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By Joe Van Fleet
This week brought a major setback for the evolution of business law firms across America. Since the very first law firms were formed, non-lawyers have been prohibited from holding any ownership interest in law firms, or in any way benefitting directly from the collection of legal fees as revenue. For the past two years, there has been a growing movement to abolish this requirement and permit law firms to organize in a manner in which they can be owned and managed just like other businesses. Some even advocate allowing law firms to go public. Nevertheless, at this year’s American Bar Association Annual Meeting on Monday, the ABA House of Delegates voted to postpone indefinitely any resolutions to support such a movement. Without the ABA’s support, any legislation allowing the transformation of law firm ownership is extremely unlikely.
In theory, disasters like the implosion of Dewey LeBoeuf could have been avoided if experienced officers and directors had been monitoring the cash flow and financial position of the firm. At a time when the supply of legal services exceeds demand, law firms of all shapes and sizes could benefit from the experience and business acumen of educated and established officers and directors. Law firms face increasing competitive pressure from business entities such as LegalZoom and offshore legal groups, most of which are operated by successful business executives rather than the attorneys they consult or employ. Indeed, law firms can continue to operate under their old business models if they choose, but more progressive forward-looking firms should have the choice of restructuring just like other businesses in our ever-evolving fiscal environment. Recent times have shown us that law firms are very capable of going insolvent; we should, therefore, allow them to engage the same structure and oversight that allows other businesses to prevail.
Shame on the ABA Delegation for its lack of insight and leadership on this issue. It has become clear to law firm managers across the country that the age-old model for administering law firms no longer works, and law firms must learn to operate just like other businesses. It is regretful that the ABA House of Delegates cannot comprehend this and react favorably.
Welcome to our new website & to our legal blawg Poetic Justis! Formerly known as Peoria Legal Blawg, we have re-launched our website to better focus on our new blawg and the artwork of Mr. VanFleet’s children, which will be featured and periodically rotated as the background theme of our entire website. Please join us each month to follow our legal based blawg posts and a special poem written by Mr. VanFleet himself!