Board plans to vote on MDP issues in November; seeks member
input
October 4, 2002
At its first 2002-03 board meeting in September, the Board of
Governors heard presentations from MDP Commission members regarding
multidisciplinary practice (MDP), unauthorized practice of law (UPL),
and ancillary business practice issues. The presentations served as a
springboard to discuss the commission's recommendations proposed in its
Interim Report.
The commission, created as a result of a May 2001 Board of Governors
resolution, was charged with determining: 1) whether the Rules of
Professional Responsibility should be amended to allow Wisconsin lawyers
to be partners with and share legal fees with nonlawyer professionals;
2) what constitutes the practice of law and if more effective
enforcement mechanisms for prosecution of the UPL should be created; and
3) whether the Rules of Professional Responsibility should clarify under
what circumstances lawyers and law firms may engage in nonlegal business
practices that are ancillary to the practice of law.
MDP. "An integrated firm with one-stop shopping is
more cost-efficient and less time-consuming for the client, avoiding the
need for the client to shop for services," said Ben Strauss who
presented the benefits of MDPs. "MDPs enable law firms to employ and
share profits with nonattorneys. For example, a business firm could
employ and share profits with actuaries, accountants, appraisers, and
insurance brokers.
"Sharing of fees is ultimately in the clients' best interest,"
continued Strauss. "If a law firm can offer a full package of services
the result is cost-efficient and less time-consuming.
"While an MDP may employ professionals who are not bound by the same
ethical guidelines regarding disclosure of information, that issue would
be dealt with within the MDP setting as just one more element of how the
firm is set up."
Strauss said the commission's report outlines safeguards, including
organizing and regulating MDPs to assure that lawyers maintain their
independence of professional judgment; preventing lawyers practicing in
MDPs that perform financial auditing; and treating clients of nonlawyer
professionals in MDPs as clients of the lawyers in those firms to
determine conflicts of interest."
Speaking against MDPs, Earl Munson, MDP Commission chair said, "In
light of the recent Enron and Arthur Andersen debacles, now is not the
time for the State Bar to adopt MDP. We must consider the unique
characteristics of the practice of law - the independence of lawyers,
the willingness of the bar to check on conflicts of interest,
confidentiality, and the inroads of confidentiality that MDP would make
toward eroding that privilege in the court of law."
Munson referred to a researcher who performed a study on conflicts of
interest among professions, saying none of the fields she studied came
close to the legal profession in devoting resources to ferreting out
conflicts or even being aware of potential conflicts on a day-to-day
basis. While other firms are strangling on their tangled loyalties, law
firms turn out to be the last fiduciary bastion where confidences are
honored and uncompromising loyalty fiercely defended.
UPL. "The commission is unified on the subject of
UPL and recommends changing the definition of the practice of law to
accurately reflect the unique skills of persons trained in the law,"
said John Bermingham. "These changes include giving advice or counsel
concerning an individual's legal rights; selection, drafting, or
completion of documents that affect the legal rights of an entity or a
person; the legal effect of which other facts and circumstances must be
carefully determined; representation of another person or entity in a
court or formal procedure; and negotiation of legal rights or
responsibilities on behalf of another person or entity.
"The commission is unanimous that there be an exception to the
proposed definition of the practice of law, permitting certain
organizations to provide legal advice to low- and moderate-income
persons," said Bermingham.
"Penalties for UPL need to be expanded. In addition to criminal
prosecution, the law should provide enforcement by civil forfeiture,
injunctive relief, and a private cause of action by those who are
harmed," concluded Bermingham. "The commission's question for the
members and the board is: Do we revise the statutes legislatively or
through the supreme court?" Arguments on both sides are fairly strong
and are set forth in the Interim Report.
Andrew Chevrez, commission member and Consumer Information and
Protection Committee vice chair, asked the board to support the creation
of a practice of law board responsible for investigating UPL complaints
that would be under the auspices of the supreme court.
"The problem of UPL should not be accomplished through legislative
process," said Chevrez. "There are already 18 exceptions to the
statutes, and there would be many more if it must go through the
legislative process.
"The committee proposes the agency be an arm of Office of Lawyer
Regulation," Chevrez continued. "The agency would be removed from the
State Bar thus avoiding conflict of interest and antitrust
arguments."
Ancillary business practice. The commission defines
an ancillary business as an entity separate from a law firm that is
controlled by a law firm or a lawyer alone or with other third parties
that may not be lawyers and which provides products or services that are
not legal services.
"Ancillary business practice is about competitive balance. It's about
lawyers having the ability and the tools to compete with nonlawyers,"
said Timothy Nettesheim. "ancillary businesses are not about who can
provide legal services but rather about how lawyers can provide nonlegal
services."
"Accountants, insurance representatives, and bankers have changed the
way they do business, but lawyers haven't, and the competitive
activities of nonlawyers is forcing the legal profession to change,"
said Nettesheim.
"Insurance companies want to be the premier provider of estate
services," he continued. "Banks want to be trust account advisers and
estate planning providers. Accountants provide tax planning. As other
professionals are broadening their offerings and spending more time with
the client, they are becoming trusted advisers. Lawyers need to touch
our clients more. We must remove the barriers. The commission's proposed
new rule, which would allow lawyers to conduct nonlegal services
provides a clear road map - protecting and governing the ethical rules
of the legal profession inside and outside of an ancillary
business."
"Opponents say permitting this change will jeopardize our core
values, but if nonlegal service providers continue to erode the
practices of the business lawyers, sooner or later lawyers will give up
their law licenses and work for accounting firms," Nettesheim concluded.
"Then we still will have lawyers providing legal services but without
being subject to the rules."
Speaking in opposition to ancillary business practices Chris Stawski
said, "I favor modifying the supreme court rule to prohibit lawyers from
operating an ancillary business in connection with their law practice. I
see ancillary businesses as the first step down that slippery slope to
eroding client confidentiality and privilege. In an ancillary business
setting, clients will be subject to pitches from lawyers selling their
companies' nonlegal services. This doesn't sound like expert advisers
but more like sales people. Ancillary business practices are not in the
best interest of clients. They are in the best interests of the lawyer
and the company's bottom line. There is no legitimate reason from the
client's standpoint to comingle those interests."
The board will continue its debate and plans to vote on these issues
at its Nov. 8 board meeting. Read the report and send comments to
district governors or mdpcommission@wisbar.org
