|The Colorado Lawyer|
Vol. 28, No. 8 [Page 45]
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ABA Delegates' Report
Multi-Disciplinary Recommendation: An Analysis
by Robert R. Keatinge
On June 8, 1999, after ten months of study with respect to the delivery of legal services by professional services firms, the American Bar Association Commission on Multi-Disciplinary Practice ("Commission") released its Recommendation ("Recommendation") for action by the ABA House of Delegates and a Report ("Report") explaining the basis for its recommendation. The Commission’s study focused on the emergence of the multidisciplinary practice ("MDP"), which was defined by the Commission as:
a partnership, professional corporation, or other association or entity that includes lawyers and nonlawyers and has as one, but not all, of its purposes the delivery of legal services to a client(s) other than the MDP itself or that holds itself out to the public as providing nonlegal, as well as legal, services. It includes an arrangement by which a law firm joins with one or more other professional firms to provide services, including legal services, and there is a direct or indirect sharing of profits as part of the arrangement.1
The Recommendation, which was reproduced in full in the July 1999 issue of The Colorado Lawyer2 and is available at www.abanet.org/cpr/multicom.html, would make several changes in the ethical rules governing the form of practice. This is being done in an effort to balance changes in the manner in which legal services are being delivered on the one hand, and, on the other, the interests of clients and the public and what the Commission describes as the "core values" of the legal profession. "Core values" are defined by the Commission as including "professional independence of judgment, the protection of confidential client information, and loyalty to the client through the avoidance of conflicts of interest."3
The Commission heard sixty hours of testimony from fifty-six witnesses and considered written and oral communications from others. It concluded that some clients want the ability to obtain legal services from MDPs, and that it would be possible to modify the ethical rules governing lawyers in such a way as to allow lawyers to practice law through MDPs while maintaining appropriate disciplinary control over the lawyers’ conduct. Among other things, the Commission determined that the ethical rules should not unnecessarily inhibit the development of new structures for the more effective delivery of services and better public access to the legal system.4
The Recommendation expressly retains the rule that nonlawyers are prohibited from providing legal services.5 However, it does address the context under which attorneys provide legal services. The Recommendation seeks to accomplish this objective by modifying Rule 5.4 of the Model Rules of Professional Conduct. Rule 5.4 currently prohibits a lawyer from providing legal services in a firm owned by nonlawyers and from sharing fees with nonlawyers.6 Under the Recommendation, this rule would be changed to permit non-lawyer ownership of firms, but with several other changes intended to preserve the "core values" described above. In some respects, the changes intended to preserve core values may have a greater impact on the regulation of the practice of law than will the elimination of the prohibition of ownership of the firm by non-lawyers.
The Recommendation would make the following changes:
1. Except as expressly authorized with respect to MDPs, lawyers would continue to be prohibited from sharing fees with a nonlawyer or forming a partnership or other entity with a nonlawyer if any of the activities of the partnership or other entity consist of the practice of law. Provided there are safeguards in effect, a lawyer may share legal fees with a nonlawyer and may provide legal services through an MDP that meets certain conditions set forth in the Recommendation.7
2. For a lawyer to be permitted to engage in the practice of law in an MDP, the MDP must be subject to regulation by the highest court with the authority to regulate the legal profession in each jurisdiction in which the MDP is engaged in the delivery of legal services.
3. In addition, the MDP would be required to give the court a written undertaking that:
a) it will not directly or indirectly interfere with a lawyer’s exercise of independent professional judgment on behalf of a client;
b) it will establish, maintain, enforce, and annually update and amend procedures designed to protect a lawyer’s exercise of independent professional judgment on behalf of a client from interference by the MDP, any member of the MDP, or any person or entity controlled by the MDP;
c) it will establish, maintain, and enforce procedures to protect a lawyer’s professional obligation to segregate client funds;
d) the members of the MDP delivering or assisting in the delivery of legal services will abide by the rules of professional conduct;
e) it will respect the unique role of the lawyer in society as an officer of the legal system, a representative of clients, and a public citizen having special responsibility for the administration of justice. This undertaking should acknowledge that lawyers in an MDP have the same special obligation to render voluntary pro bono publico legal service as lawyers practicing solo or in law firms;
f) it will annually certify to the court and each lawyer in the MDP the MDP’s compliance with the requirements set forth above;
g) it will permit the court to review and conduct an administrative audit of the MDP and bear the cost of the administrative audit of MDPs through the payment of an annual certification fee;8 and
h) an MDP that fails to comply with its written undertaking shall be subject to withdrawal of its permission to deliver legal services or to other appropriate remedial measures ordered by the court.9
These restrictions are not currently imposed on law firms under the Model Rule of Professional Conduct, so MDPs would be subject to more burdensome restrictions than law firms owned entirely by lawyers.
4. A lawyer in an MDP who delivers legal services to the MDP’s clients will be bound by the rules of professional conduct,10 and may not use a nonlawyer supervisor’s resolution of a question of professional duty as an excuse for failing to comply with the rules of professional conduct.11 In this respect, a lawyer’s duties to the client would be unaffected by his or her practice in an MDP.
5. An MDP would be subject to all rules of professional conduct that apply to a law firm.12 Because currently there are no rules of professional conduct that apply to a law firm, this rule will not impose any requirements on MDPs until such rules are adopted.
6. All clients of an MDP would be treated as the lawyer’s clients for purposes of imputed conflicts of interest in the same manner as if the MDP were a law firm and all employees, partners, shareholders or the like were lawyers.13 This rule would expand the imputed disqualification rule that currently applies to law firms14 to all clients of an MDP even if those clients of the MDP are not being provided with legal services. Such a rule would impose significant limitations on the major accounting firms’ ability to provide services without appropriate conflict waivers.
7. Where the MDP is providing both legal and non-legal services to a client, a lawyer should be required to make reasonable efforts to ensure that the client sufficiently understands the different obligations with respect to disclosure of client information and that the courts may treat the client’s communications in connection with the legal and non-legal services differently.15
8. A lawyer in an MDP who delivers legal services to a client of the MDP and who works with, or is assisted by, a nonlawyer who is delivering nonlegal services in connection with the delivery of legal services to the client is required to make reasonable efforts to ensure that the MDP has in effect measures to ensure that the nonlawyer’s conduct is compatible with the professional obligations of the lawyer.16
9. A lawyer in an MDP should not represent to the public generally or to a specific client that services the lawyer provides are not legal services if those same services would constitute the practice of law if provided by a lawyer in a law firm. Such a representation would presumptively constitute a material misrepresentation of fact.17
10. Allowing fee-sharing and ownership interest in an MDP does not change the rules of professional conduct prohibiting fee-sharing and partnership in any other respect, including the current provisions limiting the holding of equity investments in any entity or organization providing legal services.18
The Recommendation is scheduled for a vote at the ABA House of Delegates at its annual meeting August 9-10. While the Recommendation and Report have been available only since June 8, the Delegates have been aware that this issue would come up for a vote this summer, and the MDP Committee has made extensive information available on its homepage throughout the year.
Notwithstanding the regulation proposed for MDPs, there has been a vocal objection to the Recommendations from some attorneys. A few state bar associations have resolved to oppose or defer consideration of the Recommendation. Others, having seen the rapid growth of MDPs over the past few years, take the position that the organized bar has a duty to address the ethical and practical issues that will arise under the MDP form of practice. The Executive Council of the Colorado Bar Association has taken the position that debate should not be delayed in the House of Delegates, even if the House takes no final action on the Recommendation at the August 9-10 meeting.
Based on the information developed by the MDP Committee, it appears likely that, regardless of whether the House of Delegates takes action this summer, MDPs are likely to provide an increasingly broad array of services, some of which might be considered as the practice of law. If the bar and courts do not take action to address the issues, the conduct of MDPs will be without any regulation whatsoever, unless the courts choose to exercise their jurisdiction to restrict the unauthorized practice of law. In light of the fact that many clients want services provided by MDPs and that the services being offered are generally provided by lawyers, the likelihood that the courts will restrain MDPs under unauthorized practice of law statutes is far from certain.
Regardless of the action taken by the ABA this summer, the issues surrounding MDP are ultimately likely to be resolved by the state courts that promulgate the rules governing the practice of law. In light of the rate with which MDPs have grown throughout the world, it is probable that these issues will have to be addressed sooner rather than later. All interested lawyers need to familiarize themselves with those changes occurring in the provision of legal services.
1. Recommendation § 3.
2. "ABA to Consider the Future of the Practice of Law at its Annual Meeting," 28 The Colorado Lawyer 49 (July 1999).
3. Recommendation § 1.
4. Recommendation § 1.
5. Recommendation § 4.
6. Model Rule 5.4 provides:
(a) A lawyer or law firm shall not share legal fees with a nonlawyer, except that:
(1) an agreement by a lawyer with the lawyer’s firm, partner, or associate may provide for the payment of money, over a reasonable period of time after the lawyer’s death, to the lawyer’s estate or to one or more specified persons;
(2) a lawyer who purchases the practice of a deceased, disabled, or disappeared lawyer may, pursuant to the provisions of Rule 1.17, pay to the estate or other representative of that lawyer the agreed-upon purchase price; and
(3) a lawyer or law firm may include nonlawyer employees in a compensation or retirement plan, even though the plan is based in whole or in part on a profit-sharing arrangement.
(b) A lawyer shall not form a partnership with a nonlawyer if any of the activities of the partnership consist of the practice of law.
(c) A lawyer shall not permit a person who recommends, employs, or pays the lawyer to render legal services for another to direct or regulate the lawyer’s professional judgment in rendering such legal services.
(d) 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, except that a fiduciary representative of the estate of a lawyer may hold the stock or interest of the lawyer for a reasonable time during administration;
(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.
7. Recommendation §§ 2, 3 and 12.
8. Recommendation § 14.
9. Recommendation § 15.
10. Recommendation § 5.
11. Recommendation § 6.
12. Recommendation § 7.
13. Recommendation § 8.
14. Model Rule 1.10.
15. Recommendation § 9. The specific language of the Recommendation speaks of communication to a "lawyer" and "non-lawyer" as being treated differently. It is possible that the distinction would be drawn based on the types of services being provided rather than the identity of the provider of the services.
16. Recommendation § 10. This would impose a greater responsibility to ensure that the activities of others providing non-legal services in connection with the lawyer’s provision of legal services than currently applies where a lawyer is a member of a "team" of professionals providing various types of services for a single client.
17. Recommendation § 11. The Report suggests that the misrepresentation may be avoided if in a specific matter it is made clear to the client, preferably in writing, that the MDP is not providing legal services and that the client should consider retaining its own counsel.
18. Recommendation § 13.
Robert Keatinge is one of the Colorado Bar Association delegates to the ABA. Comments or questions may be directed to him or any of the other delegates at (303) 295-8595 or firstname.lastname@example.org. Other Delegates include the following: James Carr (303) 866-5283 (jim:email@example.com); Diane Mauriello (970) 476-0300 (firstname.lastname@example.org); Karen Mathis (303) 571-4500 (email@example.com); Kathleen Odle (303) 299-8116 (firstname.lastname@example.org); Fred Rogers (303) 582-5323 (email@example.com); Paul Willumstad (719) 543-3422 (firstname.lastname@example.org); and David Wood (970) 482-2727 (email@example.com).
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