Canada should not follow Britain and Australia in establishing reforms that see the rules forbidding non-lawyers from owning law firms scrapped, says Toronto business lawyer Dorothy Brophy. 

The question arises on news that a New York firm has filed suit challenging the profession’s rules that prohibit firms from raising capital on the stock market like other businesses. Read Story

“The real reason behind the need for capital is to allow firms to carry large expenditures to increase opportunities for class action suits,” says Brophy, principal of Brophy Professional Corporation.

“There are several firms now doing it (taking on class action suits) and the recovery they get is often disproportionate to the time spent and the actual recovery paid out to the group of plaintiffs who have the cause of action.

“For example, a $50 million recovery for 1,000 people can result in a lawyer getting 30% or $15 million for the firm, whereas the individual clients get $35,000.  This is destructive as we have seen in the United States where (a) Insurance Premiums make some kinds of (productive) activities prohibitively expensive, (including medical malpractice insurance); (b) can bankrupt institutions and companies which can’t fight the law factories carrying on these class actions at every turn; and (c) creates a more litigious society where the emphasis is more on rights and less on considering the long term destructive economic effects of litigation.

Brophy says she believes “the reason there’s been no public trading up to now is the whole notion that lawyers and law firms are supposed to be professionals who operate a practice within financial means generated by their professional responsibilities and there shouldn’t be the added pressure to ‘perform’ for the market.

“It might be that if firms are publicly financed, lawyers, under pressure to produce returns, will ‘find’ causes to generate class actions,” Brophy notes.

But, while Brophy doesn’t think Canadian law firms should go down this road, she does feel “it is always healthy to have a debate about new ideas.  It would be helpful to get to the bottom of the real reason for advancing this idea.”

Brophy adds: “While law must be run as a business, the professionals are to put the law first in advising their clients.  As lawyers, we should be encouraging reasonableness and fairness and should provide a rudder for responsible actions by citizens in business and in the way they live in community.  We should not be creating opportunities for arousing discontent and emphasizing rights over responsibility.”