Commission On Multidisciplinary Practice

Report To The House Of Delegates


RESOLVED, that the American Bar Association amend the Model Rules of Professional Conduct consistent with the following principles:

1. Lawyers should be permitted to share fees and join with nonlawyer professionals in a practice that delivers both legal and nonlegal professional services (Multidisciplinary Practice), provided that the lawyers have the control and authority necessary to assure lawyer independence in the rendering of legal services. "Nonlawyer professionals" means members of recognized professions or other disciplines that are governed by ethical standards.

2. This Recommendation must be implemented in a manner that protects the public and preserves the core values of the legal profession, including competence, independence of professional judgment, protection of confidential client information, loyalty to the client through the avoidance of conflicts of interest, and pro bono publico obligations.

3. Regulatory authorities should enforce existing rules and adopt such additional enforcement procedures as are needed to implement these principles and to protect the public interest.

4. The prohibition on nonlawyers delivering legal services and the obligations of all lawyers to observe the rules of professional conduct should not be altered.

5. Passive investment in a Multidisciplinary Practice should not be permitted.





 Model Rule 5.4 of the ABA Model Rules of Professional Conduct prohibits a lawyer or law firm from sharing legal fees with a nonlawyer or forming a partnership with a nonlawyer if any of the activities of the partnership consist of the practice of law. 1 The Recommendation, which is based upon anextensive public record, 2 would change that policy to permit lawyers to share fees and join with nonlawyers in a practice that delivers both legal and nonlegal professional services("Multidisciplinary Practice" or "MDP") provided that the lawyers havethe control and authority necessary to assure lawyer independence in the rendering oflegal services. 3

The Commission is submitting the Recommendation to the House for consideration at the 2000 Annual Meeting because it believes that a vote would be appropriate in light of the Commission's two years of careful study of MDP issues. The Commission also recognizes, however, that many of the state and local bars that are studying these same issues will not have completed their review prior to the 2000 Annual Meeting. The Commission therefor urges the House to consider postponing any action on MDP-related issues until the 2001 Midyear Meeting.

Control and Authority

The legal profession has long acknowledged that lawyers may work in practice settings in which nonlawyers have supervisory authority and in which lawyers do not have an ownership interest. Prominent examples include government law offices, legal aid organizations, prepaid legal services plans, and in-house legal departments. 4 Central to the ethical provision of legal services in these settings has been lawyers' ability to exercise independent judgment on their clients' behalf. The Model Rules of Professional Conduct insist on lawyer independence. They do not, however, dictate any particular organizational structure.

1) The Effect of the "Control and Authority" Principle on the Structure of an MDP

The "control and authority" mandated in the Commission's Recommendation can be satisfied in a variety of ways, depending on the practice setting. Percentage of ownership may be a factor in certain circumstances. Some members of the Commission would have added a specific requirement in the Recommendation that there be a lawyer majority ownership of an MDP(or a supermajority, as any individual state might determine) and that a primary purpose of the MDP be the delivery of legal services. Thus, these Commission members would have supported a modified version of Rule 5.4 of the District of Columbia's Rules of Professional Conduct that currently permits fee sharing and partnership with nonlawyers under limited circumstances.

Under the Commission's Recommendation, in a small-size MDP, such as one established by a lawyer, social worker, and certified financial planner to provide professional services to elderly clients and their families, the lawyer member might or might not hold a majority ownership interest. The partnership or shareholder agreement might specifically affirm that decisions relating to the provision of legal services to the MDP's clients lie exclusively in the lawyer's province. Neither the percentage of ownership interest nor any particular wording in the partnership or shareholder agreement will conclusively determine either control or authority. The control and authority principle looks to substance not form.

Lawyers in small firms have for many years functioned as dual professionals, offering legal and nonlegal services to their clients. They have had to observe various organizational safeguards designed to ensure that their legal and nonlegal services were separately conducted and that the clients who purchased these services understood the different roles. 5 These organizational safeguards evolved over time on a state-by-state basis. The Commission does not believe that it should attempt to dictate the nature or mode of delivery of legal services by an MDP or interfere with the states' ability to identify and enforce the particular structures that they determine are necessary to protect the interests of clients.

In a large-size MDP, such as one including several hundred professionals in different disciplines, formal structures are certain to be needed. At a minimum, they should include: (1) structuring the MDP so that the lawyers who are delivering legal services to the MDP's clients are organized and supervised separately from the MDP's other units ( e.g., business, technology, or environmental consulting services); and (2) establishing a chain-of-command in which these lawyers report to a lawyer-supervisor whose responsibilities include hiring and firing, fixing

the lawyers' compensation and terms of service, making decisions with respect to professional issues such as staffing of legal matters and the allocation of lawyer and paraprofessional resources, and advising on issues of professional responsibility. In a large-size MDP practice setting, the structures could be modeled on ones developed by general counsels' offices for the purpose of fostering lawyer independence. These types of structural arrangements should contribute to fostering a culture of professionalism and help to preserve lawyer independence within large MDP organizations, just as they have in large in-house legal departments and law offices in government agencies. The articulation of the precise contours of the structural arrangements is best left to the individual states for adoption in light of particular local concerns.

2) The Effect of the "Control and Authority" Principle on Referral Arrangements between Law Firms and Other Entities

Law firms and professional services firms, both large and small, have for generations referred clients to one another and these referral arrangements have benefitted both individual clients and the public. These relationships have facilitated the coordinated delivery of legal services without jeopardizing the lawyers' independence and without putting at risk other core values of the profession. Such relationships, provided that they are not masking a fee sharing or partnership arrangement with respect to the control and management of the law firm, do not appear to violate the Model Rules. To some degree, such a relationship between a law firm and a professional services firm may be analogized to the relationship that exists among independent lawyers in a shared office suite who are not partners but refer clients to one another, use common facilities, and contribute to the costs and expenses of the suite. Such exchanges do not necessarily transform the lawyer members of the suite into partners.

Although lawyers and nonlawyers have traditionally worked together, they have always billed separately, not adopted exclusive referral policies, kept their personnel distinct and otherwise complied with their individual professional standards. Variations of these familiar arrangements are developing, which could, the Commission fears, pose risks to the public, and compromise the lawyers' independence of professional judgment and, among other values, jeopardize the lawyers' obligations of confidentiality, the avoidance of conflicts, and the like.

A preferential referral arrangement between a lawyer and a nonlawyer professional should not by itself result in any ethical or professional rule violation by the lawyer. However, the Commission recognizes that what may appear ethically acceptable in form may be otherwise in substance. The Commission believes that the prohibition against the sharing of fees covers not only the actual division of fees but also includes indirect sharing of fees by certain sharing of economic benefits (other than normal compensation and related employee benefits) with nonlawyers through the practice of law.

Some new forms of referral arrangements appear to lack the traditional characteristics of separation. Indeed, they suggest the creation of a virtual MDP with the potential to undermine the principle that lawyers must have the control and authority necessary to assure the conditions that allow them to exercise independence in the rendering of legal services. If the arrangement's practical effect is to create a joint enterprise in which nonlawyers are sharing in legal fees or otherwise benefitting financially from the practice of law (other than through normal compensation and related employee benefits) and in which the nonlawyers may be able to exert an ownership-like control over the lawyers, the arrangement would violate the existing Model Rule 5.4 and the Commission's proposal. Even if there is no formal fee sharing, the relationship may so entwine the firms that they become a virtual single entity. Evidence of such interdependence might include, for example, the holding-out to clients and prospective clients that services are provided by a single enterprise or an association of linked enterprises; brand naming; providing concessions or other economic benefits to each other's clients or to affiliates, including foreign affiliated law firms; providing below market cost financing or other support; and guaranteeing or promising a minimum level of referral business with or without related guarantees of minimum compensation levels.

Where such interdependence exists, the law firm and the professional services firm should be treated as a single entity. Under the current rules, the lawyers might be subject to discipline for violation of Rule 5.4, among others. Under rules promulgated pursuant to the Commission's Recommendation, the lawyers would be subject to discipline if they did not have the control and authority necessary to assure lawyer independence of professional judgment. The lawyers also would be subject to discipline if they did not comply with their jurisdiction's rule on imputation of conflicts. The lawyers should treat the clients of both firms as if they were the clients of a single law firm. In order to help determine whether compliance is taking place, the states may want to require that arrangements between lawyers and nonlawyers be wholly transparent, that documents relating to the arrangements be filed with the appropriate regulatory authorities of any and all affected jurisdictions, and that these records be open to public inspection.

The mere fact that a law firm and a professional services firm frequently work together in teams to provide coordinated legal and nonlegal services to clients should not, by itself, be evidence of the establishment of a virtual MDP. That fact, without more substantial evidence of interdependence, should not, therefore, require that the law firm be disqualified under a theory of imputation from representing any clients adverse to the clients of the professional services firm.

3) Incentives for Compliance with the "Control and Authority" Principle

The Commission notes that there would be powerful incentives for MDPs to establish organizational structures to enable the lawyer members to adhere to the control and authority principle mandated in the Recommendation. In addition to subjecting the lawyers in the MDP to possible disciplinary sanctions, failure to establish these structures might, for example, ultimately lead to the imposition of civil liability if the lawyers failed to exercise independent judgment on a client's behalf, undertook a representation in violation of their obligation to provide conflict-free representation, failed to take reasonable and effective measures to assure confidentiality of client information, endangered the protection of the attorney-client privilege or committed any of a number of other possible violations of the rules of professional conduct or standards of practice. Moreover, the fact that a lawyer is not part of a separately organized unit supervised by another lawyer could be sufficient evidence under certain circumstances of a lack of compliance with the control and authority requirement, thereby creating a situation in which the lawyer is subject to discipline for aiding in the unauthorized practice of law by an entity that is not qualified to deliver legal services under the rule. An entity holding itself out as authorized to deliver legal services that fails to conform to the control and authority principle, additionally risks being subject to civil liability for false advertising and unfair competition. 6

As discussed more fully in the Appendix, the states' promulgation of rules embodying the Commission's Recommendation will considerably assist in clarifying the status of the 5,000 or more lawyers who currently work in professional services firms. This clarification is especially needed because of the increasing number of lawyers who are being hired by such firms.

The Meaning of "Professional Services"

The Commission has weighed carefully the merits of whether, as some have suggested, there should be any limitation on the vocation of the nonlawyer members of an MDP. It has concluded that the interests of the public would best be protected by defining "professional services" to mean "services rendered by a member of a recognized profession or other discipline that is governed by ethical standards." The Commission believes that identifying the included professions and disciplines should be left to the states' determination. However, it does suggest that, in a comment to the amended Model Rule 5.4, the definition be supplemented with a list of included professions similar to the lists and descriptions presently found in the comments to ABA Model Rule 5.7 and Rule 5.4 of the District of Columbia's Rules of Professional Conduct. The suggested list might include, for example, accountants, certified financial planners, engineers, psychologists, psychiatric social workers, and real estate brokers.


It is undeniable that competence is a core value of the legal profession and the Commission's original recommendation should have so identified it. The Commission is convinced that allowing lawyers and nonlawyers to join in a single entity that delivers both legal and nonlegal services will have no detrimental effect upon lawyer competence. Moreover, the Commission repeatedly heard testimony that the nature of the problems faced by individuals and organizations has become increasingly complex, requiring multidisciplinary assistance and not solely legal advice. 7 The boundaries between the law and other disciplines are blurring. Providing clients with the option of obtaining the assistance they need from a single entity promotes the development of more efficient delivery mechanisms and contributes to lawyer competence by expanding the lawyer's integrated knowledge base.

Protection of Confidential Client Information

The Commission's recommendation to permit lawyers to practice in MDPs continues to emphasize the importance of the protection of confidential client information.

1) The Attest Function

Some commentators believe that the Commission's August 1999 Recommendation failed to state with sufficient clarity that the functions of providing legal and audit services to the same client are incompatible. The Commission explicitly recognizes their incompatibility. 8 It does not believe that a single entity should be allowed to provide legal and audit services to the same client.

2) The Lawyer's Duty to Protect Confidential Client Information

The Commission acknowledges that, in addition to auditors, other nonlawyer professionals may also be subject to different rules governing the disclosure of client information to a third party ( e.g., the disclosure obligations of mental health professionals in cases of suspected child abuse). Thus, there may be other situations in which an MDP should not be permitted to provide both legal services and some other form of services to the same client. Just as a lawyer who works jointly on a client matter with a professional services firm must now do, a lawyer in an MDP would have to make reasonable efforts to ensure that a client to whom legal services are being rendered sufficiently understands that the lawyer and the nonlawyer professional in the MDP may have different obligations with respect to the disclosure of client information and that the courts may treat the client's communications to the lawyer and nonlawyer differently. Furthermore, the Commission's Recommendation does not relieve a lawyer in an MDP from the obligation to ensure that the MDP implements safeguards to assure that a nonlawyer who assists a lawyer in the delivery of legal services will act in a manner consistent with the lawyer's professional obligations.

A lawyer in an MDP would also have to take measures to protect against a potential impairment of the attorney-client privilege arising from the possibility that a client of the MDP would not be properly informed as to the separate functions performed by the MDP or that the members or employees of the MDP would not treat legal matters in a manner appropriate to the preservation of the privilege. Furthermore, the lawyer would bear the affirmative responsibility to assure (1) that the communications the lawyer and client intend to be protected by the attorney-client privilege satisfy the jurisdiction's applicable requirements, and (2) that the client understands that all other communications are not privileged. Finally, the lawyer would have to take measures to ensure that confidential information obtained from a client in the course of legal representation is not accessible, absent client consent, to members of the MDP not engaged in such representation.

3) Suggested Commentary for Amended Model Rule 5.4

To address concerns related to the protection of confidential client information, the Commission suggests that language be included in the Comment to the amended Model Rule 5.4 emphasizing the need for a lawyer in an MDP to take measures to clarify the lawyer's position within the MDP, the lawyer's relationship with the MDP's clients, and the obligation of the MDP to protect client and public interests. The measures should include informing clients concerning the lawyer's function as a provider of legal services and the likelihood that the client's communications with nonlawyers in the MDP that are unrelated to the provision of legal services would not be protected by the attorney-client privilege.

Loyalty to the Client through Avoidance of Conflicts of Interest

The Commission is convinced that amending Rule 5.4 to permit lawyers and nonlawyers to share fees and join with nonlawyer professionals will not threaten the core value of loyalty to clients through the avoidance of conflicts of interest. As part of the control and authority principle discussed above, the lawyers in an MDP, not the nonlawyer professionals, will determine the application of the conflicts of interest rules to the clients of the MDP seeking legal services. The Commission recognizes the divergence of opinion that exists among jurisdictions as to imputation of conflicts and the efficacy of screening. However, the Commission does not recommend any change to the existing rules on imputation, but defers to the Standing Committee on Ethics and Professional Responsibility and the Commission on the Evaluation of the Rules of Professional Conduct to make any such recommendation, which would affect not only MDPs, but also traditional law firms. If the delivery of legal services is involved, each client of an MDP is normally to be considered the client of each lawyer in the MDP, just as each client of a law firm is normally considered to be the client of each lawyer in the law firm.

Pro Bono Publico Obligations

The Commission acknowledges the unique role of the lawyer in society as a representative of clients, an officer of the legal system, and a public citizen having special responsibility for the administration of justice. Lawyers in law firms are expected to meet their professional obligations by providing a substantial majority of their pro bono publico legal services to persons of limited means or to charitable, religious, civic, community, governmental and educational organizations in matters that are designed primarily to address the legal needs of persons of limited means. Lawyers in an MDP should fulfill that responsibility in the same way. Though recognizing that pro bono service is not mandatory, the Commission nevertheless believes it is a core value of the legal profession.

Passive or Equity Investment

The Recommendation does not propose any change in the existing prohibitions against third parties' holding equity investments in an entity or organization providing legal services. Ownership would be limited to the members of the MDP performing professional services. The Recommendation would not permit an individual or entity to acquire all or any part of the ownership of an MDP for investment or other purposes. 9

The Commission acknowledges the complexity of the issues surrounding the ban on passive investment. In the view of some observers, equity investment poses a particular threat to lawyer independence of professional judgment. Other observers, however, worry that the ban on passive investment may have an unintended effect on law firms. They posit that if any form of MDP practice is ultimately authorized the ban will put traditional law firms at an economic disadvantage because, as a practical matter, bank financing is their primary source of capital. In contrast, professional services firms and consolidators will be able to draw upon their substantial earnings to finance and even subsidize the operation of their legal services unit. They will also be able to raise capital by going public and/or seeking passive investors.

Those observers who urged the Commission to recommend relaxing the ban point to the movement in New South Wales to allow public ownership of law firms 10 and argue that an ownership interest can be structured in such a way as to insure that all decisions relating to the representation of clients remain under the control and authority of the firm's lawyers. 11 In the end, the Commission chose not to recommend any change.


In the August 1999 Recommendation, the Commission proposed that the conduct of MDPs with respect to the delivery of legal services and that of the MDPs' lawyers who deliver legal services to the MDPs' clients be subject to audit and certification procedures designed to protect lawyers' independence of professional judgment. The Commission received a number of comments to the effect that the audit and certification procedures were unworkable. 12 Accordingly, it decided not to include them in the current Recommendation. It does suggest, however, that a jurisdiction considering amending its rules of professional conduct to permit lawyers and nonlawyers to share fees and enter into a partnership may want to weigh carefully the advantages and disadvantages 13 of audit and regulatory procedures such as those the Commission previously proposed 14 or as others may formulate.

The Commission’s current Recommendation continues the historic tradition of directly regulating only individual lawyers. No jurisdictions other than New York 15 and New Jersey 16 have rules regarding the exercise of disciplinary authority over law firms, companies with in-house legal departments, organizations employing lawyers to deliver prepaid legal services to the organizations' members, or government agencies employing lawyers. With the exception of law firms, each of these entities employs lawyers who are supervised by nonlawyers and who do not have an ownership interest in the organization. The key to the courts' "oversight" of these entities is that the courts can, and do, discipline the lawyers the entities employ if the lawyers act contrary to the rules of professional conduct. It would be no different for the lawyers employed in an MDP. Furthermore, as noted above, the prospect of civil liability is likely to be a powerful incentive for regulatory compliance. 17

The August 1999 House Resolution

In August 1999, the ABA House of Delegates adopted the following resolution:

RESOLVED, That the American Bar Association make no change, addition or amendment to the Model Rules of Professional Conduct which permits a lawyer to offer legal services through a multidisciplinary practice unless and until additional study demonstrates that such changes will further the public interest without sacrificing or compromising lawyer independence and the legal profession's tradition of loyalty to clients.

In response to the Resolution, the Commission endeavored to obtain expert assistance regarding the nature, organization, and implementation of such a study. The responses it received expressed significant reservations about the study's feasibility. The Commission consulted with The Institute for Social Research (ISR) at the University of Michigan, the nation's longest-standing laboratory for interdisciplinary research in the social sciences. The ISR advised the Commission that "public interest", "independence", "loyalty", or "conflict of interest" were, as a practical matter, incapable of definition in a manner that was independent of perception. It suggested, but was not certain, that it might be possible to frame an inquiry to determine client perceptions about how business and ethical considerations currently affect the resolution of conflicts of interest in law firms and how those considerations would likely affect the conflicts' resolution if lawyers were permitted to deliver legal services in a multidisciplinary practice setting. The value of such an inquiry into "client perceptions" is not at all clear. Furthermore, the Commission's current Recommendation requires that the lawyers in an MDP must have the control and authority necessary to assure lawyer independence in the rendering of legal services. Accordingly, the weighing of such considerations in an MDP, would, by definition, be the same as in a law firm.

In response to the House of Delegate's August 1999 Resolution, the Commission also sought the assistance of the American Bar Foundation (ABF). The ABF asked two top economists about the "utility of conducting market research about the demand" and was advised that "questions about services in the abstract would not be effective in telling what people might actually do," and "that there is only one way to find out if there is a demand, and that is to see if there turns out to be a market." 18 Thus, making the services available would not only determine demand, but also, the public's perception, as evidenced by that demand, of the maintenance of independence and loyalty. The Commission believes that the testimony it heard and the written comments it received demonstrate some public support for allowing MDPs, which would translate into demand if the services were available.


The forces of change are bearing down on society and the legal profession with an unprecedented intensity. 19 They include: continued client interest in more efficient and less costly legal services; client dissatisfaction with the delays and outcomes in the legal system as they affect both dispute resolution and transactions; advances in technology and telecommunications; globalization; new competition through services such as computerized self-help legal software, legal advice sites on the Internet, and the wide-reaching, stepped-up activities of banks, investment companies, and financial planners providing products that embody a significant amount of legal engineering; and the strategy of Big Five professional services firms and their smaller-size counterparts that has resulted in thousands of lawyers providing services to the public while denying their accountability to the lawyer regulatory system. 20

The Commission believes that the legal profession must take a proactive role in regard to these events in order to best serve the public interest and maintain its crucial role in the maintenance of a democratic society. Amending the Model Rules in accordance with the Commission's Recommendation is the most progressive, preservative, and practical way to accomplish these goals. The Recommendation recognizes the realties of a changing marketplace, opens up new avenues of service to clients, responds to the suggestions of consumer advocates, and provides new opportunities for lawyers.

For all these reasons, the Commission urges the House of Delegates to adopt its Recommendation that the Model Rules be amended to permit lawyers to share fees and join with nonlawyers in a Multidisciplinary Practice provided that the lawyers have the control and authority necessary to assure lawyer independence in the rendering of legal services.

Respectfully submitted,

Sherwin P. Simmons
Chair, Commission on Multidisciplinary Practice
July 2000



1 The Model Rules do not define the practice of law. In Appendix A of its July 1999 Report, the Commission provided a model of a possible definition of the practice of law, based upon District of Columbia Rule 49. The Commission has received numerous comments that the definition raised more issues than it solved. In light of these comments and the tradition of the states creating their own definitions of the practice of law, the Commission has decided not to present further suggestions in this area. However, the Commission's Recommendation reaffirms the prohibition on nonlawyers delivering legal services.

2 See infra Appendix, note 1.

<3>"Professional services" as employed in this Report is a defined term. See infra at 8-9. For ease of reference, "nonlawyer professional" is used generically to describe the type of nonlawyer with whom a lawyer may form an MDP.

4In each of these practice settings, the lawyer's client is the organization not the organization's constituents. See Model Rules of Professional Conduct R.1.13 (Organization as Client). As a practical matter, except in the rare instances of wrongdoing that is a violation of law, it is the non-lawyer who directs the lawyer's conduct. See id. cmt.[1]. Some have argued that in-house counsel are not a good example. Although in-house counsel has a single client, the corporation, counsel usually takes direction from individual members of management whose interests may not always be identical with those of the client corporation. Independence issues do arise. Rule 1.13 helps counsel address some of those issues.

5 See ABA/BNA Law. Man. Prof. Conduct 91:601 (Apr. 29, 1998).

6 Cf. Stevens v. Superior Court, 75 Cal.App.4th 594, 89 Cal.Rprt.2d 370 (1999) (the sale of insurance by an unlicensed broker violates the California Unfair Competition Act); Aponte v. Raychuk, 160 App.Div.2d 636, 559 N.Y.S2d 255 (1 st Dep't 1990) (lawyer advertising subject to regulation by local consumer protection agency); Law Offices of Andrew F. Capoccia LLC v. Spitzer, 704 N.Y.S2d 356 (3d Dep't 2000) (declining to issue a writ of prohibition to stop the state attorney general from seeking an injunction to enjoin certain activities of a lawyer based on alleged fraudulent, deceptive, and illegal business practices in relation to the provision of debt reduction services to financially distressed individuals).

7 See e.g., testimony of Steven Bennett (Nov. 13, 1998); testimony of James Jones (Feb. 6, 1999); testimony of Theodore Debro (Feb. 12, 2000); testimony of George Abbott (Feb. 12, 2000).

8The Commission notes that the Independence Standards Board is actively considering the issue of incompatibility. See Discussion Memorandum (DM 99-4), Legal Services (Dec. 1998) <>.

9If a jurisdiction considers it appropriate to continue the ban while permitting lawyers to practice in an MDP, it might consider adding language in the commentary to the jurisdiction's amended rules of professional conduct similar to the language found in the commentary to Rule 5.4 of the District of Columbia Rules of Professional Conduct:

Paragraph (b) [authorizing lawyers to practice in an MDP] does not permit an individual or entity to acquire all or any part of the ownership of a law partnership or other form of law practice organization for investment or other purposes. It thus does not permit a corporation, an investment banking firm, investor, or any other person or entity to entitle itself to all or any portion of the income or profits of a law firm or other similar organization. Since such an investor would not be an individual performing professional services within the law firm or other organization, the requirements of paragraph (b) would not be met.

District of Columbia Rules of Professional Conduct Rule 5.4 cmt. 8.

10 See Appendix, infra at note 56.

11There has been some discussion of public ownership of law firms in the popular legal press. E.g., Susan Beck, The Case for Going Public: Taking a Law Firm Through an IPO Would Require Enormous Cultural Change. That's A Good Thing, Am. Law., July1999, at 63; Steven Brill, Psst-Wanna Buy a Hot Stock, Am. Law., Nov. 1987, at 3. See also Steven Brill, War of the Tombstones, Am. Law., Mar. 1985, at 1; Paula Dwyer, Soon Anybody May Be Able to Own a Law Firm, Bus. Wk., Jan. 26, 1987, at 42.

12The Conference of Chief Justices has appointed a committee to study MDPs. The committee has advised the Commission that it is not currently prepared to comment on the Commission's August 1999 Recommendation. Furthermore, if the committee chooses to issue any statement or report concerning MDPs, it will not do so until after the ABA's 2000 Annual Meeting.

13The Commission respectfully takes issue with those critics who dismissed the procedures as "paperwork." The audit and certification procedures have a valuable educational function. Moreover, the lawyers in MDPs and the MDPs’ chief executive officer and board of directors are most likely to appreciate the seriousness of any written undertakings that they must execute. Both the lawyers and nonlawyers are not likely to disregard a statement that they are signing under penalty of perjury and submitting to the highest court of the state. Furthermore, they will be cognizant that these sworn-to statements might be used against the MDP in any action for malpractice or breach of fiduciary duty in which the lawyers’ exercise of independent professional judgment is questioned.

14By focusing on the audit and certification procedures contained in its prior Recommendation, the Commission does not mean to suggest that other regulatory mechanisms might not also serve the same purpose successfully. Other mechanisms are used to oversee the practice of foreign legal consultants, legal aid organizations, and prepaid legal plans. See e.g., Cal. Standards for Lawyer Referral Services, Rules 15-16 (1999); Rules of the Court of Appeals for the Licensing of Legal Consultants, 22 N.Y.C.R.R. ' 521.8 (1999); Rules of the Supreme Court, Appellate Division, First Department, 22 N.Y.C.R.R. ' 603.15 (1999).

15 See New York Lawyer's Code of Professional Responsibility DR 1-102(A), 22 NYCRR ' 1200.3(A) ("A lawyer or law firm shall not"); DR 5-105(E), 22 NYCRR '1200.24 (E) (AA law firm shall keep records . . . and shall have a policy).

16 See New Jersey Rules of Disciplinary Jurisdiction, Rule 1:20-1(a) ("Every attorney and business entity authorized to practice law . . . shall be subject to the disciplinary jurisdiction of the Supreme Court . . . .").

17 See supra note 6 and accompanying text.

18The ABF's response also made the telling historical observation that there was a lack of demand for business litigation (except defense work and the collection of debts) and business consulting until these services became available, at which time a dramatic increase in demand occurred. Letter to Arthur Garwin dated March 28, 2000 from Bryant G. Garth, Director, American Bar Foundation. Additionally, the ISR suggested that a survey regarding demand might be possible, if proponents and opponents were able to agree on the statements that should be presented to those surveyed. The ISR estimated the cost at $250,000.

19These forces are impacting law firms' organization, capitalization, and delivery of legal services as well. Many law firms are growing larger, and their organization is becoming more business-like. To fund their expansion, they need greater access to capital. Clients are increasingly looking to law firms for integrated legal and non-legal advice.

20The Appendix describes the changes in the market for legal services, both in the United States and abroad, that have influenced the Commission's thinking.


The Challenges Facing the Legal Profession in the 21st Century


The witnesses the Commission heard, the documents it reviewed, and the dialogue it has held with state and local bar associations have convinced the Commission that the legal profession currently faces unique and powerful challenges to the efficient, cost-effective delivery of legal services to individual and business clients. Since its appointment in August 1998, the Commission has heard the testimony of over 95 witnesses, received 120 written comments from interested parties and groups, held 9 days of open hearings, and met 10 times in executive sessions. It has received input from bar regulators, both domestic and foreign, and from business and individual clients and groups that represent their respective client views. It has been in contact with the approximately forty-one state and local bar associations that are studying issues relating to MDPs. All aspects of the Commission's process have been open and transparent, and it has made full use of the Internet to encourage exchanges of information and communications among interested observers. 1

The Commission has weighed carefully all of the evidence it has gathered and concluded that "changes [to the Model Rules of Professional Conduct to permit MDPs] will further the public interest without sacrificing or compromising lawyer independence and the legal profession's tradition of loyalty to clients."

A.  Client Interest in MDPs

The Commission is firmly convinced that there is substantial evidence of client interest in expanding the universe of legal service providers to include MDPs. It believes that the testimony it heard and the written comments it received demonstrate empirical support for its Recommendation. Of particular significance to the Commission were the views of the Councils of the ABA Section of Real Property, Probate and Trust Law and the ABA Section of Taxation and the Task Force of the Council of the ABA General Practice, Solo and Small Firm Section, noting the need for multidisciplinary counseling of individual and business clients and the inefficiencies in attempting to satisfy that need through the coordinated advice of professionals in nonaffiliated firms. 2 The ABA Standing Committee on Specialization has also urged the Commission to "recommend ethics rules that preserve the fundamental ethical standards and duties without restricting the organizational form or setting in which lawyers practice." 3 The ABA Standing Committee on Lawyers' Professional Liability has told the Commission, "MDPs will exist, and in our view the only issue remains, according to whose rules." 4

The ethics counsel of the Arizona State Bar told the Commission that she has received a substantial number of inquiries from lawyers in Arizona expressing an interest in forming a partnership with a nonlawyer. 5 An informal survey of the opinions of state bar association ethics committees issued over the course of the past ten years indicates that the overwhelming majority of the inquiries on this subject appear to have been submitted by lawyers in solo or small firms. 6 A survey by the Law Society of Upper Canada of its members in connection with the Law Society's review of issues relating to multidisciplinary practice also revealed a significant interest on the part of lawyers in solo and small law firms in the possibility of entering into partnerships with nonlawyers. 7

1) The Views of Consumer Groups

The Commission believes that allowing MDPs subject to the safeguards proposed will facilitate efficient and comprehensive solutions to the multidisciplinary problems that many individual clients encounter. For example, noting the unmet legal needs of the poor and moderate income persons, Theodore Debro, President of Consumers for Affordable and Reliable Services of Alabama and affiliated with the Jefferson County Committee for Economic Opportunity, Birmingham Alabama, 8 argued persuasively that MDPs have an enormous potential for bringing together professionals in different disciplines to help solve these persons' complex socio-legal problems. He also noted the public's perception that the legal profession was "remote and out of touch with the needs and concerns of everyday people." He offered the prospect that the delivery of legal services by MDPs would allow lawyers to "regain the trust, and business, of a segment of the population that has increasingly seen them as being more of a problem than a solution." 9

The Executive Director of the Consumers Alliance of the Southeast pointed out the benefits flowing from obtaining legal, financial, and other services from a single provider. 10 The representative of the American Association of Retired Persons agreed. 11 The Vice President of the Electric Consumers Alliance, noted that "many problems have only a legal component, and that other professionals may be needed to bring their expertise to bear on the other components of a particular problem" 12 and also remarked that more clients might actually use the services of a lawyer if that lawyer were practicing in a multidisciplinary professional services firm. Such services would be more user-friendly. 13 The President of Consumers First cited several examples of how an integrated professional services firm could best meet the needs of individuals and small businesses for multidisciplinary advice. 14 Consumer advocates and lawyers pointed out the particular need for such services in the area of family and juvenile law. 15

The Commission also received comments from other consumer groups urging changes in the Model Rules to facilitate the delivery of legal services by MDPs. 16 Finally, representatives of consumer groups indicated that many middle-income individuals with legal needs do not consult lawyers due to unfamiliarity, discontent or even fear. In the view of these witnesses, a large number of these individuals would have easier access to legal services provided by a lawyer in an MDP that was already providing them with other services. 17

2) The Views of Corporate Counsel

The American Corporate Counsel Association has adopted a resolution urging that the ethical barriers to the establishment of multidisciplinary partnerships be dismantled. 18 In addition, the Commission heard supporting testimony from witnesses with respect to the desire of corporate counsel to have the option of purchasing legal services from alternative service providers. 19

*         *        *         *

In sum, the Commission heard the testimony of 95 witnesses and received 120 comments from interested parties and groups. Not once did a client urge the Commission to maintain the status quo.

B. Pertinent Post-August 1999 Developments in the United States and Abroad

1) New Forms of Affiliation in the United States: McKee Nelson Ernst & Young

The forces of change described previously in the Conclusion to this Report 20 are clearly observable in recent events, the most controversial of which is the establishment of the law firm of McKee Nelson Ernst & Young. In November 1999, five partners from the Atlanta and Washington D.C. offices of King & Spalding broke away from that firm and formed a separate law firm in Washington D.C. 21 Based on the press release issued by Ernst & Young and articles in the legal press, it would appear that the law firm has entered into a highly unusual relationship with Ernst & Young. Ernst & Young has agreed to furnish a significant amount of start up capital to the firm and to lease it space in a building it owns. In exchange, the law firm has agreed to be known as McKee Nelson Ernst & Young. 22 The two firms have stated that they are separate entities, but many commentators regard the affiliation as a major step by the accounting firms toward the eventual establishment of multidisciplinary partnerships that include legal services. 23 A Wall Street Journal article observed: "the traditional walls are crumbling between U.S. law firms and accounting firms. . . . If successful, the arrangement, or variations of it, could become a blueprint for other major U.S. accounting and law firms eager to join forces. . . . " 24

2) Other Strategic Alliances in the United States

The establishment of McKee Nelson Ernest & Young is only one manifestation of the trend toward the formation of strategic and other alliances between law firms and professional services firms. For example, since 1997 a strategic alliance has existed between PricewaterhouseCoopers (PwC) and Miller & Chevalier, a Washington, D.C. law firm with a highly specialized practice representing domestic and international clients involved in high stakes, complex tax controversies in the United States. 25 The popular press characterized the alliance as a "significant step on the path the big six firms are taking towards offering comprehensive legal services." 26 In August 1999, KPMG announced the creation of a strategic alliance with certain law firms that are members of Saltnet, a network of state and local tax lawyers. Among the law firms that have entered into the alliance with KPMG are Morrison & Foerster 27 and Horwood Marcus & Berk.

3) New Relationships between Law Firms and Professional Services Firms

The forces of change are also contributing to the establishment of other new and unique relationships between professional services firms and lawyers and law firms. In October 1999, Bingham Dana, LLP merged its money-management practice with Legg Mason, Inc., an investment firm. Their affiliation is reported to be the first partnership between a law firm and an asset management firm in the United States. The new entity has become a registered investment advisor and is intended to be a vehicle for offering wealthy clients more sophisticated investment advice. 28 In January 2000, Bingham Dana formed a consulting entity to provide advice on state-specific concerns. The firm's managing partner has observed: "Our philosophy is that delivering a variety of integrated products makes sense for law firms. The accounting firms have proven that." 29

Even the ABA is not immune from the forces of change. In October, the ABA Section on Litigation and PwC announced that the Section had selected PwC as its "litigation consulting sponsor," an arrangement in which PwC provides enhanced benefits and resources to the Section's members. 30

4) The Increased and Targeted Hiring by the Professional Services Firms

The Big Five are also acting separately to increase the scope and quality of their tax practices. The expansion is not simply a matter of the employment of more lawyers. While the quantitative growth in the number of lawyers is impressive, 31 even more impressive is the firms' success in recruiting tax partners from leading law firms and prominent government lawyers to join the Big Five 32 and in persuading law students to join their staffs directly after graduation rather than following the more traditional law-firm career path. 33

Professional services and consulting firms are also employing more and more lawyers to provide law-related advice to their clients in areas other than tax. Those lawyers are operating outside the "regulatory tent," vigorously maintaining that they are providing nonlegal consulting services and thus are not subject to the rules of professional conduct or bar discipline. In many instances, it is seemingly impossible to distinguish the consulting services they render to the firms' clients from those rendered to clients by lawyers in traditional law firms. 34 (Lawyers at the professional service firms have stated that they do not draft contracts and that they advise their clients to have outside counsel review any of the products created by the firm.) As discussed below, however, no fact finder has yet determined that such consulting services constitute the practice of law. 35 The Commission believes that by having in place specific rules of professional conduct regulating the ethical behavior of lawyers in MDPs, bar regulators will have an efficient benchmark by which to measure the lawyers' conduct and be better able to initiate disciplinary proceedings against those lawyers in MDPs who violate their professional responsibilities or assist their employer in the unauthorized practice of law.

5) Possible Reorganizations of the Professional Services Firms

A number of significant upheavals in the organization of professional services firms are on-going. For example, Arthur Andersen and Andersen Consulting are engaged in a bitter break up dispute. 36 PwC has announced plans to spinoff its consulting from its auditing practices. 37 KPMG has incorporated its consulting unit into a separate business and is seeking to sell a twenty percent interest in the business for more than $1 billion. 38 Ernst & Young is selling its management-consulting business for approximately $11 billion. 39 One accounting-industry analyst has suggested that this sale will provide Ernst & Young with a "cash hoard . . . to acquire law firms." 40 Grant Thornton LLP, the sixth largest accounting and consulting firm in the United States, has also announced a restructuring plan, that will place its e-commerce consulting business into a separately incorporated business. 41

6) Mergers between U.S. and Foreign Law Firms

Finally, the Commission notes that between June 1999 and the date of this Report, U.S. and foreign law firms announced several mergers. 42 In part, such mergers are both a reflection of the changes in the global marketplace for legal services and a response to competition they face from MDPs in countries outside the United States. 43

7) Enforcement of the Statutory and Ethical Prohibitions against the Unauthorized Practice of Law (UPL)

Some MDP opponents argue that certain of the developments discussed above can be stopped with greater UPL enforcement. 44 They call for stepped up enforcement of (1) the ethics rules prohibiting a lawyer from assisting a nonlawyer in the practice of law and (2) UPL statutes prohibiting the delivery of legal services by corporations and other business entities controlled by nonlawyers. 45

The Commission notes that despite the considerable publicity about the alleged delivery of legal services by the Big Five and other consulting-type firms, regulatory initiatives have rarely occurred and where they have, the courts have not rendered a definite decision. For example, in 1998, the UPL Committee of the Texas Supreme Court announced that it would not file a complaint against Arthur Andersen after an eleven-month investigation. 46 In 1999, Virginia bar counsel made a similar statement with respect to the compliance law services offered by an unnamed professional services firm. 47 Furthermore, the courts have displayed a reluctance in many jurisdictions to interpret UPL statutes broadly in connection with the delivery of law-related services. 48 Even if UPL efforts were initially successful, it is likely that professional services firms and clients would seek legislative intervention. 49 This intervention could ultimately lead to an erosion of the independence of the legal profession.

C. Developments Outside the United States

1) The Expansion of the Big Five

The legal landscape outside the United States is also undergoing rapid change. 50 Starkly illustrating the commitment of the Big Five to expanding their global presence in the market for legal services was PwC's announcement in October that it had selected the name "Landwell" for its network of globally affiliated law firms. PwC now employs one thousand six hundred lawyers in forty-two different countries. 51 It has a publicly stated goal of being one of the world's five leading law firms by the year 2004. The Big Five are avidly exploring how the Internet can contribute to their expanding legal services. For example, Andersen Legal has entered into an Internet project with Network Solutions, Inc. in which the two companies have agreed to offer corporate clients one-stop shopping for, inter alia, domain name registrations. 52 The Big Five are not the only law-firm rivals outside the United States. For example, in Johannesburg, South Africa, an investment bank acquired all the lawyers in the Edward Nathan firm except for the firm's litigators. 53

2) The Response of Foreign Bar Regulators

Regulators in certain other countries have determined that allowing lawyers and nonlawyers to share fees and join in partnership will further the public interest by making available more options for the purchase of legal services and will not threaten the legal profession's core values. 54 Early this year, the Council of the Law Society of England and Wales approved the establishment of MDPs in the United Kingdom. Since implementing legislation will be necessary, it has authorized as an interim measure the establishment of a "legal practice plus" and a "linked partnership" that will allow, respectively, a nonlawyer partner in a solicitor firm and certain alliances between accounting and solicitor firms. 55 Going even further, legislation has been introduced in New South Wales, Australia, that will allow law firms to incorporate, share profits with nonlawyers, and raise capital through passive investment. Shares in these law firms will float on the Australian Stock Exchange. 56

Bar associations in other countries are also studying MDPs and appear to be on the verge of giving them a go-ahead signal. For example, The International Practice of Law Committee of the Canadian Bar Association has issued a Report on Multi-disciplinary Practices and the Legal Profession in which it recommends that lawyers be permitted to enter into partnership with nonlawyers and share fees with nonlawyers subject only to the rules of professional conduct that regulate lawyers in traditional practice structures. 57 The National Multi-Disciplinary Partnerships Committee of the Federation of Law Societies of Canada has recommended that the rules of professional conduct be relaxed to permit MDPs. 58 Finally, the General Assembly of the Union Internationale Des Avocats has adopted a Resolution on Multidisciplinary Practice approving minimum standards for lawyers in MDPs in the jurisdictions in which MDPs are allowed. Those principles reflect core values of the legal profession similar to the ones identified in the Commission's Recommendation. 59


In sum, the Commission believes it imperative that the legal profession respond in the immediate future to unprecedented challenges ranging from the blurring of the boundaries between law and other disciplines, significant client dissatisfaction with the current delivery mechanisms for legal services, and the globalization of the economy. Adoption of the Commission's Recommendation is a critical first step in meeting these challenges.



1 See <>. For a detailed description of the Commission's activities from August 1998 to August 1999, see Reporter's Notes, American Bar Association Commission on Multidisciplinary Practice, Report to the House of Delegates, Appendix C at C1, C9-10 (August 1999). Since the House's adoption of the August 1999 Resolution, the Commission members have devoted considerable time to advising and communicating with state and local bar association committees studying MDP-related issues. The Commission has published two papers and posted them on its web site, seeking comments and suggestions; held one day of open hearings at the Midyear Meeting in Dallas; and met in executive session for one and a half days. In addition, ABA President Paul sponsored a Town Hall Meeting at the Midyear Meeting at which two members of the Commission spoke.

2Testimony of Pam H. Schneider (Aug.8, 1999) (ABA Section of Real Property, Probate and Trust Law); testimony of Larry Ramirez (Feb.10, 1999) (ABA General Practice, Small and Solo Firm Section); letter from Paul J. Sax dated Oct. 13, 1999 (ABA Section of Taxation). See also testimony of Stefan F. Tucker (Feb. 4, 1999); written statement of Stefan F. Tucker dated Feb. 4, 1999; testimony of Irwin L. Treiger & William J. Lipton (Mar. 11, 1999); written statement of Irwin L. Treiger & William J. Lipton dated Mar. 11, 1999 (National Conference of Lawyers and Certified Public Accountants). See also letter from Scott Hart dated Feb. 22, 1999; letter from Haydee Velazquez Tillotson dated Feb. 19, 1999; letter from Michael H. Horner dated Feb.19, 1999. The Tax Law Committee of the Young Lawyers Division has also expressed support for amending the Model Rules to permit a lawyer to partner and share legal fees with a nonlawyer subject to safeguards intended to protect the client's best interest. See testimony of Melinda Merk & Patrick Schmidt (Feb.12, 2000); written statement of Melinda Merk & Patrick Schmidt dated Feb.12, 2000. Professor Bernard Wolfman, a leading expert in tax law and ethical issues in tax practice, has expressed grave reservations about the Commission's August 1999 Recommendation. See testimony of Bernard Wolfman (Feb.12, 2000); written statement of Bernard Wolfman dated Feb.12, 2000.

3ABA Standing Committee on Specialization, Memorandum dated March 17, 2000 to the Commission.

4Letter dated March 7, 2000 to Sherwin P. Simmons from Joseph P. McMonigle, Chair, ABA Standing Committee on Lawyers' Professional Liability.

5Testimony of Lynda Shely (Feb. 5, 1999).

6Many of the inquiring lawyers may share the lament of Charles F. Robinson, the former Chair of the ABA Law Practice Management Section, a member of a two-person law firm specializing in elder law. "I would like to form a consortium with a CPA and a money manager, and provide comprehensive services on a fee basis that's split among members of the consortium. I can't do that right now. It's not just a global fight with the Big Six." John Gibeaut, Squeeze, A.B.A.J., Feb. 1998, at 12, 46. See also Testimony of Charles F. Robinson, Feb. 5, 1999; written statement of Charles F. Robinson dated Feb. 5, 1999; statement of Philip Matthew Stinson, Sr. at the October 9, 1999 Commission hearing regarding his work with the Individuals with Disabilities Education Act. Social worker organizations have expressed their support for relaxing the current bar against fee sharing and partnerships with nonlawyers. See e.g., letter to Sherwin P. Simmons dated December 22, 1999 from Ebonnie L. Simmons on behalf of the National Association of Social Workers, Pennsylvania Chapter; letter to Sherwin P. Simmons dated January 2, 2000 from Stuart K. Kaufer on behalf of the National Association of Social Workers, New York State Chapter.

7 See Multi-Disciplinary Partnerships and Their Impact on the Future of the Legal Profession--A Request for Information from the Profession from The "Futures" Task Force--Final Report of the Working Group on Multi-Discipline Partnerships Report to the Convocation (Sept. 25, 1998).

8 See testimony of Theodore Debro (Feb.12, 2000); written statement of Theodore Debro dated Feb.12, 2000.

9 Id. See also testimony of Wayne Moore (Mar. 11, 1999).

10Testimony of Lora Weber (Mar. 11, 1999); letter dated Mar. 31, 1999 from Lora Weber. See also letter from the Washington Legal Foundation dated Apr. 6, 1999.

11 See testimony of Wayne Moore (Mar. 11, 1999). See also letter dated December 28, 1999 from Kenneth B. Crooks, Jr. on behalf of the Metro Columbus Urban League, Inc. (noting the increasing numbers of senior citizens and their families who are moving to Georgia and urging that MDPs be permitted to deliver legal services to this segment of the population).

12Written comments of Al Sterman dated Mar. 26, 1999.

13 Id.

14Written testimony of Jim Conran dated Feb. 1, 1999.

15 See e.g., letter from Marna S. Tucker, Esq. dated Mar. 30, 1999; statement of Philip Matthew Stinson, Sr. (Oct. 9, 1999) regarding his work with the Individuals with Disabilities Education Act; testimony of Theodore Debro (Feb.12, 2000); written statement of Theodore Debro dated Feb. 12, 2000 (regarding Alabama District Attorney Offices multidisciplinary team to protect children from physical and sexual abuse).

16 See e.g., letter from David M. Swankin dated Mar. 29, 1999; letter from Dorothy Garrick, James L. Brown & Louis S. Meyer dated Mar. 31, 1999; letter from James H. Brown dated Mar.10, 1999; letter from The Consumer Alliance dated Apr. 6, 2000. The Garrick et al. letter was also signed by Ms. Lora Weber and Mr. Don Rounds who appeared before the Commission (Mar. 11, 1999).

17 E.g., testimony of Wayne Moore (Mar. 11, 1999); testimony of Lora H. Weber (Mar. 11, 1999).

18"The American Corporate Counsel Association supports a broader range of choice for clients to select from service providers capable of formulating comprehensive solutions which address not only the legal aspect of their problems but various other facets as well. Subject to resolving important issues of ethics and professionalism in the best interests of the client and the public, such a broader range of choice could include multidisciplinary practices wherein lawyers are affiliated with nonlawyers." Adopted by the Board of Directors February 6, 1999. See also Charles W. Wolfram, In-House MDPs?, Nat'l L.J., Mar. 6, 2000, at B6 (exploring how permitting in-house MDPs would benefit corporate clients.)

19Testimony of Steven A. Bennett (Nov. 13, 1998); written remarks of Steven Allan Bennett dated Nov. 13, 1998; testimony of James R. Silkenat (Nov. 13, 1998); testimony of Elizabeth Wall (Nov. 12, 1998). See also testimony of Simon Potter (Feb. 6, 1999); letter from Jose MaMarti dated May 12, 1999. A survey conducted by the Financial Times (London) of one hundred senior executives at large companies and financial institutions in the United States and the United Kingdom showed a willingness by the executives to purchase legal services from MDPs, if they could offer such services. Long arm of the law: The Big Five may be right that clients want them to move into legal services, Fin. Times (London), Sept. 9, 1999, at 29. While approximately two-thirds of the surveyed respondents indicated that they still preferred to purchase legal services from a traditional law firm, they also expressed support for a wider range of alternative legal service providers. But see Michael Chambers & Richard Parnham, Accountants in the Legal Market: Has the strategy failed?, 21Commercial Law. 40 (1998).

20 See Report, supra note 18 and accompanying text.

21The Washington, D.C. version of Rule 5.4 permits a lawyer to form a partnership with a nonlawyer and to share legal fees with a nonlawyer. The "sole purpose" of the partnership must, however, be the delivery of legal services. In the press release announcing the establishment of McKee Nelson Ernst & Young, the firm was referred to as a wholly separate entity from Ernst & Young, implying that it was not attempting to take advantage of the Rule. Ernst & Young, News Release (Nov. 3, 1999).

22Ernst & Young, News Release (Nov. 3, 1999); Susan Beck, The Trojan Accountant, Am.Law., Nov. 1999, at 18; Siobhan Roth, Inside the Ernst & Young Deal: Law Firm is launched with Big 5 loan; lawyers say that they remain independent, Legal Times, Nov. 8, 1999, at 1; Jonathan Gronerand & Siobhan Roth, Envisioning A Big 5 Law Firm: Ernst & Young Positioning to Offer Full Legal Services, Legal Times, Oct. 25, 1999.

23 See Siobhan Roth, New Firm: An Ethical Accounting, Legal Times, Nov. 8, 1999, at 17. Ernst & Young has also entered into an affiliation arrangement with a prominent law firm in Canada. See A.J. Noble, Ernst & Young Already Manages A "Captive" Law Firm in Toronto. Is This the Dawn of the Profession's Future?, Am. Law., July 1999, at 51. The codes of lawyer conduct adopted in the Canadian provinces, like the ABA Model Rules, also bar fee sharing and partnership with nonlawyers.

24Tom Herman, Ernst & Young Will Finance Launch of Law Firm in Special Arrangement, Wall St. J., Nov. 3, 1999, at B10.

25 See <>; Sheryl Stratton, Practice of Law by CPA Firm Members Raises Legal and Ethical Questions, Tax Notes Today, April 25, 1997, 97 TNT 80-6; Big Six Firm Forms Strategic Alliance With Law Firm, Tax Notes Today, April 16, 1997, 97 TNT 73-53.

26 The Big Six Move In, Int'l Fin. L. Rev., Nov. 1997, at 25. According to the two firms, the alliance allowed them to offer their clients a seamless web of services:

US tax controversy work goes from the pre-examination stage to litigation. Up to the litigation stage [Price Waterhouse] can do the work, but sometimes a case cannot be settled and it has to go to court.

Sometimes clients like to have the stage set, with attorneys involved. Because we do not litigate, we cannot give the IRS the impression that we are ready to go to court. With Miller & Chevalier as part of a team, we are in a position to go to court if we need to.


27 See>; Arian Campo-Flores, Dream Team Tax Team, Am. Law., Sept., 1999, at 18; Brenda Sandburg, MOFO Allies with Accounting Giant, N.Y.L.J., Aug. 9, 1999, at 2; Ritchenya A. Shepherd, Why MOFO Teams with KPMG, Nat'l L.J., Aug. 23, 1999, at A12; KPMG Joins Forces with a group of state and local lawyers, Wall St. J., Aug. 4, 1999, at A1.

28Ritchenya A. Shepherd, Law and finance under one roof, Nat'l L.J., Nov.15, 1999, at A21; Today's News Update, N.Y.L.J., Oct. 5, 1999, at 1. See also Mark Schauerte, Law Firms Eye New Ventures As Big Five Encroach on Legal Turf, Chicago Law., Nov. 1999, at 6.

29Ritchenya Shepard, Legal and Financial Advice Under One Roof, Nat'l L.J., Nov. 9, 1999, at 5. The law firm of Fredikson & Byron, the fifth largest firm in Minnesota, expressed a similar sentiment in announcing the establishment of a consulting service for physicians and medical organizations. See <>.

30Sheryl Stratton, Pricewaterhouse Coopers to >Sponsor' ABA Litigators, Highlights & Documents, Tax Notes, Oct.19, 1999, at 589.

31In 1997,The Wall Street Journal reported that

Ernst & Young has 800 tax attorneys on its U.S. staff, double the 400 it had several years ago. Price Waterhouse has around 500 tax lawyers in the U.S. up from 250 three years ago. Arthur Andersen has 1,000 tax attorneys, 20% more than it had in 1994.

See Elizabeth MacDonald, Accounting Firms Hire Lawyers and Other Attorneys Cry Foul, Wall St. J., Aug. 22, 1997, at B8. Subsequent to the publication of this article, Price Waterhouse and Coopers & Lybrand merged, forming PricewaterhouseCoopers (PwC).

32Bruce Balestier, Under One Roof: ABA Faces Arrival of Lawyer-Accountant Pairings, N.Y.L.J., Nov. 19, 1998, at 5 (referring to a "high profile coup" by an accounting firm in hiring a noted tax partner); Tom Herman, A Special Summary and Forecast of Federal and State Tax Developments, Wall St. J., June 18, 1997, at A1 (reporting the departure of a well-known law firm tax partner to an accounting firm); Jeffrey L. Jacobs, Multidisciplinary Recruiting War. . . The Tax Brain Drain to Accounting Firms Intensifies, 17 Of Counsel 7 (1998) (same); , Accounting Firms Hire Lawyers and Other Attorneys Cry Foul, supra note 31, at B8 (same).

33Mark Schauerte, Big Five Use Stock Options, Usable Hours to Woo Law Students, Chicago Law., Nov. 1999; Anna Snider, Taking a Look Inside the Big Five, N.Y.L.J., Sept. 7, 1999, at S11. The senior vice president and general counsel at Hildebrand, Inc. has commented:

The Big Six are recruiting at the major law schools, and not only tax lawyers. They are telling students that if they come with them, they will be doing M&A, litigation and other kinds of work that goes well beyond tax counseling.

David Rubenstein, Accounting Firm Legal Practices Expand Rapidly. How the Big Six Firms Are Practicing Law in Europe: Europe First, Then the World?, Corp. Leg. Times, Nov.1997, at 1.

34At least one Big Five firm, Ernst & Young, has launched a new initiative, a Legal Management Services group, in which it advises in-house legal departments on a wide range of matters, creating new competition for outside law firms. See A.J. Noble, While the Profession Debates Where to Draw the Line Between Accountants and Lawyers, the Big Five Are Already Cozying Up to Corporate Clients, Am. Law., June 1999, at 51.

35 See infra notes 46 and 47 and accompanying text.

36 See generally Elizabeth MacDonald, Andersen Worldwide Files Counterclaim for $14.5 Billion Against One of Its Units, Wall St. J., Nov. 22, 1999, at C26; Elizabeth MacDonald, Andersen Consulting's Breakup Battle with Arthur Andersen Nears Showdown, Wall St. J., July 28,1999, at A2; Elizabeth MacDonald, Andersen Consulting Tried to Thwart Arthur Andersen's Attempt to Buy Firm, Wall St. J., June 14, 1999, at (page number unavailable online).

37Elizabeth MacDonald, PricewaterhouseCoopers Will Divide Into Two or More Parts, Under Pressure, Wall St. J., Feb.18, 2000, at B8;Elizabeth MacDonald, PricewaterhouseCoopers Nears Plan for Restructuring Involving Split or Sale, Wall St. J., Feb. 16, 2000, at C11; Elizabeth MacDonald, PricewaterhouseCoopers Plans Steps Assuring Auditor Independence, Wall St. J., Nov.18, 1999, at A4.

38Raymond Hennessey, Consulting Unit of KPMG Files $1 Billion IPO, Wall St. J., May 8, 2000, at C21; Elizabeth MacDonald, KPMG Draws Scrutiny With Investment by Cisco Systems in Consulting Unit, Wall St. J., Feb.1, 2000, at A16; PricewaterhouseCoopers Will Divide Into Two or More Parts, Under Pressure, supra note 37.

39Kevin J. Delaney & Elizabeth MacDonald, Ernst & Young To Sell Business To Cap Gemini, Wall St. J., Feb. 29, 2000, at C15; Elizabeth MacDonald & David Woodruff, Ernst & Young May Sell Unit to Cap Gemini, Wall St. J., Dec.7, 1999, at A3.

40 Ernst & Young May Sell Unit To Cap Gemini, supra note 39. See also supra notes 21-24 (discussing the establishment of McKee Nelson Ernst & Young).

41Elizabeth MacDonald, Grant Thornton Set to Restructure Consulting Division, Wall St. J., Feb. 25, 2000, at C16.

42John E. Morris, The New World Order: Clifford Chance and Rogers & Wells are About to Pull Off the First Large-Scale Transatlantic Merger. Did the Eat-What-You-Kill Americans Ever Come to Terms with the Lockstep Brits? And, More Importantly, What Will It Mean for the Competition?, Am. Law., Aug. 1999 (describing the three-way merger of Rogers & Wells, Clifford Chance, and Punder, Volhard, Weber & Aster. They are respectively, a U.S., U.K., and German law firm); Today's Update, N.Y.L.J. , Sept. 28, 1999, at 1 (describing the two recent, separate mergers of Coudert Brothers with an Australian and a Belgian law firm). See also Anna Snider, Paris-New York Merger Breaks New Ground, N.Y.L.J., Sept. 18, 1998, at 1 (describing the merger of Christy & Viener in New York and Salans Hertzfeld & Heilbronn in Paris); Today's News Update, N.YL.J., June 17, 1999, at 1 (describing the "strategic affiliation" between Holland & Knight and Haim Samet, Steinmetz Haring & Co., an Israeli law firm, noting that the two firms did not formally merge because Israeli law prohibits profit-sharing between Israeli and foreign law firms, and that the Haim firm was being treated "as part of Holland & Knight."). Similar mergers are occurring within Western Europe. See Konstantin Richter, Legal Colossus May Be Forged Between U.K., German Firms, Wall St. J., Apr.10, 2000, at A25.

43Ward Bower, The Future Structure of the Global Legal Marketplace, Metropolitan Corp. Couns., Oct. 1999, at 45. Depending upon the terms of the merger agreement, the U.S.-licensed lawyers may hold only a minority interest in the new firm. This creates the possibility that they will be subject to the control and authority of lawyers licensed in a foreign jurisdiction(s) whose rules of ethics may be significantly different from those that govern the conduct of U.S.-licensed lawyers.

44 E.g., Henry Gottlieb, MDP Could Be A Crime in New Jersey, Leg. Intelligencer, Mar. 24, 2000, at 8; Henry Gottlieb, In-House Counsel Beware in N.J., Nat'l L. J., Jan. 24, 2000, at B4. See also Anthony E. Davis, Collision Course with Disaster B Changes in >MDP,' >MJP," and >UPL," N.Y.L.J., Mar. 6, 2000, at 3.

45 E.g., Ohio State Bar Association Report with Recommendation to the ABA House of Delegates, Report 8A, adopted Feb. 14, 2000.

46Arthur S. Hayes, Accountants vs. Lawyers: Bean Counters Win, Nat'l L.J., Aug. 10, 1998, at A4; Tom Herman , A Special Summary and Forecast of Federal and State Tax Law Developments, Wall St. J., July 29, 1998 at A1.

47Comment posted on the Washburn Legal Ethics Listserv., Nov. 4, 1999 by James McCauley, Ethics Counsel, Virginia State Bar.

48For example, the Supreme Court of Indiana in October 1999 rejected the proposition that the use of in-house counsel by an insurance company to defend its insureds constituted the unauthorized practice of law by the employer-insurer. Of the thirteen states that have considered this issue, only two have condemned it. Cincinnati v. Wills, 717 N.E.2d 151 (Ind. 1999). See also Perkins v. CTX Mortgage Co., 969 P.2d 93 (Wa. 1999) (declining to find that the activities of a mortgagee in connection with the completion of financing documents constituted the practice of law); In re Florida Bar Advisory Opinion-Nonlawyer Preparation of Pension Plans, 571 So. 2d 430 (Fl. 1990) (declining to find that the law-related activities of ERISA consultants constituted the unauthorized practice of law); In re Unauthorized Practice of Law Rules Proposed by the South Carolina Bar, 422 S.E.2d 123 (1992) (concluding that CPAs may represent clients before agencies and the Probate Court without violating the state's UPL prohibition). Compare George Shima Buick, Inc. v. Ferencak, 1999 WL 1313675 (Ohio Ct. App. 1999) (Ohio statute permitting a corporate officer or employee to present a contract claim in small claims court is constitutional) with Alliance Group, Inc. v. Rosenfield, 685 N.E.2d 570 (Ohio Ct. App.1996) (same Ohio statute is unconstitutional because it violates the state constitutional doctrine of separation of powers).

49In many jurisdictions, UPL is a creature of statute. A prime example of such legislative intervention occurred recently in Texas. The UPL Committee of the Texas Supreme Court successfully obtained an injunction against the publisher of Quicken Family Lawyer software. See Unauthorized Practice of Law Committee v. Parsons Technology, Inc., 1999 WL 47235 (N.D. Tex. Jan. 12, 1999), vacated and remanded, 1999 WL 435871 (5th Cir. June 29, 1999). At the same time, it was also pursuing a UPL investigation of Nolo Press, a legal publisher. See Rinat Fried, Texas vs. Publisher: Are Books Lawyers?, Nat'l L.J., Apr. 6, 1998, at A4; Anne Veigle, Texas Court May Lasso Self-Help Law Publisher, Wash. Times, June 16, 1998, at E4; Nolo Takes on High Court, Nat'l L.J., Aug. 10, 1998, at A10. In response to the Parsons Technology decision, the Texas legislature amended the state's definition of the "practice of law" to exclude "written materials, books, forms, computer software, or similar products if the products clearly and conspicuously state that the products are not a substitute for advice of an attorney." Tex. Gov. Code Ann. ' 81.101, amended by H.B. 1507, 76th Reg. Sess. (1999). See Texas Amends Unauthorized Practice Statute, 15 Laws. Manual on Prof. Conduct (ABA/BNA), Current Reports at 314 (July 7, 1999).

The Texas amendment is a striking example of how a state legislature will respond when UPL enforcement smacks of "turf" protection and bar regulators are unable to demonstrate how the challenged activity or product have harmed the public. See also Charles W. Wolfram, Modern Legal Ethics 842 (1986) (describing how in response to a restrictive UPL decision by the state supreme court, the voters in Arizona by a margin of over four to one, voted in favor of a constitutional amendment to permit real estate agents and title insurance companies to prepare legal documents in connection with residential real estate transactions). Some commentators speculate that a result similar to the ones in Texas and Arizona would occur if a court were to declare the employment activities of lawyers in professional service firms in delivering legal services to the firms' clients to be the unauthorized practice of law. See Siobhan Roth, Bar Going Nowhere Fast on MDPs, Legal Times, Feb. 21, 2000, at 1.

50 See generally The Future Structure of the Global Marketplace, supra note 43. Those critics who claim that there is no empirical evidence of client demand for MDPs should take note that Andersen Legal's revenue for the fiscal year ending August 31, 1999 was $482 million, an increase of 30% over the prior year. Andersen Legal's rate of growth was more than double the rate of the average American Lawyer100 firm in 1998. See Arian Campo-Flores, King Arthur, Am. Law., Jan. 2000, at 17.

51Jean Eagleshaw, PwC reorganizes global network of legal firms, Fin. Times (London), Oct. 11, 1999, at 8; Konstantin Richeter, Managers & Managing: Pricewaterhouse Renames Legal Unit, Adopting Landwell as Brand, Wall St.J. Eur., Oct.12, 1999, at 30, 1999 WL-WSJE 27641212.

52 See Network Solutions idNames and Andersen Legal Sign Agreement to Address Offshore Cybersquatting, <http://www.nsol.scom/news/2000/pr__20000315.html>.

53 See Bar Going Nowhere Fast on MDPs, supra note 49.

54At a program of the Section of International Law and Practice on Feb. 11, 2000 during the ABA Midyear Meeting, Ramon Mullerat, former president of the Council of the Bars and Law Societies of the European Union (CCBE) in commenting on the situation in Europe, noted that the Netherlands allows MDPs in the tax (tax advisors), real estate (notaries) and intellectual property (patent agents) areas; Spain allows MDPs unless the activities and behavior are incompatible with the legal profession; in Belgium the Brussels Bar is split, its Francophone section allows certain kinds of MDPs with reservations (the January 2000 agreement) and its Flemish section prohibits them. Since 1994, New South Wales, Australia has permitted MDPs provided that the lawyers hold a majority of the voting rights in the entity. See generally Laurel S. Terry, A Primer on MDPs: Should the "No" Rule Become a New Rule?, 72 Temple L. Rev. 869 (2000) nn.57-70 and accompanying text.

55Lucy Hickman, LawSoc votes for MDPs after 10-year wait, The Lawyer, Oct.18, 1999, at 2.

56 See Incorporation of Solicitors' Practices under Corporations Law, <; Shaw Should Watch the Society He Keeps, ABIX, Sept. 3, 1999, 1999 WL 26582433; Andrew Burrell, Shackles removed for law firms, Austl. Fin. Rev., Sept.1999.

57Canadian Bar Association International Practice of Law Committee, Striking A Balance: The Report of the International Practice of Law Committee on Multidisciplinary Practices and the Legal Profession (1999); see Breaking Barriers, Int'l Acc. Bull., Sept. 30, 1999, at 9.

58Federation of Law Societies of Canada, National Multi-Disciplinary Partnership Comm., Multi-Disciplinary Partnerships: Report to the Delegates (Aug. 1999). See also The Bar Going Nowhere Fast on MDPs, supra note 49 (reporting that Donahue and Partners, an Ernst & Young affiliated law firm in Toronto, has grown to seventy lawyers).

59 See Union Internationale des Avocats, Resolution on Multidisciplinary Practices (Nov. 3, 1999). The Commission notes that the CCBE has vacillated on the question of MDPs. In 1996, the CCBE adopted a position strongly opposed to multidisciplinary partnerships between lawyers and nonlawyers. In 1998, a subsequent proposal to soften that position received a majority of votes cast but failed to pass because it did not meet a supermajority requirement. Testimony of Michel Gout (Nov. 12, 1998). The CCBE has now adopted a resolution disapproving the establishment of MDPs. "Position of CCBE on integrated forms of co-operation between lawyers and persons outside the legal profession" (Nov. 13, 1999, Athens).