Remarks on the report and recommendations of the ABA Commission on MDPs - Center for Professional Responsibility

Remarks on the report and recommendations of
the ABA Commission on MDPs

June 1999

by

Ramón M. Mullerat
Abogado of Barcelona, Spain
Avocat à la Cour de Paris, France
Former President of the Council of the Bars and Law Societies
of the European Community (CCBE)
Member of the Academy of Jurisprudence and Legislation of Catalonia
Member of the American Law Institute
Member of the American Bar Foundation

   "These are times that try men’s souls"
Thomas Paine, The American Crisis, I, 1776.

 

  1. Presentation and purpose

This memorandum proposes to make some remarks on the Report and Recommendations which were issued by the ABA Commission on MDPs on June 11, 1999 and which will have to be analysed by the policy-making body of the ABA at its Annual Meeting in Atlanta on August 8, 1999 1.

  1. The legal profession
  1. The legal profession

The legal profession is a calling in the spirit of a public service 2. Lawyers are officers of the court in that they participate in the function of administering justice 3. Therefore, the lawyer has a public character as has the judge 4. The lawyer is a protector of civil rights and liberties.

  1. The ethical duties

The mission of public service confers on the lawyer some prerogatives (e.g. attorney-client privilege) and correlatively imposes on him strict ethical duties beyond those that are imposed on regular citizens (e.g. integrity, independence, confidentiality, avoiding conflicts of interest) 5.

These ethical duties mould the profession. They make the specificity of lawyers. If such duties were to be abandoned or unduly relaxed, the legal profession would become a mere business, an honest business perhaps, but it would cease to be a profession.

Independence is the quintessence of the profession. All the other ethical duties of the lawyer directly emanate from the primordial right and duty of independence and find their efficient cause in the need to protect such independence.

Today, the profession is suffering a serious crisis of commercialism which threatens the substance of the profession 6.

  1. The MDPs
  1. The MDPs

An MDP is understood to be the practice of different professions within the same structure and with common interests, whether shared directly or indirectly, and in the same or different physical places.

Although co-operation between lawyers and other professions must be promoted and enhanced, full association like MDPs can create problems.

The particular MDPs which present more difficulties are those between lawyers and accountants/auditors. For this reason we will concentrate our remarks on them.

  1. The main arguments in favour of and against MDPs

The main reasons in favour of MDPs are that clients may receive "packaged services" in the "one-stop shop", that they promote competition and that the big accounting firms have decided to set up global services providing all sorts of services, including legal services, becoming global "professional services organisations".

The main arguments against MDPs are the following 7:

  1. Independence

The crucial feature of the legal profession is the lawyer’s independence 8. The many duties to which a lawyer is subject require his absolute independence, free from all other influence, especially such as may arise from his personal interests or external pressure. Such independence is as necessary in the process of justice as is the impartiality of the judge. A lawyer must avoid any impairment of his independence and be careful not to compromise his professional standards in order to please his client, the court or third parties 9.

What must be protected is the absolute independence of the lawyer, not only independence of judgment but also professional freedom (to take or leave a client, to select the defence methods, to settle, etc.)

The lawyer, therefore, needs to be in command of his law firm and no third party should be allowed to dominate or have any determining influence on the advice its lawyers give to clients. The independence of the lawyer, then is the crucial point in determining whether or not MDPs between lawyers and accountants should be permitted.

The direct or indirect 10 control of the law firm, the control of lawyers’ activities and the control of lawyers’ work and judgment exercised by non-lawyers is contrary to the independence of lawyers 11.

  1. Clients’ choice

Clients should be guaranteed a genuinely free choice of legal adviser. Clients' free choice would be jeopardised by MDPs marketing "packaged services". Were MDPs to be permitted, the trend would undoubtedly be towards the MDP endeavouring to monopolise legal and financial advice as well as the auditing of a given client (particularly in continental Europe where there are few large law firms). This may eventually place the client in a state of dependency on the MDP, especially if the "package" includes auditing. Besides, changing auditors is a most serious move, apt to alarm creditors.

  1. Legal privilege

Attorney-client privilege (what in Europe is called "secret professionnel") is one of the pillars of democracy 12. It is the primary and fundamental right and duty of the lawyer 13. Lawyers obtain from their clients’ information which they have a duty to keep confidential. The other professions do not have the same concept nor the same duty of confidentiality. MDPs put this fundamental concept in jeopardy since "Chinese walls" are often a deceptive concept used to defend an insurmountable obstacle.

  1. Conflict of interests

Both the accountant and the lawyer must be independent. But the accountant must also be impartial, like a judge (the accountant is the judge of the accounts), while the lawyer in essence is partial (a defender or adviser of one party). The two of them working in association, i.e. becoming a single-advisor entity, they could not carry out such conflicting functions.

It is important to emphasise that what is at stake is not a pure fight for the domination of a market as some media may have suggested 14, but the protection of clients’ interests, the ethical values of the profession and the judicial system 15.

  1. The position of the Commission

The Commission recognises that MDPs represent a danger to independence, confidentiality, avoidance of conflict and other values which are at the core of the profession

The position of the Commission is to pass from the traditional "no" attitude to the "yes, but" attitude. The Commission has decided to propose revoking the categorical prohibition contained in rule 5.4 of the Model Rules of Professional Conduct for a permissive position through the introduction of certain safeguards of doubtful efficacy. Using the Commission’s own words:

[Report] "… the Commission has concluded that there is an interest by clients in the option to select and use lawyers who deliver legal services as part of a multidisciplinary practice (MDP) … [and] that it is possible to satisfy the interests of clients and lawyers by providing the option of an MDP without compromising the core values of the profession…"

[Recommendations] "… 2. A lawyer should be permitted to share legal fees with a non-lawyer subject to safeguards that prevent erosion of the core values of the legal profession. 3. A lawyer should be permitted to deliver legal services through a multidisciplinary practice (MDP)…"

In spite of the Commission’s good intentions, these safeguards seem to be unviable and based on unfounded expectations, such as that non-lawyers in MDPs should not be permitted to deliver legal services; that all rules which apply to a law firm should also apply to an MDP; that all clients of an MDP should be treated as the lawyers’ clients; that a lawyer should be required to make reasonable efforts to ensure that the client understands that the lawyer and the non-lawyer may have different obligations in respect of the disclosure of client information; that the MDP’s board of directors should give an undertaking to the court that the MDP will not interfere with the exercise by the lawyer of his independence and the like, to protect the values which are at the core of the profession, and other ancillary measures.

 

  1. Criticism to the Commission’s recommendations
  1. Inviability of the proposed safeguards

The safeguards proposed by the Commission simply cannot work efficiently 16 and it is surprising that these may be considered as a replacement for essential and axiomatic ethical principles. In practical terms it is difficult to ask non-lawyers to abide by the lawyers’ strict ethical rules and to enforce such rules on them. It is difficult to ensure that clients understand that the lawyer and the non-lawyer working in association in a MDP may have different obligations in respect of client information and confidentiality (especially a posteriori when the client discovers that the information has been unduly disclosed). It is difficult in practical terms to enforce the board of directors' undertaking that the MDP will not interfere with the lawyer’s independence.

  1. Recommendations based on unfounded expectations

To propose that the essential values of lawyers can be respected in practice by the MDP and by non-lawyers controlling the MDP is a naive approach, at best based on unfounded expectations.

When professionals work in the same structure, under the same roof with the same personnel to assist the same client in the same matter, they tend to develop a shared approach. It is an unfounded expectation to think that the approach will always be the lawyer’s. It is very difficult to impose the same strict standards to persons of different training, functions and goals. No convincing argument has been put forward to sustain the notion that the non-lawyers’, who will control the MDP, will abide readily, or without substantial friction, by the lawyers’ stringent rules regarding criminal matters related to the provision of their services.

It should not be forgotten that the economic dominance of the MDPs will be generally exercised by non-lawyers and that MDPs will be controlled by the accountants’ organisations, who have not only almost unlimited resources, but also on the one hand a better understanding of managing services firms and on the other hand a more commercial attitude towards services than lawyers 17. This concern is highlighted by the axiom "he who controls the purse controls all".

If lawyers can be controlled by very commercialised organisations like the big accounting firms, it is only a short step to accept the idea that banks, financial institutions or even retail stores could establish legal departments to "sell" law to their clients.

  1. Impossibility of making compatible what is incompatible

Law firms, especially multinational law firms, are already facing serious difficulties in dealing with conflicts of interests MDPs, with their conflicting services, would make this problem intolerable.

MDPs would dilute what lawyers do, and clients, the protection of whom is of the utmost importance, would be confused because they would not understand if they are giving their information to a lawyer to be defended or to an accountant to be evaluated.

The accountant’s and in particular the auditor’s role is based on the principle of impartiality, like that of the judge. The auditor is the judge of the accounts. The lawyer must be independent but partial. Both missions are essentially incompatible.

If, according to the Recommendations, the functions of lawyers and accountants can be reconciled and made compatible through the introduction of certain safeguards, the same attitude could be predicated of associations of lawyers and judges. Obviously, it would be useful for a client to present a case to a firm in which the lawyer would plead for it and the judge would issue the verdict 18. Nobody would accept that lawyers and judges could work in partnership even if Chinese walls, undertakings and safeguards were introduced.

Put simply, what is incompatible cannot be made compatible through the introduction of sophisticated and difficult-to-enforce measures.

  1. The "yes, but" attitude may cause the split of the profession

In spite of the many differences of the lawyers' activities due to different organisation of the bars and the firms, the practice in urban or rural areas, the type of law, the working in large partnerships or as a solo practitioner, the type of client, etc., the lawyer’s mission (the defence of the rights and liberties of citizens) and his functions (advice, defence in court, etc.) are the same world-wide and, therefore, to this extent all types of lawyers are mutually interdependent and there is one identifiable and undivided legal profession the world over.

The approval of MDPs, even with the introduction of safeguards, would cause a split in the profession, since thereafter clients would have to distinguish among the providers of legal services, between law firms and MDPs, between "legal-only" law firms and "accounting" law firms, and between "independent" lawyers and "dependent" (externally controlled) lawyers. A lawyer is a lawyer; let us keep it that way 19.

  1. The "yes, but" attitude a new concession to commercialism

The legal profession throughout the world and more particularly in the United States has been fighting against de-professionalisation and commercialisation through the loss of professional values since the ABA launched its appeal in 1986: "Has our profession discarded principle for profit, professionalism for commercialism?"

MDPs would represent a further step down in the ability of the profession to control its own associations, to control the workplace, to control the market for its services and to control its relations with the state 20, as well as the loss of ethical values and the erosion of the professional characteristics on the way to becoming a business occupation 21.

It is precisely in periods of crisis that prudence advises sticking to axiomatic basic principles rather than relaxing them 22.

Just last year, the President of the ABA launched a very intensive campaign "Promoting Professionalism" in order "to achieve what every lawyer wants: to enhance our professional values, to increase respect for our profession and to advance the rule of law and our system of justice".

The approval of MDPs would mean putting the values of the profession at extra risk, diluting ethical rules and ultimately diminishing professionalism, giving concession to commercialism. By doing so, the objectives announced by the President will certainly not be advanced.

  FOOTNOTES

1. The remarks express the personal views of this author. The author is aware of the audacity to make critical comments on the decisions on ethical rules of a jurisdiction other than his own and would not even have considered doing so had he not been invited to comment by the Commission and for the influence that the ABA’s decision on this matter will have on the legal profession throughout the world.

2. Roscoe Pound, The Lawyer from Antiquity to Modern Times, 1953.

3. Bundesrechtsanwaltsordnung, § 3: "the lawyer is an independent organ of the administration of justice." ABA, Model Rules, Preamble [1]: "A lawyer is a representative of clients, an officer of the legal system and a public citizen having a special responsibility for the quality of justice"; Crompton, J., R v. Connell (1844): "the advocate at the bar as well as the judge at the bench are equally members of that temple [of justice]"; Piero Calamandrei, Elogio dei giudici scrito da un avvocato, XXIX: "giudici e avvocati sono ugualmente organi de la giustizia."; Mucius Scaevola, Comentarios al Código Civil, XXIV, 1: "en él (abogado) debe verse, sobre todo, un verdadero colaborador del órgano judicial en la función esencial de administración justicia."

4. Piero Calamandrei, op. cit., XXIX: "l’avvocatura risponde … a un interesse essenzialmente publico."

5. Antonio Fernández Serrano, La abogacía en España y en el mundo, 1955, V, p. 205.

6. ABA, Comission on Professionalism, In the spirit of public service. A blueprint for the rekindling of lawyers’ professionalism, 1986: "Has our profession discarded principle for profit, professionalism for commercialism?"; Rudolf J. Gerber, Lawyers, courts and professionalism: "lawyers attitudes reveal a progressive deprofessionalisation of a once lofty calling, to the point where lawyering has become a mercantile business like any other"; The Economist, July 18, 1992: "Today many lawyers are torn between being professionals and being businessmen and people think that a lawyer is just another businessman selling his services."; Rayman L. Solomon and others, Lawyers’ ideals, lawyers’ practices.

7. Transformation in the American legal profession, 1992, pp. 153-154, who have identified five crises in the legal profession between 1925 and 1960, and state that commercialism is the sixth crisis; Terry Carter, "A lesson learned", ABA Journal, May 1998, p. 70, quoting Thomas J. Donahue, President of the US Chamber of Commerce: "The lawyers are busy reworking legal principles to enrich themselves, regardless of the impact on society."

8. See CCBE Declaration on MDPs, November 1993.

9. Robert Martin, "L’independence de la Justice": "L’independence est à la fois la force, le devoir et la raison d’être de l’avocat"; Ramón Mullerat: "Independence: the quintessence of legal ethics", Leuven, 1996.

10.It does not matter if such control is subtle or sophisticated.

11.Webster’s Dictionary defines the term "independent" in its first meaning as "not subject to control by others; not affiliated with a larger controlling unit."

12.Christian Raoult, "Report to the CCBE on professional secrecy", Madrid, 1996; Conference des Battoniers, 1989: "Le combat pour le respect du secret professionel ne sera jamais terminé, car il est le combat des droits de la personne contre tous les pouvoirs, que ceux-ci soient de nature économique, politique, ou même quelques fois judiciaire."

13.CCBE Code of Conduct, art. 2.3.1

14.Jean Eaglesham and Jim Kelly, "US set to scrap lawyer-only partnership", Financial Times, June 9, 1999.

15.Piero Calamandrei, op. Cit., XXVIII: "solo là dove gli avvocati sono independenti, i giudici possono essere imparziali."

16.Some ethical rules are difficult to enforce. T.Z. Parza, "The Drudge Report", New York, 21 st June 1999: "… the New York State Bar Association’s rules of ethics prohibited lawyers from trying to woo clients away from their old firms before they leave. But in the increasingly mercenary law-firm world, such niceties are seldom respected."

17.Michael Chambers, Commercial Lawyer, The Editor’s Page.

18.As the Recommendations say of MDPs, it would certainly satisfy the clients’ interest if lawyers and judges could associate, justice would be easier, cheaper and quicker, provided that the association made an annual statement of non-interference and the safeguards protected the impartiality of the judge and.

19.David Ward, "The rule of law. The President’s address to the 1989 National Conference ", The Law Society Gazette, October 19, 1989.

20.Elliot A. Krause, The death of the guilds, 1996, p. 280.

21.Warren E. Burger, "The ABA has fallen down on the job", The Wall Street Journal, August 10, 1994: "All the profession’s current problems – the eroding public respect for lawyers, the pack of professional dignity and civility on the part of many lawyers … are clear indications that the professionalism of the bar is in sharp decline."

22.St. Ignatious Loyla, Spiritual exercises, said that in times of grief you should not move home, meaning basic principles should be adhered to.

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