Tennessee high court maintains ban on nonlawyer ownership of law firms, fee splitting
Outside investors, private equity included, will remain shut out of ownership in Tennessee law firms after the state’s highest court turned down a push to relax the long-standing restrictions.
Law.com reported Tuesday that the Tennessee Supreme Court, in an opinion dated Oct. 2, decided not to change its ethics rules banning nonlawyer ownership of firms and splitting legal fees with nonlawyers.
“At this time, the court has not identified sufficient need or support for reforms related to nonlawyer ownership of law firms or fee sharing with nonlawyers,” the state supreme court stated in its opinion. “The court may revisit this topic in the future as additional data regarding the success of these reforms becomes available.”
The Tennessee Supreme Court had invited public comment on the idea, saying it was concerned that the state lacked enough legal services. According to Law.com, the court received nearly 400 comments. So far, only Arizona and Utah have rewritten or relaxed their nonlawyer ownership rules statewide.
“While the court correctly recognizes that many Tennesseans face barriers to obtaining legal assistance, opening the door to private equity is not the appropriate solution. The justice gap should instead be addressed through measures that preserve professional competence while expanding services, such as increased support for legal aid organizations and incentives for attorneys to practice in underserved rural communities,” wrote the presidents of several Tennessee county bar associations, including Cocke County, Grainger County, Jefferson County and Sevier County, in their comment to the court.
Lucian Pera, a Memphis, Tennessee-based partner at Adams & Reese told Bloomberg Law that he didn’t think that the ban would last forever.
The state supreme court “didn’t say this is antithetical to the core values of the profession. They just said we’re not doing this now,” Pera, who helped draft Arizona’s changes to its ethical rules, told Bloomberg Law.
The Tennessee Supreme Court’s opinion also covered other territory, including taking additional steps away from relying on the council of the ABA Section of Legal Education and Admissions to the Bar to accredit the state’s law schools. Under the new rules, applicants must attend a school approved by an accreditor that the court recognizes, a category that can include other state supreme courts, rather than relying only on the council.
The court also established a taskforce to explore alternative pathways to bar licensure, interstate practice and mobility, and whether to allow licensed paraprofessionals to provide limited legal services to pro se litigants.
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