THE ASSOCIATION OF THE BAR OF THE CITY OF NEW YORK
STATEMENT OF POSITION ON MULTIDISCIPLINARY PRACTICE
July 20, 1999
Over the past year, several entities within The Association of the Bar of the City of New York ("the Association") have undertaken extensive studies of multidisciplinary practice ("MDP"): first, the Association's Committee on Professional Responsibility (John B. Harris, Chair); second, the Task Force on Multidisciplinary Practice of the Association's Council on International Affairs (Donald H. Rivkin, Chair); and, third, a special subcommittee of the Executive Committee (consisting of Vice Presidents Michael B. Gerrard and Steven B. Rosenfeld, and Frances Milberg).
On June 8, 1999, the Commission on Multidisciplinary Practice of the American Bar Association ("ABA") released its recommendations in the form of a proposed resolution for consideration by the ABA House of Delegates. The New York County Lawyers' Association Board of Directors on June 14, 1999, adopted a resolution recommending that lawyers be permitted to practice in an MDP organization only if, inter alia, the lawyers retain "full control" (including two-thirds ownership and vote). On June 26, the New York State Bar Association House Delegates called for further study and expressed "concern[ ] that changing existing legal and ethical rules to permit lawyers to practice law in MDPs will adversely and irreparably affect the independence and other fundamental principles of the legal profession." 1
After considering the divergent views that have been expressed both within and outside this Association, and having paid particularly close attention to the concerns that have been raised about the impact that MDP would or might have on the public and on the legal profession, the Association's Executive Committee sets forth the Association position on MDP in this statement.
Any examination of MDP should address three questions: (1) Can MDP benefit consumers of legal services? (2) What forms of organization should MDP take, and what controls should apply? (3) How compatible are the rules and values of the legal profession with those of the other professions that might be involved in MDP? We will address each of these questions in turn. That discussion will be followed by our conclusion that MDPs may offer substantial benefits to consumers of legal services and should be permitted under certain defined conditions, but that under no circumstances should an MDP be allowed to provide audit and legal services to the same client.
First, however, we wish to comment on the process to be followed in considering this subject. We understand that in August 1999 the ABA House of Delegates will debate the proposed ABA Resolution, which embodies 15 principles recommended by the ABA's Commission on Multidisciplinary Practice. Our comments are limited to this Resolution and, to a lesser extent, the Commission's report, and do not address the language prepared by its Reporter for possible amendments to the Model Rules of Professional Conduct. Only after basic principles are established would it be appropriate, in our view, to focus on the intricacies of revising the disciplinary rules and applicable court rules, as well as drafting any enabling legislation that may be required.
In view of the momentous nature of the subject matter and the complexity of the Commission's recommendations, we believe that the recommendations should be debated at the August 1999 ABA Annual Meeting but no vote taken. State and local bar associations and other interested parties should then have sufficient additional time to consider and comment on the recommendations. At the end of this period the ABA Commission could consider making amendments or supplements to its report and recommendations, and a fully-vetted document could be voted upon at the ABA's midyear meeting in Dallas in February 2000 (or thereafter, if additional time for comment and revision is deemed desirable).
Can MDP benefit consumers of legal services?
The ABA Commission's Report concluded (at 1) after "extensive reflection and analysis," including sixty hours of public hearings, that "there is an interest by clients in the option to select and use lawyers who deliver legal services as part of a multi-disciplinary practice." 2 At the same time, the Report acknowledged that "detailed empirical data is not available" ( id.) -- and we are not aware of any data (as contrasted with self-serving statements) that purports to show whether consumers of legal services would benefit from MDPs. We believe a definitive answer would come only after multidisciplinary services are offered and clients declare, by their choice of practitioners, whether these services are superior to more traditional forms of delivery of legal services.
Nevertheless, even in the absence of empirical data we believe that at least some forms of MDP could benefit consumers of legal services in a variety of contexts beyond the corporate lawyer/accountant model that has dominated the discussion of MDP to date. There are many situations presented in today's world that are so multifaceted that clients might be well served by teams drawn from multiple professions. Many such combinations come to mind: patent lawyers and engineers; environmental lawyers and geologists or biologists; ERISA, divorce or trusts and estates lawyers and actuaries; construction lawyers and architects; criminal or family lawyers and psychologists or social workers; elder lawyers and financial advisors or gerontologists -- the list could undoubtedly be lengthened.
Accordingly, we believe that a wide variety of clients could potentially benefit from at least some forms of MDP. Indeed, in several professional settings, MDPs have been in existence for some time. The juvenile and civil units of many legal services providers employ social workers. 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.
The converse is also apparent. We are aware of numerous instances where clients have been led astray by nonlegal professionals who did not have ready access to legal advice and did not suggest that their clients obtain such advice. Just as not every doctor's visit leads to a prolonged hospitalization, not every legal question will require hundreds of hours of research and the preparation of lengthy memoranda. Brief professional consultations may suffice, but clients face barriers (real or perceived) in finding and retaining lawyers or other professionals with the right types of expertise. Clients of many non-legal firms would benefit if those firms had, under the same roof, skilled and experienced lawyers who were available for consultation on legal questions. Indeed, more than a little litigation involves resolving problems that might have been prevented if the right professional team had been consulted or involved in the underlying situation in the first place.
MDP means that lawyers and members of at least one other profession practice together. It does not necessarily mean that they have chosen any particular form of organization in which to conduct that practice. Recognizing the benefits to clients of MDP does not necessarily mean that any particular form of organization is best; indeed, different substantive areas and kinds of clients may well make different kinds of affiliations appropriate. However, we believe that the conditions set forth in the Proposed ABA Resolution for a partnership, professional corporation, or other entity that includes lawyers and non-lawyers are all appropriate and necessary, with the exception as to auditing discussed below.
What forms of organization should MDP take, and what controls should apply?
The ABA Commission listed several different forms the MDP might take, ranging from informal affiliations to full integration. This formulation was helpful, but the diversity of the legal profession is likely to defeat any effort to adopt a single preferred approach. Corporate tax lawyers, plaintiffs' environmental lawyers, and children's rights lawyers are all members of the same profession, but they inhabit altogether different professional settings, with little overlap in clients, issues, and types of non-legal expertise required. In fashioning appropriate relationships with other professionals, one size will not fit all.
Thus, rather than attempting to dictate a particular form of organization, we believe the focus should be upon preserving the core values of the legal profession while (subject to that constraint) affording flexibility that would allow improved client service.
It may well be that further exploration will lead to the conclusion that some changes to the lawyers' codes of ethics are warranted. Most prominent among these likely changes are to allow fee-splitting in certain defined circumstances and to allow lawyers to become partners with non-lawyers in firms and provide legal advice to clients of those firms, rather than only to the firm itself (as house counsel ostensibly do).
At least three essential conditions must be met before this Association would conclude that MDP can be accommodated with the basic ethical principles of the legal profession:
(1) The core ethical values of the legal profession must not be eroded, particularly:
(a) independence of judgment and decision-making;
(b) loyalty to one's client and its concomitant, avoidance of conflicts of interest;
(c) preservation of a client's confidences and secrets;
(e) avoiding improper solicitation; and
(f) maintaining the independence and integrity of the judicial system and a commitment (i) to provide pro bono legal services to those unable to pay, and (ii) to improve the legal system.
(2) Individuals who are not lawyers may not render legal advice or otherwise provide legal services, nor should they control, influence or seek to control or influence the professional judgments of lawyers.
(3) Clients must give informed written consent prior to receiving representation or service from an MDP, after full disclosure of the conflicts, confidentiality and other ethical issues and risks presented by the MDP format.
The principles embodied in 1(f) above -- "maintaining the independence and integrity of the judicial system and a commitment (i) to provide pro bono legal services to those unable to pay, and (ii) to improve the legal system" -- have historically been of particular importance to this Association. While we do not pretend that lawyers are unique as a profession in pledging a commitment to the public good, their unique relationship to our society's law-making and law-enforcement institutions places upon lawyers a special obligation to improve the legal system and to increase its accessibility to the poor. Lawyers practicing in MDPs must be particularly sensitive to resisting pressures from their non-lawyer colleagues to subordinate this obligation to the pressures of the bottom line -- and any new professional standards governing MDPs should provide ample ammunition for such resistance. The Resolution proposed by the ABA Commission expressly and appropriately addresses this concern. 3
Avoidance of conflicts of interest must receive special attention in the MDP setting. At a minimum, as the ABA Commission proposes, engagements which involve legal services must be subjected to existing conflict-of-interest rules, extended to all clients of the MDP, including those who do not receive legal services. 4 We also believe that non-lawyers working jointly with lawyers on client legal matters must expressly undertake to maintain the same degree of confidentiality as their lawyer colleagues, (unless otherwise required by law -- see n.10, infra) and that the MDP must adopt and enforce procedures assuring the maintenance of such confidentiality 5 . In this connection, we are not at all convinced of the efficacy of "screens" to solve conflicts of interest or to prevent unnecessary disclosure of client confidences to non-lawyers in the MDP. 6 The fact that law firms have used ad hoc screening devices to address certain conflicts, such as those involving lawyers who were formerly in government service, does not mean that "screens" are acceptable as a permanent, firm-wide solution to these problems.
Moreover, even a faithfully-observed rule requiring non-lawyers working in MDPs to agree, apart from the audit context, to preserve client confidences would provide no assurances that courts will be willing to extend the existing attorney-client and work product privileges to cover information disclosed to such non-lawyers. Indeed, recent court decisions suggest that many judges are increasingly hostile to efforts to expand either privilege. Thus, while clients can be given contractual commitments that non-lawyers in MDPs will not voluntarily disclose confidential communications, they cannot be assured that disclosure of such communications will not be judicially compelled.
The foregoing concerns suggest that before undertaking representation of a client, the lawyer in an MDP should determine that the representation comports with the disciplinary rules, and should obtain from the client written consent to such representation after full written disclosure to the client of at least the following: (i) that professional services will be provided to the client both by lawyers and by non-lawyers who are not independently bound to observe the same ethical code of conduct as lawyers; (ii) that only lawyers will provide legal advice or other legal services; (iii) all existing actual conflicts and reasonably foreseeable potential conflicts which may arise from any activities of the organization, whether or not they involve the professional services of lawyers; and (iv) that lawyers are ethically obligated to, and will, maintain the confidentiality of information imparted to them in confidence for the purpose of obtaining legal representation or advice, and that non-lawyers in the organization providing services to the client have undertaken to maintain the same confidentiality, but that there can be no assurance that information disclosed to non-lawyers will be considered by the courts to be protected from disclosure under privileges applicable to lawyers. 7
In view of the second condition listed above, we believe that one or more lawyers must have exclusive authority over the rendering of legal advice or other legal services. 8 This point cannot be overemphasized. On the other hand, requiring that the entire organization be controlled and managed by lawyers would unduly restrict the fostering of MDP.
The Proposed ABA Resolution subjects entities "not controlled by lawyers" to special strictures. The term "control" denotes an amorphous concept that the ABA Commission leaves undefined. Precedents regarding "control" under provisions of the Securities Act of 1933 and the Securities Exchange Act of 1934 could provide assistance in this regard. However, we disagree with the underlying premise that MDPs that are controlled by lawyers and those that are not should be regulated differently. We believe that all MDPs -- whether or not they are "controlled" by lawyers -- (i) should certify that the lawyers within them maintain the ability to exercise independent judgment on behalf of their clients and (ii) should meet the other requirements of the certification required by the proposed ABA Resolution.
To the extent that revised rules allow lawyers to practice in MDPs subject to certain conditions, the enforceability of those conditions is important. The principal means of enforcing both existing ethical rules and those revised to accommodate MDPs would no doubt be disciplinary action against the lawyers in the MDP. New York State has adopted a salutary rule (DR 1-104(A), (C)) that subjects law firms to discipline for certain kinds of misconduct by individual attorneys; we think such a rule should be considered by other states, and we believe that any MDP organization should agree to be treated as a "law firm" for purposes of this rule (and thus subject to disciplinary sanctions applicable to law firms). Any MDP which agrees to be treated as a "law firm" could in most cases be well disciplined by imposition of sanctions similar to those that may be imposed on lawyers ranging from admonition to withdrawal of the privilege of providing legal services. The array of possible sanctions might be expanded to include fines and forfeiture of fees. 9 Lawyers and non-lawyers in an MDP that fails to comply with ethical and legal standards, and the MDP itself, may also be liable to clients for malpractice or breach of contract -- at the very least, for breach of the representations and undertakings described above. In addition, as noted below, other professions have their own disciplinary rules and practices, which would potentially be enforceable in an MDP context. Accordingly, such rules and practices, and the legal basis for their enforcement, should be examined to ensure that they provide a context assuring an MDP's compliance with the applicable legal rules. It is likely that states will need to adopt statutes to ensure that comprehensive discipline against MDPs and their non-lawyer members is available.
The Proposed ABA Resolution suggests that the court systems of the various states should further ensure the compliance of MDPs with applicable ethical rules by auditing the certifications that are filed by MDPs. We disagree with this suggestion. We are persuaded that such audits would overtax the resources of the court systems, even if MDPs had to pay certification fees, and that the audits would raise difficulties of administration and judgment that would outweigh their possible benefits. The courts would, of course, retain the authority to impose discipline upon lawyers and MDPs whom they found to have filed false certifications or to have otherwise violated applicable rules. However, self-certification and self-policing are more workable than widespread auditing and fit well within the traditions of our profession.
Thorough examinations of each state's disciplinary rules will also be necessary. Among the disciplinary rules in New York that are implicated by MDP are 3-102(A) (prohibition against fee-splitting); 3-103(A) (prohibition against forming a partnership with a non-lawyer if any of the activities of the partnership consist of the practice of law); 5-107(A) (requiring client consent to a lawyer's accepting compensation from one other than the client); 5-107(B) (prohibition against subordinating a lawyer's professional judgment to the direction of a non-lawyer); and 5-107(C)(1) (prohibition against a lawyer practicing in a for-profit professional corporation or association in which a non-lawyer owns any interest). DR 5-107(B) goes to the heart of a lawyer's professional obligations and must not be weakened in any way; there may be room for modifying the other enumerated rules after careful examination.
How compatible are the rules and values of the legal profession with those of the other professions that might be involved in MDP?
One misleading thread runs, if only by implication, through some of the writings attacking MDP: that ours is the only profession with a code of ethics, a method of enforcing that code, and a long and honorable tradition of client and public service. 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. We have examined many of these codes and found them to resemble the lawyers' codes in many respects.
Further study and comparison of other professions' codes with our own, which we would urge, may reveal additional points of conflict, but, so far, the only irreconcilable difference we have identified is the confidentiality obligations of lawyers (DR 4-101, 7-102(B)) vs. the public disclosure obligations of auditors. 10 Because of that difference, we believe that legal and auditing services cannot be provided to the same clients by one firm. 11
The ABA Commission's Report does not confront the attorney-auditor conflict as squarely as it should. True, the Commission "recommends no changes be made to the lawyer's obligation to protect confidential client information," and the proposed Resolution "specifically recommends several safeguards to assure that a nonlawyer who works with, or assists, a lawyer in the delivery of legal services will act in a manner consistent with the lawyer's professional obligations" (Report at 3). But the Report's only recognition of the auditor-lawyer dilemma is in endnote No. 3, which acknowledges that the Securities and Exchange Commission's auditor independence rules specifically hold the roles of auditor and attorney under the federal securities laws to be incompatible. This Association believes that those roles are always intrinsically incompatible, and that any regime permitting MDPs should make clear that the same MDP may not provide both legal and audit services to the same clients.
Leaving aside the auditor-lawyer incompatibility, we believe that efforts should be focused on attempting to harmonize the ethical codes of the different pertinent professions. This is not an effort that can or should be attempted by lawyers alone. Instead, we recommend that the ABA convene a working group of representatives of the legal profession and the other professions -- e.g., accountants, engineers, architects -- to foster mutual understanding among these professions and ours, identify any conflicts that cannot be reconciled, and try to reconcile those that can. (Precedent for such an effort can be found in the discussions between the legal and accounting professions in the 1970s that gave rise to the protocol governing what lawyers may reasonably be asked to say in response to auditors' inquiries.) Representatives of consumers of legal services might also be included in this group. A first step might be to organize a program (perhaps with the co-sponsorship of other professional societies) at which leading authorities on the ethical codes of each profession might compare and contrast those codes. 12
The point of this exercise will not be to try to arrive at the lowest common denominator. Rather, the purpose will be to allow the legal profession to shed the adversarial nature of some of the discussion of MDP, and instead adopt a more informed view of the codes and mores of each of the various professions with which lawyers may wish to associate themselves. It may be that there are some professions (in addition to auditors) with such serious incompatibilities that only arms-length relationships are appropriate, but we think it likely that most, if not all, of the pertinent professions will be found to have important similarities and only isolated (albeit perhaps critical) differences between their ethical guidelines and our own. We would not, however, condone MDPs with professions that are not subject to licensing, regulation, and a code of conduct.
There is no denying that lawyers working for MDPs will face challenges. The conflict problems that daily face law firms, particularly the larger firms with many clients, are likely to be more prevalent in MDPs and will require close attention. Ways will have to be found to encourage pro bono service and activities to improve the legal system by lawyers in MDPs (a problem faced already by many government and in-house corporate attorneys and by a distressingly large and growing number of lawyers in private practice). Many of the concerns raised by opponents of MDPs are real. But in the end, the economic and technological forces that are leading to more applications of MDP will only increase, not abate. We believe the legal profession should find constructive ways to adapt to these forces, while preserving our highest traditions, rather than trying vainly to deny these forces or to hold them back.
Thus, we believe that MDPs should be permitted, but only under a regime that requires MDPs to respect and preserve the core values of the legal profession -- independence of judgment, loyalty to the client, preservation of confidences, competence, avoiding improper solicitation, and support for pro bono legal services and improving the legal system. To make sure that such a regime is properly designed, we believe that these issues should be fully discussed at the 1999 ABA Annual Meeting and voted upon at a subsequent meeting. We also call upon the ABA to open a dialogue between our profession and other professions potentially embraced within the MDP concept.
1. The State Bar resolution also "oppose[d] any changes in existing regulations prohibiting attorneys from practicing law in MDPs, in the absence of a sufficient demonstration that such changes are in the best interest of clients and society, and do not undermine or dilute the integrity of the delivery of legal services by the legal profession."
2. The ABA Commission heard views generally supportive of MDP (at least in concept) from such diverse consumers of legal services as the American Corporate Counsel Association and the American Association of Retired Persons.
3. The Resolution would require all MDPs to file with the highest court with authority to regulate the legal profession, in each jurisdiction in which it is engaged in provision of legal services, an undertaking that, inter alia,
"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."
4. The Association is thus in agreement with the ABA Commission, whose proposed Resolution puts it well: "In connection with the delivery of legal services, all clients of an MDP should be treated as the lawyer's clients for purposes of conflicts of interest and imputation in the same manner as if the MDP were a law firm and all employees, partners, shareholders or the like were lawyers."
5. This requirement appears to be embraced within Principle 14(D) recommended by the ABA Commission.
6. The ABA Commission suggests that lawyers should take special care to ensure that the non-lawyers in an MDP understand the obligation to maintain confidentiality of information, and that "it may be necessary for an MDP to implement special procedures to protect confidential information such as building firewalls in the firm's computer information system, restricting access to client files by the use of special passwords, and physically separating the lawyers and their non-lawyer assistants, paralegals, and secretaries from other service units within the MDP." (Report App. A at 7, comment 3).
7. This requirement of disclosure is embodied, in a more generalized way, in Paragraph 9 of the Proposed ABA Resolution.
8. The Proposed ABA Resolution addresses this issue in Paragraph 6, which states: "A lawyer acting in accordance with a non-lawyer supervisor's resolution of a question of professional duty should not thereby be excused from failing to observe the rules of professional conduct." We are uneasy with this formulation, because we do not believe that a lawyer may ethically permit a non-lawyer to resolve any "question of professional duty" of the lawyer. Accordingly, we propose that "matters of administration or organization" be substituted for "a question of professional duty".
9. Paragraphs 14 and 15 of the Proposed ABA Resolution, as elaborated in the Reporter's Notes (at 9 and n.67), take a similar position. Legislation may well be required to allow courts to discipline multidisciplinary firms (as opposed to the lawyers who work in them); this would be a question of state law.
10. There may also be a serious question raised where non-lawyer professionals in an MDP (such as social workers, physicians and mental health professionals) have an affirmative obligation to report suspected child abuse or maltreatment under N.Y. Social Services L. § 413, while a lawyer may be precluded under the confidentiality provisions of DR 4-101 from such disclosure. See Association of the Bar of the City of New York, Committee on Professional and Judicial Ethics, Opinion No. 1997-2, March 1997 (serious question as to whether attorneys employed by social service agencies must report suspected child abuse to the authorities, even if the lawyer represents the child and the child does not consent to disclosure); see also N.Y. Public Health L. § 2803-d (various non-lawyer professionals are obligated to report abuse in residential health care facilities); N.Y. St. Dep't of Environmental Conservation, In the Matter of Middleton, Kontokosta Associates and Donald J. Middleton, Jr., Op. of Commissioner (Dec. 31, 1998), 1998 WL 939495 (duty of professionals who observe spilled oil to file immediate report with State under 6 N.Y.C.R.R. § 613.8).
11. Vigilance must be exercised to ensure that this proscription is not evaded by placing the auditing function in an organization that is nominally, but not in reality, separate from the organization providing tax, consulting and legal services.
12. In making these suggestions, we would go further than the New York State Bar Association House of Delegates resolution, which calls for further studies "within the Association," rejecting the proposal by the State Bar's Special Committee that such studies be undertaken "both within and outside the Association."
Carol Sherman, Chair
Barry A. Cozier, Secretary
|Richard T. Andrias||Gregory P. N. Joseph|
|Peter Bienstock||*Daniel F. Kolb|
|Laurie Berke-Weiss||Roger J. Maldonado|
|Jane E. Booth||Frances Milberg|
|Daniel J. Capra||Kathy Hellenbrand Rocklen|
|Richard Cashman||Sidney S. Rosdeitcher|
|Michael A. Cooper||Fern Schair|
|William J. Dean||Michael R. Sonberg|
|L. Priscilla Hall||Robert F. Van Lierop|
|Michael Iovenko||Mary Marsh Zulack|
*Did not participate in deliberations.
This report was drafted by Michael B. Gerrard, Frances Milberg and Steven B. Rosenfeld.