Oral Testimony of James W. Jones,
Vice Chair and General Counsel of APCO Associates Inc.
James W. Jones, Vice Chair and General Counsel of APCO Associates Inc., and former managing partner of Arnold & Porter, next addressed the Commission. Created in 1984 as a wholly-owned subsidiary of Arnold & Porter, APCO Associates, a global public affairs and strategic communications firm, was conceived as a vehicle to broaden the scope of services, particularly in legislative and related public policy matters, offered to firm clients. It was sold in 1991 to Gray Advertising, APCO’s current parent company. Mr. Jones presented his paper to the Commission.
Professor Daly started the dialogue with a question regarding the imputation rule. Mr. Jones thinks the problem with the imputation rule is trying to apply it to a large, multi-office, multinational organization whether that organization is a law firm or some other kind of organization in which lawyers are practicing. With a Big Five mega organization there’s a bigger problem just because the organization is bigger. Asked to recommend a change in the imputation rule Mr. Jones suggested focus on the kind of conflict. A directly adverse, clear ethical conflict was relatively rare and it was a simple decision. It’s the murky issue of whether or not the position that the organization has taken in some matter makes it less likely that the lawyer working on the new matter will be as free to state a contrary position if that’s in the new client’s best interest that is difficult. He thinks client disclosure is the answer and that the profession must grapple with what is an adequate barrier to transmission of information from one part of an organization to another. He does not think the organization should be regulated but rather that the rules should continue to regulate individuals and get to the organization through the individual. He mentioned the instances in which the profession has accepted lawyers reporting to and being managed by nonlawyers - government agencies, in-house counsel, legal service organizations - and said the focus should be on the process followed to assure independent professional judgment rather than who has an ownership interest in the entity. He commented that the French National Bar Council approach of limiting participants of an MDP to regulated professionals could lead the U.S. down a slippery slope as a nonlawyer professional could be regulated in 35 states and if the entity had an office in any of the other 15 states it’s forced to act according to the lowest common denominator. Limitation of MDPs to the regulated professions in the U.S. wouldn’t work as a practical matter. He identified as an impetus for APCO to split from being a law firm subsidiary the constraints of lawyer ethics rules on advertising and fee splitting (and their effect on APCO’s ability to compete in its market) and on law firm financing as major capital resources were needed for APCO to go global. Asked by Mr. Wander whether ownership control was needed to ensure lawyer independence Mr. Jones referred back to Mr. Mazet’s comment that when a lawyer becomes a manager he’s no longer wearing his lawyer hat and said the argument could be made that managing partners, chairmen and even practice group leaders in major law firms operate more as managers than lawyers in those circumstances. The problem of reporting to someone who is not functioning as a lawyer thus exists all over the place and is not an MDP problem per se. Judge Friedman refuted this conclusion with the follow-up that a managing partner, despite the business pressures, is schooled in the ethical obligations of a lawyer, has an ethics committee that understands these rules and if he pressures a young associate to do something unethical is concerned that the associate will blow the whistle or someone will find out and get them both in trouble. The manager of XYZ MDP placing the young lawyer in the same situation would face a different outcome because he is not subject to the same regulatory framework. Mr. Jones responded with the example of a major client exerting enormous pressure on a matter and questioned whether a rule was needed that a client represent not more than "x" percent of a firm’s business. Mr. Jones thinks a more profitable course of action would be for the profession to assess the kinds of procedures or processes to ensure independent judgment with which to surround the young lawyer, no matter whether he is operating in an MDP, a corporation, a legal services operation or a law firm. He is not in favor of a regime in which the lawyer has the ability to opt in or out of the practice of law on a daily basis or from matter to matter. It would need to be a mechanism for opting into a system - possibly something as simple as active bar membership - and he thinks that mechanism should control the applicability of the attorney/client privilege as well. This would create a positive incentive for the professional (and his client) to opt in to the practice of law. The mechanism should also include restrictions on holding out. Judge Friedman added the need for a disclosure component, the client might need to be advised that it’s likely the privilege would apply because you’re dealing with "x" who has opted in or it’s probable the privilege would not apply because you’re dealing with "y" who’s opted out. Asked by Mr. Nelson if APCO’s frustrations with the lawyer ethics rules arose from difficulties with promotion activities limitations or the conflict rules Mr. Jones said there wasn’t a lot of frustration with the conflicts issue. He identified three areas of frustration: 1) vetting the advertising and marketing through the firm’s Ethics and Practice Committee, 2) fee arrangements that could not encompass payment or acceptance of referral or finders fees that in APCO’s business were not an unusual mode of compensation, and 3) capitalization constraints impeding APCO’s ability to become global. Acknowledging that Mr. Jones thinks adequate firewalls can deal with the confidentiality aspect of conflicts Mr. Nelson asked how to deal with the loyalty aspect of conflicts. Mr. Jones acknowledged that the imputation rule’s principle area of concern was the issue conflict and that the principal consequence of imputation is a disclosure requirement and he responded that as regards imputation the profession needs to look functionally at what are reasonable restrictions separating different parts of a firm. As long as the U.S. is not going to adopt the U.K. barrister system that arguably organizationally assures loyalty, he thinks the profession must rely on the ethical sense of the individual lawyer on the loyalty issue. He recognizes the need for rules but also recognizes their limitations in dictating loyalty. A firm holding itself out as providing legal services could only hold out persons within the firm who were lawyers and who had opted in. Asked by Mr. Mundheim who makes the decision between an old low revenue generating client and a new highly profitable one in a conflict situation in an MDP Mr. Jones said if the activity were the delivery of legal services by lawyers lawyer rules should control whereas if the activity had nothing to do with lawyers and legal services another result might obtain. In response to Mr. Traynor’s question regarding public service Mr. Jones said there should be no difference in the lawyer's pro bono obligation whether he worked for General Motors, Sherman & Sterling or Smith & Smith MDP. He said the lawyer’s self-regulation and special position in society is based upon the bargain that lawyers provide access to justice for all citizens and he thinks the profession’s track record in this regard is not good. In response to Ms. Lamm’s question regarding how to reach professionals who hold out the fact of their law licensure (albeit they are not licensed in the jurisdiction in which they are located and are presumably practicing law or something pretty close to it) and do not work in a traditional law firm, Mr. Jones advocated creating a big tent in that he would modify the lawyer rules to make it clear that lawyers can work in non-traditional settings and extend to them the benefits of being a lawyer, primarily the privilege for their clients. He agreed with the concept of registering in the state in which the lawyer intends to deliver legal services and would expand that concept to lawyers working in corporations and government agencies as well. He commented on the limitations of the D.C. Rule 5.4 that says a nonlawyer can have an equity interest in a law firm as long as he does nothing but assist the firm in the practice of law because in order to do a quality MDP the kinds of professionals you’d want to attract to participate are not going to be willing to simply give up the rest of their practice and indenture themselves to doing nothing but work on matters that happen to be in the law firm and the varying state requirements create a lowest common denominator problem if the firm has an office in any other jurisdiction. He acknowledged to Ms. Garvey that APCO has lawyers engaged in activities that if they were engaged in those activities in law firms would plainly be viewed as the practice of law, yet they are activities that when engaged in by lay people do not constitute the unauthorized practice of law. That is, its lawyers are providing services that fall into the limbo area. Faced with the question of whether a lawyer doing something a lawyer does constitutes the practice of law that could be regulated through the lawyer or it is something else because somebody else could do it although it’s being done by a lawyer, Mr. Jones eschewed a regulatory scheme that depends for its enforcement on a precise definition of what is the practice of law (it’s a hopelessly slippery slope) and urged a kind of opt in system that affords the benefits of being a lawyer. He says there’s a little bit of inconsistency between the opt in approach and urging a rule that deals with holding out but he can live with that inconsistency because there are enough objective ways of measuring whether someone is holding themselves out to the public as a lawyer. He thinks the attorney-client privilege is broad and pervasive enough that it’s worth having. Bringing forward the example used during the ancillary business debate of a Las Vegas law firm opening a brothel Mr. Jones nonetheless thinks the profession should not restrict who can come together with a lawyer as trying to craft a rule to avoid partnership with a tow truck driver would cause more mischief than allowing the possibility that it might happen. Though not familiar with client security funds, Mr. Jones though a rule could require contributions to the client security fund in respect to legal services.