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Utah State Bar
Multidisciplinary Task Force Report
Report
Task Force Members:
- Michael D. Blackburn – Co-Chair, Blackburn & Stoll, LC
- Ray O. Westergard – Co-Chair, Grant Thornton, LLP
- Val R. Antczak, Parsons Behle & Latimer
- Brent R. Armstrong, Armstrong Law Office
- Cynthia J. Crass, Callister, Nebeker & McCullough
- George C. Harris, University of Utah College of Law
- Mark E. Lehman, Lehman Walstrand & Associates, LLC
- Robert K. Merrell, NPS Pharmaceuticals, Inc.
- Craig S. Omer, KPMG Peat Marwick, LLP
- Mark W. Stevens, Deloitte & Touche, LLP
- Toby Brown - Reporter, iLumin Corp. & Utah State Bar
Special Thanks to Parker Douglas of Parsons Behle & Latimer for drafting assistance
Utah State Bar
Multidisciplinary Task Force Report
Multidisciplinary Practice (“MDP”) is neither new nor revolutionary. MDPs have operated for many years in Europe and other countries. MDPs openly operate in several locations within the United States. Arizona, Colorado, and Minnesota have each recently adopted recommendations for rule changes favorable to MDPs operating in their jurisdictions. MDPs conducted under an ancillary business model or in the form of a contract between independent professional service providers can operate at the present time in full compliance with all ethical standards applicable to Utah licensed attorneys.
Strong market forces, including the availability of legal information, advice, and documents over the Internet; the desire of some clients for one stop shopping; concentration of financial and accounting services; and international trade treaties, are encouraging the expansion of MDPs. MDPs exist in Utah and will continue to grow in number and size.
Members of the legal profession have a choice to make. They may stand on the sideline and observe the development of MDPs without their input, or they may become actively involved in shaping the development of MDPs. The MDP Task Force of the Utah State Bar believes that the best interest of the public as well as the best interest of members of the legal profession require an active role.
MDPs can operate without jeopardizing the core values of the legal profession:
· Confidentiality. Current rules should remain in place, with expanded applicability to all employees of an MDP who have access to confidential client information.
· Conflict of Interest. Current rules should remain in place, with expanded language interpreting applicability of the rules to MDPs.
· Responsibility For Your Conduct and the Conduct of Others. The duty of a lawyer to supervise all non-lawyer employees should be expanded to cover all non-lawyer employees of an MDP who participate in providing legal services. Relief granted to a lawyer for certain determinations made by his or her supervisor should be limited to supervisors properly licensed to practice law.
· Independent Professional Judgment. Prohibitions which tell lawyers how they must exercise independent professional judgment, which include absolute bans on fee splitting and business associations with non-lawyers, should be eliminated. Language which charges each individual lawyer with the responsibility to exercise independent professional judgment when performing legal services should remain in place.
· Unauthorized Practice. Current rules prohibiting a lawyer for assisting any other person in the unauthorized practice of law should remain in place with additional language to clarify that the proper practice of law in an MDP is not a violation of this rule.
· Advertising and Solicitation. Rules prohibiting false or misleading statements and prohibiting solicitation of physically or emotionally distressed persons should remain in place. Rules inconsistent with these concepts should be eliminated.
All persons with a legal problem should have access to the advice of a lawyer. MDPs can be an important step in assuring the availability of quality legal services across the broad range of economic and educational strata.
Multidisciplinary Practice (“MDP”)
Task Force Report
November 1, 2000
The Long Range Plan of the Utah State Bar, 1997-1998, identifies five core objectives for the Bar.
- To regulate lawyers and the practice of law
- To serve the public and legal profession
- To facilitate the delivery of legal services
- To promote respect and appreciation for the rule of law
- To lead in the improvement of the justice system
The Multidisciplinary Practice (“MDP”) Task Force has considered our ability as a profession to fulfill these objectives in light of the changing economic, social, and technological landscapes in which we deliver legal services. Financial institutions, insurance companies, accounting firms and others are now bundling legal services with their core competencies to market themselves as “one stop” service providers. At present, because lawyers are not meeting middle-class legal needs, consumers seek out and obtain less expensive alternatives outside the legal profession. For instance, the Internet offers clients access to self-help and “smart” legal systems that do not involve consultation with a lawyer. As a result of these changes, our role as an integral part of society’s economic, social, and justice institutions is decreasing.
As the legal profession loses relevancy in the main stream of American life and commerce, our ability as a profession to regulate, serve, facilitate, promote, and lead in the practice of law will dwindle. With this future in mind, the Task Force concludes that changes in our profession and rules of professional conduct are necessary. These changes are essential to allow the Bar, and the individuals who make up the Bar, to advance our core objectives and preserve the standards of practice and conduct in delivering legal services that have long held intrinsic value in our society.
A. The History of the Ethical Prohibitions on MDPs[1]
A multidisciplinary practice or MDP is any organization or association that provides legal services to others and also provides non-legal services that are ancillary to or separate from the legal services offered. MDPs do not include non-profit legal service organizations or corporate in-house legal departments that do not provide legal services to anyone other than the corporation.
The idea of multidisciplinary practice is not new. The ABA’s first ethics code, the 32 Canons adopted in 1908, did not prohibit lawyers from partnering or sharing fees with non-lawyers. Canons 33, 34 and 35, which prohibit a lawyer from entering into a partnership with a non-lawyer, dividing fees for legal services with anyone other than a lawyer, or being employed by a corporation or other organization to render legal services to others, were adopted in 1928. These Canons codified then recent opinions of the ABA ethics committee.[2]
Although these rules were supported as necessary protection for lawyers’ professional independence of judgment, “bar leaders . . . acknowledged that their motivation was primarily to protect lawyers’ livelihood.”[3] They responded, in particular, to the fact that, at the time, corporations had been providing transactional legal services. As one commentator noted in 1931, “Title, insurance, trust, indemnity, collection and other corporations are spreading their tentacles over large segments of the lawyer’s domain. It has been estimated that corporations today perform 60 percent of corporate legal work.”[4] One source of special concern at the time was the fact that corporations, unlike lawyers, were able to advertise their legal services.
The ABA Model Code of Professional Responsibility (“the Model Code”), adopted in 1969, perpetuated, with little discussion or analysis, the standards set forth in Canons 33–35. Responding to widespread general criticism of the Model Code, the ABA in 1977 appointed a Special Commission on Evaluation of Professional Standards, which came to be known as “the Kutak Commission” after its original chairman, Robert Kutak. The Kutak Commission was charged with the duty to evaluate and revise the Model Code. Its recommendations resulted in the ABA Model Rules of Professional Conduct (“the Model Rules”), which were adopted by the ABA in 1983.
The Kutak Commission’s final draft of the Model Rules rejected any flat prohibition on affiliations between lawyers and non-lawyers. Its proposed Rule 5.4 would have permitted all forms of law practice as well as all financial arrangements for providing legal services, so long as lawyers would continue to meet their responsibilities under the rules of professional conduct. The Commission proposed various safeguards to provide that assurance, including what were adopted as Rules 5.3 and Rule 5.5(b). It also proposed a provision that would have required a lawyer providing legal services through an organization managed by non-lawyers to receive written assurance that the lawyer’s independence of judgment would be protected.
Despite little comment on the Kutak Commission’s proposed Rule 5.4 from the public or the bar, the ABA House of Delegates passed a last minute floor amendment rejecting it and substituting current Rule 5.4, which restored verbatim the restrictions in the Model Code. Rule 5.4 was the only rule proposed by the Kutak Commission that the House of Delegates rejected in its entirety.
The House of Delegates’ action has been widely criticized. One pair of commentators has characterized it this way:
The Kutak Commission’s carefully layered safeguards were disregarded, and in their place was put a flat prohibition on sharing fees or organizational authority with non-lawyers regardless of whether any specific harms occur or are even threatened. This substitution of a broad prophylactic rule where a narrow one would have sufficed suggests that . . . [an] illegitimate rationale was actually decisive, namely economic protectionism.[5]
B. Current Developments
1. The ABA MDP Commission
In 1998, the ABA established a Commission on Multidisciplinary Practice (“the MDP Commission”) to consider again—in the context of recent developments in legal services—the propriety of lawyers joining together with other professionals in MDPs. After conducting extensive public hearings and receiving written comments from individuals and organizations, the MDP Commission made its initial recommendations in August of 1999. Like the Kutak Commission, the MDP Commission recommended that Rule 5.4 be amended to permit lawyers to partner with non-lawyers for the purpose of providing legal services, and to share legal fees with non-lawyers. The MDP Commission also recommended other amendments to the Model Rules to ensure that the core values of the legal profession were protected in the MDP context.
The MDP Commission presented its initial recommendations to the ABA House of Delegates in August of 1999 but moved to defer a vote on the recommendations in response to requests by state and local bar associations for more time to consider the issues. The House ultimately adopted a resolution, proposed by the Florida Bar, that no amendments to the Model Rules permitting lawyer participation in MDPs be made “unless and until additional study demonstrates that such changes will further the public interest without sacrificing or compromising lawyer independence and the legal profession’s tradition of loyalty to clients.”
In response to this resolution, the MDP Commission continued its investigation of the issues and engaged in discussions with state and local bar associations. In July of 2000 it made its final recommendations to the ABA House of Delegates. While adhering to the basic conclusions in its initial report, the MDP Commission replaced its initial fifteen recommendations with five as follows:
RESOLVED, that the American Bar Association amend the Model Rules of Professional Conduct consistent with the following principles:
1. Lawyers should be permitted to share fees and join with non-lawyer professionals in a practice that delivers both legal and non-legal professional services (Multidisciplinary Practice), provided that the lawyers have the control and authority necessary to assure lawyer independence in the rendering of legal services. “Non-lawyer professionals” means members of recognized professions in other disciplines that are governed by ethical standards.
2. This Recommendation must be implemented in a manner that protects the public and preserves the core values of the legal profession, including competence, independence of professional judgment, protection of confidential client information, loyalty to the client through the avoidance of conflicts of interest, and pro bono publico obligations.
3. Regulatory authorities should enforce existing rules and adopt such additional enforcement procedures as are needed to implement these principles and to protect the public interest.
4. The prohibition on non-lawyers delivering legal services and the obligations of all lawyers to observe the rules of professional conduct should not be altered.
5. Passive investment in a Multidisciplinary Practice should not be permitted.
At its July 2000 meeting, the ABA House of delegates rejected the MDP Commission’s recommendations. It adopted, instead, a resolution introduced by the Illinois, New Jersey, New York, Florida and Ohio state bars that urged each jurisdiction to implement certain broad policies, including the principles that:
1. Jurisdictions should retain and enforce laws that generally bar the practice of law by entities other than law firms.
2. The sharing of legal fees with non-lawyers, and the ownership and control of the practice of law by non-lawyers, are inconsistent with the core values of the legal profession.
3. The law governing lawyers—which prohibits lawyers from sharing legal fees with non-lawyers and from directly or indirectly transferring to non-lawyers ownership or control over entities practicing law—should not be revised.
The resolution discharged the MDP Commission “with the Association’s gratitude for the Commission’s hard work and with commendation for its substantial contributions to the profession.”
2. State Bars
Based on information available as of July 6, 2000, the MDP Commission reported that 44 states and the District of Columbia had created committees to examine MDP issues and make recommendations. As of that time, ten state committees had returned reports favoring rule changes that would allow MDPs, and nine had returned reports opposing such changes. Among the states favoring rule changes, Arizona, Colorado and Minnesota have already adopted recommendations for rule changes to facilitate MDPs.
3. Policy Arguments for Opposing MDP Recognition
Opponents of MDPs raised a number of arguments before the ABA House of Delegates, which include the following:
(a) MDPs can and should be prevented.
MDP opponents assert that the organized Bar, by vote, can prevent MDPs from coming into being. The quick answer to that assertion is that MDPs are already here. The facts are that “virtual” MDPs are all around us and that the MDPs will continue to exist in spite of any possible action by the Bar. The ABA spent a significant amount of money and time in studying the MDP phenomenon and concluded that the push for MDPs is real and largely unavoidable. Because the growth of MDPs in Utah is also largely unavoidable, the Bar should acknowledge the fact and formulate a framework to allow lawyers to work in MDPs while, at the same time, maintaining their ethical obligations. The Task Force believes that the Bar should acknowledge that MDPs are here to stay and adapt our rules to keep the practice of law ethically sound. If the Bar adapts to MDPs, it can help to regulate the practice of law in both the traditional law firm environment and in the MDP environment.
(b) The Practice of Law needs definition.
Due to confusion over what constitutes the "practice of law," it is often impossible to tell when a person is practicing law. As a consequence, non-lawyers have entered the traditional legal arena by marketing themselves as "consultants" in order to avoid Unauthorized Practice of Law (“UPL”) claims. However, these practitioners give legal advice, prepare legal documents, and assist in what has traditionally been the practice of law—and do so for compensation. For the most part, these “consultants” go unpunished. They may argue that they are not practicing law because, as they define it, the practice of law is limited to going to court for a client.
The Task Force believes that most of the areas and issues within the "practice of law" require a skilled lawyer. Prohibiting the practice of law by unqualified persons is designed to protect the public from those who lack the competency and integrity needed to advise and represent clients in legal matters. With these policy considerations in mind, the Task Force believes that recognition of MDPs will help to deal with the growth of UPL. If lawyers are allowed to work with non-lawyers in MDPs, the MDPs can provide services by non-lawyers when appropriate while directing clients to lawyers for those matters that require the training and judgment of a lawyer. By working with non-lawyers in a sanctioned environment, lawyers can more effectively guard the core values of the legal profession. Current Rule 5.3, originally drafted by the Kutak Commission as a protection for the core values of the legal profession in the MDP context, makes lawyers responsible for the conduct of non-lawyers with whom they associate.
(c) MDPs will undermine the "Core Value" of Independence of Professional Judgment.
A lawyer must exercise independent legal judgment on behalf of the client. MDP opponents assert that non-lawyer influence over a lawyer in an MDP could jeopardize that independence. The Task Force believes that MDP-like situations already abound. There are already many situations in which lawyers work under the supervision of non-lawyers—such as government law offices and in-house legal departments. These lawyers must still retain the freedom to exercise independent judgment. Existing rules require lawyer independence regardless of the particular organizational structure. All lawyers, regardless of the form of organization in which they work, must adhere to ethical obligations. These principles are emphasized in the rule revisions proposed by the Task Force. The Task Force agrees with the Kutak Commission and the ABA MDP Commission that independence of professional judgment can be maintained by enforcing that standard directly and without prohibiting lawyers from associating with non-lawyers in MDPs.
(d) MDPs will undermine the "Core Value" of Loyalty to Clients and Avoidance of Conflicts.
Lawyers must be loyal to their clients and avoid conflicts of interest. MDP opponents assert that this "core value" is threatened in an MDP environment because the rules of ethics for other professions are inconsistent with the ethics rules for lawyers. The Task Force believes that there is a simple answer to this concern—conflicts checking would be required on all clients of an MDP. In the delivery of legal services, each client of an MDP would be considered the client of each lawyer in the MDP, just as current rules require in the traditional law firm setting. With a firm-wide imputation rule, possible conflicts of interest would be resolved on a firm-wide basis.
(e) MDPs will undermine the "Core Value" of Confidentiality of Client Information.
Lawyers and law firms may not disclose clients' confidential information. Opponents of MDPs claim that, in a fully integrated MDP, confidentiality issues would be jeopardized. The Task Force believes that there are ways to maintain the ethical duty of confidentiality. Where necessary or appropriate, a system of worker separation might be implemented. Lawyers would continue to be responsible for maintaining confidentiality according to the standards established by Rule 1.6. Client confidences could be shared with non-lawyers members or employees of an MDP, as is now the case with regard to non-lawyer employees or independent professionals, only when doing so would assist the proper representation of the client. As is the case under existing Rule 5.3, lawyers would be responsible for the maintenance of client confidences by those who assist in the client representation.
4. The View Of The Task Force
After careful consideration of the arguments against MDPs, the Task Force does not find them persuasive. The position of the ABA House of Delegates that states should prohibit MDPs and enforce UPL statutes is unrealistic. The Task Force supports the recommendations of the MDP Commission and believes we should adopt changes to our rules that will permit MDPs.
A. External Forces
The environment in which we as lawyers operate is changing dramatically, and the pace of change seems to be ever increasing. However, the Task Force also finds that change brings opportunity, and opportunity brings new excitement and revitalization to the profession.
Generally, the Task Force believes that education is needed to understand the very nature of MDPs. MDPs are not the result of a conspiracy by other professions or service providers to take over the legal field. MDPs are a market-driven phenomenon. They exist because a certain segment of the consuming public needs them to exist. Indeed, the Task Force believes that legal professionals need to understand that a variety of marketplace factors have come together to create an environment where MDPs are critical to consumers. The forces driving the need for MDPs are as follows:
1. Technology
Technology is changing the manner in which virtually every profession performs its services and markets its capabilities. For instance, the Internet offers “do-it-yourself kits” for estate planning, divorces, bankruptcies, real estate closings, among other matters in the traditional field of law. These “kits” are so extensive that some websites are created by non-lawyers who might be accused of engaging in the unauthorized practice of law. Many of the websites, however, are created by lawyers, who are using the Internet as a means to introduce potential clients to their firm’s capabilities. An Internet user can now enter an interactive program and create the first draft of divorce documents, wills and trusts, or simple contracts, and then e-mail the draft to a lawyer for review. These and other uses of technology have great potential for helping lawyers meet the needs of consumers for affordable legal services.
2. Concentration of Financial Services
The 1999 repeal of the Glass-Steagall Act paved the way for large-scale mergers of banks, stock brokerage, financial planning, investment banking, insurance and other financial service companies. A few large institutions are already emerging. Even with antitrust restraints, larger institutions are likely in the future. Indeed, the highest courts in 11 states have now ruled that in-house counsel may represent individual clients of the employer without resulting in the unauthorized practice of law. As a result of such change, large financial institutions will be able to offer a full range of legal services to their existing customer base and to attract new customers, through the use of lawyers who are salaried employees of the financial institution. Tax-return preparation, estate planning, prenuptial agreements, real estate sales documents and simple contracts would easily adapt to this approach. Once the financial institutions master these services, there may be few limitations on their ability to provide a full range of legal services.
3. CPA Firms
For many years lawyers have felt that Big 5 CPA firms, as well as other accounting firms, were poised and ready to compete for their share of the legal marketplace. All of the Big 5 CPA firms are engaged in the practice of law outside the United States. In fact, the largest law firm in the world is one of the Big 5 accounting firms. Within the United States, several Big 5 accounting firms have already acquired or opened law firms. All of the Big 5 employ large numbers of lawyers who currently practice accounting, but who could also shift to the practice of law when needed. However, this phenomenon may or may not cause great concern to the bar. Recent audit independence challenges by the Securities and Exchange Commission have dominated the attention of most large accounting firms and have called into question whether audit firms will be able to expand into related lines of business.
4. International Trade Treaties
On an international basis, MDPs now thrive in many countries throughout the world. Treaties between these countries and the United States purport to allow a free interchange of professional services across national borders. If a Canadian MDP or an English MDP can perform certain types of legal services for a Utah client, while a Utah MDP cannot, Utah lawyers are placed at a serious competitive disadvantage.
5. Client Needs
Many clients of Utah lawyers genuinely want professional services which cross state borders, international borders and interdisciplinary borders, coordinated through a single professional advisor in the client’s home town.
B. Changes in the Profession
Reflecting on these forces, it should come as no surprise that the practice of law, like everything else in our society, is changing rapidly. The Task Force believes that the ethical rules must also change to ensure that the practice of law by lawyers does not become obsolete.
The practice of law has seen enormous change in the last 20 years. For instance, collaborative, rather than adversarial-dispute resolution models have greatly increased in various Alternative Dispute Resolution forums, particularly mediation. Lawyers are not necessary for ADR, and in some ADR arenas legal training may be considered a liability. Lawyers no longer have a monopoly on supplying even dispute resolution services to the general public.
While no one has yet marketed do-it-yourself legal advice that will serve all legal needs, our profession has largely priced itself out of the middle class market. Low-income clients have subsidies and high-income clients have money for their legal needs, but the great middle class is left largely under-served. Consequently, the middle class has worked on its own initiative and serves as the largest consumer group for “do-it-yourself” bankruptcy provisions, wills, contracts, business agreements and even court pleadings.
To the legal profession’s financial detriment, other professionals have stepped in to serve the middle class legal consumer. Insurance and investment representatives (in addition to the Utah sanctioned real estate professionals) routinely provide form wills, trusts and business agreements as value added services to their product sale. What we must recognize is the fact that clients enjoy the convenience of one-stop quick delivery, even if they are often either apathetic or uneducated about quality of the legal services they purchase.
Of course, financial interests should not be our only concern. Those of us who take pride in the fact that we belong to a professional society governed by ethical canons must squarely confront the fact that non-lawyer-professionals, who provide legal services, do so without the regulation of our ethical rules.There does not appear to be any case law in Utah to the effect that when an injury occurs to a consumer from legal services rendered by a non-lawyer the non-lawyer will be held to the same standards of competence and conduct that apply to lawyers. As a rule of law, the Task Force believes the higher standard of liability should extend to non-lawyers. Extending standards of competence and ethical conduct to non-lawyers may have the effect of regulating the conduct of non-lawyers through liability. But for non-lawyers offering legal services this is really a matter of risk management, and will not prevent them from offering legal services as long as it makes economic sense. Liability will encourage non-lawyer providers to employ lawyers who are bound by our standards of competence and conduct to perform legal services, which will better serve consumers in the legal services they receive.
“It is my ironclad belief that 90 percent of white collar jobs, starting with mine, will over the next ten years be eliminated or reconfigured beyond recognition.” – Tom Peters, Sept. 2000. Author, In Search of Excellence.
Unless the legal profession changes to adapt to the forces explained above, the Task Force believes that the profession will confront the following problems:
1. Major shifts away from the use of lawyers will occur, probably in the transactional practices first, but then spreading to litigation/dispute resolution practices. The combination of seamless professional services and the speed and accessibility of information on the Internet will lure clients away from the traditional services that law firms offer.
2. It will become increasingly difficult for the Bar to regulate the practice of law. Geographic borders are disappearing, and lawyers’ roles are shifting such that regulation under the current rules will be difficult to enforce.
3. UPL will become increasingly difficult and expensive to regulate. As a flood of providers start offering legal “consulting” services, those bars authorized to pursue UPL cases will not have sufficient resources to respond.
4. Accounting firms, the “Big 5” and others, will continue to encroach upon the practice of law since these firms already employ thousands of lawyers and offer legal “consulting” advice and legal information.
5. Large financial service corporations also pose a threat given the fact that the banking and insurance industries were deregulated in late 1999. Those companies are hungry for clients and have significant capital at their disposal.
6. Clients will, when they weigh the value of legal services versus the cost, increasingly try to find ways to do their own legal work—a trend that mirrors the overall growing drift to self-help services.
7. If the above predictions come to pass, the relevance of the courts may come into question and the rule of law may be negatively impacted. Since legal issues will be handled outside of the lawyers’ sphere of influence, the ability of the courts to set precedents will diminish.
8. Law schools will likely become more inter-disciplinary in order to meet the needs of students and employers. If traditional law schools do not change, they will lose enrollment and alternative educational forums will train those who will provide the interdisciplinary services that will replace traditional legal services.
9. Regardless of whether rules are changed to recognize and allow MDPs, lawyers and law firms will attempt to move into MDP-like circumstances, such as ancillary businesses and contract model MDPs.
10.In-house counsel will face increasing pressure to provide legal services to clients of their companies. Some in-house counsel may be employed to provide services to employees of the corporation.
Considering these social and economic forces may seem overwhelming. Indeed, it is easy to fear the unknown, and the eventual impact of MDPs remains unknown. The Task Force believes, however, that the vast majority of lawyers who understand MDPs, and the market forces behind them, will recognize that MDPs are not a threat to the legal profession. Rather, MDPs are, instead, an opportunity to: 1) encourage clients to use lawyers in the performance of traditional legal services; 2) make legal services more available to a broader cross section of the marketplace; and 3) protect the public by encouraging the performance of legal services by those best qualified to offer those services.
The legal profession provides advice and representation primarily to the most wealthy segments of society. Middle and lower income groups generally perceive that they cannot afford sound legal advice and, more often than not, do not seek it. An MDP is not a total solution to providing legal services to middle and low-income groups. It may, however, be a significant step in the right direction.
One might expect that customers with an inherent fear of lawyers will find lawyers less intimidating when their lawyer’s advice is provided at the recommendation of, and perhaps even in the presence of, an accountant, financial advisor, banker or other advisor who already has the client’s trust and confidence. Within MDPs, other professionals could alert clients to situations in which legal advice might be helpful. Indeed, in many cases, other professions may simply have greater contact with members of middle and lower income groups and may assist those groups in finding the proper legal assistance. One can imagine that when professionals work together, a client has a better chance of finding the correct expertise to assist with its needs.
As a market-based phenomenon, MDPs will succeed or fail based solely on the marketplace. At present, all indications point to the fact that MDPs are here and growing. Utah lawyers may bury their heads in the sand and ignore the phenomenon. The Task Force believes that to do so would make such lawyers quickly antiquated and unsuited for an ever changing market. Alternatively, Utah lawyers may recognize the phenomenon, embrace the possibilities, and help to guide the creation and implementations of MDPs in ways designed to protect the ethical standards of our profession, to protect the public from receiving legal advice from the unqualified, and to protect lawyers from a substantial invasion of their traditional practice areas.
The bottom line concerning the future of our profession is that the current ethical regulations greatly restrict the ability of lawyers to provide critical services to their clients. Other providers of “legal services” are not limited by these restrictions. As a consequence of this difference, if the rules for lawyers are left unchanged, lawyers will be functioning at a distinct disadvantage, and clients will eventually go to other service providers. If we want clients to continue to enjoy the benefits of legal services provided in accordance with the core values of our profession, the Bar will have to make changes to the current rules.
After considering the history of the ethical prohibitions on MDPs, and the complex social and economic forces lawyers will continue to encounter, the Task Force believes that the Code of Professional Responsibility should be modified in the following specific ways[6]:
A. Confidentiality – Rule 1.6
Confidentiality of client communications allows the lawyer to collect the information required to render effective legal service. This rule should remain in place, but the interpretation of its scope should be expanded to include MDPs.
B. Conflict of Interest – Rules 1.7 and 1.10
The current rules prohibiting conflicts of interest address the specific ethical concern of providing objective, unbiased legal services to the client. Permitting MDPs under Rule 5.4 has the effect of extending our practice standard regarding conflicts to other professions and businesses where legal services are performed without meaningful consideration of this standard. The Task Force recommends expanding the scope of the rules to include MDPs.
C. Responsibility For Your Conduct and the Conduct of Others – Rules 5.1 through 5.3
Rule 5.1 imposes on a lawyer the obligation to supervise the delivery of legal services and compliance with the professional rules of conduct. This obligation does not change when the lawyer practices in a MDP. The scope of this rule should be modified to include MDPs.
Rule 5.2 has the effect of protecting a subordinate lawyer from responsibility for a violation of the conduct rules if the issue giving rise to the potential violation was reasonably resolved by a supervising lawyer. The subordinate lawyer cannot allow his compliance with the rules of conduct to be determined by a supervisor who is a non-lawyer. Protection for a subordinate lawyer is only available when the decision on how to proceed is made by a supervisor who is subject to the rules of professional conduct. The interpretation of the rule should make it clear a subordinate lawyer cannot rely on a non-lawyer supervisor for protection.
Rule 5.3 governs supervision of non-lawyer staff and associates. Rule 5.3 was originally drafted by the Kutak Commission to assure that standards set by the rules of professional conduct would be protected despite assistance from and collaboration with non-lawyers in the representation of clients. It is directly applicable to MDPs and should be an important safeguard for the core values of the legal profession in that context.
D. Professional Independence – Rule 5.4
As a matter of ethics, a lawyer should not represent a client if the lawyer cannot render objective and independent legal advice because of an economic interest, a circumstance of employment, or a relationship to another person. However, if the lawyer reasonably believes that such factors will not interfere with his or her ability to provide objective and independent advice, the lawyer should be able to accept the engagement with the client’s consent after consultation. Current Rule 5.4 prohibits fee splitting and business association with non-lawyers on the presumption that lawyers will be unable to exercise the prudence and judgment necessary to resist inappropriate encroachments on their professional independence. The Task Force recommends that the Bar should remove these artificial restrictions on lawyers; it recommends instead that the Bar should allow fee splitting and business associations with non-lawyers, while imposing the duty on lawyers to determine whether any element of his or her business association interferes with the ability to exercise professional judgment.
E. Unauthorized Practice – Rule 5.5
The Task Force recommends retaining the prohibition in Rule 5.5 against assisting any person in the unauthorized practice of law. The point of our proposed changes is not to allow everyone to practice law, but to allow lawyers to practice law in a broad range of business forms so that our standards of practice are extended through MDPs for the benefit of consumers. Therefore, the prohibition should remain in place, but the interpretation should make it clear that practicing in an MDP is not a violation of the rule.
The practice of law is becoming increasingly multi-jurisdictional, particularly in the areas of corporate and commercial transactions. The Task Force believes that this trend will continue with the advent of Internet commerce, and in the number of financial institutions, insurance companies, accounting firms and others offering bundled services. The Task Force therefore recommends considering a modification to the prohibition under Rule 5.5 and state licensing statutes of practicing law in a jurisdiction where doing so violates regulation of the legal profession in that jurisdiction to permit reciprocal practice.
F. Advertising/ Solicitation – Rules 7.2 and 7.3
A lawyer should not make false or misleading statements about legal services offered, and should not solicit physically or emotionally distressed persons. Beyond these limitations, the Task Force cannot discern any meaningful justification for the broad prohibitions in Rules 7.2 and 7.3, other than an antiquated notion that it is unseemly for lawyers to advertise. The Task Force therefore recommends eliminating the rules against advertising where they go beyond the policy interests noted above.
The Task Force also believes that our canons of ethics must continually respond to an ever changing social climate, and that therefore, in time, technical changes will be required in other rules of professional conduct to allow for the changes described above.
G. Other Practice Considerations
Lawyers in MDPs may want to consider disclosing the following to their clients:
1. Referrals
While a lawyer practicing in a large firm may prefer to refer legal matters within his or her own firm, the MDP lawyer may be expected to refer a whole host of matters within his or her own MDP structure.
2. Confidentiality
Under the rules as proposed by the Task Force, an MDP could combine all the various professions and occupations into a single fee-sharing unit, or could maintain substantially separate independent practices linked together by contract. To the extent the MDP chooses to practice as a single unit, the rules regarding confidentiality will apply to all members of the unit whether or not they are lawyers. At the same time, lawyers within the MDP will be entitled to share information with non-lawyers practicing within the MDP when appropriate to obtain assistance ion the representation of the client. The client will need to be told who will have access to his information.
3. Cross-Selling
Although the concept of cross-selling will not be universal, one advantage for many professions and occupations to participate in an MDP is the possibility of cross-selling services among the various professions and occupations. Clients will need to be informed whether cross-selling might occur and whether information will be shared as part of the cross-selling process. The wise MDP may also allow clients to opt out of cross-selling activities.
4. Fee Sharing
Fee sharing inside the MDP can be structured to meet the needs of its various participants. Because of the possibility that a lawyer could earn a portion, even a substantial portion, of his or her income from activities other than the practice of law, the incentives driving an individual lawyer might be dramatically different in the MDP setting.
5. Conflicts of Interest
The conflict of interest rules would be applied to the entire MDP, therefore separating the legal unit contractually from an MDP may make sense. With a separate legal unit, an MDP could isolate conflict of interest issues within that unit. Otherwise imputing conflicts within the larger MDP could become problematic.
The practice of law has changed with the rest of the world. Today, law firms are not the only providers of legal services. Multidisciplinary practice is a fact. To recognize this fact, the Bar Commission created this Task Force to look at the market forces and determine how to best preserve the important “core” values of the legal profession, which must survive in the new market. The Task Force has attempted to provide these perspectives and to suggest changes in the rules of professional conduct in order to allow lawyers to serve modern clients interests in a traditionally ethical manner.
The Task Force decided that the core values of the profession could not be abandoned without abandoning our obligation to the public. These values of the profession are:
1) The duty to maintain competency;
2) The duty of loyalty to the client;
3) The duty to maintain independence of judgment;
4) The duty to remain free from conflicts of interest; and
5) The duty of client confidentiality.
The Task Force also decided that we cannot preserve these core values by ignoring MDPs. The Task Force believes the Bar should preserve and promote our core values by embracing MDPs and thereby extending our professional standards of practice and conduct through lawyer participation in MDPs. The Task Force believes this is our best opportunity as a profession to regulate, serve, facilitate, promote, and lead in the practice of law and the delivery of legal services to the public.
[1] For a more complete history of the rules prohibiting lawyers from joining multidisciplinary partnerships, see Bruce A. Green, The Disciplinary Restrictions on Multidisciplinary Practice: Their Derivation, Their Development, and Some Implications for the Core Values Debate, 84 Minn. L. Rev. 1115 (2000), on which this summary relies.
[2] See ABA Comm. on Professional Ethics, Formal Op. 8 (1925) and Formal Op. 10 (1926).
[3] See Green, supra note 1, at 1135.
[4] I. Maurice Wormser, Frankenstein Incorporated 164–65 (1931).
[5] Geoffrey C. Hazard, Jr. & William Hodes, 2 The Law of Lawyering: A Handbook on the Model Rules of Professional Conduct § 5.4:101, at 796 (Supp. 1991).
[6] See Attachment A, for specific rules language proposals
Last Update: 09/04/02
