Appendix A

The Commission recognizes that the House of Delegates will be asked to vote solely on the Recommendations and not on the Report. The Commission asked the Reporter to provide the following illustrations of possible amendments to the Model Rules of Professional Conduct. Approval of the Recommendations will not constitute approval of these Rules and the Rule amendment task will be referred to the appropriate ABA ethics authorities. New material is underlined.

TERMINOLOGY

"Multidisciplinary practice (MDP)" denotes a partnership, professional corporation, or other association or entity that includes lawyers and nonlawyers and has as one, but not all, of its purposes the delivery of legal services to a client(s) other than the MDP itself or that holds itself out to the public as providing nonlegal, as well as legal, services, It includes an arrangement by which a law firm joins with one or more other professional firms to provide services, and there is a direct or indirect sharing of profits as part of the arrangement.

"Legal services" denote those services which, if provided by a lawyer engaged in the practice of law, would be regarded as part of such practice of law for purposes of application of the rules of professional conduct.

"Member" of an MDP denotes any employee, partner, shareholder or the like to the extent permitted of lawyers organized in law firms.

"Practice of Law" means the provision of professional legal advice or services where there is a client relationship of trust or reliance. One is presumed to be practicing law when engaging in any of the following conduct on behalf of another:

(a)  Preparing any legal document, including any deeds, mortgages, assignments, discharges, leases, trust instruments or any other instruments intended to affect interests in real or personal property, wills, codicils, instruments intended to affect the disposition of property of decedents' estates, documents relating to business and corporate transactions, other instruments intended to affect or secure legal rights, and contracts except routine agreements incidental to a regular course of business;

(b)   Preparing or expressing legal opinions;

(c)  Appearing or acting as an attorney in any tribunal;

(d)  Preparing any claims, demands or pleadings of any kind, or any written documents containing legal argument or interpretation of law, for filing in any court, administrative agency or other tribunal;

(e)  Providing advice or counsel as to how any of the activities described in subparagraph (a) through (d) might be done, or whether they were done, in accordance with applicable law;

(f)  Furnishing an attorney or attorneys, or other persons, to render the services described in subparagraphs (a) through (e) above.

* This definition is based in great part on District of Columbia Rule 49, which the Reporter viewed as a useful model.

RULE 1.6 CONFIDENTIALITY OF INFORMATION
Comment

Multidisciplinary Practices

[23] A lawyer in an MDP who provides legal services to the MDP's clients may encounter confidentiality problems that require special attention. The lawyer should scrupulously observe the rules of professional conduct relating to the protection of confidential client information.

[24] A lawyer in an MDP who delivers legal services to the MDP's clients and who works with, or is assisted by, a nonlawyer in the MDP who is delivering nonlegal services in connection with the delivery of legal services to a client should make reasonable efforts to ensure that the nonlawyer behaves in a manner that discharges the lawyer's obligation of confidentiality. (See Comment, Rule 5.3)

[25] In the context of an MDP, there is a particular concern about the potential loss of the attorney-client privilege, arising out of the possibility that the MDP's clients might not be properly informed as to the separate functions performed by the MDP and that the members of the MDP would not treat legal matters in a fashion appropriate to the preservation of the privilege. A lawyer in an MDP should take special care to avoid endangering the privilege by either the lawyer's own conduct or that of the MDP itself, or its nonlawyer members, and should take such measures as shall be necessary to prevent disclosure of confidential information to members of the MDP who are not providing services in connection with the delivery of the legal services to the client. (See Comment, Rule 5.1)

RULE 1.10 IMPUTED DISQUALIFICATION: GENERAL RULE
Comment

[4] With respect to an MDP, imputed disqualification of a lawyer applies if the conflict in regard to the legal services the lawyer is providing is with any client of the MDP, not just a client of a legal services division of the MDP or of an individual lawyer member of the MDP.

RULE 5.1 RESPONSIBILITIES OF A PARTNER OR SUPERVISORY LAWYER

(a) A partner or person in a similar position in a law firm or in an MDP shall make reasonable efforts to ensure that the firm or MDP has in effect measures giving reasonable assurance that all lawyers in the firm or MDP conform to the Rules of Professional Conduct.

(b) A lawyer having direct supervisory authority over another lawyer shall make reasonable efforts to ensure that the other lawyer conforms to the Rules of Professional Conduct.

(c) A lawyer shall be responsible for another lawyer's violation of the Rules of Professional Conduct if:

(1) the lawyer orders or, with knowledge of the specific conduct, ratifies the conduct involved; or

(2) the lawyer is a partner in the law firm or the MDP in which the other lawyer practices, or has direct supervisory authority over the other lawyer, and knows of the conduct at a time when its consequences can be avoided or mitigated but fails to take reasonable remedial action.

Comment

[1] Paragraphs (a) and (b) refer to lawyers who have supervisory authority over the professional work of a firm , an MDP or legal department of a government agency. This includes members of a partnership and the shareholders in a law firm or MDP organized as a professional corporation; lawyers having supervisory authority in the law department of an enterprise , MDP or government agency; and lawyers who have intermediate managerial responsibilities in a firm.

[2] The measures required to fulfill the responsibility prescribed in paragraphs (a) and (b) can depend on the firm's structure and the nature of its practice. In a small firm, informal supervision and occasional admonition ordinarily might be sufficient. In a large firm, or in practice situations in which intensely difficult ethical problems frequently arise, more elaborate procedures may be necessary. Some firms, for example, have a procedure whereby junior lawyers can make confidential referral of ethical problems directly to a designated senior partner or special committee. See Rule 5.2. Firms, whether large or small, may also rely on continuing legal education in professional ethics. In any event, the ethical atmosphere of a firm can influence the conduct of all its members and a lawyer having authority over the work of another may not assume that the subordinate lawyer will inevitably conform to the Rules.

[3] Paragraph (c)(1) expresses a general principle of responsibility for acts of another. See also Rule 8.4(a).

[4] Paragraph (c)(2) defines the duty of a lawyer having direct supervisory authority over performance of specific legal work by another lawyer. Whether a lawyer has such supervisory authority in particular circumstances is a question of fact. Partners of a private firm have at least indirect responsibility for all work being done by the firm, while a partner in charge of a particular matter ordinarily has direct authority over other firm lawyers engaged in the matter. Appropriate remedial action by a partner would depend on the immediacy of the partner's involvement and the seriousness of the misconduct. The supervisor is required to intervene to prevent avoidable consequences of misconduct if the supervisor knows that the misconduct occurred. Thus, if a supervising lawyer knows that a subordinate misrepresented a matter to an opposing party in negotiation, the supervisor as well as the subordinate has a duty to correct the resulting misapprehension.

[5] Professional misconduct by a lawyer under supervision could reveal a violation of paragraph (b) on the part of the supervisory lawyer even though it does not entail a violation of paragraph (c) because there was no direction, ratification or knowledge of the violation.

[6] Apart from this Rule and Rule 8.4(a), a lawyer does not have disciplinary liability for the conduct of a partner, associate or subordinate. Whether a lawyer may be liable civilly or criminally for another lawyer's conduct is a question of law beyond the scope of these Rules.


RULE 5.2 RESPONSIBILITIES OF A SUBORDINATE LAWYER

(a) A lawyer is bound by the Rules of Professional Conduct notwithstanding that the lawyer acted at the direction of another person.

(b) A subordinate lawyer does not violate the Rules of Professional Conduct if that lawyer acts in accordance with a supervisory lawyer's reasonable resolution of an arguable question of professional duty.


Comment

[3] The exception contained in paragraph (b) does not apply to acts by the lawyer in accordance with the instructions of a nonlawyer supervisor.

RULE 5.3 RESPONSIBILITIES REGARDING NONLAWYER ASSISTANTS OR ASSOCIATES

With respect to a nonlawyer employed or retained by or associated with a lawyer:

(a) a partner or person with a comparable role in a law firm or an MDP shall make reasonable efforts to ensure that the firm or MDP has in effect measures giving reasonable assurance that the person's conduct is compatible with the professional obligations of the lawyer;

(b) a lawyer having direct supervisory authority over the nonlawyer shall make reasonable efforts to ensure that the person's conduct is compatible with the professional obligations of the lawyer; and

(c) a lawyer shall be responsible for conduct of such a person that would be a violation of the Rules of Professional Conduct if engaged in by a lawyer if:

(1) the lawyer orders or, with the knowledge of the specific conduct, ratifies the conduct involved; or

(2) the lawyer is a partner in the law firm or in the MDP in which the person is employed, or has direct supervisory authority over the person, and knows of the conduct at a time when its consequences can be avoided or mitigated but fails to take reasonable remedial action.


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, pursuant to the provisions of Rule 1.17, pay to the estate or other representative of that lawyer the agreed-upon purchase price; and

(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.

(b) A lawyer shall not form a partnership with a nonlawyer if any of the activities of the partnership consist of the practice of law.

(c) A lawyer shall not permit a person who recommends, employs, or pays the lawyer to render legal services for another to direct or regulate the lawyer's professional judgment in rendering such legal services.

(d) A lawyer shall not practice with or in the form of a professional corporation or association authorized to practice law for a profit, if:

(1) a nonlawyer owns any interest therein, except that a fiduciary representative of the estate of a lawyer may hold the stock or interest of the lawyer for a reasonable time during administration;

(2) a nonlawyer is a corporate director or officer thereof; or

(3) a nonlawyer has the right to direct or control the professional judgment of a lawyer.

 

(e) To the extent provided in Rule 5.8, the provisions in subsections (a), (b), or (d) above do not apply to a lawyer in an MDP.


Comment

[1] The provisions of this Rule express traditional limitations on sharing fees The only exceptions to this rule are those contained in Rule 5.8. These limitations are to protect the lawyer's professional independence of judgment. Where someone other than the client pays the lawyer's fee or salary, or recommends employment of the lawyer, that arrangement does not modify the lawyer's obligation to the client. As stated in paragraph (c), such arrangements should not interfere with the lawyer's professional judgment.


RULE 5.8 RESPONSIBILITIES OF A LAWYER IN A MULTIDISCIPLINARY PRACTICE FIRM

(a) A lawyer shall not share legal fees with a nonlawyer or form a partnership or other entity with a nonlawyer if any of the activities of the partnership or other entity consist of the practice of law except that a lawyer in an MDP controlled by lawyers may do so, subject to the present provisions limiting the holding of equity investments in any entity or organization providing legal services. A lawyer in an MDP not controlled by lawyers may do so, subject to the conditions set forth in paragraphs (c)(1)-(5), and subject to the present provisions limiting the holding of equity investments in any entity or organization providing legal services.

(b) A lawyer in an MDP remains subject to all the Model Rules of Professional Conduct, unless this Rule provides otherwise.

(c) A lawyer may practice in an MDP in which lawyers do not own a controlling interest only if the MDP provides the highest court with the authority to regulate the legal profession in each jurisdiction in which the MDP is engaged in the delivery of legal services written undertakings signed by the chief executive officer (or similar official) and the board of directors (or similar body) that:

(1) it will not directly or indirectly interfere with a lawyer's exercise of independent professional judgment on behalf of a client;

(2) it will establish, maintain and enforce procedures designed to protect a lawyer's exercise of independent professional judgment on behalf of a client from interference by the MDP, any member of the MDP, or any person or entity associated with the MDP;

(3) it will establish, maintain and enforce procedures to protect a lawyer's professional obligation to segregate client funds;

(4) its members will abide by the rules of professional conduct when they are engaged in the delivery of legal services to a client of the MDP;

(5) it will respect the unique role of the lawyer in society as an officer of the legal system, a representative of clients and a public citizen having special responsibility for the administration of justice. This statement should acknowledge that lawyers in an MDP have the same special obligation to render voluntary pro bono publico legal service as lawyers practicing solo or in law firms;

(6) it will annually review the procedures established in subsection (2) and amend them as needed to ensure their effectiveness; and annually certify its compliance with subsections (1)-(6) and provide a copy of the certification to each lawyer in the MDP;

(7) it will annually file a signed and verified copy of the certificate described in subsection (6) with the highest court with the authority to regulate the legal profession in each jurisdiction in which the MDP is engaged in the delivery of legal services, along with information identifying each lawyer who has been a member of the MDP during the reporting period, the jurisdiction in which the principal office of each such lawyer is located, and the jurisdiction(s) in which those lawyers are licensed to practice law;

(8) it will permit the highest court with the authority to regulate the professional conduct of lawyers in each jurisdiction in which the MDP is engaged in the delivery of legal services to review and conduct an administrative audit of the MDP, as each such authority deems appropriate, to determine and assure compliance with subsections (1)-(7); and

(9) it will bear the cost of the administrative audit of MDPs described in subparagraph (8) through the payment of a reasonable annual certification fee.

(d) An MDP that fails to comply with its written undertaking shall be subject to withdrawal of its permission to deliver legal services or to other appropriate remedial measures ordered by the court.


Comment:

[1] Independence of professional judgment is a cornerstone of the client-lawyer relationship. It is imperative that the legal profession protect and nurture that independence. The problems faced by clients in modern society are often complex, calling for the coordinated advice of professionals in different disciplines, including the law. To better meet the needs of such clients, lawyers and nonlawyer professionals may join together in MDPs to offer legal as well as other professional services to the MDP's clients. The ethical prohibitions of Model Rule 5.4 against sharing legal fees with a nonlawyer and forming a partnership or other entity with a nonlawyer if any of the activities of the partnership or other entity consist of the practice of law have operated to prevent such affiliations. This rule modifies those prohibitions and permits lawyers and nonlawyers to work together in an MDP that provides legal services to clients. The modification, however, is subject to a number of restrictions that are designed to protect a lawyer's exercise of independent professional judgment on behalf of a client.

[2] "MDP" is defined in the Terminology section. Examples of professions that may appropriately be included in MDPs are accountancy, economic forecasting, financial planning, lobbying, psychological counseling, social work, consulting, architecture and design and tax return preparation. While the provision of legal services is one function of an MDP, it need not be the principal function.

[3] This Rule intends the term "lawyer in an MDP" to mean a person who is licensed to practice law and who holds himself out or is held out as providing legal services to the clients of the MDP. Holding out would include such activities as using the term "Esquire," "attorney-at-law," "counselor at law," "J.D." or the like after the lawyer's name, providing biographical information that indicates that the lawyer is licensed to practice law, or offering the provision of services that would be considered the practice of law, if offered by a lawyer in a law firm. A lawyer in an MDP remains subject to all the rules of professional conduct, unless this rule provides otherwise. For example, the lawyer must maintain confidentiality of information relating to the representation. If a nonlawyer member of the MDP works with a lawyer in providing legal services to the MDP's clients, the lawyer must give reasonable assurances that the member's conduct is compatible with the professional obligations of the lawyer. See Rules 5.1 and 5.3. A lawyer should take special care to insure that the members understand the obligation to maintain confidentiality of information. In addition, it may be necessary for an MDP to implement special procedures to protect confidential information such as building firewalls in the firm's computer information system, restricting access to client files by the use of special passwords, and physically separating the lawyers and their nonlawyer assistants, paralegals, and secretaries from other service units within the MDP.

[4] A lawyer in an MDP must also take special care to heed the proscriptions of the Rules addressing conflicts of interest (Rules 1.7 through 1.11, especially Rules 1.7(b) and 1.8(a), (b), and (f)). The promotion of the legal services of an MDP must also comply in all respects with Rules 7.1 and 7.3 regarding advertising and contacts with prospective clients. With respect to advertising and solicitation, lawyers should take special care to identify the obligations that may be imposed as a result of a jurisdiction's decisional law. Finally, lawyers must be especially mindful of the rules governing legal fees and trust accounts. The fact that a lawyer is practicing in an MDP does not excuse compliance with these rules.

[5] There is no ethical bar that prevents a lawyer from being a member of, or practicing, another profession or pursuing another career calling. For example, a lawyer may also be a certified public accountant, a computer programmer, a financial planner, a psychologist, or a social worker. Such a lawyer is often referred to as a "dual professional." When a client is receiving services from a lawyer in an MDP who is a dual professional, it is critical that the client understand in what capacity the lawyer is rendering services. In the absence of a clear understanding, the client may erroneously assume that all the client's communications with the dual-professional lawyer or other nonlawyer member of the MDP are protected by the attorney-client privilege. A lawyer who is a dual professional and who offers nonlegal services to the client of an MDP has an affirmative obligation to insure that the client understand the nonlegal nature of those services.

The lawyer should communicate to the client receiving the nonlegal services, in a manner sufficient to assure that the client understands the significance of the distinction between nonlegal and legal services and that their relationship will not be a client-lawyer relationship. The communication should be made before entering into an agreement for the provision of, or providing, nonlegal services and preferably should be in writing.

[6] The burden is upon the lawyer to show that the lawyer has taken reasonable measures under the circumstances to communicate the desired understanding and that the client understands that the MDP is not rendering legal services in this matter. A sophisticated user of the services offered by an MDP, such as a publicly held corporation, may require a lesser explanation than an individual client seeking advice from a lawyer-accountant or lawyer-social worker. The failure to take reasonable measures to insure that the client understands the nonlegal nature of the services constitutes a material misrepresentation of facts in violation of Rule 7.1.

[7] To protect a client's right to the exercise of independent professional judgment by a lawyer and to facilitate conduct by a lawyer that is consistent with the obligations set forth in the Model Rules, this rule places special requirements upon an MDP not controlled by lawyers. These requirements are appropriate because of the serious injury that the MDP's clients may suffer if independence is not exercised or a lawyer fails to observe the lawyer's ethical responsibilities. Thus, a lawyer may not practice in an MDP unless the MDP undertakes in writing: (1) that it will not directly or indirectly interfere with a lawyer's exercise of independent professional judgment on behalf of a client; (2) that it will establish and enforce procedures designed to protect a lawyer's exercise of independent professional judgment on behalf of a client from interference by the MDP, any constituent of the MDP, or any person or entity associated with the MDP; (3) that members of the MDP will abide by these rules of professional conduct when they assist a lawyer in the MDP in the delivery of legal services to a client of the MDP; (4) that it will respect the special role of the lawyer as a representative of clients, an officer of the legal system and public citizen having special responsibility for the administration of justice; and (5) that it will annually review the procedures established in subsection (c)(2), certify its compliance with subsections (c)(1)-(6), and a copy of the certification provide to each lawyer in the MDP.

[8] A lawyer plays a unique role in society as a representative of clients, an officer of the legal system and public citizen having special responsibility for the administration of justice. The MDP must acknowledge and respect that role. It must be cognizant that in certain circumstances, the representation of a client consistent with the Model Rules of Professional Conduct may require a lawyer to take action that may result in a diminution of the MDP's profits either with respect to a particular matter or in general. The MDP, like all law firms, must respect the fundamental principle that every lawyer, regardless of professional prominence or professional work load, has an obligation to provide legal services to those who are unable to pay.

[9] This Rule requires that the MDP agree in writing that it will annually review the procedures established in subsection (c)(2) and amend them as appropriate, certify its compliance with subsections (c)(1)-(6), and provide a copy of the certification to each lawyer in the MDP. The purpose of this certification is two-fold: first, it serves as an annual reminder to the MDP of the importance of the procedures and encourages any appropriate amendments to them; and second, it reminds a lawyer in an MDP of the lawyer's own obligation to insure that the MDP is in compliance with the Rule. If an MDP is not in compliance, the lawyer should remind the highest authority of the MDP of this fact and urge compliance. If the MDP remains in noncompliance, the lawyer must terminate the lawyer's relationship with the MDP. In addition, the lawyer may have an obligation to inform the appropriate professional authority of the professional misconduct of any other lawyer who continues to offer legal services to clients of the MDP. It would be professional misconduct for a lawyer employed by or affiliated with an MDP to offer legal services to clients of the MDP if that MDP is not in compliance with this Rule.

[10] In addition, this Rule provides for the review and supervision of MDPs not controlled by lawyers by the highest court in a jurisdiction responsible for the professional conduct of lawyers. Since MDPs are new structures for the delivery of legal services and permit previously prohibited fee-sharing and ownership interest with nonlawyers, it is appropriate that those not controlled by lawyers be monitored to assure the preservation of a lawyer's independent professional judgment, the protection of confidential client information, and the avoidance of conflict of interest. The Rule requires that such MDP annually file a signed and verified copy of the certificate described in subsection (6) with the jurisdiction's highest court and that the copy must be accompanied by information identifying each lawyer employed by the MDP during the reporting period and the jurisdictions in which each lawyer is licensed to practice law. The Rule also permits the jurisdiction's highest court to review the certificates or conduct an investigation or an administrative audit of MDPs, as it deems appropriate, to determine and assure compliance with subsections (1)-(7) and permits the court to take appropriate action if it finds that an MDP has not complied with those subsections. Finally, the Rule provides that the cost of conducting the investigation and administrative audit described in subparagraph (8) is to be borne by the MDPs through the payment of an annual fee.

 

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