the introduction of more modern management methods and technologies. In the US, some law firms, notably Clearspire
, has developed a workaround to the Rule 5.4 prohibition by creating a well-financed management company that provides all of the technological and management process to the law firm, enabling the lawyer's in the firm to focus on the practice of law.
In theory, in the UK and AU, safeguards have been put in place to prevent any interference with the independence of the lawyer. Should the US follow the practice of the UK and AU? What do you think?