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D.C. Bar Law Firm Ownership Rules May Be in for More Changes

Sept. 3, 2020, 7:21 PM

The pandemic hasn’t slowed the District of Columbia Bar committee weighing whether to loosen its law firm ownership rules by giving nonlaywers more prominent roles in legal services operations.

Since January, the D.C. Bar’s 13-member global legal practice committee has received comments about proposed changes—as well as benchmark data on how many and what types of legal service businesses have formed in the city that include nonlawyer partners.

And since May, the panel has held about 20 Zoom meetings with different state and foreign officials and interest groups to gain information on how other jurisdictions are handling the issue, committee chair Rick Talisman, a partner with Squire Patton Boggs, told Bloomberg Law.

The potential rule changes in D.C. are being considered as states like California, Arizona, and Utah, and cities such as Chicago are pursuing similar reforms—and could result in allowing third-party litigation funders to co-own legal operations. It’s an idea that already has sparked opposition from some legal and business groups.

When the request for public comment regarding Rule 5.4 was issued by the bar in January, “we decided we needed to get various types of feedback in a variety of ways,” said Talisman, who also serves as assistant general counsel for his firm.

The public comment call ended March 9, and garnered 17 submissions. They included 12 from groups and another five from individual attorneys, said Talisman. The nonlawyer partner survey elicited 28 responses, he said.

Talisman and a D.C. Bar spokeswoman declined to provide further details about the responses.

Funding Litigation

The U.S. Chamber of Commerce’s legal policy arm, the Institute for Legal Reform, made plain its opposition to the proposed change to the D.C. rules involving third-party litigation funding in a March 9 letter.

"(R)relaxing Rule 5.4 any further to permit fee-sharing with, or ownership of, law firms by TPLF companies would pose deleterious ethical and normative consequences for D.C.’s civil justice system and should be strongly rejected,” wrote the institute’s president, Harold Kim, in a 14-page letter co-signed by the American Tort Reform Association and two business trade groups.

Most states have adopted in part or in whole ABA Model Rule 5.4, which forbids lawyer/nonlawyer partnerships if any of the activities of the partnership consist of the practice of law.

D.C.'s unique rule for decades has been less restrictive than state rules. It allows for such partnerships only if their “sole purpose” is to provide legal services to clients, among other conditions. It doesn’t permit corporations or investment banks to acquire parts of law partnerships or law practices.

Most states considering rule changes have done so in an effort to make legal services more affordable—a mission even more important during the pandemic, they say.

Yet the possibility of loosened law firm ownership rules in the nation’s capital also could be of special interest to the Big Four accountancies, EY, PwC, KPMG, and Deloitte.

Ethics lawyers in Washington and bar officials have said they already know of instances that include at least one of the Big Four and at least one former AmLaw 100 law firm that have utilized D.C.'s Rule 5.4 parameters, though they’ve declined to name the accountancy involved.

Any recommendations by Talisman’s panel will need to go through a lengthy process before taking effect, including approvals by the D.C. Bar Board of Governors and the D.C. Court of Appeals.

To contact the reporter on this story: Sam Skolnik in Washington at sskolnik@bloomberglaw.com

To contact the editors responsible for this story: Chris Opfer at copfer@bloomberglaw.com; Rebekah Mintzer at rmintzer@bloomberglaw.com