The increasing debate over nonlawyer investment in law firms brings to the forefront certain fundamental issues. In today’s rapidly evolving legal marketplace, many firms have a greater need for capital than they had in the past. Whether funds are needed to support innovation, geographic or practice area expansion or other initiatives, the possibility of gaining access to capital through nonlawyer investment might have immediate appeal. However, I believe that attorneys should, just as they advise clients to do with many decisions they face, carefully examine the implications of such a material change to the profession before pursuing that change.
Understandably, investors expect appropriate returns on their invested capital and, as a result, may seek to ensure that businesses take actions necessary to achieve those returns. Investor expectations often cause businesses to implement changes intended to drive efficiency and heighten discipline in the enterprise. Those changes can provide valuable benefits. However, in many instances, the desired changes are made with the goal of achieving short-term financial gain. This objective, in my view, is inconsistent with the proper focus of a law practice.
Jay O. Rothman, Harvard 1985, is chair and CEO of Foley & Lardner LLP, Milwaukee.
The practice of law has elements of a business, but it is a business unlike nearly all others. The legal profession in the United States is considered to be fundamentally different than other types of businesses, with a focus on the ethical and civic responsibilities of attorneys and the unique nature of the attorney-client relationship. In addition, many law firms have long histories of stewardship by the firms’ founders and their successors. Nonlawyer investment in law firms presents unique threats to these fundamental tenets of our profession.
Of paramount importance is the potential impact on clients of nonlawyer investment in law firms. Attorneys are committed to serving clients in a manner that places their clients’ interests above their own. In many instances, attorneys appropriately provide clients with advice that, if followed, would not result in maximizing financial gain for their law firms. Although attorneys deserve to be compensated for the performance of excellent services, maximization of short-term financial gain, including the type that may be the principal objective of nonlawyer investors, should never be the predominant goal of law firms. Instead, the predominant goal of law firms should remain the delivery of high-quality, high-integrity legal services in a cost-effective manner.
The importance of this goal is embedded within the culture of many successful law firms. A firm’s best attorneys view themselves as stewards who take great pride in personal efforts to leave their firm in a position better than they found it. Those attorneys are not focused on incessant efforts to identify the next opportunity to secure short-term financial gain. Instead, they understand that, if they assist their clients’ long-term efforts to be successful, their law firm’s success will follow. With that understanding comes an unyielding commitment to serve the best interests of clients.
If law firms become subject to the rights and expectations of nonlawyer investors, a dramatic shift in the practice of law could be in our future. Will that shift permit all law firms to remain focused on serving their clients’ interests before their own? I fear not.