Every state has a rule proscribing nonlawyer investment in, law firms.
This sixty-plus-year-old prohibition has created an inefficient legal
services market. Firms cannot access capital markets, limiting their
opportunities for expansion, curtailing investments in technology and
training, and hindering competition. Furthermore, every jurisdiction e
xcept the District of Columbia prohibits lawyers from entering into a
business association with nonlawyers as partners or directors if the b
usiness provides legal services. These prohibitions against nonlawyer
investment and participation in law firms have long hindered the legal
profession with no signs of change. This Article advocates that these
prohibitions be lifted It discusses the source of these prohibitions
and the historical and ethical arguments of critics, which are shown t
o be merely phantom concerns. These concerns are far outweighed by the
substantial benefits of allowing law firms to incorporate, to engage
in business associations with nonlawyers, and to receive investments b
y nonlawyers. The benefits include capital for expansion, capital for
investment in new technologies and new lawyers, financing for continge
ncy fee cases, and a myriad of other rewards. Most persuasively, perha
ps, as the practice of law continues to be increasingly transformed fr
om a profession into a business, it makes little sense to prevent lawy
ers from using the financial tools that virtually every other business
has available to it.