DC Bar Says Discovery Firms in Law Practice Can’t Have Non-Lawyer Investors

07/12/12

It has been learned that last month the District of Columbia Bar issued an opinion holding that companies which offer both discovery and legal services in Washington should not be owned by non-lawyers. The opinion toes the line laid by an earlier opinion by the committee of the District of Columbia Court of Appeals made in January. In that decision, the committee had sought to define the kind of services that discovery companies were permitted to offer, and permissible methods to market such services.

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The fresh opinion from the DC bar comes at a time when discovery companies in Washington have begun to broaden their offerings and have begun providing office space for review work, as well as starting to provide consultation on e-discovery. The new offerings by discovery companies are testing the limits of how far they can go without breaking rules that prohibit them from direct law practice.

In the opinion of the Court of Appeals, DC, issued in January, the appellate court committee held that discovery companies may not provide legal advice to clients and the use of broad marketing language like “end-to-end” service created ambiguity. The committee had held that discovery companies intent on using such ambiguous language or desiring to provide legal advice to clients need to be wholly owned by lawyers. The committee had also held that lawyers representing clients must be allowed to supervise attorneys at document-review companies.

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Hope Todd, the assistant director for legal ethics for the D.C. Bar told the media that as long as a discovery company stops short of providing legal advice, it may continue to have non-lawyer investors. However, the opinion of the DC Bar held, if a discovery company starts offering legal advice it would be a violation of the District of Columbia Rules of Professional Conduct.

Even though the opinion of the DC Bar is not mandatory in nature, practicing attorneys who are members of the bar generally follow such opinions in their conduct. The opinion also mentioned that lawyers working at companies that have non-lawyer investors cannot practice law within the District of Columbia. Of late, the issue has been gaining notice as the District of Columbia is the only jurisdiction in the United States that allows non-lawyers to invest in law firms.