WRITTEN TESTIMONY OF
PRESIDENT, CONSUMERS FIRST
submitted to the
AMERICAN BAR ASSOCIATION
COMMISSION ON MULTIDISCIPLINARY PRACTICE
February 1, 1999
I want to thank members of the Commission for the opportunity to submit written testimony on the issue of how to change the Model Rules to give consumers more options with regard to the provision of legal services. I also want to congratulate the American Bar Association for undertaking this important review. This is an issue that resonates within the consumer movement because it goes to the very heart of the interest of consumers in almost any situation: they want more choices, not fewer. I am pleased to be able to offer some thoughts about this matter from the consumer perspective.
By way of background, I am the founder and president of Consumers First, a California-based statewide consumer education and advocacy organization. This broad-based grassroots association provides information to consumers, encourages participation in the governmental process and works with business and media to educate consumers and improve the marketplace. Prior to establishing Consumers First, I was director of the California Department of Consumer Affairs under Governor Pete Wilson, where I ran the largest business, professional and consumer affairs regulatory agency in the nation.
One of the common reactions Ive heard recently when I talk about this issue is that "this isnt a consumer issue." I disagree. I believe this issue is an important one to consumers on a number of levels, and I want to take just a few moments to explain why. First of all, consumers, whether they are individual Americans shopping in a mall or global corporations shopping for professional services, all want they same thing: choice. Whether it is mayonnaise or legal services, consumers want choices in the products they purchase because choice means competition, and competition means increased value. Its a basic component of American economic success: consumers deserve - and, in fact, demand - a wide range of choices. The current rules of the state bars regarding multidisciplinary practices limit the consumers freedom of choice. Consumers of legal services want to be able to choose the best provider, regardless of whether that lawyer practices law in a law firm or somewhere else. Purchasers should be free to determine how and where the legal services they buy are provided.
Second, in todays society, consumers are more and more frequently looking for "one-stop shopping" from firms that can provide a broad array of services. The economic efficiency of one-stop shopping is particularly critical for small business owners, who constitute an integral part of my organization. But a business of any size surely can benefit from hiring a firm that has expertise in a variety of areas, and theres no reason why legal services should not be one of those areas. The increasing complexity and globalization of todays business world make it crucial, especially for a small businesses, that companies have access to a variety of services under one roof. In most cases, such a package comes at a more competitive price, but it also ensures that a company is not relying on advice from someone who is not an expert in a particular field. A lawyer, for example, is not the best person to offer financial planning advice, because that is not a lawyers trained area of expertise. The reverse, of course, is also true. But a firm that offers both these services can ensure that its client is getting the best possible value.
Its a popular myth that these first two points apply mostly to what Ill call "business consumers" -- companies that spend a lot of money on comprehensive business services, including financial services, systems management, risk management and countless others. Ive tried to point out that small businesses - the backbone of much of this nations economic success - would also benefit significantly from changing the restrictions on lawyers practicing within multidisciplinary practices (MDPs). But how, you might ask, do these concepts come into play for the ordinary average American? Again, the answer is rooted in a basic tenet of American business. The reality is that if a business, large or small, can get the professional services it needs from a single firm that can provide a package of services at a lower price, that business will save money and, hopefully, pass on those savings to its consumers in the form of lower prices at the marketplace. The owner of a three-generation hardware store, for example, stays in business against the Home Depots of the world only if he can provide more value - through price, hands-on service, and other means - than the large company. To do so, that owner looks for every advantage he can get in terms of reducing his overhead. If he has to pay two separate bills - one to a lawyer and one to a financial planner at a different firm, for example - he has a more difficult time keeping that overhead down than if he could play one firm to provide both services. In the end, that affects the customers wallet.
I also believe it is important to point out that while it may have been the recent increase in the number of lawyers hired by accounting firms that prompted scrutiny of this issue, allowing lawyers to practice within multidisciplinary practices can help ordinary people in a multitude of ways - many of which dont have anything to do with accounting:
A multidisciplinary practice that consists of realtors, notaries, title searchers, financial planners, insurance experts and a mortgage lender might also include a lawyer, making the closing of a home purchase easier on the buyer.
Divorce lawyers might work with a tax planner, a financial advisor and even a child psychologist to provide complete services to a client going through a divorce.
Estate planners can collaborate with lawyers, tax professionals, auction houses and other kinds of service providers to complete the dispensation of an estate.
These are just three examples of what must be hundreds of everyday situations in which lawyers working in conjunction with other types of professionals can provide better, more coordinated and more cost-efficient services to the American public. Yet current rules prohibit these kinds of relationships. Frankly, it just doesnt make sense. Ultimately, this is an issue of choice. The reality is that the consumer of legal services, whether he or she is the general counsel of a worldwide manufacturing company or a young couple buying their first home, doesnt much care whether the lawyer they hire works in a prestigious law firm or some other kind of alliance with other professionals. That consumer cares only that the lawyer is competent, ethical, well-trained, thorough, hard-working and focused solely on providing the best possible advice and service for his or her clients needs.
It is time, I believe, for the bar to acknowledge that reality, to go back to the drawing board and come up with sensible rules that better reflect todays way of doing business and, more importantly, that better serve todays consumers. I urge this Commission and the entire American Bar Association to listen closely to the debate, to examine the successes of multidisciplinary practices overseas and to do whats best for the American consumers.
Thank you very much.