To: ABA Commission on Multidisciplinary Practice
From: L. Harold Levinson *
Re: The Commission’s Postscript to February 2000 Midyear Meeting
The Commission’s Postscript aptly observes that a lawyer is "disingenuous" in claiming to be "practicing consulting," not law, if the lawyer is employed by a professional services firm to perform services which are "comparable to the services being rendered on a daily basis by lawyers in law firms for the firms’ clients." In order to address this problem, and to bring lawyers in professional services firms "more clearly under the regulatory tent," the Postscript indicates the Commission is considering the creation of a separate lawyers’ unit, headed by a supervising lawyer, within a fully integrated MDP.
The approach being considered by the Commission raises serious questions, such as who will supervise the supervising lawyer, and whether the lawyers’ unit may become, in effect, a subsidiary profit center of a nonlawyer-controlled parent. This approach prescribes a needlessly drastic, complex and controversial remedy for a fairly simple problem. I invite the Commission to consider another approach, which would assert that lawyers who provide lawyer-type services in professional services firms are already under the regulatory tent, and are already subject to discipline if they violate the rules of professional conduct of the relevant jurisdiction. This assertion does not preclude further study and debate on future amendments to the rules. It merely declares that the existing rules can be enforced if compliance is not forthcoming.
Enforcement of Existing Rules
As the Commission well knows, the rules of professional conduct are enforceable through the disciplinary processes of each state, under the control of the state supreme court. In a disciplinary proceeding, the court has access to the facts of the specific case, as developed during the disciplinary process. The court also has the opportunity to interpret the state’s rules of professional conduct, as applied to those facts. The rules leave considerable room for interpretation, as noted later in this memorandum. The court has discretion to impose lenient sanctions in a case of first impression, if the lawyer attempted in good faith to comply with a plausible interpretation of the rules, even though the court rejects the lawyer’s interpretation. If, however, the court finds the lawyer’s position to be "disingenuous," the court may be less inclined to leniency.
Over a period of time, enforcement proceedings in the state courts may reveal general satisfaction with the policies reflected in the existing rules, but dissatisfaction with the language through which the rules express these policies. This Commission or its successor will then be in a position to recommend amendments to the rules so as to express existing policies more appropriately. If, however, experience with enforcement proceedings leads to general dissatisfaction with the policies reflected in the existing rules, this Commission or its successor will have an improved basis for recommending new rules reflecting changed policies.
Interpretation of Existing Rules
In interpreting the existing rules, the state courts may derive guidance from the U.S. Supreme Court’s decision in In re Snyder, 472 U.S.634 (1985). This case arose from the lower court’s imposition of sanctions against a lawyer based on Fed. R. App. Proc. 46(c), which provides sanctions for "conduct unbecoming a member of the bar." Based on the facts of the case, the Supreme Court concluded that sanctions were not warranted. The Court reached this decision by interpreting the term "conduct unbecoming a member of the bar" in light of the "lore of the legal profession." It is noteworthy that the Supreme Court’s own Rule 8.1 includes language similar to Fed. R. App. Proc. 46(c).
If a state court has an opportunity to interpret its own rules of professional conduct, and the court wishes to consider the "lore of the legal profession," the court will have access to a rich collection of historical and current sources, including but by no means limited to the ABA’s Annotated Model Rules of Professional Conduct (4 th ed. 1999) and resolutions adopted by the ABA House of Delegates. The clear message of the "lore of the legal profession," I suggest, strongly supports the need to retain and enforce the state rules corresponding to Model Rules 5.4 and 5.5(b), and to interpret them in a manner that will best preserve the traditional independence of lawyers and the legal profession.
Commission Should Acknowledge That Enforcement Merits Serious Consideration, Subject to State Courts’ Interpretation of Rules
The examples offered later in this memorandum illustrate some plausible interpretations of terms in Model Rule 5.4, giving effect to the policy of preserving the traditional independence of lawyers and the legal profession, on the assumption that this policy is dominant in the "lore of the legal profession." Significantly, the title of Rule 5.4 is "Professional Independence of a Lawyer."
I do not suggest that the interpretations offered here are the only plausible ones. I suggest merely that the Commission should acknowledge, in its final report or even earlier, that (1) enforcement of the existing rules merits serious consideration, (2) the existing rules are subject to various interpretations, including interpretations reflecting the "lore of the legal profession," and (3) interpretation of the existing rules is ultimately a matter for the state courts in their exercise of appellate review of disciplinary proceedings (and, in some states, in the courts’ appellate review of ethics opinions).
If the Commission fails to make this acknowledgment, the Postscript and the Commission’s earlier releases may discourage state disciplinary counsel from attempting to enforce the rules, and may encourage lawyers to persist in "disingenuous" rationalizations of their conduct.
Rule 5.4(a), prohibiting the sharing of "legal fees" with non-lawyers, invites interpretation of the term "legal fees." The term could be interpreted to include all fees charged for lawyer-type services rendered by a lawyer, whether or not these services come within the definition of the "practice of law" in the statutes or court rules of the jurisdiction. This interpretation of "legal fees" could include, for example, fees charged by a professional services firm for the services of lawyers in tax matters, lobbying, and consulting about mergers and acquisitions, whether or not the prevailing definition of the "practice of law" extends to these services. The term "legal fees" could also apply to fees generated by a lawyer’s work "behind the scenes," discussed infra, even if the court concludes these services should not be regarded as the "practice of law."
Rule 5.4(b), prohibiting "partnership" with nonlawyers if any part of the firm’s activity is the "practice of law," leaves room for interpretation of the terms "partnership" and "practice of law." The term "partnership" could be interpreted to include a "de facto partnership," in which the substance of the arrangement contains some partnership-type features even though the arrangement is not in the form of a partnership. If the cumulative effect of the partnership-type features indicates that the arrangement is, in substance, a de facto partnership, it could be treated as a partnership for purposes of Rule 5.4(b). (The Postscript expresses the Commission’s concern along the same lines, regarding the possibility that an arrangement that takes the form of a strategic alliance may be, in substance, a partnership.)
"Practice of Law" by Behind-the-scenes Lawyers
As regards the term "practice of law" in Rule 5.4(b), the term could be interpreted to include services rendered by lawyers who do not personally deal with the firm’s clients, but whose work behind the scenes is used by nonlawyer firm members who maintain contact with the clients.
In law firms, the role of the behind-the-scenes lawyer is quite customary. A team of lawyers may work behind the scenes in support of one lawyer who maintains contact with the client. These behind-the-scenes lawyers in law firms are clearly under the regulatory tent, and they have client-attorney relationships with the clients they may never see. The behind-the-scenes lawyers must comply, for example, with the rules on confidentiality and privilege, conflicts of interest, trust fund accounting, and fairness during discovery. In order to distinguish these behind-the-scenes lawyers from their colleagues who maintain contact with the client, perhaps the behind-the-scenes lawyers could be deemed to have "indirect" client-attorney relationships with the firm’s clients.
Along similar lines, if a lawyer works behind the scenes in a professional services firm, feeding legal services to the nonlawyers who maintain direct contact with the client, the lawyer may be regarded as being engaged in the "practice of law," and as having an indirect client-attorney relationship with the client. Further, if the lawyer prepares generic research, forms, or plans, to be kept by the firm as proprietary information for later use by nonlawyers in serving future clients, the lawyer may still be regarded as engaging in the "practice of law" because the work product is prepared for future clients, rather than for public distribution.
Even if a court determines that a behind-the-scenes lawyer is not engaged in the "practice of law" for purposes of the partnership provisions of Rule 5.4(b), the fees generated by that lawyer may be regarded as "legal fees" for purposes of the fee sharing provisions of Rule 5.4(a), discussed supra. The behind-the-scenes lawyer in a professional services firm may also be in violation of Rule 5.5(b), by assisting nonlawyers in the unauthorized "practice of law."
Respect Rights of Multiple Licensees
In enforcing Rule 5.4, state bar disciplinary counsel and courts may appropriately respect a lawyer’s right to practice one or more other professions in which the lawyer is licensed. Any impairment of this right could raise questions under state constitutional separation of powers (regarding a license issued under the authority of the state legislature) or federal supremacy (regarding a federal license). Further, there is no indication that multiple licensure of individuals has caused any of the problems the Commission is addressing, or has endangered the independence of the legal profession.
* L. Harold Levinson
Professor of Law Emeritus
Vanderbilt University Law School
Member: American Bar Association; American Institute of Certified Public Accountants; American Association of Attorney-Certified Public Accountants.
The views expressed here are my own, and should not be attributed to any organization.