Opening at $25 1/2 Is Big Firm U.S.A.: Why America May Eventually Have a Publicly Traded Law Firm, and Why Law Firms Can Succeed without Going Public

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I. INTRODUCTION
II. BACKGROUND
   A. The Legal Profession and Recent Trends and Changes
      1. Defining a "Profession" and a Discussion of Partnership Ethos
      2. Recent Trends and Changes in the Legal Profession
   B. The United States and Model Rule 5.4
      1. The ABA Canons of Professional Ethics
      2. The Model Code of Professional Responsibility
      3. The ABA Model Rules of Professional Conduct
        i. The Kutak Commission
        ii. Local Variations to Model Rule 5.4 in North Dakota and the
         District of Columbia
        iii. The Failed Attempt to Allow Multi-Disciplinary Practices
   C. The International Movement Toward Public Ownership of Law Firms
      1. Australia
      2. The United Kingdom
III. ANALYSIS
   A. Misguided Reasons to Upset the Fruit Basket: Arguments for
    Public Ownership
   B. Why the Status Quo Isn't so Bad: Arguments Against Public
    Ownership
   C. Fun with Numbers: How to Value a Law Firm
      1. The Basic Approach--The PIE Valuation
      2. The Advanced Approach--The Invisible Balance Sheet
   D. A Brief Lesson on How the Bad Guys Could Change the Current
    Ethical Rules
IV. RECOMMENDATIONS
   A. The Unnecessary Costs of Going Public
   B. The Need to Focus on Organizational Capital
V. CONCLUSION

1. INTRODUCTION

As you brew your coffee and sit down to read the Wall Street Journal before heading to work, you look for your major stock holdings. After all, you have never been keen on waiting to retire at age 65. Thankfully, you see your two newest stocks are performing well; Latham & Watkins is up, as is Wachtell, Lipton, Rosen & Katz. While this scenario is not yet a reality, the chance of public ownership of American law firms is rising dramatically. This is due to the world's first publicly traded. (1) law firm in Australia, and the United Kingdom's recently enacted Legal Services Act--which allows for public ownership of law firms. (2)

Every state in America currently has adopted an ethical rule that prevents public ownership (3) of a law firm. (4) Further, most states base their ethical rules on the American Bar Association's (ABA) Model Rules of Professional Conduct (Model Rules). (5) Among other prohibitions, Model Rule 5.4 states: "(d) A lawyer shall not practice with or in the form of a professional corporation or association authorized to practice law for a profit, if: (1) a nonlawyer owns any interest therein...." (6) Despite this absolute rule, the commission that proposed the initial version of the Model Rules in 1982 advocated a rule that would have allowed public ownership of law firms. (7) Since the adoption of the Model Rules, scholars and lawyers have spent little time and effort considering the modification of the prohibition against public ownership. (8)

However, things are changing internationally. On May 21, 2007, a small plaintiff's firm in Australia became the world's first publicly traded law firm. (9) Further, the United Kingdom recently enacted the Legal Services Act, which allows public ownership of law firms. (10) The international movement toward public ownership of law firms leads one to wonder whether such a thing could ever occur in the United States.

Part II.A discusses the concept of the "legal profession," as well as recent trends and changes to the profession. Part 11.13 summarizes America's history of ethical rules regarding public ownership. Specifically, Part II.B.3.i discusses the ABA commission that recommended the Model Rules allow public ownership. Part II.B.3 also discusses two local variations to Model Rule 5.4 and, more recently, a failed attempt to amend Model Rule 5.4 to allow multi-disciplinary practices. Finally, Part ILC of this Note discusses the events in Australia and the United Kingdom and the path each country is taking toward public ownership.

Part III begins by analyzing conventional arguments for and against public ownership of law firms. …