Jacoby & Meyers, LLP v. Presiding Justices of the First, Second, Third & Fourth Departments, Appellate Division of the Supreme Court of New York

852 F.3d 178, 2017 WL 1101082, 2017 U.S. App. LEXIS 5247
CourtCourt of Appeals for the Second Circuit
DecidedMarch 24, 2017
DocketDocket No. 15-2608
StatusPublished
Cited by23 cases

This text of 852 F.3d 178 (Jacoby & Meyers, LLP v. Presiding Justices of the First, Second, Third & Fourth Departments, Appellate Division of the Supreme Court of New York) is published on Counsel Stack Legal Research, covering Court of Appeals for the Second Circuit primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Jacoby & Meyers, LLP v. Presiding Justices of the First, Second, Third & Fourth Departments, Appellate Division of the Supreme Court of New York, 852 F.3d 178, 2017 WL 1101082, 2017 U.S. App. LEXIS 5247 (2d Cir. 2017).

Opinion

SUSAN L. CARNEY, Circuit Judge:

Through a set of prohibitions of long standing in New York and similar to those widely prevalent in the fifty states and the District of Columbia, the State of New York prohibits non-attorneys from investing in law firms. See generally N.Y. State Bar Ass’n, Report of the Task Force on Nonlawyer Ownership, reprinted at 76 Alb. L. Rev. 865 (2013) (“NYSBA Report”). The prohibition is generally seen as helping to ensure the independence and ethical conduct of lawyers. See id. at 876-77. Plaintiffs-Appellants Jacoby & Meyers, LLP, a limited liability partnership (the “LLP”), and Jacoby & Meyers USA II, PLLC, a related professional limited liability company (the “PLLC”; together, “plaintiffs” or the “J&M Firms”) bring a putative class action challenging New York’s rules, regulations, and statutes prohibiting such investments. The infusions of additional capital that the regulations now prevent, they declare, would enable the J&M Firms to improve the quality of the legal services that they offer and at the same time to reduce their fees, expanding their ability to serve needy clients. They assert that, were they able to do so, they would act on that ability in the interests of such potential clients. Because the laws currently restrict their ability to accomplish those goals, they maintain, the state regime unlawfully interferes with their rights as lawyers to associate with clients and to access the courts — rights they see as grounded in the First Amendment.

The United States District Court for the Southern District of New York (Kaplan, [182]*182Judge) dismissed the complaint for failure to allege the infringement of any cognizable constitutional right. On de novo review, we identify no error in that conclusion. Neither as a for-profit law partnership nor as a professional limited liability company do the J&M Firms have the associational or petition rights that they claim. Even were we to assume, given the evolving nature of commercial speech protections, that they possess some such First Amendment interests, the regulations at issue here are adequately supported by state interests and have too little effect on the attorney-client relationship to be viewed as imposing an unlawful burden on the J&M Firms’ constitutional interests. We therefore AFFIRM the judgment of the District Court.

BACKGROUND

We draw this factual statement from the J&M Firms’ Third Amended Complaint (“TAC”), accepting as true the allegations stated there for purposes of our review of the District Court’s decision. AHW Inv.

P’ship v. Citigroup, Inc., 806 F.3d 695, 697 n.1 (2d Cir. 2015).

Founded in 1972, Jacoby & Meyers, LLP, is a New York-based law partnership that “maintains a network of affiliated law offices across the country, including in Southern California, New York, Alabama, Florida, and Arizona.” Joint Appendix (“J.A.”) 106-07. The LLP presents as its mission the following: “[T]o ensure that people of modest or average means, who could often not afford to hire a lawyer, ha[ve] a practical alternative to obtain competent, qualified counsel at reasonable rates.” J.A. 106. The LLP was formed and is operated, still, as a for-profit law firm, as is its co-plaintiff, the related professional limited liability company Jacoby & Meyers USA II, PLLC.1

The J&M Firms challenge the constitutionality of New York Rule of Professional Conduct 5.4, “Professional Independence of a Lawyer,” and a clutch of New York state laws that in combination work to prevent non-lawyers from investing in New York law firms.2 Rule 5.4, for exam-[183]*183pie, provides in part that “[a] lawyer shall not practice with or in the form of an entity authorized to practice law for profit if: (1) a non lawyer owns any interest therein ... or (3) a non lawyer has the right to direct or control the professional judgment of a lawyer.” N.Y.R. Prof 1 Conduct 5.4(d).3 Approaching the issue from a slightly different angle, New York Judiciary Law Section 491, for example, makes it a misdemeanor for any non-attorney to share fees or compensation with an attorney in consideration of client referrals.

The LLP alleges that it “wishes to expand its operations, hire additional attorneys and staff, acquire new technology, and improve its physical offices and infrastructure to increase its ability to serve its existing clients and to attract and retain new clients and qualified attorneys.” J.A. 107. To make these improvements, the LLP asserts, it requires capital contributions. It reports receiving “numerous offers” from “prospective non-lawyer investors ... who are prepared to invest capital in exchange for owning an interest in the firm.” J.A. 109. These include some “high net-worth individuals” and “institutional investors” identified in the TAC. J.A. 109. And it would accept such contributions through the vehicle of the professional limited liability company that it has formed for this purpose. But in light of New York’s prohibitions, it has “been relegated to obtaining capital from (i) the personal contributions of the partners, (ii) retained earnings on fees generated and collected, and (iii) commercial bank loans, which invariably come with onerous interest rates and intrusive covenants and conditions.” J.A. 109. Moreover, these potential alternative sources of capital are either not available in practice, or too costly to be used.

In 2011, the LLP sued the Presiding Justices of the New York Supreme Court’s Appellate Divisions (who administer Rule 5.4) and others, asserting that the rule violates the First and Fourteenth Amendments and the Dormant Commerce Clause of the U.S. Constitution. After an amendment of the complaint, a dismissal for lack of standing, and a successful appeal to this Court with respect to standing, the case was remanded to the District Court, at which point the J&M Firms filed a second amended complaint that attempted to articulate a constitutional challenge to the entire New York regulatory regime. See Jacoby & Meyers, LLP v. Presiding Justices of the First, Second, Third & Fourth Dep’ts, 847 F.Supp.2d 590, 591 (S.D.N.Y. 2012) (“Jacoby I”); Jacoby & Meyers, LLP v. Presiding Justices of the First, Second, Third & Fourth Dep’ts, 488 Fed.Appx. 526, 528 (2d Cir. 2012) (“Jacoby II"); Jacoby & Meyers, LLP v. Presiding Justices of the First, Second, Third & Fourth Dep’ts, 118 F.Supp.3d 554, 563 (S.D.N.Y. 2015) (“Jacoby III”).4 But on remand they met with no [184]*184greater success: the District Court again granted the state’s motion to dismiss, this time holding that the J&M Firms’ amended complaint failed to state a claim for a violation of any constitutional right. See Jacoby III, 118 F.Supp.3d at 566-81.

This appeal followed.

DISCUSSION

We review de novo■ a district court’s decision to dismiss a complaint for failure to state a claim pursuant to Federal Rule of Civil Procedure 12(b)(6). Apotex Inc. v. Acorda Therapeutics, Inc., 823 F.3d 51, 59 (2d Cir. 2016).

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852 F.3d 178, 2017 WL 1101082, 2017 U.S. App. LEXIS 5247, Counsel Stack Legal Research, https://law.counselstack.com/opinion/jacoby-meyers-llp-v-presiding-justices-of-the-first-second-third-ca2-2017.