Written Testimony of Lynda Shely,
Ethics Counsel for the State Bar of Arizona
Lynda Shely, Ethics Counsel for the State Bar of Arizona and a member of the ABA Standing Committee on Client Protection, made the first presentation of the day. First she spoke as Ethics Counsel starting off with the caveat that her comments were her own and not those of the State Bar of Arizona or the Committee on the Rules of Professional Conduct. She receives about 8,000 ethics inquiry telephone calls a year from the State Bar of Arizona’s 14,000 active members. This smaller jurisdiction thought it would be beneficial for the Commission to hear that multidisciplinary practice is not just an issue of the Big Five accounting firms hiring lawyers, solo practitioners and small firms are also very interested. About a half-dozen to a dozen of the calls each month ask whether lawyers can form a partnership or some other type of business affiliation with CPAs, insurance agents, sports agents, certified financial planners, law firm marketing directors, or paralegals. As Arizona has no unauthorized practice of law enforcement there is a very big problem with document preparers and independent paralegals practicing law. From bar members’ perspective equity ownership would give mediators or paralegals or other para-professionals recognition of their importance to the practice beyond employee status and an incentive to stay with the firm. If the fee-sharing provision were modified along the lines of D.C.’s Model Rule 5.4 there would not be a need to change any other ethics rules dealing with independent professional judgment such as confidentiality or conflicts avoidance. The concerns with nonlawyer partners or business relationships with nonlawyers is much akin to the concern regarding defense counsel’s violation of a lawyer’s duty of confidentiality by having to disclose what they’re doing to insurance company auditors. Allowing partnership with nonlawyers would be a benefit to the public in the sense of more protection, more accountability, as lawyers would be responsible for what goes on in a business where part of the business is the practice of law. Now when it’s unauthorized practice of law there is very little discipline of lawyers for failing to supervise support staff as it’s very hard to prove. The Model Rules could be expanded to cover nonlawyer partners as well as a lawyer’s legal secretary. Putting on her committee member hat, Ms. Shely talked about the ABA Client Protection Committee’s concern with the viability of state client protection funds that reimburse clients in the event of lawyer theft or conversion if firms have nonlawyer partners. If the funds were responsible for the legal providers in such enterprises it would be necessary to make the nonlawyers pay into the fund or post bond. This is an issue the Committee would like addressed if partnerships with nonlawyers is proposed. Regarding UPL and tax practice Ms. Shely asserts that if you look at the definitions of practicing law in almost all the states there is no such thing as the practice of tax - giving legal advice is giving legal advice. She has no position on this issue one way or another. She asks that the Commission make lawyers, whether they are practicing in an accounting firm or in a one man shop with a CPA, accountable under conflicts and confidentiality rules for their client’s protection.
In response to Professor Daly’s question regarding the remedy for a victim of a document preparer she was told it would be a lawsuit although there have not been any such lawsuits in Arizona to date. The Arizona Attorney General has occasionally brought consumer fraud actions, but only in large egregious cases, and victimized consumers are told to get a lawyer to fix the problem. Ms. Shely felt that further clarification of what the practice of law is, perhaps from the ABA would help, as MDPs is a big picture issue. Better clarification of where you’re allowed to practice and what law practice is, however, is also pertinent to folks who practice in more than one state and to internet access. She thinks imputation, MR 1.10, should be modified as it even creates a problem for lawyers moving from one firm to another. According to an Arizona Ethics Opinion a person cannot practice law and be a CPA in the same firm. Asked by Judge Friedman where is the best place to look for a definition of unauthorized practice of law Ms. Shely offered that the Consumer Protection Committee is currently editing results of its survey regarding definitions of the practice of law and UPL and the compilation should be available by March or April 1999. She referenced the Texas UPL case against Arthur Andersen to comment that Unauthorized Practice Committees customarily do not have the resources to enforce the police power statute. She oftentimes gets questions from lawyers regarding who they can work with (in order not to assist the unauthorized practice of law) even though Arizona does not have a UPL statute. Asked what she thinks should be the Commission’s goals Ms. Shely said that since there is a market for legal services that the Bar is not serving these nonlawyer providers should be brought into the fold so they become subject to client protection mechanisms such as discipline, restitution and bonding. Judge Friedman amplified by stating that supervision rules, continuing legal education and imputation rules would also assure standards of competency. Ms. Garvey asked if a MDP’s primary purpose were not the practice of law one would ask why lawyer rules should be applied to the enterprise as they are not necessarily superior. Mr. Shely responded that if D.C.’s MR 5.4 is used the issue of supervision of the nonlawyers is covered. She also mentioned the idea of joint rules for the comprehensive entity with each professional continuing to be covered by their own rules. She thought these combined rules should be federal in order that one set of rules apply for all. She explained to the Chair that inquirers are told an ancillary business must be kept separate and that it can’t be a subsidiary (based on an Arizona ethics opinion). The Bar has heard that if they intend to enforce the ethics code against lawyers in accounting firms they would resign their licenses. Small firm and solo practitioners appear to want to partner with CPAs, financial planners and insurance agents in order to remain competitive with nonlawyers who are so partnering and giving what appears to be or is very close to legal advice.