March 27, 2017 / 6:34 PM / 5 months ago

For-profit law firms have no First Amendment right to expand business - 2nd Circuit

(Reuters) - In a highly anticipated ruling on Friday, the 2nd U.S. Circuit Court of Appeals explained why, for constitutional purposes, the personal injury firm Jacoby & Meyers is not like the NAACP Legal Defense Fund and the American Civil Liberties Union.

Specifically, as my Reuters colleague Nate Raymond reported, the 2nd Circuit refused to strike down New York state laws and regulations prohibiting non-lawyers from investing in law firms. Jacoby & Meyers challenged the laws in 2011, asserting if it were allowed to accept capital from non-lawyer investors, it would be able to represent clients who could not otherwise afford the firm. The law firm claimed the prohibition on outside investments violated its First Amendment right of free association and right to petition the government.

Unfortunately for Jacoby & Meyers, the 2nd Circuit said U.S. Supreme Court precedent does not recognize a constitutional right of association or petition for “attorneys who are engaged in litigation for their own commercial rewards.” Judges Susan Carney, Gerard Lynch and U.S. District Judge Alvin Hellerstein of Manhattan, sitting by designation, acknowledged that the Supreme Court has granted First Amendment protection to lawyers for advocacy groups like the NAACP Legal Defense Fund and the ACLU when those lawyers were accused of improperly soliciting clients.

But in an opinion by Judge Carney, the appellate panel said the key difference is whether lawyers are using litigation as a vehicle to advance causes they believe in, as public interest lawyers do, or to make money through garden variety client representation. Citing the Supreme Court’s 1963 ruling in NAACP v. Button and 1978 decision in In re Edna Smith Primus, the 2nd Circuit said the justices have never found that lawyers “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.”

In fact, the 2nd Circuit said, the Supreme Court has itself highlighted the difference between the First Amendment rights of nonprofit and commercial lawyers. In their ruling in the Primus case, the justices tossed South Carolina sanctions against an ACLU lawyer who sought to represent women claiming they had been sterilized as a condition of public medical assistance. In a companion decision issued the same day, the court upheld an Ohio ban on personal injury lawyers soliciting clients. The Supreme Court's intent in handing down those contrasting decisions, according to the 2nd Circuit, was “distinguishing the pursuit of expressive activity from the pursuit of commercial interests.”

Jacoby & Meyers had also argued that it has First Amendment rights under a line of Supreme Court cases in which the justices recognized union members’ constitutional power to band together to find a lawyer and bring a suit. But the 2nd Circuit read those cases to uphold the rights of clients, not of their lawyers. “They do not establish that an attorney is entitled to access the court on a client’s behalf, at least not under the First Amendment rights to petition or association,” the opinion said. “The rights of petition and assembly attach to ‘the people’—who are themselves aggrieved and accordingly who seek to assemble or to petition in order to redress their own grievances. Lawyers in a for-profit practice who act in their representative capacities do not themselves seek access to the courts to remediate their own grievances; rather, they are doing so as a part of a commercial transaction in which they serve, and are paid.”

If it were to have sided with Jacoby & Meyers and held that lawyers have a First Amendment right to represent clients with grievances, the 2nd Circuit said, it would have effectively negated state regulations on lawyers. Both the 3rd and 9th Circuits, the opinion noted, have recently refused to strike down state regulation of lawyers as unconstitutional under the First Amendment, the 3rd Circuit in 2015’s National Association for the Advancement of Multijurisdictional Practice v. Castille and the 9th Circuit in National Association for the Advancement of Multijurisdictional Practice v. Berch.

“Many of the rules governing lawyers, such as educational requirements, directly or indirectly affect the cost of legal services,” the 2nd Circuit said. “There is no basis for subjecting legislative judgments that balance increased cost against consumer protection to strict judicial scrutiny simply because the business being regulated is the practice of law.”

Almost as an afterthought, the 2nd Circuit also held that even if, under the “evolving nature of commercial speech protections,” Jacoby & Meyers has a First Amendment right to expand its client base by accepting investment from non-lawyers, the state still has a rational basis for prohibiting such investments because of its “well‐established interest in regulating attorney conduct and in maintaining ethical behavior and independence among the members of the legal profession.”

Jacoby & Meyers was represented by Gregory Blankinship of Finkelstein Blankinship Frei-Pearson & Garber. Blankinship did not respond to a previous Reuters request for comment on the 2nd Circuit decision.

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