August 2000 

Multidisciplinary Practice: Will We Vote Ourselves Out of the Competition? 

by Caryn L. Abramowitz

Despite being highly competitive by nature, lawyers may be putting themselves at a distinct competitive disadvantage in the legal marketplace. While bar associations debate the merits and evils of multidisciplinary practices (MDPs), the large accounting firms are developing and expanding their already flourishing MDPs. From a marketing perspective, it looks like law firms need to jump on this bus. Indeed, it looks like law firms may be in danger of missing the bus altogether. But like any good legal issue, there are two sides to the story. Those not in favor of lawyers participating in MDPs cite codes of professional ethics, tradition, and the "core values of the legal profession."1 But isn't there a way to compete in the marketplace as it exists today while still maintaining these "core values"? Traditionalists should not forget that law firms are businesses, and that sometimes they have to act like businesses.

Staunchly defending ethical barriers to participating in MDPs, rather than trying to craft more current and flexible ethical canons that allow lawyers to join in the competition, simply does not make sense for the profession. Lawyers are so good at changing laws to better represent what's going on in the world. As technology plays a greater role in society, lawyers play their part in developing new laws and in molding existing laws to accommodate technology. When regulations restricting affiliations between certain types of financial institutions became too limiting for these industries in the current economic landscape, lawyers participated in liberating them.2 Is it because MDPs so intimately affect them that lawyers are taking such a myopic view? Is it because they fear the increased competition promised by, among others, large accounting firms?

Reasons aside, in August 1998 the American Bar Association (ABA) created a Commission on Multidisciplinary Practice (the Commission) to gather, study and analyze the issues surrounding MDPs and legal practice. Despite numerous hearings, many interviews with and communications from anyone even tangentially impacted by MDPs, and a 1999 report by the Commission advising the ABA to change some of the Model Rules of Professional Conduct (the Model Rules),3 the ABA decided to put off the decision for another year.4 

But now, the time is approaching for yet another review of this issue. After hearing additional information gathered by the Commission, the ABA House of Delegates is set to vote on whether it should change the Model Rules to allow lawyers to share fees and enter into MDPs with nonlawyer professionals.5 The remainder of this article will discuss concerns about MDPs, the Model Rules implicated, the current legal climate with regard to MDPs and the reasons why the ABA House of Delegates should vote wholeheartedly in favor of MDPs in the legal profession.

In August 1999, the Commission on Multidisciplinary Practice proposed changes to the Model Rules of Professional Conduct in order to allow for MDPs in the legal profession.6 The ABA House of Delegates voted not to change the Model Rules. In doing so, the delegates represented the many lawyers and bar associations also hesitant to "whittle away" at the ethical guidelines lawyers have followed for so long. This delegation of MDP naysayers cited several Model Rules as the reason for its position.

The Model Rule most impacted by allowing MDPs certainly would be Rule 5.4, Professional Independence of a Lawyer. Allowing MDPs would render obsolete the basic tenet of this rule: "A lawyer or law firm shall not share legal fees with a nonlawyer…."7 The essence of most types of MDPs is permissible fee-sharing between lawyer and nonlawyer professionals.

But the remaining provisions of Rule 5.4, as well as the accompanying comments to the rule, hint at some of the reasoning behind the basic tenet of the rule. For instance, Rule 5.4(b) states: "A lawyer shall not form a partnership with a nonlawyer if any of the activities of the partnership consist of the practice of law." And Rule 5.4(d) says: "A lawyer shall not practice with or in the form of a professional corporation or association authorized to practice law for a profit, if: 1) a nonlawyer owns any interest therein…; 2) a nonlawyer is a corporate director or officer thereof; or 3) a nonlawyer has the right to direct or control the professional judgment of a lawyer."8 

The Model Rule drafters apparently feared that if a nonlawyer professional — one who does not have to comply with the Model Rules — had any type of financial or business interest or control over a lawyer partner, that lawyer partner could lose his independent judgment. It is true that a nonlawyer boss may be bound by a completely different set of ethical standards and interests. And it follows that a nonlawyer boss paying a lawyer's salary may exercise the authority of a boss and may therefore impact a lawyer's judgment. Those opposing MDPs for the legal profession find this obstacle to be unconquerable; exercise of a lawyer's judgment should not be compromised for mere economic or business objectives.9 

In reality, however, having such close access to nonlawyer professionals could universally enhance, rather than compromise, lawyers' professional judgment. For instance, suppose a family lawyer handling a client in a divorce case works in an MDP with a social worker who counsels this same client. Discussing the case with the social worker (with the client's knowledge, of course), accessing the tools of another trade, and learning from the nonlawyer can only assist the lawyer in rendering more appropriate and fully informed advice about the case. Even in a non-case-specific sense, working so closely with another professional only affords lawyers added information and tools to better assist them in zealously advocating for their clients.10

Those opposing MDPs also point to Model Rule 5.5(b) as a deal breaker. It says: "A lawyer shall not…(b) assist a person who is not a member of the bar in the performance of activity that constitutes the unauthorized practice of law."11 Apparently, those espousing this argument against the use of MDPs believe that allowing lawyers to share fees and business decisions with nonlawyer professionals creates a greater risk that the lawyers will assist those nonlawyer professionals in activities that really constitute practicing law.

This point is amusing in a sense, because the inverse of the argument seems more apparent than the argument itself. If lawyers are able to join MDPs and perform legal services for the clients of the MDPs, wouldn't the instances of unauthorized practice of law actually decrease? Currently, MDPs composed only of nonlawyer professionals frequently are accused of crossing the line into the unauthorized practice of law. Adding lawyers to these MDPs would almost certainly leave the nonlawyer professionals free to do the types of work they are qualified to do, leaving the legal work to the lawyers.

Other concerns include the impact of MDPs on attorney/client privilege and confidentiality, increasing instances of conflicts of interest, the duty to provide pro bono services, and handling client funds.12 

For a group of people accustomed to making and overruling rules and laws, taking this position on the unalterable nature of the Model Rules seems strangely incongruous. Opponents basically are saying that MDPs will compromise the Model Rules as written. Rather than ruling out the idea of MDPs all together, couldn't lawyers agree to allow MDPs in the legal practice, and simply implement some new rules to ensure that the moral obligations implicit in the current Model Rules remain intact?

In fact, to some extent the Commission has done exactly that. Recognizing the importance of ensuring independent judgment, for example, but not tied to the present wording and method of ensuring such independent judgment, the Commission recommends requiring the MDP to certify to the state supreme court "that it will not interfere with the lawyer's independence of judgment and exercise of professional judgment."13 Such a rule would, in essence, accomplish the same purpose as disallowing the associations all together. The rule would also put MDPs on alert that maintaining lawyers' independence is critical and something that the state supreme court will be closely monitoring.

State supreme courts could implement similar requirements concerning the unauthorized practice of law. If MDPs certify that the lawyers will not assist non-lawyers to practice law, it should accomplish the same thing as requiring lawyers themselves not to assist nonlawyers in practicing law. Again, requiring certification would bring the issue of unauthorized practice of law to the forefront and encourage MDPs to be diligent in monitoring for violations.

The state supreme courts could implement similar rules and regulations to combat issues that arise with regard to handling funds, the attorney/client privilege and confidentiality. Yes, conflicts of interest may occur with more frequency, but aside from the inconvenience posed by having to be painstakingly attentive to more conflicts, this argument does not offer a reason to disallow MDPs.

Keep in mind that lawyers are not the only professionals with a code of ethics. A recent Wall Street Journal article on MDPs reported: "In fact, virtually every other profession (at least those with which MDP relationships are likely) has its own code, disciplinary system and traditions. Deceptive advertising, self-dealing and practicing beyond one's competence are widely condemned; integrity, public service and continuing education are widely encouraged, if not required."14 Studies have found that these codes resemble the Model Rules so closely that "the only irreconcilable difference [identified] is the confidentiality obligations of lawyers vs. the public disclosure obligations of auditors."15 The practical solution for this problem is not a sweeping prohibition of MDPs for lawyers, but rather a narrow limitation disallowing MDPs with both lawyers and auditors for the same client.

The answer to this question should be obvious. Most importantly, clients want it. What consumer wouldn't want the option to have his multiple needs met by one provider? The potential professional combinations are virtually endless:16 family lawyers and social workers; environmental lawyers and geologists; business or estate planning lawyers and accountants or financial consultants; antitrust lawyers and economists; medical malpractice litigators and medical illustrators; technology lawyers and information technology consultants or systems analysts; intellectual property lawyers and engineers; health care lawyers and doctors.

The Big Five accounting firms are already offering it, so consumers must want it. Accounting firms like PriceWaterhouse Coopers and Arthur Andersen have already taken over a good portion of the European legal market, "avidly acquiring law firms in dozens of cities in Europe."17  Large European legal consumers have given them rave reviews. For instance, one large venture capitalist using an MDP said that he has saved 20 percent in legal, tax and audit fees over the course of the six years he has used the MDP.18 European clients have cited efficiency and cost savings as the most significant reasons to use MDPs over traditional law firms. Studies have shown that using one MDP for a variety of needs eliminates the "getting to know you" time factor associated with employing a number of different practitioners from a number of different firms. The MDP and all of its professionals will understand the client and its way of doing business. MDPs can therefore provide clients with more seamless service.19 

The new "hybrid operations" in Europe provide "a broad array of legal services, including counseling on such high-end matters as corporate finance and mergers and acquisitions."20 They already provide a range of services including employment law audits, training on legal requirements, and "regulatory compliance."21  The Big Five are slowly slipping their MDP approach into the United States, recruiting lawyers from large U.S. firms. These lawyers do not officially practice law. But ask any tax lawyer where the competition for clients is coming from and one of the answers is sure to be "accounting firms."

If competition from the Big Five accounting firms is not enough reason to allow lawyers to join MDPs, the potential boost to client service is. As one writer noted: "Governments and corporations often employ lawyers and other professionals under the same roof within the same unit. These organizations have discovered a lesson that is more broadly applicable — that coordination, teamwork and fully considered strategic planning are often fostered when professionals from different disciplines work within one service organization for the same clients."22 Clients will benefit from access to the various disciplines. Their legal problems, once considered in a virtual legal vacuum, can be approached multi-dimensionally, within a fuller context.

MDPs also provide the chance for lawyers to boost their popularity and credibility. The American Association of Retired Persons found in a study that a high percentage of people who could use a lawyer do not consider using one. These people seek out other professionals for the advice they need.23 Another study indicated that consumers are intimidated by lawyers and worry that they will be taken advantage of and pay for inefficient work. Often, lawyers are used merely as a last resort; this negative public perception and hesitance to engage lawyers results in many missed business opportunities. This same study, conducted by the Consumers Alliance of the Southeast, demonstrated that "MDPs offer an opportunity to recast the legal profession as part of a problem-solving team whose primary goal is finding integrated efficient and effective solutions to the everyday problems that confront all consumers.…"24 

The MDP debate brings to mind a joke recently told on a television drama. The National Guard issued a flood warning in the area where John Doe lived. John Doe's house was in particular danger, and the news recommended that everyone in his area evacuate. He stayed in his house. As the storm began to get serious, the National Guard knocked on his door and told him that he should evacuate. He refused, saying, "God will save me." A few hours later, after the flood had become much more serious, the National Guard rowed in a boat to John's door and told him to evacuate. But he said that he would stay because he trusted that God would save him. The flood got worse, and the National Guard again tried to save John, this time in a helicopter. He refused once again, saying, "I trust God will save me." John drowned. When he went to heaven and met with God he asked, "Why didn't you save me? I put all of my faith in you and you let me drown. What happened?" God said, "I sent you the National Guard, a boat and a helicopter — what more did you want?"

Lawyers regulate themselves. They also have the know-how to fashion regulations and rules to best accomplish certain objectives. So they have in their hands the tools necessary to compete in today's marketplace, just like John Doe had the tools to save himself from drowning in the flood. Lawyers cannot hide behind the high ideals of the Model Rules of Professional Conduct and hope that ethics alone will help them to survive the competition. They have the tools, and now is the time to use them, so that the profession can continue to thrive. The ABA House of Delegates should let lawyers use these tools to rework the Model Rules to fit today's legal marketplace — to uphold the underlying ethical canons while allowing lawyers to compete on new frontiers and against new challengers. In adjusting the Model Rules to allow MDPs, lawyers would not be releasing their professional ethics to other hands. They would be "entrusting those core values to the same people who have always been responsible for their protection: lawyers."25 

NOTES

1 Carol McLean Brewer, Joan Hume, Michael Nachwaiter and Katherine Silverglate, Facing The Tide of Change, 74-Mar Fla. B. J. 13 (2000).

2 Public Law, 106-102, 113 Stat. 1338.

3 The Report of the Commission on Multidisciplinary Practice to the ABA House of Delegates, reported in the spring 1999 issue of The Professional Lawyer.

4 Nick Badgerow, 69-Mar J. Kan. B. A. 12, 13 (2000).

5 Many state and local bar associations have rejected resolutions proposing permissible MDPs, but this past month, the Philadelphia Bar Association became the first regional bar association to approve a resolution recommending MDPs. The resolution limits the approval only to lawyer-controlled MDPs. The Pennsylvania Supreme Court must approve the resolution. Washington, D.C., is currently the only region that permits MDPs, albeit on a limited basis. Philly Bar Okays MDPs, 5/1/00 Prac. Acct. Mag. 6.

6 The Report of the Commission on Multidisciplinary Practice to the ABA House of Delegates, reported in the spring 1999 issue of The Professional Lawyer.

7 Model Rules of Professional Conduct 5.4 (1995). All states have adopted the Model Rules in one form or another.

8 Id.

9 Nick Badgerow, 69-Mar J. Kan. B. A. 12, 16 (2000).

10 Michael Gerrard, Statement of Position of Multidisciplinary Practice, Executive Committee of the Association of the Bar of the City of New York, 595 PLI/PAT 75, 80 (2000).

11 Model Rules of Professional Conduct 5.5 (1995).

12 Nick Badgerow, 69-Mar J. Kan. B. A. 12, 16 (2000).

13 Id. at 15.

14 Michael Gerrard, Statement of Position of Multidisciplinary Practice, Executive Committee of the Association of the Bar of the City of New York, 595 PLI/PAT 75, 87-88 (2000).

15 Id.

16 Margaret Jacobs, Hybrid Law Practices in U.S. Debated, Wall St. J. Eur., May 31, 2000 at 6.

17 Id.

18 Id.

19 Abigail Townsend, Lovells Lures Legal Director in Shake-up, The Lawyer, May 8, 2000 at 1; 2/14/00 Nat'l L.J. A21 (col.5); 12/13/99 N.Y.L.J. 5 (col. 1).

20 Margaret Jacobs, Hybrid Law Practices in U.S. Debated, Wall St. J. Eur., May 31, 2000 at 6.

21 Nick Badgerow, 69-Mar J. Kan. B. A. 12, 16 (2000).

22 Michael Gerrard, Statement of Position of Multidisciplinary Practice, Executive Committee of the Association of the Bar of the City of New York, 595 PLI/PAT 75, 80 (2000).

23 Alfred M. Butzbaugh, On Solos, Small Firms and MDPs, 79 Mich. B.J. 314 (2000).

24 Id.

25 Multidisciplinary Practices: Smart Marketing Tool or an Ethical Question, 35 No. 22 Bankr. Ct. Dec. (LRP) 1 (April 18, 2000).

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