Report To The House Of Delegates, Illinois State Bar Association New Jersey State Bar Association - Center for Professional Responsibility

ILLINOIS STATE BAR ASSOCIATION
NEW JERSEY STATE BAR ASSOCIATION

REPORT TO THE HOUSE OF DELEGATES


RECOMMENDATION


RESOLVED, that the American Bar Association adopts the following statement of principles:

1. It is in the public interest to preserve the core values of the legal profession, among which are:

a. the lawyer's duty of undivided loyalty to the client;

b. the lawyer's duty competently to exercise independent legal judgment for the benefit of the client;

c. the lawyer's duty to hold client confidences inviolate; and

d. the lawyer's duty of avoiding conflicts of interest with the client.

2. All lawyers are members of one profession subject in each jurisdiction to the law governing lawyers.

3. The Model Rules of Professional Conduct and other forms of the law governing lawyers were adopted to protect the public interest by preserving the core values of the legal profession, and the core values of the legal profession are essential to the proper functioning of the American judicial system.

4. Multidisciplinary practice in the form of permitting the sharing of legal fees with non-lawyers or permitting ownership and control of the practice of law by nonlawyers threatens the core values of the legal profession.

5. The American Bar Association shall make no change to any of the Model Rules of Professional Conduct to permit lawyers to share legal fees with non-lawyers or to permit law firms directly or indirectly to transfer ownership or control to nonlawyers over entities practicing law.

6. Lawyers should be permitted to enter into interprofessional contractual arrangements with nonlegal professionals and nonlegal professional service firms for the purpose of offering legal and other professional services to the public, either on an ad hoc or on a systematic and continuing basis, provided no nonlawyer has any ownership or investment interest in, or managerial or supervisory right, power of position in connection with, the practice of law by any lawyer or law firm.

FURTHER RESOLVED that the Standing Committee on Ethics and Professional Responsibility of the American Bar Association shall undertake a review of and make recommendations to the House of Delegates regarding the safeguards in the Model Rules of Professional Conduct required for strategic alliances and other contractual relationships with nonlegal professional service providers to be consistent with the above statement of principles, which safeguards, at a minimum, shall include the following: No nonlawyer may have any ownership or investment interest in, or managerial or supervisory right, power or position in connection with, the practice of law by any lawyer or law firm when lawyers and law firms enter into interprofessional contractual arrangements with nonlegal professionals and nonlegal professional service firms for the purpose of offering legal and other professional services to the public, either on an ad hoc or on a systematic and continuing basis.

 

FURTHER RESOLVED that the American Bar Association recommends that:

 

1. In jurisdictions that permit lawyers and law firms to own and operate nonlegal businesses, no nonlawyer or nonlegal entity involved in the provision of such services should own or control the law firm or otherwise be permitted to direct or regulate the professional judgment of the lawyer or law firm in rendering legal services to any person.

2. State bar associations and other entities charged with attorney discipline should reaffirm their commitment to enforcing vigorously their respective law governing lawyers.

3. Jurisdictions should retain and enforce laws that generally bar the practice of law by corporations and voluntary associations.

4. Each jurisdiction should reevaluate and refine to the extent necessary the definition of the "practice of law."

FURTHER RESOLVED that the Commission on Multidisciplinary Practice be discharged with the Association's gratitude for the Commission's hard work and with commendation for its efforts.

 


 
REPORT

The Illinois State Bar Association and the New Jersey State Bar Association offer the foregoing Recommendation as a comprehensive response by the American Bar Association to the issue of multidisciplinary practice. Our goal is to bring the current round of debate on the subject of multidisciplinary practice to a close by adopting a statement of principles, charging the Standing Committee on Ethics and Professional Responsibility with the task of filling in a regulatory gap in one area, making various recommendations to jurisdictions and discharging the Commission on Multidisciplinary Practice with the Association's thanks. In offering a comprehensive response, the Recommendation draws on reports and draft reports from a number of entities, each of which offers valuable insights.

We do not believe that it is adequate to "just say no" to multidisciplinary practice in the form of a strong endorsement of the independence of the legal profession as the bulwark of its core values. While we recommend the adoption of a statement of principles and state that multidisciplinary practice in the form of permitting the sharing of legal fees with non-lawyers or permitting ownership and control of the practice of law by nonlawyers threatens the core values of the legal profession, we also believe that the Association must take into account related developments and the insights gained by those who have studied the issue. If we simply issue a ringing endorsement of the independence of the legal profession, then we open ourselves up as an Association to the criticism that we have not addressed the issue as a whole. That would be a disservice to the profession and to the public, when we have learned so much about multidisciplinary practice in its various manifestations since the creation of the Commission in August 1998.

In particular, the Recommendation draws heavily upon the insights gained and the positions adopted by the commission appointed by the New York State Bar Association and headed by former ABA President Robert MacCrate. Its report (the "MacCrate Report") is the first truly comprehensive examination in the United States of multidisciplinary practice. It exhaustively surveys developments in other jurisdictions and considers multidisciplinary practice within the context of trends within the U.S. legal profession and the economy.

One of the most important insights of the MacCrate Report concerns the need for safeguards regarding the provision of legal services by law firms in arrangements with separate nonlegal professional services firms ("side-by-side" arrangements). Side-by-side arrangements generally are permitted under current rules, and various "strategic alliances" and other ad hoc and systematic arrangements have been announced between law firms and other professional firms. As the MacCrate Report so effectively demonstrates, the core values of the profession are at risk if side-by-side arrangements result in any ownership in or supervisory right by nonlawyers over the practice of law. The Model Rules of Professional Conduct should be amended to make this clear and in that connection the Standing Committee on Ethics and Professional Responsibility also should undertake a review of the safeguards required for strategic alliances and other contractual relationships with nonlegal professional service providers to be consistent with the core values of the profession. We commend to that Standing Committee's attention the work of the MacCrate Report on this topic.

The Recommendation makes one significant departure from the MacCrate Report, as it originally was issued. The MacCrate Report permits ancillary businesses by lawyers and law firms, so long as safeguards are in place to prevent the ownership or control of the practice of law by nonlawyers. The question of ancillary business, however, has been widely debated. Some jurisdictions permit lawyers to offer ancillary businesses, while most do not. We do not believe that the debate over multidisciplinary practice should reopen the question of ancillary business. For that reason, we commend the safeguards proposed by the MacCrate Report to the jurisdictions that permit ancillary business, but take no position on the question of whether to permit ancillary business.

Finally, in order to bring this round of debate regarding multidisciplinary practice to a close, we would discharge the Commission with our gratitude. The members and staff of the Commission have given generously of their time. This dedicated group has brought the issue of multidisciplinary practice to the attention of the profession and the public during the almost two years of its existence. The Commission and its staff developed new methods for conducting a national and international debate through the use of its very informative website. The Commission deserves our heartfelt thanks, but with the adoption of a comprehensive response to multidisciplinary practice contained in the Recommendations, the work of the Commission will be completed.


Cheryl I. Niro
President, Illinois State Bar Association

Barry D. Epstein
New Jersey State Bar Association

June 2000

 



GENERAL INFORMATION FORM


Submitting Entity:
  Illinois State Bar Association
                                New Jersey State Bar Association

Submitted By:         Cheryl I. Niro
                                Michael L. Prigoff

1. Summary of Recommendation(s).

A. That the ABA adopt the following statement of principles:

1. It is in the public interest to preserve the core values of the legal profession, among which are:

a. the lawyer's duty of undivided loyalty to the client;

b. the lawyer's duty competently to exercise independent legal judgment for the benefit of the client;

c. the lawyer's duty to hold client confidences inviolate; and

d. the lawyer's duty of avoiding conflicts of interest with the client.

2. All lawyers are members of one profession subject in each jurisdiction to the law governing lawyers.

3. The Model Rules of Professional Conduct and other forms of the law governing lawyers were adopted to protect the public interest by preserving the core values of the legal profession, and the core values of the legal profession are essential to the proper functioning of the American judicial system.

4. Multidisciplinary practice in the form of permitting the sharing of legal fees with non-lawyers or permitting ownership and control of the practice of law by nonlawyers threatens the core values of the legal profession.

5. The American Bar Association shall make no change to any of the Model Rules of Professional Conduct to permit lawyers to share legal fees with non-lawyers or to permit law firms directly or indirectly to transfer ownership or control to nonlawyers over entities practicing law.

6. Lawyers should be permitted to enter into interprofessional contractual arrangements with nonlegal professionals and nonlegal professional service firms for the purpose of offering legal and other professional services to the public, either on an ad hoc or on a systematic and continuing basis, provided no nonlawyer has any ownership or investment interest in, or managerial or supervisory right, power of position in connection with, the practice of law by any lawyer or law firm.

B. That the Standing Committee on Ethics and Professional Responsibility of the American Bar Association undertake a review of and make recommendations to the House of Delegates regarding the safeguards in the Model Rules of Professional Conduct required for strategic alliances and other contractual relationships with nonlegal professional service providers to be consistent with the above statement of principles, which safeguards, at a minimum, shall include the following: No nonlawyer may have any ownership or investment interest in, or managerial or supervisory right, power or position in connection with, the practice of law by any lawyer or law firm when lawyers and law firms enter into interprofessional contractual arrangements with nonlegal professionals and nonlegal professional service firms for the purpose of offering legal and other professional services to the public, either on an ad hoc or on a systematic and continuing basis.

C. That the ABA recommends that:

1. In jurisdictions that permit lawyers and law firms to own and operate nonlegal businesses, no nonlawyer or nonlegal entity involved in the provision of such services should own or control the law firm or otherwise be permitted to direct or regulate the professional judgment of the lawyer or law firm in rendering legal services to any person.

2. State bar associations and other entities charged with attorney discipline should reaffirm their commitment to enforcing vigorously their respective law governing lawyers.

3. Jurisdictions should retain and enforce laws that generally bar the practice of law by corporations and voluntary associations.

4. Each jurisdiction should reevaluate and refine to the extent necessary the definition of the "practice of law."

D. That the Commission on Multidisciplinary Practice be discharged with the Association's gratitude and with commendation.

2. Approval by Submitting Entities.

On June 24, 2000, the Assembly of the Illinois State Bar Association is expected to approve the Report and Recommendation.

On June 16, 2000, the Board of Trustees of the New Jersey State Bar Association approved the Report and Recommendation.

3. Has this or a similar recommendation been submitted to the House or Board previously?

The Recommendation is made pursuant to the prior action of the House in August 1999 that

RESOLVED, that the American Bar Association make no change, addition or amendment to the Model Rules of Professional Conduct which permits a lawyer to offer legal services through a multidisciplinary practice 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.

4. What existing Association policies are relevant to this recommendation and how would they be affected by its adoption?

The Recommendation could lead to a subsequent proposal to amend the Model Rules of Professional Conduct.

5. What urgency exists which requires action at this meeting of the House?

This Recommendation is a timely response to the action of the House in August 1999 and will permit an effective response in the immediate future to "the blurring of boundaries between law and other disciplines" that the Commission on Multidisciplinary Practice states is "imperative" in its latest submission to the House.

6. Status of Legislation. (If applicable)

Not applicable.

7. Cost to the Association. (Both direct and indirect costs)

Not applicable.

8. Disclosure of interest. (If applicable)

Not applicable.

9. Referrals.

The Report and Recommendation have been placed on the websites of the sponsoring entities. Additionally, they have been disseminated to:

ABA House of Delegates
State Bar Presidents and Executive Directors
Conference of Chief Justices
ABA Commission on Multidisciplinary Practice

10. Contact Person. (Prior to the meeting)

Gary T. Johnson                        
Jones, Day, Reavis & Pogue       
77 West Wacker, Suite 3500       
Chicago, IL 60601-1692                
312/269-1599
Fax: 312/782-8585
email: gtjohnson@jonesday.com

Michael L. Prigoff
Lebson, Prigoff & Baker, LLP
39 Park Place, P.O. Box 68
Englewood, NJ 07631-0068
201/568-4000
Fax: 201/568-7795
email: mlp@njlaw.com

11. Contact Person. (Who will present the report to the House)

Cheryl I. Niro                                
Quinlan & Crisham Ltd.                
30 N. LaSalle St., Suite 2900       
Chicago, IL 60602-2590                
312/917-8839
Fax: 312/263-5013
email: cniro@aol.com                

Michael L. Prigoff
Lebson, Prigoff & Baker, LLP
39 Park Place, P.O. Box 68
Englewood, NJ 07631-0068
201/568-4000
Fax: 201/568-7795
email: mlp@njlaw.com

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