American bar closes door on 'lowest common denominator' ABSs

Topics: Alternative business structures

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Leading US lawyers have voted down a proposal to rule out all further studies on non-lawyer ownership of firms – while indicating that alternative business structure (ABS) arrangements remain firmly off the agenda for now.

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The vote took place in a lengthy American Bar Association debate last week. The association was discussing a decision taken by its ethics commission last April not to allow ABSs of the kind created in England, Wales and Australia.

Members of the ABA House of Delegates subsequently proposed a resolution, which would have reaffirmed the opposition stance and ended the commission’s study on the subject. That motion was voted down as the ABA elected to look further into how fee-sharing would work with firms in jurisdictions that allow non-lawyer ownership.

Frederic Ury, a member of the ethics commission, said there was no desire to amend the 12-year-old rule opposing multi-disciplinary practices. But he said the changing legal landscape meant the matter could not be permanently ignored. ‘We do have an issue raised by regulators and lawyers asking us for some guidance in what happens when they get a matter from a firm in England and how they go about sharing those fees,’ he said.

‘As a profession and as a commission we decided that was something we should look at and investigate.’

April’s announcement followed increasing calls from some members of the legal profession in the US to allow a form of non-lawyer ownership. Any change would have enabled non-lawyers, employed by a law firm and assisting the firm’s lawyers in the provision of legal services, to have a minority financial interest in the firm and share in its profits.

The strength of feeling from both sides of the House of Delegates debate was clear, with more than 90 ‘salmon slips’ – intentions to make a speech – submitted in advance.

Speaking for the resolution, Lawrence Fox, from the Pennsylvania State Bar Association, said the US authorities should have nothing to do with jurisdictions that license non-lawyers. ‘Sharing fees is just as insidious when it is done overseas as it is in America,’ he added. ‘We are exporting our standards, not importing the lowest common denominator from other countries.’

  • Meanwhile, Northamptonshire firm Franklins Solicitors has become the latest domestic firm to be granted an ABS licence by the Solicitors Regulation Authority. A legal disciplinary practice since 2009, the firm will use ABS status to create a more corporate structure but has no immediate plan to raise external investment. Managing partner Simon Long said the licensing process had gone ‘very smoothly’ and that confirmation had come four months earlier than expected.

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