Multidisciplinary Practices: Service Package of the Future?
By Dianne Molvig
he consumer movement and the computer age have
spawned a plethora of do-it-yourself legal handbooks and software
packages that help consumers do everything from handling their own
divorces to applying for patents. Today, yet another movement is
knocking on the door of what used to be lawyers' exclusive domain. It's
a concept called multidisciplinary practice, and it's now undergoing the
scrutiny of the American Bar Association's Commission on
Multidisciplinary Practice, formed last August.
Sherwin Simmons, the
Miami attorney who chairs the Commission, believes multidisciplinary
practice is the most significant issue facing the bar in the 21st
century. "You've got the public and the lawyer's ability to practice
intersecting, big time," he says. "We're seeing the intrusion of
personal service organizations into the practice of law."
The "personal service organizations" Simmons
refers to previously were known as accounting firms. Currently, these
firms - especially the Big Five, including PricewaterhouseCoopers, Arthur Andersen, KPMG Peat Marwick, Ernst & Young, and Deloitte Touche Tohmatsu - are
branching out beyond traditional accounting. They're aiming to be
one-stop shops for their corporate clients, offering a full-range of
consulting services on taxes, computer systems, employee benefits, human
resources ... and legal matters. They are doing things corporations used
to hire law firms to do, such as giving advice on mergers and
acquisitions, personnel problems, and expert witness preparation.
"To some extent, this is nothing new," points out James Wilber, a principal at
the Midwest office in Milwaukee of Altman Weil Inc., management
consultants to law firms. "The Big Five have been practicing tax law for
years. What is different is that they are moving to openly come above
board and become true multidisciplinary practices. In some countries
that's legal. In others where it's not legal, they are doing it in all
kinds of artful ways."
The Big Five and beyond
Definition: Multidisciplinary Practice (MDP) - a
partnership owned by lawyers and professionals from other disciplines
who work together to solve client problems.
A multidisciplinary practice (MDP), in its true form, is a
partnership owned by lawyers and professionals from other disciplines
who work together to solve client problems. Such associations are
allowed in Australia, Canada, and many European countries. There the Big
Five professional service organizations are aggressively hiring lawyers,
even merging with entire law firms.
In the United States, rules of conduct in all jurisdictions - except
one - prohibit lawyers from sharing fees with nonlawyers or owning a
business with nonlawyers that involves the practice of law. While true
MDPs are prohibited in all 50 states, the Big Five have been hiring
hundreds of lawyers onto their staffs. Are these staff attorneys
providing legal services for the Big Five's clients? That's an issue of
debate. The Big Five and the attorneys working for them claim they do
not hold themselves out as providing legal services. Consulting on
matters having legal components, they say, does not necessarily involve
the practice of law. Skeptics, on the other hand, contend that the
"practice of law" is precisely what is going on under the roofs of the
Big Five - not just abroad where it's allowed - but also here in this
country where, supposedly, it's not.
Besides professional rules of conduct, a key issue hovering over MDPs
is the states' unauthorized practice of law (UPL) statutes. Some
observers claim the Big Five are engaging in UPL. But that front has
seen little action to date. Texas filed a complaint against Arthur
Andersen and Deloitte & Touche in 1997, but it was dismissed 11
months later. According to the ABA
Commission's "Background Paper" published in January 1999, a UPL
charge against Ernst & Young is under investigation in Virginia. "I
think a big part of the problem," says Keith Kaap, State Bar of Wisconsin
ethics consultant, "is that not only in Wisconsin, but in most states,
there is no good mechanism for determining what is or is not the
unauthorized practice of law."
In addition to bringing lawyers on staff here at home, some of the
Big Five are forming strategic alliances between accounting and law
firms, with each entity remaining separate. Many of these alliances
aren't well publicized. One exception was the alliance in 1997 between
PricewaterhouseCoopers and Washington, D.C.-based Miller &
Chevalier, one of the major tax firms in the United States.
MDP Resources
Big Five Consulting Firms
Washington, D.C., is the only U.S. jurisdiction that has rules
allowing lawyers to be part of MDPs, but with restrictions. The rules
allow lawyer/nonlawyer partnerships and fee sharing only if the
organization's sole purpose is to provide legal services to clients. It
can't be in the business of offering accounting or other services. That
in effect has curbed interest in Washington in full-fledged MDPs, in
which lawyers and nonlawyers are business partners, according to Susan
Gilbert, ethics counsel for the District
of Columbia Bar Association. Also tempering enthusiasm there for
MDPs is ABA Formal Opinion 91-360, which states that a law firm with
offices in more than one jurisdiction cannot have nonlawyer partners in
its Washington, D.C., office.
Elsewhere in this country, MDPs don't exist de jure, observers say,
but they exist de facto. Which is precisely why this phenomenon is
unstoppable, says Wilber. "One reason we think this will be impossible
to stop is because this has been going on for years. The Big Five have
been hiring lawyers for years. There's more tax law practiced in
accounting firms than in all the U.S. law firms, and that's been the
case for 20 years."
As the Big Five migrate toward MDP set-ups on an international level
- and on a de facto basis in the United States - Wilber surmises others
will follow suit, albeit on a smaller scale. "Maybe that's the next
step," he says. "For example, regional CPA firms might get into this.
Are they looking into it? Who knows. But I can't imagine they're
not."
Here in Wisconsin, the Big Five have a smaller presence than in major
urban areas like New York, Boston, or Chicago. Still, it's no secret
that accounting firms have gradually expanded into handling clients'
legal-related matters. "I think they get bolder from year to year in
what they're comfortable having their people do," says a Wisconsin
attorney who is a former chair of the State Bar
Taxation Section. "For example, they haven't been shy about advising
clients on legal matters related to mergers and acquisitions and estate
planning, and in some circumstances providing suggested forms of
documents - things they would never have thought of doing 10 years
ago."
In addition, last summer's new law overhauling the Internal Revenue Service (IRS) included a
provision for accountant/client privilege in tax matters. Client
privilege once was a benefit only lawyers could offer their clients.
Accountant/client privilege, however, applies only in limited IRS
matters.
Wisconsin rules, fashioned after the ABA Model Rules on Professional
Conduct, prohibit outright MDPs. Lawyers can't go into business together
with nonlawyers if the partnership practices law; they can't share fees
with nonlawyers. They can hold ownership in ancillary businesses - that
is, outside law-related operations. Wisconsin has no ancillary business
rule, but ethics opinions have allowed such arrangements. "I know of a
good number of attorneys who have ownership interest in title companies,
real estate brokerages, tax firms, or insurance businesses," says Kaap.
The rules prohibit Wisconsin attorneys, however, from bringing any of
those services inside their law firms.
But are de facto MDPs cropping up here in Wisconsin? "I'm not sure
that's not happening," Kaap says. "But it's a separate question as to
whether they're really permitted. Frankly, I think there are a lot of
things happening that we're not completely aware of. People do send us
inquiries from time to time regarding certain proposed arrangements. We
don't know whether or not they just go ahead and do what they're
proposing to do, because they don't follow up on getting advice from the
(State Bar) Ethics Committee."
Big questions
On the surface, the MDP issue seems to be a fight between the legal
profession and the Big Five. But it's much more complicated than that.
"This is not a turf battle," emphasizes ABA Commission Chair Simmons.
"Our obligation is to the public. Is it in the public's interest to
allow lawyers to practice in a multidisciplinary configuration, whether
the lawyers put it together or somebody else does? If you get into a
turf battle, you're getting down in the gutter arguing about how you
stop someone from taking your clients. That doesn't advance the ball for
anybody - and certainly it doesn't advance the ball for the public."
Lawyers' opinions on MDPs vary widely. On one end of the
spectrum are those who argue that if lawyers participate with nonlawyers
in MDPs, the result will be the ruination of the legal profession's core
values, such as loyalty to clients, confidentiality, and independent
judgment of lawyers.
In fact, if the debate over MDPs comes across as economic
protectionism on the part of lawyers, "the lawyers are going to lose
badly," Wilber points out. "To the extent they can show that the
problems are problems for clients, they may win some of these
battles."
Another misconception about the MDP debate, Wilber adds, is that it's
being waged between lawyers and accountants. "That's not what this is
about at all," he says. "This is a debate between lawyers who want to
practice law in a different setting than they've been able to do to date
- that is, in a multidisciplinary practice setting - versus lawyers who
think the traditional way is the only way that should be allowed."
Lawyers' opinions on MDPs vary widely. On one end of the spectrum are
those who argue that if lawyers participate with nonlawyers in MDPs, the
result will be the ruination of the legal profession's core values, such
as loyalty to clients, confidentiality, and independent judgment of
lawyers. On the other hand, proponents contend that MDPs match with the
way organizations like to solve problems in today's world: by bringing
together teams of professionals from multiple disciplines. If lawyers
can't be part of MDPs, proponents say, they risk becoming dinosaurs.
Possible MDP relationships for lawyers include far more than
accountants. Financial planners, psychologists, gerontologists, and
others are natural candidates for partnership.
The attraction of MDPs doesn't stop with large-firm lawyers. A solo
practitioner in Chippewa Falls, for example, may see an advantage in
setting up shop with other local professionals, such as a tax
specialist, financial planner, or insurance agent. To date, both the ABA Taxation Section and
the ABA General
Practice, Solo and Small Firm Section have formally endorsed the MDP
concept.
Still, complex questions remain. Again, they come back to issues of
client benefit and protection. The key benefit for clients is the
convenience and economies derived from using one-stop shops for business
consulting services. Clients like to get everything they need in one
place, with all services condensed on one bill.
But will traditional client protections be the cost? Can a lawyer
working for or with nonlawyers preserve his or her independent judgment?
Or is there a risk that nonlawyer stakeholders could sway that judgment,
putting it second behind profit concerns? How would conflict of interest
and client confidentiality standards be maintained when lawyers are
partners with other professionals who have no such standards, or at
least less stringent ones?
Part of the difficulty in seeking answers is that the legal
profession is unfamiliar with the rules of conduct of other professions.
What precisely do accountants do, for example, to protect client
confidentiality? How do they handle conflict of interest? What are the
differences between the legal profession's standards of conduct and
those of other professions? Researching that kind of information is one
of the tasks set before the ABA Commission. Harold Levinson,
Vanderbilt University Law professor and Commission member, has stated
that he is in the process of drawing up a side-by-side comparison of
professional standards of accountants and lawyers.
Another part of the difficulty is that many clients are unaware of
how they benefit from lawyers' professional standards. They don't
understand, for instance, what they may be losing if they hire an
accounting firm to settle a personnel dispute instead of hiring an
attorney. If the dispute ends in a lawsuit, the accountant with whom the
client has shared information could be called as a witness - against the
client. Lawyers would never be put in that position because of
attorney/client privilege rules.
Now, take that a step further into a bona fide MDP setting, where
lawyers, accountants, and other professionals are all involved with the
client. Does the lawyers' client privilege remain intact? Is the client
still protected when other professionals, who have no client privilege
standard, also are involved in what is or becomes a legal matter?
Searching for answers to these and many more questions - with the
public's best interest in mind - is part of what lies before the ABA
Commission and the legal profession as a whole. Accompanying that must
be an effort to better inform the public about what lawyers' rules mean
to clients. The core values that lawyers talk about preserving must be
seen by the public as holding value to them. That means lawyers have to
do a better job conveying what they give their clients, points out
Steingass. "It's not just an approved tax return or a will to sign," she
says. "It's all the preparation, training, currency on legal issues, and
professional standards involved that make us competent to serve
clients."
"To me," Wilber says, "the real issue here is not whether lawyers
should own firms with accountants or not. It's how are we going to give
our clients what they want, whatever the rules are?"
Looking abroad
The Big Five accounting firms
have succeeded in attracting top attorneys. All combined, they employ
more than 5,500 nontax attorneys worldwide (excluding lawyers practicing
tax law exclusively within the firm's accounting or tax divisions),
according to the November 1998 American Lawyer.
PricewaterhouseCoopers leads the way with more than 1,600 lawyers in 39
countries. Only two law firms in the world have more attorneys than
PricewaterhouseCoopers.
All of the Big Five are actively pursuing clients - and offering
legal services - in markets as diverse as France, Spain, Australia,
Canada, and the Confederation of the Independent States of the former
Soviet Union.
While many countries allow MDPs, at this time only the state of New
South Wales, Australia, has ethics rules specifically addressing MDPs.
And those rules require that an MDP remain in the effective control of
the firm's lawyers.
So far, only one report of disillusionment among MDP attorneys has
surfaced. A recent British legal periodical reported that six highly
respected attorneys were leaving MDPs in Spain, Scotland, Hong Kong, and
Paris (Commercial Lawyer, issue 27, 1998) to return to
traditional law firms. The article says little about their reasons, only
mentioning differences of culture between accounting firms and law
firms. The article poses questions: "Has the tide turned? Has the
forward march of the accountants halted?"
Like the ABA Commission, international bar groups also have grappled
with the ethical questions surrounding MDPs. The International Bar
Association Council adopted a resolution in September 1998 calling for
neither approval nor disapproval of MDPs. "The IBA took the position,"
Wilber explains, "that protection of client confidentiality, the
independent judgment of lawyers, and so on are the bedrock principles of
the legal profession. We're not going to tell the regulators not to
allow MDPs. We're saying that if you allow MDPs, that wherever lawyers
work - no matter if it's a traditional law firm or something that's new
- those principles must be protected."
Another international professional group, the Council of the Bars and
Law Societies of the European Union, adopted a position opposed to MDPs
in 1996. At a November 1998 plenary session, a new proposal attempting
to soften that position won a majority of votes. But it failed to pass
by the required supermajority.
What is the upshot of all this on a global scale? Some countries
allow MDPs; some don't. Some are moving in that direction; others, such
as Finland and Denmark, remain stalwartly opposed to MDPs, at least for
the time being. Meanwhile, the Big Five seem to be forging ahead with a
full head of steam. And banks, insurance companies, securities firms,
and others have shown interest in moving in the same direction.
Looking ahead
The ABA Commission continues its process of study. As stated in its
January 1999
"Background Paper," "The Commission has not reached even tentative
conclusions." To assist in fashioning its eventual recommendations, the
Commission has held three sets of hearings (in November 1998
and February and
March
1999). Practicing attorneys from the U.S. and abroad, law
professors, judges, legal consultants, representatives from the Big Five
accounting firms, and consumer representatives have presented their
varying points of view. The "Background Paper" and hearings testimony
are available on the Commission's Web
site. The Commission aims to submit its final report and
recommendations to the ABA House of Delegates at the latter's annual
meeting in Atlanta in August.
The final recommendations, however, are only a first step. The ABA House of
Delegates decides what, if any, action to take. Any recommended
changes in professional rules of conduct then must be dealt with in each
state by whatever agency has jurisdiction, such as the state supreme
court (as in Wisconsin) or the bar.
While the Commission weighs whether current rules should be relaxed
to allow creation of MDPs, it is examining various models for delivery
of such services. The "Hypotheticals and
Models" also can be found on the Web site, and the Commission is
inviting comments.
"The models don't telegraph our thinking," Simmons emphasizes. "They
state our analysis. These are the kinds of things we could do. Maybe
we'll get somebody to come up with a brilliant response to them. We're
looking for Solomon."
Dianne Molvig operates
Access Information Service, a Madison research, writing, and editing
service. She is a frequent contributor to area publications.
Wisconsin
Lawyer