Federal court hears case about outside investment in law firms

By Chad Bray

The Wall Street Journal

Jacoby & Meyers LLP, a New York law firm, has asked a federal appeals court to revive its lawsuit challenging a state rule that prohibits law firms from seeking outside investment from non-lawyers.

The law firm claims the rule is unconstitutional, violating its First Amendment rights, as well as its equal protection and due process rights under the Fourteenth Amendment.

The firm, which could lose its right to practice in New York under the rule if it were to accept such funding, has already formed a limited liability corporation in anticipation of being allowed to accept outside investments.

In March, a district court judge dismissed Jacoby & Meyers’s lawsuit, saying the firm lacked standing to bring the claims against New York’s judicial system.

New York’s Attorney General has argued that the plaintiffs can’t demonstrate they were damaged by the disciplinary rule and that others state laws prohibit such investment. The law firm challenged only the disciplinary rule in its lawsuit.

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