STATEMENT OF JAMES W. JONES
Vice Chairman and General Counsel of APCO Associates Inc.
Good morning Mr. Chairman and members of the Commission. My name is James Jones, and I am Vice Chairman and General Counsel of APCO Associates, a global public affairs and strategic communications firm headquartered in Washington, D.C. but with ten other offices throughout the world. I have served in my current position for the past three years. Prior to that, for some 25 years, I was an associate and partner in the Washington, D.C. based law firm of Arnold & Porter, serving my last nine years there as managing partner of the firm.
I was pleased to receive the invitation of the Commission to share with you my views on the topic of multidisciplinary practice, particularly so since I have been actively engaged with MDP and related issues for the past 15 years. In the interest of full disclosure, I should note that I have, from time to time, consulted with several law firms and with one of the "Big Five" accounting firms concerning these matters. However, I appear here today on my own behalf and on behalf of APCO to describe our experience with MDP and, hopefully, to bring a somewhat broader perspective to the Commissions deliberations.
A Brief History: APCO and Arnold & Porter
Let me begin by noting that APCO itself is a multidisciplinary practice, a firm that combines the skills of many professional disciplines including lawyers to assist its clients in addressing public affairs, government relations, and strategic communications issues wherever they arise throughout the world. APCO today has some 250 professionals operating in governmental capitals and commercial centers throughout the Americas, Europe, and Asia. We are successful at what we do precisely because we are good at "thinking outside the box," at fashioning innovative strategies and creative solutions for our clients problems. Our ability to do that results directly from the quality and multidisciplinary skills of our professional staff. The MDP concept is at the heart of what APCO is and it always has been.
APCO was created in 1984 as a wholly owned subsidiary of Arnold & Porter. It was intended to complement several existing practice areas within the law firm by bringing to bear the talents and expertise of a number of non-lawyer professionals, particularly in legislative and related public policy fields. APCO was conceived as a vehicle for broadening the scope of services offered by Arnold & Porter to its clients and as a means for offering services in a more efficient and cost-effective manner. It grew out of the conviction that at least for certain types of matters an interdisciplinary approach combining the skills of lawyers and non-lawyer professionals could lead to better and more creative solutions for client problems. The clients evidently agreed since APCOs business grew and the company expanded. In 1991, when APCO was sold by Arnold & Porter to Grey Advertising (APCOs current parent company), the firm had increased to some 35 persons serving numerous clients on a wide variety of issues.
Moreover, Arnold & Porters experience with APCO soon led the law firm to create two additional subsidiary companies MPC & Associates, a development consulting firm that worked primarily with colleges, universities, and other large nonprofit institutions on major real estate projects, and The Secura Group, a consulting firm for the financial institutions industry. Both of these companies worked closely with lawyers in established Arnold & Porter practice groups to serve the needs of existing clients and to expand the range of services that clients could be offered.
At the time that Arnold & Porter created these three subsidiaries, the impact of the Model Rules of Professional Conduct on their structure and operations was far from clear. Accordingly, the firm sought guidance from experts in professional ethics as well as a ruling from the D.C. Bar before proceeding with its plans. The structure that was ultimately adopted consisted of several elements:
- First, all promotional literature and all retainer agreements used by each subsidiary company were required to disclose the relationship between the company and the law firm; to note that the company itself was not engaged in the practice of law; and to state that the clients of the company were not required to use the services of the law firm even if legal services were required in connection with the matters for which the company was retained.
- Second, each of the subsidiary companies was held to the same ethical requirements in terms of conflicts of interest, protection of client confidences, advertising of services, etc. that applied to the law firm itself, and all questions arising in this area were required to be resolved by the firms ethics committee and not by the subsidiary company.
- Third, for purposes of conflict-of-interest screening, all of the subsidiary companies and the law firm itself were treated as a single entity, and any potential conflict that emerged was required to be resolved by the governing committees of the law firm and not by the subsidiary companies.
- And fourth, all brochures and other promotional materials of each of the subsidiary companies were required to be cleared by the law firms ethics committee using principles consistent with those applicable in the legal profession.
The ABAs Debate on Ancillary Business Activities
I should stress that these principles were put in place in 1984 out of an abundance of caution and in the absence of any clear guidance as to the applicability of the Model Rules to these sorts of activities. Consequently, they exceeded in certain respects the requirements currently imposed under Rule 5.7 of the Model Rules concerning the provision of "law-related services." Nonetheless, as many members of the Commission will recall, Arnold & Porters activities and those of a large number of other law firms also engaging in these so-called "ancillary businesses" were widely criticized within the ABA at the time. Many critics asserted that permitting affiliations between lawyers and non-lawyers would inevitably lead to serious ethical conflicts and abuses of the rights and interests of clients. Indeed, one report issued by the Section of Litigation boldly asserted that such activities posed "one of the most important [crises] to ever face the American legal profession."
Caught up in this fervor, the House of Delegates in 1991, over the strong objection of the Standing Committee on Ethics and Professional Responsibility, narrowly approved a prohibitory version of Rule 5.7 proposed by the Section of Litigation. That version prohibited law firms from providing non-legal services ancillary to the practice of law, unless such services were provided by employees of the law firm, to clients of the firm, and in connection with legal services otherwise being provided. Not surprisingly, the prohibitory version of the rule was quickly recognized as too extreme, prohibiting as it did a great variety of activities traditionally engaged in by lawyers throughout the nation. Consequently, the House of Delegates, responding to requests from several ABA sections and bars across the country, repealed the prohibitory rule in 1992. It was ultimately replaced in 1994 by the current version of Rule 5.7, which takes a far more moderate, disclosure oriented approach to the regulation of ancillary services.
I take the time to recount this history of the ancillary business debate of the early 1990s because I think that the lessons learned from that experience are both relevant and instructive for the Commissions current deliberations concerning the MDP concept. To emphasize this point I would note that the current MDP debate is, in one sense, the "flip side" of the previous ancillary business debate.
Most of the ancillary businesses that were the subject of attention in the early 1990s were, in fact, entities engaged in multidisciplinary practice, combining the skills of lawyers and non-lawyers to serve the needs of clients. The focus of the ancillary business debate was, however, on the extent to which lawyers themselves should be permitted to own or control entities engaged in multidisciplinary practice. In todays MDP debate, the primary focus is on the extent to which lawyers should be permitted to practice in entities not owned or controlled by lawyers in a sense the "flip side" of the previous question. So, it is, I think, relevant to reflect on several points arising out of the ABAs prior consideration of the ancillary business question. There are four such points that I would raise for your consideration.
Affiliations between Lawyers and Non-lawyers Have a Long History
The first is the importance of realizing that affiliations between lawyers and non-lawyers do not constitute a new phenomenon in American law. Indeed, such affiliations have been a part of the legal landscape in America for a very long time.
In the first place, many practicing lawyers have qualified to practice other professions as well and hold separate licenses as certified public accountants, real estate brokers, insurance agents, financial planners, marriage counselors, and the like. It is quite common to find such persons, in communities across the country, engaging in both their non-legal specialties and their law practices, sometimes working closely with non-legal professionals. Indeed, for many lawyers in small towns and rural areas, the ability to supplement the income derived from their law practices by engaging in other professional and business activities is critical.
However, even in cases where lawyers do not hold licenses to practice separate professions, the affiliation of members of the bar with non-lawyer professionals in a wide range of activities is quite common. To cite but a few examples identified by the Working Group on Ancillary Business Activities of the ABAs Special Coordinating Committee on Professionalism:
- In hundreds of law firms throughout the country, real estate lawyers routinely act as agents for title insurance companies in connection with transactions in which the lawyers are also involved representing one or more of the parties concerned. In some cases, the lawyers own the local abstract or title company involved in the transactions.
- In hundreds of other cases, lawyers routinely provide trust services as adjuncts to their probate practices or serve as personal representatives for decedents, minors, or incompetents. Indeed, in Massachusetts, some firms many years ago established separate trust companies, registered with the SEC, to service the needs of their clients and others.
- Many lawyers routinely act as trustees in bankruptcy proceedings or as conservators in other types of insolvency matters.
- Other lawyers practicing in the domestic relations field often also provide marriage counseling or mediation services.
- Still other lawyers with active criminal practices offer private investigation services to their clients.
- And, in neighborhood legal clinics and other centers across the country providing legal services to the poor, lawyers routinely work in combination with social workers, medical personnel, family counselors, and other non-lawyer professionals in providing comprehensive services to meet the special needs of their clients.
In short, the affiliation of lawyers and non-lawyers in MDP situations clearly pre- dates the relatively recent creation of consulting companies by large law firms like Arnold & Porter. The practice is, in fact, almost as old as the practice of law itself in this country. Consequently, in considering the implications of the MDP concept, I urge you to remember that we are talking about practices that are very widespread and have been going on for a very long time.
The "Practice of Law" Is Almost Impossible to Define Precisely
The second point I would offer for your consideration is that the definition of the "practice of law" is frustratingly illusive. Indeed, aside from a few obvious functions (like the filing of pleadings in court or the rendering of formal opinions), it is almost impossible to define with precision what constitutes the practice of law in the United States today, at least in any exclusive sense. While it is certainly possible to list the hundreds of things that lawyers do, as bar counsel and many courts have discovered, it is very difficult to come up with a comprehensive list of many things that only lawyers can do. To cite but a few examples:
- Everyone would agree that assisting a client in the negotiation of a contract constitutes the practice of law when undertaken by a lawyer holding himself out as engaged in legal practice. But few would argue that such functions cannot also be performed by lay persons (such as real estate agents, talent agents, professional managers, or financial advisors) without violating proscriptions on the unauthorized practice of law.
- Similarly, lawyers who engage in lobbying activities or who advise their clients on the drafting of proposed legislation are clearly practicing law, even though lay persons who undertake the same activities are not subject to prosecution for unauthorized practice.
- And lawyers assisting clients in tax and estate planning are involved in providing legal services while lay persons engaged in the same activities are not.
Stated differently, the scope of the "legal monopoly" in the U.S. i.e., those activities that only lawyers may engage in -- is fairly narrow and arguably getting narrower. Thus, any regulatory scheme that is premised on a tightly drawn exclusive definition of lawyering is likely to be either too narrow to be much good in a regulatory sense or too broad to be enforceable. I would accordingly be very suspicious of any regulatory approach to dealing with the MDP concept that depends for its effectiveness on a precise definition of the "practice of law."
The Development of the MDP Concept Is a Logical Step in the Ongoing Evolution of the Profession
The third point I would suggest for your consideration is that the current deliberations regarding the MDP concept are quite consistent with the evolving character of the legal profession. It bears remembering, in this regard, that the American legal profession has never been static but has always evolved to meet the changing needs of the country. Thus the profession has changed dramatically and often during its some 200+ years of history. Creative and innovative lawyers have introduced many "revolutionary" concepts that are now an accepted part of our professional landscape.
The creation of law firms an American invention is a good case in point. The modern law firm was first conceived in New York in the 1870s as a means of providing more responsive and comprehensive legal services to growing corporate enterprises that needed large-scale representation. Although many at the time criticized this decision of lawyers to act as a joint economic unit and feared the implications of it, the form soon became a permanent part of the American legal landscape and completely transformed the way legal work was organized and performed.
Many other examples of the dynamic character of the American bar could also be cited:
- The concept of "in-house counsel" -- also an American invention -- and the growth of large corporate legal staffs, developments that were vigorously attacked in former days on a variety of ethical and professionalism grounds;
- The provision of legal service by "in-house" lawyers to members of trade associations and similar groups, a development that altered traditional concepts of the appropriate relationship of lawyer and client;
- The use of pre-paid legal services plans, a development that triggered a substantial amount of opposition from bars around the country; and
- The expansion of "legal services" to include work in a wide variety of areas certainly not historically included in the definition of lawyering e.g., legislative services, the structuring of complex financings, compliance audits for various regulatory schemes, etc.
The point is that the practice of law in America has never been a static enterprise. It has always responded to the changing legal needs of society. I suggest that, properly viewed, the development of the MDP concept is but a logical step in the ongoing evolution of the profession as it seeks to respond to the changing needs of its clients.
Modifications to the Model Rules Are Needed to Assure the Continuing Role of the Legal Profession in Key Client Matters
And that leads to the fourth and final point I would like to offer for your consideration. It is the need to rethink the applicability of various provisions of the Model Rules to the evolving MDP concept and the implications of that applicability to the future of the legal profession. It is a very important point, because I believe that in a perverse way -- the strict applicability of the Model Rules has led (and will continue to lead) to the increasing marginalization of the legal profession, at least in respect of certain clients and certain types of matters. Let me explain what I mean.
Under Rule 5.4, a lawyer is forbidden from sharing "legal fees" with a non-lawyer and from engaging in the "practice of law" in any organization in which a non-lawyer has an ownership interest, serves as a director or officer, or has a right to direct or control the lawyers professional judgment. The implications of this rule are clear in the context of a law firm, where virtually everything that a lawyer does is regarded as the "practice of law." However, many of these same activities if performed by non-lawyers do not constitute the unauthorized practice of law. Consequently, when those activities are undertaken in non-law firm settings whether by lawyers or non-lawyers they do not constitute the "practice of law." As a consequence, such activities even though undertaken by persons who are trained as lawyers are not governed by most of the rules of the legal profession.
In my view, this is a highly undesirable result from the standpoint of all concerned. It deprives the lawyers themselves of full participation in their profession; it prevents the bar from exercising its supervisory role over a growing number of lawyers who choose to work in non-traditional settings; and it deprives the public of the full benefits and protections of dealing with "regulated lawyers." Moreover, as the range of services offered through MDP organizations expand and as more lawyers elect to work in such settings, the problem will only be exacerbated. Perversely, the rules intended to preserve the integrity of the legal profession will, over time, force increasing numbers of lawyers into this jurisdictional limbo where the services they perform and for which they were trained will fall outside the ambit of the legal profession.
I believe that all lawyers working in settings where they are called upon to use their legal skills and experience should be subject to the discipline of the bar regardless of the nature or ownership structures of the organizations for which they happen to work. However, to achieve this result it will be necessary to modify Rule 5.4 to remove the restrictions that cause the current problem. And that, in turn, will require an openness to the continuing evolution of the profession and to the changing demands being placed upon it by the society it serves.
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I hope that the Commission will find my comments of some help as it continues with its important deliberations. Thank you again for inviting me to appear today. I would be happy to try and answer any questions you might have.