According to a Wall Street Journal report, lawyers at the firm maintain the current rule violates the 1st amendment, and that it breaks equality protection and due process rights under the 14th amendment.

Lack of standing

The firm saw its first appeal dismissed by a district court in March, with Judge Lewis Kaplan citing a lack of standing to bring the claims against New York’s judicial system. However, commentators point out that a challenge to that ruling was inevitable, as the firm has already formed a limited liability company with the expectation of being allowed to accept outside investments.
The newspaper reports that during the challenge, heard by a three-judge panel of the US Court of Appeals for the Second Circuit on Friday, the firm was questioned as to why it did not more broadly challenge rules against law-firm investment, instead of focusing on the single professional-conduct rule. ‘It’s kind of a mystery to me why we are debating these arcane questions of standing,’ Judge Gerard Lynch said Friday.
However, the panel indicated that the case would be sent back to the district court for further proceedings, according to Thomson Reuters.

Resolutely opposed

The news agency reported that lawyers for the firm told the court that they would be happy to see the case remanded back to Judge Kaplan, agreeing that there is no standing, but instructing him to allow the firm to amend its complaint.
The case is certain to ramp up debate in the US over the issue of external investment. Law firms in England and Australia are allowed to float on stock exchanges or take private equity capital. However, senior figures in the American Bar Association remain resolutely opposed to those developments spreading to the US.