Oral Testimony of Patricia J. Kerrigan, August 1999 - Center for Professional Responsibility

Oral Testimony of Patricia J. Kerrigan,
President of Texas Association of Defense Counsel,
Before the American Bar Association
Commission on Multidisciplinary Practice

August 8, 1999
Atlanta, Georgia

 

The next speaker was Pat Kerrigan, an attorney in private practice in Houston, who testified on behalf of the Texas Association of Defense Counsel (TADC). The TADC is a professional organization comprised of about 2,300 civil trial lawyers whose practice is primarily in areas other than the representation of plaintiffs and personal injury lawsuits. Their lawyers engage in the civil practice areas of intellectual property, employment, insurance and general civil and tort litigation. The Board of Directors of TADC has reviewed the Commission’s proposal and recommendation and related materials and opposes that portion of the proposal that recommends amending the Model Rules to permit lawyers to deliver legal services through an MDP and to allow lawyers to split fees with nonlawyers. Nonetheless TADC appreciates the Commission’s bringing the MDP issue into focus (and igniting what can only be described as intense and excited debate across the country) and the opportunity to be heard in this forum today. The TADC fully supports that portion of the recommendation which urges the legal profession to adopt and maintain Rules of Professional Conduct that protect the profession’s core values - independence of professional judgment, protection of confidential client information and attorney loyalty owed to the client through avoidance of conflict of interest. The TADC believes further study should be given on how best to preserve and maintain these core values. Today as part of modern practice, lawyers in all areas face difficult and complex ethical dilemmas. While most lawyers make every effort to analyze and resolve these dilemmas in accordance with the Model Rules, there is a need for more guidance and support to all lawyers, and TADC hopes to see further study and support in this area by the ABA. The TADC, in general, opposes the recommendations pertaining to MDPs and amending the ethics rules on several grounds. First, the proposal is not supported by sufficient study. Second, the recommendations are fundamentally inconsistent with the preservation of the core professional and ethical values that are so important to the legal profession. Third, the proposal raises important questions on how an MDP may create situations that encourage the unauthorized practice of law. One of the TADC's primary areas of concern is that there is a lack of information demonstrating that there is a need in the United States to change or offer even an alternative method of delivering legal services. Many believe that the MDP paves the way for the globalization of legal services, a concept which in the opinion of the TADC requires much further study of the consequences that could result to the profession. To the TADC’s way of thinking, globalization must be very carefully studied before embracing MDPs in the United States. Under current rules lawyers can refer clients to other professionals and work with those professionals to coordinate the services performed on behalf of the client. What is really the added benefit that justifies changing the Model Rules of Professional Conduct and thereby risking additional pressures and the duty of loyalty or independence of judgement or the problems of conflicts of interest? There has been a rise in Texas, and probably across the country, in malpractice claims that are based precisely upon issues of conflict of interest and breaches of duties owed to clients. In fact, a recent Texas Supreme Court opinion held that in the breach of a fiduciary duty involving the services of a lawyer and their loyalty and dedication to the client, that even absent actual damages to the client fee forfeiture is an appropriate remedy. Much further discussion and investigation of these issues must be undertaken or they believe that an MDP may create greater risks of malpractice liability. What the MDP appears to offer is a financial benefit to the business partners, rather than a clearly identified benefit to the client. How much of the motivation for this change is based on pocketbook issues, benefiting the partners is a question that must be put on the table and fully and openly addressed. Is a profitability plan being cloaked in the guise of a somewhat vague client benefit? Is there an actual and documented client benefit that has been evaluated in the light of the potential for diminishing the core ethical values of the profession? There is no indication that MDPs will enhance the important role that lawyers play in society or the public’s awareness of that role. The profession is charged with the responsibility to protect and safeguard various fundamental rights, including the rights and privileges of clients; unfortunately in recent times the profession has been joked about and the respect with which lawyers have been held in the past has deteriorated. The distrust and animosity is often based on the public’s perception, or an experience, that a lawyer does not comply with the canon of ethics but puts pocketbook issues ahead of client loyalty, client fiduciary duties, or the exercise of independent judgment. Has the potential impact of an MDP on this perception been evaluated? Doesn’t fee sharing with nonlawyers present a very slippery slope for lawyers that will lessen their traditional role and further erode their image? The TADC urges that these questions be answered; as a profession they choose to direct their practice in a direction that will reinspire public trust and respect, and strengthen lawyer’s loyalties to clients. The question of whether clients really desire one stop shopping is not fully documented and that is why it keeps arising. The TADC believes that the proposal calls for in-depth research on the reactions of all types of clients to the prospect of obtaining legal services through MDPs and the research must ensure that the clients studied are educated as to the professional and ethical questions raised by such a system. Before a client can reasonably evaluate the possible benefit, or even the concept of an MDP, the client must know the potential impact of these changes on his or her rights and representation. Over the past two years the TADC Board of Directors and its ethics and professionalism committee has been researching, monitoring and analyzing developments across the country on problems related to the unauthorized practice of law, the attempts by corporations to practice law and pressures on lawyers’ abilities to exercise independent judgment in face of billing and handling guidelines that have been promulgated by nonlawyers. They are extremely concerned by the pressures placed on the lawyer and the dilemmas created when nonlawyers in corporations attempt to control the practice of law. They have looked closely at the experience of patients and doctors when medical care is delivered in a corporate setting and controlled by non-physicians who are not restrained or even inspired by the ethical obligations which apply to the medical profession. A proposal endorsing MDPs ignores the lessons that have been learned by the medical profession’s experience with HMOs and invites similar consequences to the practice of law. Only a lawyer owes to the client the ethical professional obligations contained in the canons of legal ethics. Imputation can only apply to a law firm. To expect an entire MDP to be bound by the conflicts and ethical rules of the legal profession is unfounded and, quite frankly, naïve, especially when the proposal contains little procedure for enforcement or audit of compliance with ethical considerations. MDPs create a risk unacceptable in today’s society that the professional and ethical commitment of the lawyer to the client will be pressured by business considerations and ultimately diminished. How realistic is it to place a lawyer in a business venture with nonlawyers where fee-splitting is allowed and the business goals of the partners are unified, and expect the lawyer to fully adhere to ethics that may be a complete enigma to his partners and an impediment to their business goals? The recommendation and some of the related materials suggest that because MDPs operate in certain European countries, and may, in fact, already exist in the United States they are simply a fait accompli that should be accommodated. Such a suggestion seems to say that the profession should bow to the emergence of a practice that may, in fact, be in conflict with the rules of ethics rather than try to enforce the existing ethical rules. The implication that MDPs operate in the United States is disturbing, absent the profession’s identified effort to challenge the practice as being in violation of ethical canons. If the rules have been ignored and individuals or businesses have been practicing law through entities similar to MDPs here in the United States, is the profession really limited to endorse the practice and amend ethical rules just to accommodate the practice? What kind of a precedent does this set? The emergence and acceptance of MDPs in certain other countries is no evidence that MDPs in the United States present a good opportunity for either the legal profession or the client. If there were studies or data that demonstrated benefit to the client and an improvement in the legal profession by changing the ethics rules to accommodate an MDP the Texas Association of Defense Council would certainly reevaluate its position. At present, however, there is insufficient study to support MDPs in theory or the recommended changes to the ethics rules. The TADC agrees with the comments of the State Bar of California’s Committee on Professional Responsibility and Conduct and its Board of Governors. It joins with that group and other state bar associations, such as Pennsylvania, which oppose the proposal, and thanks the Commission for the opportunity to consider and address these important points.

Dean Powell asked if Ms. Kerrigan believed that Texas’ effort to enforce its unauthorized practice of law provision would have been helped by the regulation, certification and audit provisions in the Commission’s proposal. She wasn’t sure there had been a number of unsuccessful results in Texas’ prosecution of the unauthorized practice of law, although there was the Arthur Andersen issue. However, the Texas legislature recently amended the practice of law definition and the Commission’s proposal includes a practice of law definition; she didn’t know if Arthur Andersen would have had the UPL charges dismissed under either of those definitions. She didn’t know if UPL enforcement would have been helped, as there weren’t enough completed results from the UPL Committee.

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