Status of Multidisciplinary Practice Studies by State
(and some local bars)
The Alabama State Bar has a 25-member multidisciplinary practice task force that has been divided into pro and con subcommittees, which submitted reports on June 2, 2000. The bar has asked for comments on the reports from its members.
Has no formal study underway.
The Board of Governors, on May 19, 2000, approved the majority report of the State Bar of Arizona Task Force on the Future of the Legal Profession, which supported MDPs.
The Task Force majority recommended the following policies:
1. Recognize that multidisciplinary practices already exist de facto in the United States, including in Arizona.
2. The Bar and the Court must participate in the regulation of legal services delivered by lawyers in MDPs to assure that clients who receive those legal services receive the levels of professionalism and protection as clients of lawyers who are not in MDPs.
3. Reaffirm that lawyers and others providing legal services must abide by the Rules of Professional Conduct whenever they are providing those services, regardless of their practice setting receive.
4. Require lawyers to take reasonable steps to ensure that any entity through which they provide legal services ensures that non-lawyers do not engage in the delivery of legal services unless authorized to do so by the Supreme Court of Arizona.
5. Clarify the definition of the "practice of law" as used in Supreme Court Rule 31(a)(3) and the definition of "legal services" to include: preparing legal documents, giving legal advice, negotiating legal matters for a client, or representing a person in a court or administrative proceeding.
6. Modify the Rules of Professional Conduct, specifically ER 5.4, to permit non-lawyers to have an ownership or equity interest (but not passive investment) in firms that engage, at least in part, in providing legal services, as long as the lawyers have sufficient authority to protect client interests and maintain their ethical obligations.
7. Require lawyers in MDPs to provide legal services clients with written disclosures regarding the different duties of confidentiality (and/or disclosure) that each profession in the MDP must follow.
8. Require lawyers in MDPs to provide legal services clients with written disclosures about the financial benefit that the lawyer will derive if the legal services client engages the services of other professionals in the firm and that legal services clients are not obligated to use the other professionals in the MDP and are free to retain the services of professionals outside of the MDP.
9. Require that a lawyer in an MDP must consider all clients of the MDP as clients of the lawyer for conflict purposes.
10. Continue to encourage all lawyers and any other authorized legal service providers to provide pro bono assistance.
11. Assure that the Rules of Professional Conduct continue to require lawyers to maintain all of their ethical obligations including maintaining the confidentiality of all information related to the lawyers’ representations and exercising their independent professional judgment.
12. Provide educational programs for lawyers regarding their ethical obligations when working in any practice setting, including MDPs.
13. Provide public service programs about the regulation of legal services in Arizona.
14. Prohibit MDPs from providing to a legal client both legal services and any other professional services (such as auditor functions) that may have an affirmative duty of disclosure that would conflict with the lawyers’ duty of confidentiality.
15. Direct further review of the MDP issue, particularly with respect to: a) evaluating specific modifications of the Rules of Professional Conduct; b) clarifying who may provide legal services under the Supreme Court’s jurisdiction; and c) considering the availability of and need for liability coverage for MDPs to protect the public and whether such coverage should be mandatory.
16. Approve the Recommendations of the ABA’s Commission on MDP as attached hereto.
The Task Force has drafted proposed Rule amendments (1.6,1.7,1.10, 1.15, 1.16, 5.3, 5.4,5.5, 7.1, 7.3, 7.5 and 8.3) that were presented to the Board of Governors in November 2001. On April 18, 2002 the Board deferred a vote on the proposals indefinitely.
The House of Delegates of the Arkansas Bar Association rejected a proposal to allow attorneys to engage in multidisciplinary practices with other professions. At its June 17, 2000 meeting it adopted a motion similar to the one adopted by the ABA House of Delegates, which urges each state to revise its laws governing lawyers in order to implement certain principles and to preserve the core values of the legal profession.
The Task Force filed its report on June 29, 2001. In August 2001 the California Board of Governors put the report out for comment.
1. In considering MDP, it should be viewed as just one point in the critical process necessary to evolve, develop and advance the systems by which legal services are delivered to the public with the goal of making legal services and the administration of justice accessible to all.
2. Although legitimate questions remain regarding how compelling the consumer demand for MDP is and how much MDP will advance the goals of improving the accessibility and quality of legal services, these questions were not considered to be within the Task Force’s charge. The charge of the Task Force was to develop, as best it could, MDP models which would allow MDP and preserve the legal profession’s "core values." The findings of the Task Force should be viewed in this context.
3. There are existing practice models through which a form of indirect MDP currently exists in California and there are potentially viable models for permitting a "pure form" of MDP to exist in California.
4. To enhance existing indirect MDP models and implement a viable "pure form" MDP model in California, modifications of Rules of Professional Conduct and other authorities, including amendments to existing prohibitions against fee-sharing and partnerships with nonlawyers, can be effectuated without compromising the legal profession’s "core values."
5. The "core values" of the legal profession must and can be maintained in an MDP environment. "Core values" can be effectively maintained through continued individual accountability of lawyers for fulfilling their professional responsibilities in all respects and through a required certification process for entities which seek to engage in a "pure form" of MDP.
6. As the administrative arm of the California Supreme Court in the certification of persons and entities authorized to practice law in California, it is appropriate for the State Bar of California to establish and administer a certification program for a "pure form" MDP model including rules and regulations which will bind MDP entities and subject the entities to decertification in the event of noncompliance with the governing rules and regulations.
7. The five MDP models identified by the ABA MDP Commission are not a definitive description of all possible MDP forms. Associations by which lawyers practice law are not static and will continue to evolve. The Task Force acknowledges the dynamic nature of the forms of practice by which professionals provide services to the public, and that the distinctions between the MDP models made by the Task Force cannot correspond perfectly to the dynamic actuality of the professional services market place. Nevertheless, the Task Force adopts the five MDP models identified by the ABA MDP Commission, described below, as the basis for its findings here.
8. In doing so, the Task Force deems three of these models to be indirect MDP models that are within existing standards, fully viable and currently extant without the need for significant changes in existing authorities. It deems the fourth model to be another indirect MDP form, finds it to be viable also, but currently prohibited under existing California authorities, requiring changes in existing authorities. It deems the fifth, Fully Integrated Model, to be a "pure form" MDP and is prepared to explore this model under a State Bar MDP Certification Demonstration Project where the integrated MDP entity would be certified by the State Bar, initially on an experimental basis, to engage in the practice of law.
9. The models, described in more detail, are as follows:
The Cooperative Model: This model involves the rendition of legal services on a "stand alone" basis in "cooperation" with other nonlawyer service providers. This is the status quo in most states. While it allows for multidisciplinary services, it is not considered a "pure form" MDP by the Task Force. Fee-splitting and co-principal relationships with nonlawyers are prohibited. Lawyers are free to employ nonlawyer professionals under the lawyer’s control to assist in providing legal services to clients. Lawyers are also free to work with nonlawyer professionals employed directly by clients. But the lawyers’ services ultimately "stand alone" from all other services. Maintenance of the status quo allowing this practice to continue can occur consistent with "core values." This requires no changes in existing authorities.
The Ancillary Business Model: This model permits a law firm to own and operate an ancillary business entity that renders nonlegal services to clients of the law firm and to others. The entities, however, operate on a non-integrated basis. Legal services are provided on a "stand alone" basis. ABA Model Rule 5.7 on ancillary services, requires that recipients of the ancillary services understand that the ancillary business exists as an entity separate and distinct from the law firm. California does not currently have an ancillary business rule, but this model is not prohibited in California, subject to existing restrictions that assure that the separateness between the legal and non-legal services are adequately understood by the public. Although this also allows for a form of multidisciplinary services, it is not considered a "pure form" MDP by the Task Force. Clarifications in existing authorities to enhance the viability of this model in California can occur consistent with "core values."
The Contract (Strategic Alliance) Model: This model contemplates an express agreement between a law firm and a professional service firm setting forth various mutually beneficial terms. For example, the agreement might state that: (1) the law firm agrees to note its affiliation with the professional service firm on its law firm letterhead, business card, and other materials; (2) the law firm and the professional service firm will engage in mutual client referrals on a nonexclusive basis; or (3) the law firm agrees to purchase goods and services from the professional service firm such as equipment, communications technology, and staff management. This model, also called a " strategic alliance," like the above models, operates without fee-splitting and common equity interests. The legal services are provided on a "stand alone" basis. Although this model also allows for a form of multidisciplinary services, it is not considered a "pure form" MDP by the Task Force. This model is currently not prohibited by California authorities. Maintenance of the status quo allowing this practice to continue can occur consistent with "core values." This requires no changes in existing authorities. However, clarifications in existing authorities to enhance the viability of this model in California may be appropriate."
The Command and Control Model: This model reflects the situation that currently exists in Washington, D.C., under its variation of ABA Model Rule 5.4. Lawyers are permitted to share law firm fees and equity interests with nonlawyers subject to specific limitations, including requirements that: (1) the activities of the firm be limited to the provision of legal services; (2) the involved nonlawyers agree to comply with the lawyers’ rules of professional conduct; and (3) the lawyers, who are principals or who have management authority, take responsibility for the acts of the nonlawyers. Although fees and equity interests are shared with nonlawyers, all services are controlled by lawyers and relate directly to the rendition of legal services. Although this model also allows for a form of multidisciplinary practice within the confines of lawyer-controlled legal services, it is not considered a "pure form" MDP by the Task Force. This model requires changes in California’s existing prohibitions on fee-sharing and partnering with nonlawyer professionals which the Task Force finds can be made consistent with "core values" to allow this model to be viable in California.
The Fully Integrated Model: This model is a single fully integrated professional services firm. The single firm has organizational components that provide legal services, consulting services, accounting services, and/or other professional services. It is marketed as a one-stop shopping center for clients interested in legal services and other professional services. The various services may be provided to a single client on a single matter or on multiple related or unrelated matters. Legal services may be provided independently of other services, and vice-versa, and may involve the lawyers seeking professional services for the client from the other professionals and vice-versa. This model is considered by the Task Force to be a "pure form" MDP model. It is now prohibited in California. The Task Force finds that this model can be explored on a Demonstration Project basis, subject to State Bar certification, and that changes can be made to existing authorities to allow such an entity to exist consistent with the legal profession’s "core values."
10. In the Fully Integrated Model, the Task Force finds that the "core values" of the legal profession not only can be maintained, but can be reaffirmed, through the principle that all professionals involved may not, by virtue of their integration with other professionals, reduce their responsibilities below those which apply to a non-integrated environment. The basic premise of the Fully Integrated Model adopted by the Task Force is two fold: First, is the cross-imputation of the values of all participating professionals to each other, without diminution, when integrated services are provided to consumers; Second is a presumption from the outset of the consumer’s relationship with an integrated MDP, that integrated legal and non-legal services are being sought so that cross-imputation of values is the rule. Only when the consumer affirmatively "opts out" of legal services will the lawyer values cease to apply.
11. In considering the viability of making legal services more accessible through authorized new delivery systems like MDP, the Task Force also finds that it would be beneficial to develop, through a rule of court or rules of professional conduct, a concise definition of what constitutes the practice of law as is currently being considered by the State of Washington.
12. It is also considered necessary, in conjunction with the development of such new systems of legal services delivery, that the Board consider how to enhance protection of the public by stricter enforcement of the unauthorized practice of law as a consumer fraud issue.
13. The Task Force is also of the opinion that passive investment in a multidisciplinary, or other legal practice, should not be permitted.
14. The Task Force recommends that this Report be published for a ninety-day public comment period which actively seeks comment from consumers of legal services, so all interested parties can be heard regarding this important subject. Upon analysis of the public comment received, and in consultation with the California Supreme Court, the Task Force is prepared to assist the Board, as it determines appropriate, in moving forward with an implementation plan for these models.
The Orange County (CA) Bar Association ( http://www.ocbar.org/multidis.html )
Task Force on Multidisciplinary Practice has issued a report that concludes:
The Task Force is unable to reach a concrete conclusion of a thumbs up or thumbs down on the Commission’s recommendation and MDPs. We generally lean towards a thumbs down because of the many unanswered questions raised by the recommendation.
However, we did reach one unanimous conclusion. California has remained independent of the ABA in terms of its own rules of professional responsibility. The case should be no different in the face of the current movement of allowing MDPs. The OCBA could consider focusing on a strong recommendation to the California State Bar to remain independent and not allow MDPs until questions and issues can be adequately addressed. Let some other jurisdiction undertake the risks associated with MDP formation and be the guinea pig. The consumers of legal services in California and the attorneys here will benefit from that approach in the long run.
San Diego County (CA) Bar Association [SDCBA Additions to ABA Commission Recommendations are underlined] (May, 2000) ( http://www.abanet.org/cpr/sandiegobarmdp.html)
RESOLVED, that the American Bar Association amend the Model Rules of Professional Conduct consistent with the following principles:
1. Lawyer should be permitted to share fees and join with nonlawyer professionals in a practice that delivers both legal and nonlegal professional services (Multidisciplinary Practice), provided that the lawyers have the control and authority necessary to assure lawyer independence in the rendering of legal services. "Nonlawyer professionals" means members of recognized professions or other disciplines that are governed by ethical standards.
2. This Recommendation must be implemented in a manner that protects the public and preserves the core values of the legal profession, including competence, independence of professional judgment, protection of confidential client information, loyalty to the client through the avoidance of conflicts of interest, and pro; bono publico obligations.
3. To protect the public interest, regulatory authorities should enforce applicable rules and adopt such additional enforcement procedures as are needed to implement the principles identified in this Recommendation.
4. This Recommendation does not alter the prohibition on nonlawyers delivering legal services and the obligations of all lawyers to observe the rules of professional conduct. Nor does it authorize passive investment in a Multidisciplinary Practice.
5. Rules permitting Multidisciplinary Practices should be adopted which provide for self-funded regulation.
6. Before a lawyer joins a Multidisciplinary Practice with a member of any nonlawyer profession: (A) That lawyer’s regulatory authority should identify the ethical issues raised by that particular combination; (B) The rules of professional conduct governing legal practice should be modified as appropriate; and (C) The rules governing the ethical conduct of that nonlawyer profession should be modified as necessary for consistency with those of the legal profession.
Colorado ( http://www.cobar.org/static/mdp/index.cfm)
The Denver Bar Association Board of Trustees and Colorado Bar Association Board of Governors have adopted resolutions in support of MDP as recommended by their joint Multidisciplinary Task Force. A subcommittee of the Task Force is drafting proposed new rules and rules amendments to permit MDPs.
On May 6, 2000, the Board of Governors of the Colorado Bar Association adopted the following Resolution:
RESOLVED, that the Board of Governors of the Colorado Bar Association Accepts the Report of the CBA/DBA Joint Task Force on Multidisciplinary Practice;
FURTHER RESOLVED, that the Board of Governors of the Colorado Bar Association recommends that the Colorado Rules of Professional Conduct and other Colorado rules should be amended to accommodate multidisciplinary practices, provided that this recommendation must be implemented in a manner that protects the public and preserves the core values of the legal profession, including competence, independence of professional judgment, protection of confidential client information, and loyalty to the client through the avoidance of conflicts of interest.
FURTHER RESOLVED, that the CBA/DBA Joint Task Force is authorized to continue to study issues relating to multidisciplinary practice and with due deliberation to make further recommendations to the Board of Governors, including recommendations as to specific amendments to the Colorado Rules of Professional Conduct and other rules as needed to implement the Task Force Recommendations.
Connecticut ( http://www.ctbar.org/public/mdpreport.doc)
The Connecticut Bar Association Study Committee on Multidisciplinary Practice filed a report dated May 2000 that contained the following:
"Fully Integrated MDP
The majority of the Committee recommends at this time that the CBA oppose changes in the Code of Professional Conduct which would permit fully integrated MDP’s.
MDP Controlled by Lawyers in Supermajority
The majority of the CBA Study Committee at this time is of the opinion that real control of a professional firm is dependent on the production of billings regardless of the mechanics of voting and the paper records of ownership, particularly in the small firm.
[T] he Committee recommends that the CBA continue to study the issue and monitor the developments in other states and at the ABA level with a committee of its most learned members in ethics and unauthorized practice of law."
A new Committee on Multidisciplinary Practice has been appointed. The task of the committee is to investigate possible changes to Rule 5.4 and to determine whether there should be changes in the law governing lawyers to respond to the guiding principles set forth in the resolutions adopted by the ABA House of Delegates on July 11, 2000.
Adopted May 11, 2000
RESOLVED, that the Board of Trustees of the Denver Bar Association accepts the Report of the CBA/DBA Joint Task Force on Multidisciplinary Practice;
FURTHER RESOLVED, that the Board of Trustees of the Denver Bar Association recommends that the Colorado Rules of Professional Conduct and other Colorado rules should be amended to accommodate multidisciplinary practices, provided that this recommendation must be implemented in a manner that protects the public and preserves the core values of the legal profession, including competence, independence of professional judgment, protection of confidential client information, loyalty to the client through the avoidance of conflicts of interest, and pro bono publico responsibilities.
FURTHER RESOLVED, that the CBA/DBA Joint Task Force is authorized to continue to study issues relating to multidisciplinary practice and with due deliberation to make further recommendations to the Board of Trustees, including recommendations as to specific amendments to the Colorado Rules of Professional Conduct and other rules as needed to implement the Task Force Recommendations.
Committee determined that MDP should not be permitted in Delaware beyond current practices of law firms associated with incorporation businesses, etc. However, if the ABA changes its position, Delaware will reconsider.
On Oct. 19, 2001 the Special Committee on Multidisciplinary Practice unanimously approved its report, which stated that existing restrictions on lawyer participation on multidisciplinary practice should be substantially reduced. On May 14, 2002, the Bar Board of Governors voted to approve the report. The Board transmitted the report and its recommendation for approval to the D.C. Court of Appeals. The Court is currently reviewing this matter.
Florida ( http://www.flabar.org/newflabar/organization/committees/scanc.html )
(Pro report http://www.flabar.org/newflabar/organization/committees/promdp.pdf )
(Con report http://www.flabar.org/newflabar/organization/committees/conmdp.pdf )
The Florida Bar Special Committee on Multidisciplinary Practice issued a con report in Dec. 1999 and a pro report on Jan. 7, 2000. The Florida Bar Board of Governors adopted a resolution opposing MDPs on June 2, 2000 ( http://www.flabar.org/newflabar/images/downloads/resoltfb.pdf) .
The Florida Bar has appointed a successor commission, the Special Commission on Multidisciplinary Practice and Ancillary Business. The mission statement for the special commission is as follows:
The mission of the Special Commission on Multidisciplinary Practice and Ancillary Business is to protect the public interest by:
1. Enabling lawyers to participate in business ventures not engaged in the practice of law in conformance with The Rules Regulating The Florida Bar, through research and development of business models, prototype forms, ethical guidance and educational programs; and
2. Monitoring developments affecting the practice of law and new methods for the delivery of legal services, the protection of the core values of the profession and the enforcement of the Rules Regulating The Florida Bar and disseminating this information to the members of The Florida Bar and its Board of Governors.
Georgia ( http://www.gabar.org/mdpreport.asp)
On February 8, 2001, the State Bar of Georgia Multidisciplinary Practice Committee submitted a report containing the following recommendation:
The Georgia Rules of Professional Conduct should be amended to allow the association of lawyers and nonlawyer professionals in MDP to provide legal services, and to share fees, whether as partners, co-owners, members or shareholders, with the following limitations:
A. Only licensed lawyers in the MDP may practice law.
B. Lawyers in the MDP shall remain vicariously liable for nonlawyers who assist in providing legal services, and all who assist lawyers in providing legal services through an MDP shall comply with the Georgia Rules of Professional Conduct.
C. All clients of the MDP shall be protected by the conflicts of interest rules that protect the clients of lawyers.
D. Protection of funds held by the MDP in "fiduciary capacity" shall include all funds held for clients of the MDP.
E. The MDP must not offer legal and attest (audit) services to the same client.
F. The MDP must be majority owned and controlled by licensed lawyers.
G. The MDP shall not have passive investors.
The Hawaii State Bar does not have any committee specifically looking into the issue of MDP. They value the expertise of the ABA and larger jurisdictions that have more resources to devote to this subject.
The Idaho Bar Commission appointed a committee from the bar and business to study the issue. The Committee has voted to disband.
The Illinois State Bar Association Task Force on Multidisciplinary Practice submitted pro and con reports to its assembly. The assembly voted to file (with the New Jersey State Bar Association) a Report and Recommendation to the ABA House of Delegates for the July 2000 Annual Meeting stating that:
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.
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.
Indiana ( http://www.inbar.org/default2.asp)
The Indiana State Bar Association Multidisciplinary Practice Committee has filed a report that concludes that concluded that: (i) MDPs may be good for Indiana citizens, and therefore for Indiana lawyers; and (ii) the current Rules of Professional Conduct should be amended to permit MDP, but in a way to ensure that the core values of the legal profession are preserved. On Jan. 24, 2002 the House of Delegates voted against the recommendation the text of which follows:
1. The "practice of law" must be defined. The Committee encourages the amendment of the Preamble to Rule 5.5 of the Rules of Professional Conduct to define what constitutes the practice of law as determined by the Indiana Supreme Court in its various decisions including, but not limited to the following activities: a) providing legal advice to clients; b) preparing legal documents for clients; c) representing clients in legal proceedings; and d) conducting the business management of a law practice. By defining the activities that constitute the practice of law, clients should be better protected from the unauthorized practice of law.
2. Rule 5.4 should be amended to permit nonlawyers to become owners of an MDP, but any such nonlawyer owner of an MDP must be a member of a regulated profession, subject to a code of ethical conduct, and the percentage ownership of an MDP by nonlawyers be limited to a minority which cannot assert control over the MDP.
These changes to the Rules of Professional Conduct will permit MDP so that clients who want legal services from an MDP have the opportunity to obtain them. They also ensure that the core values of the legal profession are maintained for the benefit of clients and that legal services do not become yet one more of the array of "consulting services" offered to clients by an MDP.
Committee filed report on January 19, 2001 that recommended that it continue monitoring developments relating to MDP.
On June 10, 2000, the Kansas Bar Association Board of Governors accepted the recommendation of the Task Force on Multi-Disciplinary Practice, which asked the Board to:
-- oppose the authorization of multidisciplinary practice groups either in Kansas or by amendment of the Model Rules of Professional Conduct by the ABA, and
-- take action to study and to pursue enforcement of sanctions for violation of Model Rule 5.4 and the unauthorized practice of law within the State of Kansas.
The Kentucky Bar Association Committee on Multidisciplinary Practice voted unanimously on June 9, 2000 to recommend to the KBA Board of Governors to oppose MDP in any form, to oppose any rule changes designed to allow MDP and to strengthen and broaden KBA enforcement of rules prohibiting the unauthorized practice of law and the sharing of fees with non-lawyers.
Louisiana State Bar Association found no interest among its members on the issue. The bar sees a need for extensive member education. The ABA delegates comprise an informal task force to monitor the issue.
The Maine State Bar Association Task Force on the Future of the Practice of Law has issued a Preliminary Report to the Maine State Board of Governors. The Report recommends that:
[A] prompt review of [the Maine Rules] be undertaken with the ultimate aim of allowing layers to share fees when associated with other professionals and disciplines either on a permanent basis or on a case by case basis to provide a client with a greater range of services so long as lawyers control the MDP and are responsible for adherence to the Bar Rules by all persons engaged in the enterprise and for the preservation of the core values of the profession.
The Maryland State Bar Association Task Force on Multi-Disciplinary Practice filed a report that recommended that:
1. Lawyers be permitted to share fees and join with non-lawyers in a practice that delivers both legal and non-legal services provided that the lawyers have the control and authority necessary to assure lawyer independence in the rendering of legal services.
2. Regulatory authorities enforce existing rules and adopt such additional enforcement procedures as would be needed to implement the principles identified in the recommendations.
3. Non-lawyers in the MDP not be permitted to deliver legal services and all lawyers in the MDP be required to observe the Rules of Professional Conduct. That passive investment by non-lawyers not be permitted.
4. An MDP not be permitted to offer legal and audit services to the same client.
5. The Maryland State Bar Association institutionalize a special committee whose purpose would include education of the bar and public as to the existence and function of MDP's, the monitoring and evaluation of MDP's and a reporting requirement to the bar's Board of Governors relating to the above.
6. The Rules of Professional Conduct be revised to conform with the recommendations above.
The Board of Governors rejected the recommendations on September 18, 2000 by a vote of 20-11.
Massachusetts Bar Association Multidisciplinary Practice Center.
Boston Bar Association ( http://www.bostonbar.org/gr/adhoc/mdphd.htm#DraftPart1)
BBA MDP Task Force issued an interim report on June 7, 2000 in support of changing the rules to permit MDPs subject to the following:
The Task Force proposes a three-pronged means of ensuring that lawyers actually control an MDP. The Task Force believes that adherence to the Rules of Professional Conduct (and, concomitantly, preservation of the core values of the legal profession) may be assured by requiring in an MDP setting that lawyers: (1) are the beneficial owners of a majority of the outstanding voting shares or other equity interests in the MDP; (2) control the MDP (meaning that they have the power to make and enforce the MDP's policies); and (3) exercise managerial authority over the MDP. If lawyers possess these three hallmarks of control over an MDP, then those persons in charge of the MDP are not only obliged to comply with the Rules of Professional Conduct, but also are subject to disciplinary proceedings should they fail to comply with those rules.
In July 2000 the State Bar of Michigan Multidisciplinary Practice Committee published its report and recommendation. On February 10, 2001 the Representative Assembly postponed consideration of the recommendations until at least September 2001. The Executive Summary of the report states that:
The Committee proposes amendments to the Michigan Rules of Professional Conduct that would clarify the obligations of a lawyer when offering law and nonlaw services to a client, either through an ancillary service or jointly with other nonlaw service professionals. The proposed amendments would permit lawyers to exchange referrals with nonlawyers without compensation, and would permit lawyers serving a client under a joint agreement to share fees with nonlawyers outside the firm, if the client is advised of and does not object to the participation of the lawyers and nonlawyers.
The proposal does not permit lay ownership of law firms, "fully integrated" multidisciplinary services [MDPs], delivery of legal services from nonlaw entities, nor indiscriminate sharing of legal fees with nonlawyers. The Committee recommends continued study of those concepts.
Specifically, the committee recommends:
That the Michigan Rules of Professional Conduct be amended to add a Rule [Proposed 2.4] pertaining to Multidisciplinary Practices, and that existing Rules 5.4 and 7.2 be amended consistent with that change, as set forth below. [New language underscored.]
Proposed Rule [2.4]. Multidisciplinary Practice
(a) Ancillary Services. A lawyer may invest in or operate a nonlaw business offering services to clients of the lawyer provided that:
the relationship between the lawyer and the nonlaw business is disclosed in writing to the client or nonlaw business customer;
there is no interference with the lawyer’s independent professional judgment regarding the client’s representation; and
client and customer information is not shared between the law and nonlaw businesses unless the client consents in writing to disclosure or use of specific information. A blanket waiver or advance consent to disclosure or use of information that does not specify the information to be shared, is not adequate to satisfy this requirement.
(b) Joint Services. A lawyer may offer or make an agreement with one or more other service providers to deliver services to existing or future clients of the other in a specific matter or on an ongoing basis prospectively, or may participate with one or more other service providers in bidding for prospective business involving the services of each, provided that:
1. the relationship between the lawyer and the other service providers is disclosed to the client;
2. there is no interference with the lawyer’s independent professional judgment regarding the client’s legal representation;
3. confidences and secrets are not disclosed or used except as permitted or required by Rule 1.6;
4. the scope of the legal representation is set forth;
5. the fees for lawyer services are separately stated from other fees to be charged to the client; and
6. the client consents, preferably before legal services begin.
(c) Division of Fees. A division of a fee between lawyers and nonlawyers delivering services to a client may be made only if
1. the fee arises under an arrangement for multidisciplinary services as permitted by paragraphs (a) or (b); and
2. the client is advised of and does not object to the financial participation of the lawyers and nonlawyers involved.
Lawyers may employ nonlawyer professionals on their staffs to assist them in advising clients. Lawyers may work with nonlawyer professionals whom they directly retain or who are retained by the client. To the extent that the lawyer retains, controls, or has supervision over the nonlawyer, the lawyer must comply with Rule 5.3.
When the nature of an engagement requires, or the client would benefit from, advice or service from service providers in addition to lawyers, a lawyer may participate with other service providers to meet the client’s needs. In so doing, the lawyer and the client must be aware of the limits of the participation of each service provider. Laws or rules of other professions may circumscribe how lawyers and other professionals may provide services. A lawyer’s services may not be used to further illegal or improper activity of a service provider, even if a client requests the service or consents to it. See, e.g. Rule 1.2(c), counseling a client concerning illegal or fraudulent activity; Rule 5.5, aiding the unauthorized practice of law; Rule 8.4(b), conduct involving dishonesty, fraud, deceit or misrepresentation.
Generally, if the lawyer does not retain, control or supervise the nonlawyer service provider, the lawyer is not responsible for the acts or omissions of the other service provider. Ordinarily, conflicts of interest of other service providers would not impute to the lawyer, and vice versa. The terms of a particular engagement may change these general duties. It is the lawyer’s responsibility to ensure that the client understands the lawyer’s duties, and to correct any misunderstanding that may arise among the service providers regarding the lawyer’s obligations. A written understanding between the lawyer and the other service providers and a written agreement with the client, although not required, assists in clarifying and determining respective roles and responsibilities. Where client consent is required, written consent is preferable.
When delivering services with other professionals, a lawyer should take special care that the lawyer’s obligations under these Rules are fulfilled. If the lawyer is one of several professionals involved in a service project, and not the leader of the project, there may be more pressure or incentive for the lawyer to share confidences and secrets with the other members of the service team, or to allow the goals and ideas of other members of the service team to improperly influence the lawyer’s independent professional judgment regarding the client’s legal representation.
Lawyers have special responsibilities regarding fee arrangements under Rule 1.5, and regarding money handling under Rule 1.15. These obligations do not apply to other service providers. A prudent lawyer will arrange the terms and mechanics of an engagement to facilitate the lawyer’s compliance with those obligations.
MRPC Rule 7.2 Advertising.
a. Subject to the provisions of these rules, a lawyer may advertise.
b. A copy or recording of an advertisement or communication shall be kept for two years after its last dissemination along with a record of when and where it was used.
c. A lawyer shall not give anything of value to a person for recommending the lawyer's services, except that a lawyer may:
i. pay the reasonable cost of advertising or communication permitted by this rule;
ii participate in, and pay the usual charges of, a not-for-profit lawyer referral service or other legal service organization that satisfies the requirements of Rule 6.3(b); and
iii pay for a law practice in accordance with Rule 1.17; and
iv agree to exchange referrals.
To assist the public in obtaining legal services, lawyers should be allowed to make known their services not only through reputation but also through organized information campaigns in the form of advertising. Advertising involves an active quest for clients, contrary to the tradition that a lawyer should not seek clientele. However, the public's need to know about legal services can be fulfilled in part through advertising. This need is particularly acute in the case of persons of moderate means who have not made extensive use of legal services. The interest in expanding public information about legal services ought to prevail over considerations of tradition. Nevertheless, advertising by lawyers entails the risk of practices that are misleading or overreaching.
A lawyer may agree to receive referrals from, refer clients to, or exchange referrals with, a professional or group of professionals, as long as there is no compensation or other fee shared or exchanged. A lawyer may share fees pursuant to Rules 5.4 and [2.4].
Neither this rule nor Rule 7.3 prohibits communications authorized by law, such as notice to members of a class in a class action.
Record of Advertising
Paragraph (b) requires that a record of the content and use of advertising be kept in order to facilitate enforcement of these rules.
MRPC Rule 5.4 Professional Independence of a Lawyer.
(a) A lawyer or law firm shall not share legal fees with a nonlawyer, except that:
1. an agreement by a lawyer with the lawyer's firm, partner, or associate may provide for the payment of money, over a reasonable period of time after the lawyer's death, to the lawyer's estate, or to one or more specified persons;
2. a lawyer who purchases the practice of a deceased, disabled, or disappeared lawyer may pay to the estate or other representative of that lawyer the agreed-upon purchase price pursuant to the provisions of Rule 1.17;
3. a lawyer or law firm may include nonlawyer employees in a compensation or retirement plan, even though the plan is based in whole or in part on a profit-sharing arrangement;
4. a lawyer or law firm may have an agreement as permitted by Rule [2.4].
Minnesota State Bar Association Multidisciplinary Task Force issued a pro MDP report on May 23, 2000 that was adopted by the MSBA General Assembly on June 23, 2000. On September 17, 2002 the Supreme Court entered an order denying the Bar's petition to adopt specific rule amendments to allow for MDP.
The MSBA Multidisciplinary Practice Task Force (the "Task Force") recommends that the MSBA Board of Governors adopt the following resolution:
Resolved, that the Board of Governors recommends to the General Assembly that the Minnesota delegates to the ABA House of Delegates be encouraged to communicate the following position to the ABA House of Delegates and to take action consistent with such position in any ABA proceedings:
1. General Position. The Model Rules of Professional Conduct should be amended to permit lawyers to practice law in an entity at least partially owned by licensed professionals who are not lawyers, subject to the limitations set forth below. The limitations are intended to ensure that the multidisciplinary entity operates consistently with applicable Rules of Professional Conduct, as amended, and the core ethical values reflected therein, and with statutory prohibitions on unauthorized practice of law.
a. The ABA should amend the Model Rules of Professional Conduct to include a definition of "practice of law" to clarify which lawyers are subject to the Model Rules, including any limitations on multidisciplinary practice, and to clarify which services provided by a permitted MDP entity may only be provided by its lawyers. For instance, "practice of law" could be defined to mean:
(1) rendering legal consultation or advice to a client;
(2) appearing on behalf of a client in any hearing or proceeding or before any judicial officer, arbitrator, mediator, court, public agency, referee, magistrate, commissioner, or hearing officer unless the rules of the tribunal involved permit representation by nonlawyers;
(3) appearing as a representative of a client at a deposition or other discovery matter; and
(4) engaging in other activities that constitute the practice of law as provided by statute or common law.
b. "Professionals" means "individual licensed professionals who are governed by promulgated codes of ethical conduct."
3. Limitations on Permitted Multidisciplinary Practice.
a. The nonlawyer owners must be actively practicing their professions in the entity and may not be passive investors. Only lawyers may practice law within the entity.
b. A majority percentage of ownership in the entity must be held by lawyers licensed to practice law and practicing law in that entity. In addition, the lawyers practicing law in the entity must ensure that they retain the control and authority necessary to assure lawyer independence in the rendering of legal services. A substantial minority of the Task Force opposes this particular recommendation.
c. The lawyers practicing law in the entity in any state must be licensed to practice law in that state and abide by the Rules of Professional Conduct in effect in that state, including the rules governing client confidentiality and conflicts of interest. Conflicts will be imputed firm-wide for purposes of applying applicable Rules of Professional Conduct to lawyers practicing in a permitted MDP entity. No change is intended with respect to Rule 8.5 regarding application of the Rules of Professional Conduct to lawyers providing services outside of the state.
d. The lawyers practicing law in the entity must obtain an affirmative written agreement signed by each member of the entity that there will be no interference with the lawyer’s independence of professional judgment or with the client-lawyer relationship.
The MDP Task Force has been disbanded.
Missouri ( http://www.mobar.net/news/boardmdp.htm)
The Report of the Board of Governors of The Missouri Bar on the Multidisciplinary Practice of Law, issued June 30, 2000, includes the following statements:
The conclusion of the Board of Governors of The Missouri Bar is that neither the latest recommendations by the ABA Commission nor the MacCrate Committee are acceptable. (Report 117 and Report 100 respectively on the House of Delegates' agenda) . . .. The aspirational goals of the MacCrate Report contained in Report 100 are more consistent with the recommendations of The Missouri Bar Special Committee . . .. The Missouri Bar Special Committee did not endorse either of the proposals (Report 100 and Report 117) . . .; neither did the Special Committee rule out absolutely the concept of MDP.
The Board of Governors believes that any proposal for MDPs must be considered in light of specific language, including amendments to the Model Rules, where appropriate. Specific language, if proposed, should include consideration of at least the following points:
If MDPs are allowed, they should be controlled by lawyers, meaning that lawyers should constitute at least 51 percent of the ownership of MDPs. Passive investment in MDPs should not be permitted.
In jurisdictions where state supreme courts regulate the legal profession, the courts must continue to maintain that control over the profession.
Any regulation of MDPs should be by a comprehensive rule dealing with all aspects of MDPs, not simply fee-splitting.
The independent judgment of lawyers must be maintained.
Consideration should be given to the exclusion of litigation services from MDPs in order to maintain attorney/client confidentiality.
The protection of the client's interests should be paramount, and there should be recognition that MDPs can put the client's interests at risk, and the unsophisticated clients may be more at risk than sophisticated ones, such as corporations with in-house counsel. In any proposed regulation of MDPs, consideration should be given to additional protection for ordinary consumers, including more detailed disclosures and more explicit waivers of potential conflicts of interest. (It may be appropriate for MDPs to treat different types of clients differently. One suggestion that could be considered would be to adopt a concept similar to that of the "accredited investor," which is used in the securities industry to distinguish sophisticated institutional investors from others. A similar concept could be developed to distinguish sophisticated from unsophisticated clients in terms of the duties, disclosures, waivers, etc., that may be required by MDPs.)
Any rule regulating MDPs should include provisions for funding the necessary regulatory oversight, with the cost to be borne by the MDPs.
There should be a clear definition of either "the practice of law" or of what actions only lawyers are permitted to undertake or perform.
There should be a list of or detailed criteria describing the professions that can participate with lawyers in an MDP.
The standard applicable to lawyers regarding imputation of conflict of interest should also apply to all members, lawyer and non-lawyer, of the MDP.
The Bar Association of Metropolitan St. Louis
Report of the Multidisciplinary Practice Task Force (adopted by the Board of Governors, April 8, 2000)
Because of the lack of hard data to show the feelings of the membership, the Task Force will not take a position either supporting or rejecting MDPs as the way to solve the problem. Nevertheless, there appears to be a need to express the views of BAMSL to the Commission and to the ABA House of Delegates as to the nature of the "core values" we feel should be included in any rule promulgated to regulate multi-disciplinary practice, and time is now of the essence.
This Task Force believes that even those who favor MDP recognize the need to preserve the core values of the legal profession, and the need for some regulation of MDPs. The Task Force recommends to the Board of Governors of BAMSL that it adopt five principles that any change of rules permitting MDPs should contain. They are as follows:
The highest Court of each State must continue to regulate and control the practice of law. Nothing should be done that would in any way indicate a willingness to accept regulation by State legislatures.
Any MDP must be owned and controlled by lawyers, i.e. lawyers must own at least 51% in the entity and control and manage the operation of the entity.
A rule that only is directed toward fee sharing is insufficient to deal with the problem of MDPs. A new special rule relating to MDPs should be promulgated. Such a rule should require other professionals to be governed by rules relating to conflict of interest, confidentiality and loyalty.
The rules relating to unauthorized practice must be vigorously enforced. This has not been done in the past, and with new responsibility being placed on Bar counsel, adequate resources must be made available and if necessary, laws changed, to give the bar and attorneys general more authority to enforce these rules.
Any rule authorizing MDPs must be implemented in a manner that protects the public and preserves the core values of the legal profession, including competence, independence of professional judgment, protection of confidential client information, loyalty to the client through the avoidance of conflict of interest, and pro bono publico obligations.
The State Bar of Montana's Multidisciplinary Practice Committee continues to study the issue. It had aimed at having a recommendation ready for the State Bar Board of Trustees’ December 2000 meeting but may not rush to meet that timetable in light of the ABA action.
The Nebraska State Bar Association Unauthorized Practice Committee delivered a report on April 20, 2000 that has been passed by the NSBA House of Delegates. The Report states:
The NSBA finds no credible evidence or pervasive argument that it would be in the public interest to amend the rules regulating the Nebraska Bar or the Code of Professional Responsibility to allow the formation of MDPs which would include lawyers, and the consequent sharing or splitting of fees for legal services among lawyers and nonlawyers.
New Hampshire ( http://www.nhbar.org/barnews/parser.cgi?FILE=data/4/data.373)
The New Hampshire Bar News has asked for comments on MDPs and the ABA's stance toward changes in the Model Rules of Professional Conduct.
New Jersey ( http://www.abanet.org/cpr/njsba.html)
The New Jersey State Bar Association has an MDP Committee that issued a report opposing changes in RPC's to permit lawyer formation or participation in MDP's. The report was approved by NJSBA Board of Trustees on July 16, 1999. Further, the Board voted to file (with the Illinois State Bar Association) a Report and Recommendation to the ABA House of Delegates for the July 2000 Annual Meeting stating that:
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.
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.
Task force report is expected by November, 2001.
The New York State Bar Association Special Committee on the Law Governing Firm Structure and Operation (MacCrate Committee) issued a report in April 2000 that calls for permitting two forms of multidisciplinary practice (MDP) with nonlawyers, but partnerships with nonlawyers and multidisciplinary practice in which nonlawyers have any degree of ownership or control over the practice of law would be prohibited.
Lawyers and law firms would be permitted to provide ancillary nonlegal services and to provide services to clients in cooperation with nonlegal firms, while providing safeguards for the public to protect against the risks of nonlawyer involvement in the practice of law. The NYSBA House of Delegates approved the report on June 24, 2000.
Under existing ethics rules, ancillary businesses are permitted in New York. The new rule, however, is framed by reference to the relationship between the ancillary business and the client, as seen from the client’s perspective. Recommended rule changes expressly impose upon the lawyer a duty to educate the client about the nature of the nonlegal services being provided.
The report recommends amendments to the New York Code of Professional Responsibility. These changes include two new disciplinary rules and 10 new ethical considerations. In addition to the ancillary business amendment, other proposed changes include:
A revised rule to permit lawyers to advertise truthfully the fact that they provide nonlegal services, either directly or through a lawyer owned and controlled entity.
Recommending that the practice of law be clearly defined.
A call for vigorous enforcement of the prohibition against the unauthorized practice of law which ensures that nonlawyers do not injure the public by claiming to provide legal services.
On November 4, 2000, the NYSBA House of Delegates approved the two new Disciplinary Rules and ten new Ethical Considerations.
Association of the Bar of the City of New York ( http://www.abcny.org/mdprep.htm)
Issued a Statement of Position on Multidisciplinary Practice in July 1999:
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.
New York County Lawyers’ Association ( http://www.nycla.org/publications/multi.htm)
Special Committee approved concept of MDPs, if lawyers retain full control, including at least 66 2/3 % ownership. Approved by Board of Directors on June 14, 1999.
Bar Association of Nassau County
Ad Hoc Committee on Multidisciplinary Practice issued a report that supported the New York State Bar position. The Board of Directors passed a resolution supporting the report.
The Suffolk County Bar Association
Has developed a task force to study the MDP issue.
North Carolina ( http://www.barlinc.org/legal_prof/committees/mdp/mdpreport/index2.asp )
The North Carolina Bar Association Multidisciplinary Practice Task Force issued a report on September 13, 2000 with the following recommendations:
RESOLVED, that the North Carolina Bar Association supports the following principles, concerning business forms for the practice of law including, if appropriate, amending the North Carolina Rules of Professional Conduct and other laws and rules governing lawyers consistent with the following principles:
1. Any changes to the laws governing lawyers and the Rules of Professional Conduct must be implemented in a manner that protects the public and preserves the core values of the legal profession.
2. No change should be made to the law that now prohibits lawyers and law firms directly or indirectly from transferring ownership or control to nonlawyers over entities practicing law except as provided below. Any further demand that exists for greater integration of legal services with those of other professions may be satisfied by permitting lawyers to enter into strategic alliances and other contractual relationships with nonlegal professional service providers, as well as by permitting lawyers to own and operate nonlegal businesses. Passive investment in a firm providing legal services should not be permitted.
3. Lawyers should be allowed to deliver legal services in conjunction with nonlawyer professionals as long as the arrangement is one in which lawyers (who practice law) have the control and authority necessary to assure lawyer independence in the rendering of legal services and to assure compliance with ethical standards. The following non-traditional arrangements are examples of ones in which lawyers have sufficient control and authority:
a. Cooperative Model. Lawyers may employ nonlawyer professionals on their staffs to assist them in advising clients or work cooperatively with nonlawyer professionals whom they directly retain or who are retained by a client. To the extent that the nonlawyer professionals are employed, retained, or associated with a lawyer, the partners in a law firm and any lawyer having direct supervisory authority over a nonlawyer professional must take steps "to ensure that the person’s conduct is compatible with the professional obligations of the lawyer," especially with respect to the obligation not to disclose information relating to the representation.
b. Ancillary Business Model. Lawyers and law firms should be permitted to provide legal and nonlegal services to clients or other persons, directly or through affiliated entities, provided that the nonlawyer or nonlegal entity involved in the provision of such services does not direct or regulate the professional judgment of the lawyer or law firm in rendering legal services to any person. Specifically, a law firm may operate an ancillary business that provides professional services to clients. The law firm must take great care to assure that its clients understand that the ancillary business is affiliated with, but distinct from, the law firm and does not offer legal services. Lawyers and nonlawyer professionals may be partners in the ancillary business, sharing fees and jointly making management decisions. The lawyer-partners will provide consulting services not legal services to the clients of the ancillary business. No nonlawyer or nonlegal entity involved in the provision of such services should own or control the practice of law by a lawyer or 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.
c. Contract Model. Lawyers and law firms should be permitted to enter into interprofessional contractual arrangements with nonlegal professionals and nonlegal professional services firms for the purpose of offering legal and other professional services to the public, on a systematic and continuing basis, provided no nonlawyer has managerial or supervisory right, power or position in connection with, the practice of law by any lawyer or law firm. Specifically, a professional services firm may contract with an independent law firm. A typical contract might include terms such as (1) the law firm agreeing to identify its affiliation with the professional services firm on its letterhead and business cards, and in its advertising; (2) the law firm and the professional services firm agreeing to refer clients to each other on a nonexclusive basis; and (3) the law firm agreeing to purchase goods and services from the professional services firm such as staff management, communications technology, and rent for the leasing of office space and equipment. The law firm will remain an independent entity controlled and managed by lawyers and accept clients who have no connection with the professional services firm. These arrangements must be non-exclusive and there must be full disclosure.
d. Modified Command and Control Model. Lawyers should be permitted to share fees and join with nonlawyer professionals in an entity that delivers both legal and nonlegal professional services provided that the lawyers (who practice law) have the control and authority over the entity necessary to assure lawyer independence in the rendering of legal services, which control must represent at least a 51% controlling interest, in law and in fact, in the entity. "Nonlawyer professionals" means members of recognized professions or other disciplines that are governed by ethical standards. Specifically, lawyers (who practice law) may form a partnership with a nonlawyer and share legal fees subject to certain clearly defined restrictions. The nonlawyer professionals must agree "to abide by the rules of professional conduct" and the lawyers with a financial interest or managerial authority must "undertake to be responsible for the nonlawyer participants to the same extent as if nonlawyer participants were lawyers under Rule 5.1." A significant purpose of the entity must be the provision of legal services. These conditions must be set forth in writing. This model will require changes to the Rules of Professional Conduct including Rule 5.4. Such changes must provide specific restrictions including direct supervision by the State Bar of such fee splitting arrangements.
4. The North Carolina Rules of Professional Conduct should be revised to assure that there are safeguards in the Rules relating to strategic alliances and other contractual relationships with nonlegal professional service providers. Such changes should include provisions similar to the following:
Rule 5.7. Ancillary Services
(a) A lawyer who provides nonlegal services to a recipient that are not distinct from legal services provided to that recipient is subject to the Rules of Professional Conduct with respect to the provision of both legal and nonlegal services.
(b) A lawyer who provides nonlegal services to a recipient that are distinct from any legal services provided to the recipient is subject to the Rules of Professional Conduct with respect to the nonlegal services if the lawyer knows or reasonably should know that the recipient might believe that the recipient is receiving the protection of a client-lawyer relationship.
(c) A lawyer who is an owner, controlling party, employee, agent, or is otherwise affiliated with an entity providing nonlegal services to a recipient is subject to the Rules of Professional Conduct with respect to the nonlegal services if the lawyer knows or reasonably should know that the recipient might believe that the recipient is receiving the protection of a client-lawyer relationship.
(d) Paragraph (b) or (c) does not apply if the lawyer makes reasonable efforts to avoid any misunderstanding by the recipient receiving nonlegal services. Those efforts must include advising the recipient that the services are not legal services and that the protection of a client-lawyer relationship does not exist with respect to the provision of nonlegal services to the recipient.
Rule 5.8. Contractual Relationships Between Lawyers and Nonlegal Professionals
(a) A lawyer or law firm may enter into and maintain a contractual relationship with a nonlegal professional or nonlegal professional service firm for the purpose of offering to the public, on a systematic and continuing basis, legal services performed by the lawyer or law firm, as well as other professional services, provided that:
(1) The profession of the nonlegal professional or nonlegal professional service firm is a profession listed by the North Carolina Supreme Court pursuant to Rule 5.8(b); and
(2) The lawyer or law firm neither grants to the nonlegal professional or nonlegal professional service firm, nor permits such person or firm to obtain, hold or exercise, directly or indirectly, any ownership or investment interest in, or managerial or supervisory right, power or position in connection with, the practice of law by the lawyer or law firm except as otherwise provided in these Rules.
(b) For purposes of Rule 5.8(a):
(1) Each profession on the list maintained by the North Carolina Supreme Court shall have been designated by it, or shall have been approved by it upon the application of an individual or firm in this State, upon a determination that the profession is composed of individuals who, with respect to their profession;
(i) have been awarded a Bachelor’s Degree or its equivalent from an accredited college or university;
(ii) are licensed by this State; and
(iii) are required under penalty of suspension or revocation of license to adhere to a code of ethical conduct that is reasonably comparable to that of the legal profession.
(2) The term "ownership or investment interest" shall mean any such interest in any form of debt or equity, and shall include any interest commonly considered to be an interest accruing to or enjoyed by an owner or investor.
(c) Rule 5.8(a) shall not apply to relationships consisting solely of non-exclusive reciprocal referral agreements or understandings between a lawyer or law firm and a nonlegal professional or nonlegal professional service firm.
(d) Notwithstanding Rule 5.4(a), a lawyer or law firm may allocate costs and expenses with a nonlegal professional or nonlegal professional service firm pursuant to a contractual relationship permitted by Rule 5.8(a).
5. The Rules of Professional Conduct should be further amended to permit the practice models described above which will include changes to Rule 5.4 and other changes to provide proper safeguards for the public in the provision of legal services.
6. The North Carolina Bar Association should continue vigorous study of developing business practice forms nationally and internationally to assure that North Carolina lawyers can best provide legal services to meet the needs of the public.
RESOLVED, FURTHER that the North Carolina Bar Association supports the following principles concerning the practice of law by lawyers and others:
- The law governing lawyers was developed to protect the public interest and to preserve the core values of the legal profession, which values are essential to the proper functioning of the American justice system.
- All lawyers are members of one profession subject to the laws governing lawyers.
- The prohibition on nonlawyers delivering legal services and the obligations of all lawyers to observe the Rules of Professional Conduct should not be altered.
- North Carolina should retain and enforce laws that generally bar the practice of law by entities other than law firms and individuals other than lawyers.
- Regulatory authorities should enforce existing laws and rules and adopt such additional enforcement procedures as are needed to implement these principles concerning the proper practice of law to protect the public interest.
- Regulatory authorities charged with attorney discipline should reaffirm their commitment to enforcing the laws and rules governing lawyers that protect the public interest.
- Regulatory authorities should provide further guidance on the parameters of the unauthorized practice of law and proper interpretation of the Rules of Professional Conduct.
- To facilitate enforcement of statutes prohibiting the unauthorized practice of law, North Carolina should reevaluate and refine to the extent practical its definition of the "practice of law." For example, the North Carolina Bar Association should develop a Model Act on the practice of law in close conjunction with the North Carolina State Bar.
- The North Carolina Bar Association should continue to monitor developments concerning the unauthorized practice of law and its enforcement and enforcement of the Rules of Professional Conduct including educating its members on these developments.
Has been referred to Joint Commission on Attorney Standards for monitoring. The committee is reviewing activities of other states and has not taken substantive action.
On May 17, 2000, The Ohio State Bar Association Council of Delegates approved a report with the following findings, recommendations and conclusion:
1. The OSBA finds that the accounting industry, through its consulting affiliates and subsidiaries, is holding itself out as providing legal services to the public. The spin-off of accounting-audit functions from consulting-business advisory services is evidence of this market driven endeavor. Enhanced recruitment at law schools is another example of this aggressive expansion to provide legal services. Further, the OSBA recognizes the expansion of financial institutions, brokerage houses and insurance companies into multidimensional service centers as evidence of widespread consulting conglomerates.
2. The OSBA finds that MDP is not just inevitable, it is here and now. Some would argue, as the term implies, that it cannot be avoided and is a reasonable certainty. Our observations earlier in this report note that law firms are already engaged in multidimensional services through ancillary business arrangements and await the day that more formal restructuring can occur.
3. Although the special committee did not hear through public hearings or correspondence any significant demand for MDP through "one-stop shopping," it did receive some correspondence that it may be a growing preference in the future.
4. In addition, the OSBA recommends that for the protection of the public more vigorous investigation and enforcement of the unauthorized practice of law occur.
The OSBA does not believe that MDP should be authorized or sanctioned. The OSBA, Ohio’s organized bar, should be proactive in addressing this issue to protect the client and public interest, and not assume a purely defensive position.
Oklahoma ( http://www.okbar.org/news/MDPreport.htm)
The OBA Board of Governors is serving as the MDP Task Force. They have issued three informational reports. The final report stated that "the national inquiry and debate relating to Multidisciplinary Practice (MDP) which was implemented and facilitated by the ABA Commission on Multidisciplinary Practice has now reached a conclusion."
The Bar’s Strategic Planning Committee presented the following to the Board of Governors on June 2-3, 2000. The Board approved sending it to the Oregon House.
Recommend to the OSB House of Delegates that the OSB change its ethics and disciplinary rules to permit lawyers to share fees and join with non-lawyer professionals to deliver to clients both legal and non-legal professional services (MDP), provided that lawyers have control and authority to assure that all other existing core values of the legal profession for the protection of clients are maintained, including competence, independence of professional judgment, protection of confidential client information, loyalty to the client through avoidance of conflicts of interest, and pro bono publico obligations; and that all non-lawyer professionals and employees are held to the same ethical requirements as the lawyer they are working with.
Oregon's House of Delegates rejected the recommendation on September 23, 2000.
Pennsylvania ( http://www.pabar.org/webmdp.pdf)
On March 13, 2000 the Pennsylvania Bar Association Multidisciplinary Commission and Related Trends Affecting the Profession issued a report supporting lawyer controlled (60% ownership) MDPs. The Pennsylvania House of Delegates opposed the majority report of the PBA’s MDP commission and postponed voting on any other position until further study is conducted.
Philadelphia Bar Association ( http://www.philadelphiabar.org/about/news/newspage.asp?newsid=159283162000 and http://www.abanet.org/cpr/pbamdpresolution.html)
The Bar’s Multidisciplinary Practice Task Force issued a report on March 10, 2000 that was approved by its Board of Governors on March 23, 2000:
Recommendation 1: Some forms of MDPs should be allowed and the fee-splitting prohibition relaxed.
Recommendation 2: Lawyer controlled MDPs should be allowed to practice without delay; other forms should be allowed only after additional study and the enactment of appropriate regulations.
Recommendation 3: An MDP should not be allowed to offer legal and audit services to the same client.
Recommendation 4: Only lawyers in an MDP should be allowed to practice law.
The Rhode Island Bar Association House of Delegates adopted a final report on Multi-Disciplinary Practice on October 30, 2000. The recommendations in that report read as follows:
The Rhode Island Bar Association Ad Hoc Committee on Multi-Disciplinary Practice recommends the following position on multi-disciplinary practice to the House of Delegates:
1. It is in the public interest to preserve the lawyer’s duty of undivided loyalty to the client.
2. The Rhode Island Bar Association finds no credible evidence or persuasive argument that it is in the public interest to amend the rules of professional responsibility to allow the formation of MDP’s which would include lawyers, and the consequent sharing or splitting of fees for legal services among lawyers and non-lawyers.
3. The rules regulating the practice of law in Rhode Island should be vigorously enforced and such actions undertaken as necessary to diligently prosecute all violations thereof, including the unauthorized practice of law.
The South Carolina Bar Task Force on Multidisciplinary Practice has issued a report, which recommends:
1. The Rules of Professional Conduct be modified to permit an MDP to the extent defined below.
- A licensed attorney may not enter into an MDP to provide legal services which include civil and criminal litigation, or appearance on behalf of a client, in any state court.
- A licensed attorney may enter into an MDP practice to provide legal services which include civil and criminal litigation, or appearance on behalf of a client, in any federal court only if the federal forum has licensed all nonlawyer principals in the practice.
- A licensed attorney may enter into an MDP practice to provide advisory, consulting, planning and transactional legal services in one of the two following ways:
i) In a professional association, or other type of entity, with members of the following licensed and regulated professions:
Certified Public Accountant
Certified Financial Planner (ACFP)
Enrolled Agent before the I.R.S.
Licensed Social Worker
Licensed Insurance Agent
Registered Investment Advisor
Registered Land Surveyor
Stockbroker and Investment Advisor, registered with NASD or SEC
Additions to the list should only include licensed and regulated professions.
ii) By becoming an employee in a financial planning entity, such as a bank, stock brokerage firm, financial planning firm, or life insurance company.
5. Any Bar member seeking to establish an MDP should be required to petition the Court for permission to form the MDP. The petition requirement is consistent with In re Unauthorized Practice of Law Rules Proposed by the South Carolina Bar, 309 S.C. 304, 422 S.E.2d 123 (1992), the decision in which the Court noted that it is not practicable to define the practice of law by a set of rules. Notice should be provided to the Bar and others, with an opportunity for comment as appropriate. A public hearing will be held on the merits of the petition. The Court would authorize formation of the specific entity, issue an opinion which would provide a safe haven for MDPs formed with similar professionals or deny the petition.
In June 2000 the Bar's House of Delegates debated the recommendation of the Task Force. No conclusion was reached. No further action is currently under consideration.
The South Dakota Bar Association Committee on Multi-Disciplinary Practice presented a draft definition of the practice of law that was approved by the membership at the 2000 annual convention. Following is the substance of that draft:
There is no question that MDP now, and in the future, will affect the practice of law drastically. Unlike the current ABA position, it is our feeling that MDP is not something that should be totally eliminated or can be ignored. The committee felt that we should deal with what is reality and attempt to define the area so that all parties, particularly our clients, can benefit. In that respect, we felt that the first hurdle was to define what the practice of law is. If we can define the practice of law, the next step is regulating and controlling the MDP practice so that the ultimate users of that service benefit by being provided quality services at affordable prices. We have, therefore, after extensive work, come up with the definition of the practice of law that we would like to submit to the Bar for their approval. If the Bar approves, then it is the committee’s intention that this be presented for codification.
The committee recommends that the State Bar approve and secure enactment of legislation and, where appropriate, adoption of Supreme Court Rule, of the following:
"Practice of law" means the performance for another person or entity, of any of the following services:
(a) Representation before a judicial, legislative, or executive, administrative, or other governmental official or body, or before a government-owned body, or before an arbitrator or similar body;
(b) Preparation or review of documents involving liberty, property, or other rights or interests; or
(c) Any other service including, but not limited to, advice or negotiation, which in view of the facts and circumstances requires the knowledge, skill and judgment of a person trained in law.
(d) Whether or not they constitute the "Practice of law", the following are permitted:
(1) Practicing law in accordance with §16-16-7.1, 16-16-7.6, 16-16-17.1, 16-18-2, 16-18-2.1 to 16-18-2.10, and 16-18-34 to 16-18-34.6.
(2) Acting as a lay representative before administrative agencies or tribunals, if statutorily authorized.
(3) Serving in a neutral capacity as a mediator, arbitrator, conciliator, or facilitator.
(4) "Participating in labor negotiations, arbitrations or conciliations arising under collective bargaining rights or agreements."
(5) Providing assistance to another to complete a form provided by a court for protection under Chapters 29-19(a) and 25-10 when no fee is charged to do so.
(6) Acting as a registered legislative lobbyist under Chapter 2-12.
(7) Preparing a federal, state or local tax return or an appearance before a federal, state or local taxing authority in connection with an audit or administrative appeal of an audit or return by a person with respect to (i) their own tax returns, or (ii) tax returns of entities of which they are a substantial (ten percent or more) owner. The preparation of federal, state or local tax returns for third parties or the appearance before agents of taxing authorities in connection with audits on behalf of third parties or appearances before non-evidentiary administrative appeal bodies are also permitted.
(8) Other activities that the South Dakota Supreme Court has determined do not constitute the unauthorized practice of law.
§16-16-7.1 refers to nonresident attorneys employed by legal aid bureaus or public defender agencies;
§16-16-7.6 refers to attorneys who are state court administrators or full-time law school faculty and administrators;
§16-16-17.1 refers to conditionally admitted bar applicants;
§16-18-2 refers to nonresident attorneys admitted for a trial or hearing of a particular cause;
§16-18-2.1 refers to law students serving as legal interns; and to 16-18-2.10
§16-18-34 refers to legal assistants. to 16-18-34.6
"Unauthorized practice of law" means the practice of law by a person or entity who is not legally authorized to do so.
As to EXCEPTION 5, SDCL 29-19(a) pertains to stalking and SDCL 25-10 pertains to domestic abuse.
The other change which we intend to make is amending SDCL 16-16-1 to make a violation of the "Unauthorized Practice of Law" a Class I Misdemeanor instead of a Class II Misdemeanor.
Tennessee ( http://www.tba.org/mdp.html)
On February 1, 2000 the Tennessee Bar Association MDP Task Force issued their findings in response to the ABA Commission’s August 1999 report.
Having thoughtfully considered the report, for the reasons expressed above, the task force recommends that the Board of Governors and the House of Delegates formally indicate their opposition to the recommendation contained in the report and suggest to the Tennessee representatives to the ABA House of delegates that they vote against the recommendation; and in the event that the recommendation is nevertheless adopted and approved by the ABA House of delegates, that a separate classification of lawyers be established for those lawyers who choose to practice in an MDP in order to distinguish to the consuming public that the protections of the traditional duty of loyalty will not be available in the context of an MDP.
The State Bar of Texas Task Force on MDP issued a report in October 1999 that was accepted and approved by the Bar's Board of Directors on January 21, 2000.
The executive summary reads as follows:
The task force believes that the ABA Commission's June 1999 proposal to allow multidisciplinary practice groups to practice law has not been adequately justified. The task force recommends, for the reasons stated in the Recommendation at the end of this paper, that the proposal not be approved unless and until empirical evidence is brought forward, the present proposal's apparent deficiencies are addressed, and further study demonstrates that the public interest in fact will be furthered. The public interest includes providing legal services consistent with a high, enforceable level of ethics, confidentiality, and loyalty to the client in a cost-effective manner for all those needing legal services.
On January 26, 2001, the Utah Bar Commission unanimously approved the recommendations of the Utah MDP Task Force. (See Conclusion below.) On February 15, 2001 the Utah State Bar filed a petition asking that after the Advisory Committee completes its study and recommendations, the Court authorize amendments to the Rules of Professional Conduct to permit multi-disciplinary practice. The Utah Supreme Court's "Rules" committee came out against the MDP proposal. On January 30, 2002, the Utah State Bar's Past-President and the Chair of the Utah State Bar MDP Task Force met with the Utah Supreme Court and representatives from the Court's Rules Committee. On April 2, 2002 the Court denied the Bar's petition on MDP, expressing its willingness to reconsider the concept in the future "in light of experience that may be gained from other jurisdictions dealing with the multidisciplinary issue."
The practice of law has changed with the rest of the world. Today, law firms are not the only providers of legal services. Multidisciplinary practice is a fact. To recognize this fact, the Bar Commission created this Task Force to look at the market forces and determine how to best preserve the important "core" values of the legal profession, which must survive in the new market. The Task Force has attempted to provide these perspectives and to suggest changes in the rules of professional conduct in order to allow lawyers to serve modern clients interests in a traditionally ethical manner.
The Task Force decided that the core values of the profession could not be abandoned without abandoning our obligation to the public. These values of the profession are:
1) The duty to maintain competency;
2) The duty of loyalty to the client;
3) The duty to maintain independence of judgment;
4) The duty to remain free from conflicts of interest; and
5) The duty of client confidentiality.
The Task Force also decided that we cannot preserve these core values by ignoring MDPs. The Task Force believes the Bar should preserve and promote our core values by embracing MDPs and thereby extending our professional standards of practice and conduct through lawyer participation in MDPs. The Task Force believes this is our best opportunity as a profession to regulate, serve, facilitate, promote, and lead in the practice of law and the delivery of legal services to the public.
No discussion before July ABA meeting.
Commission issued a report on October 1, 2001 with the following recommendations:
1. Limited Ability to Practice in MDPs. Lawyers should be permitted to practice law in entities (commonly called MDPs") in which non-lawyers hold a position of control or an ownership interest, as long as the owners are not merely passive investors or suspended/disbarred lawyers. MDPs should not be required to register with the state, and should not be restricted to entities that are majority-owned by lawyers. MDP ownership should not be limited to licensed professionals.
2. Requirement to Follow All Ethical Obligations. Lawyers who practice law in MDPs must abide by the Rules of Professional Conduct, including the Rules protecting the "core values" of competence, loyalty, independence, confidentiality and avoidance of conflicts, and must assure that their legal services clients receive the same level of professionalism and protection as clients of lawyers who are not practicing law in MDPs.
3. Requirement of Lawyers’ Independence. Lawyers who practice law in MDPs must possess sufficient autonomy within the MDP to maintain their independence and to assure their adherence to all of their other ethical obligations.
4. Requirement to Avoid Assisting UPL. Lawyers (whether or not they are practicing law) shall not participate in any MDP or other entity in which non-lawyers are allowed to engage in the unauthorized practice of law.
5. Requirement to Explain Different Confidentiality Duties. Lawyers who practice law in MDPs must explain, in writing, the duties of confidentiality and disclosure governing others in the MDP who will provide services to the lawyer’s client, including any differences between the lawyers’ duties and the others’ duties.
6. Requirement to Explain Client Options. Lawyers who practice law in MDPs must explain, in writing, that: (a) the lawyer may benefit financially if the lawyer’s client obtains other services offered by the MDP; (b) the lawyer’s client is not obligated to use any other services offered by the MDP; and (c) the lawyer’s client may consult with an independent lawyer before obtaining other services offered by the MDP.
7. Requirement to Avoid Conflict of Interests. Lawyers who practice law in MDPs must consider all clients of the MDP or any of its owners/employees as legal services clients for purposes of avoiding conflicts of interest.
8. Responsibility to Attend Continuing Legal Education (CLE). Lawyers who practice law in MDPs should attend educational programs that emphasize the legal profession’s core values and the particular ethical obligations of lawyer practicing in MDPs. Virginia’s law schools, the VSB’s Mandatory Professionalism Course and all CLE providers should make such education available.
9. Responsibility to Perform Pro Bono Work. All lawyers, including lawyers practicing law in MDPs, should provide pro bono legal services.
10. Implementation. The Virginia State Bar should develop modifications to specific Rules implementing these Recommendations.
Washington ( http://www.wsba.org/2001/future/default.htm)
Study Group filed a report in July 2001 that was divided on the issue of whether to recommend changes to permit MDP.
West Virginia State Bar has appointed a Multi-Disciplinary Practice Committee, which reported to their Board of Governors on May 11, 2000. The Board adopted the majority report of the committee, which was in opposition to the MDP concept.
The Multidisciplinary Practice Commission recommended that the Wisconsin Rules of Professional Conduct be amended to permit lawyer controlled MDPs with approved professions. On Nov. 8, 2002 the State Bar Board of Governors rejected the Commission's recommendation.
May 16, 2002
The Commission recommends that the Wisconsin Rules of Professional Conduct be amended to permit lawyers to participate in multidisciplinary practice firms subject to the following restrictions:
1. Ownership and structure of MDPs
- Multidisciplinary practice firms may only be owned by lawyers licensed to practice in Wisconsin and by other licensed professionals whose profession is included in a list maintained by the Wisconsin Supreme Court.
- Lawyers may share legal fees with other licensed professionals within multidisciplinary practice firms.
- Lawyers must hold majority ownership of multidisciplinary practice firms.
- The owners of multidisciplinary practice firms must be actively practicing their professions in the entity and may not be passive investors.
- Multidisciplinary practice firms must register annually with the Wisconsin Supreme Court.
2. Regulation of lawyer professional responsibilities in MDPs
- Multidisciplinary practice firms shall be organized and regulated to assure that lawyers maintain their independence of professional judgment.
- Lawyers may not practice law in multidisciplinary practice firms that perform financial audits.
- Lawyers in multidisciplinary practice firms must assure that all non-lawyers in the firm understand and act consistently with lawyers’ obligations under the Rules of Professional Conduct
- Clients of non-lawyer professionals in multidisciplinary practice firms must be treated as clients of the lawyers in those firms for purposes of determining conflicts of interest.
- Lawyers in multidisciplinary practice firms should maintain attorney-client confidentiality consistent with SCR 20:1.6.
- Lawyers in multidisciplinary practice firms must establish procedures and protocols to reasonably assure that any mandatory reporting requirement of employees of a multidisciplinary practice firms are exercised compatibly with the lawyer’s duties of confidentiality under SCR 20:1.6.
Recommendations of the Wyoming MDP Task Force to the Wyoming State Bar
After due consideration to the foregoing, and in adherence to the mission of the Wyoming State Bar to regulate the practice of law; to facilitate the provision of competent legal services to the public; educate the public about the legal system; and assist attorneys in the professional practice of law, the MDP Committee makes the following recommendations:
1. To preserve the core values of the legal profession-independence of professional judgment, confidentiality, loyalty and confidence, the Wyoming State Bar should continue its current prohibition against multidisciplinary practice.
2. To preserve and enforce the existing rules prohibiting multi-disciplinary practice, the Wyoming State Bar should aggressively enforce prohibitions against the unauthorized practice of law and pursue efforts to preserve the right of the public to engage the personal services of a trusted lawyer.
3. To the extent that the existing rules of the Wyoming State Bar are found to be inadequate to prohibit unauthorized multi-disciplinary practice, the Wyoming State Bar should promptly amend such rules to consistently and uniformly enforce the prohibition of the Wyoming State Bar against multi-disciplinary practice in the State of Wyoming.
4. That the MDP Committee of the Wyoming State Bar continue in existence and be requested to provide an annual report on or before July 1 of each year, regarding MDP issues in other states and in the State of Wyoming for the purpose of keeping the Wyoming State Bar in a proactive position with respect to the development of MDP issues, actions and responses.