Second Circuit Rejects First Amendment Claim of Law Firm to Accept Investment from NonLawyers

Professor Ruthann Robson, City University of New York (CUNY) School of Law

In its opinion in Jacoby & Myers, LLP v. The Presiding Justices of the First, Second, Third & Fourth Depts, the Second Circuit upheld the New York Rules of Professional Responsibility prohibitions of nonlawyers investing in law firms, rejecting the firm's First Amendment challenges.  The law firm argued it had rights to associate, to access the courts, and to petition the courts.

Writing for the panel, Judge Susan Carney noted that while cases such as NAACP v. Button (1963) "might casually be characterized as reflecting lawyers’ expressive rights in the causes they pursue—when those causes implicate expressive values," the Supreme Court has "never held, however, that attorneys have their own First Amendment right as attorneys to associate with current or potential clients, or their own right to petition the government for the redress of their clients’ grievances when the lawyers are acting as advocates for others, and not advocating for their own cause." 

Clients have First Amendment expressive rights for which litigation may provide a vehicle. When the lawyers’ own expressive interests align with those rights, the lawyers themselves may have a cognizable First Amendment interest in pursuing the litigation. We are not aware of any judicial recognition of such an interest, however, when it comes to the lawyer’s generic act of pursuing litigation on behalf of any client.

Of course attorneys have First Amendment rights regarding their professional advertising, but the court distinguished those precedents and further rejected the asserted rights to association, access to the courts, and to petition.  Moreover, the court found that even if such rights were to be recognized as asserted by the law firm, "the regulations are supported by a substantial government interest and impose an insubstantial burden on the exercise of any such First Amendment rights."  Yet the court clearly stated that "rational basis review applies," and that the regulations "serve New York State’s well‐established interest in regulating attorney conduct and in maintaining ethical behavior and independence among the members of the legal profession."

Affirming the district judge, the Second Circuit decision means that the law firm's challenge has yet to  survive a motion to dismiss.  Yet this is most likely only the beginning of challenges to professional rules regarding lawyer and non-lawyer business relationships.