Background Paper on Multidisciplinary Practice

Issues and Developments

January, 1999

 ABA Board of Governors
ABA House of Delegates
Chairs of ABA Entities

In August, at the 1999 Annual Meeting, the House of Delegates will consider a report of the Commission on Multidisciplinary Practice on what has been termed the most important issue to face the legal profession this century -- the expansion of professional service entities, principally accounting firms, into the practice of law.

Because this development impacts every American lawyer, as well as our colleagues around the world, the Commission’s report and its disposition by the House will be memorable events in the annals of the American Bar Association and the legal profession. It is far too early to even guess as to the content of the report, except to say that the Commission is not approaching this issue as a "turf war" but is attempting to develop recommendations that will provide guidance to the Bar and will allow the Bar to compete effectively in this new environment and at the same time protect the interests of the public in all the traditional respects.

To assist the House, the Board and Association members in preparing for the House debate, the Commission has prepared this informational paper concerning the development of multidisciplinary practice and the important issues surrounding it that the legal profession must address.

We invite you to attend the Commission’s hearings on February 4, 5, and 6 in conjunction with the Midyear Meeting of the Association in Los Angeles. The hearings will be held in the Century Plaza Hotel, except for the morning of Friday, February 5, when they will be held in the Park Hyatt Hotel. We call your attention to our web page at The web page contains the schedule of speakers, along with papers that have been submitted to the Commission, summaries of testimony from speakers at prior hearings and a bibliography of related materials.

Sherwin P. Simmons, Chair
Steel, Hector & Davis LLP
Miami, Florida
Professor Phoebe A. Haddon
Temple University School of Law
Philadelphia, Pennsylvania
Carolyn B. Lamm
White & Case
Washington, D.C
Dean Burnele V. Powell
School of Law of the University of Missouri at Kansas City
Kansas City, Missouri
Honorable Carl O. Bradford
Maine Superior Court
Portland, Maine
Professor Geoffrey C. Hazard Jr.
University of Pennsylvania School of Law
Philadelphia, Pennsylvania
Robert H. Mundheim
New York, New York
Michael Traynor
Cooley Godward LLP
San Francisco, California
Honorable Paul L. Friedman
U.S. District Court for the District of Columbia
Washington, D.C.
Roberta Reiff Katz
Netscape Communications Corp.
Mountain View, California
Steven C. Nelson
Dorsey & Whitney
Minneapolis, Minnesota
Herbert S. Wander
Katten Muchen & Zavis
Chicago, Illinois

Board of Governors Liaisons

Joanne M. Garvey
Heller Ehrman White & McAuliffe
San Francisco, California
Seth Rosner
Jacobs Persinger & Parker (Of Counsel)
New York, New York


Professor Mary C. Daly
Fordham University School of Law
New York, New York

Counsel to Commission

Arthur H. Garwin
Chicago, Illinois
Carol A. Weiss
Chicago, Illinois


The delivery of legal services in the United States faces unprecedented challenges. Revolutionary advances in technology and information sharing, the globalization of the capital and financial services markets, and more expansive government regulation of commercial and private activities have reshaped client demands for legal advice and advocacy. As the Baby Boomer generation ages, individual clients more than ever before need coordinated advice from lawyers, financial planners, accountants, social workers, and psychologists. As the global economy expands, both Wall Street and Main Street business clients look to teams of professionals from different disciplines for consolidated advice on complex commercial and regulatory issues.

How to permit multidisciplinary practice, if it is to be permitted, consistent with the protection of the public interest, is the subject of debate. On one side are the proponents of "one-stop shopping" who argue that restrictions on lawyer and nonlawyer partnerships and the sharing of legal fees are outdated. In their view, these restrictions are the unfortunate relics of a regulatory system constructed in the early twentieth century that now impede the delivery of efficient and reasonably priced professional services. On the other side are the defenders of the restrictions who contend that they are necessary to preserve a lawyer's independent professional judgment and to protect client rights of confidentiality and loyalty.

Adding to the complexity and urgency of the debate is the emergence of consulting firms that are aggressively soliciting clients, offering services remarkably similar to those traditionally offered by law firms, such as advice on mergers and acquisitions, estate planning, human resources, and litigation support systems. The biggest of these consulting firms are closely affiliated with the Big-5 accounting firms and derive substantial benefit from the cross-selling initiatives of the accounting/auditing partners. The rules that regulate lawyer conduct in some foreign countries permit various forms of lawyer/nonlawyer affiliations that are prohibited in the United States. As a result, the Big-5 accounting firms have vigorously entered the market for the delivery of legal services in those countries. In a search for new sources of revenue, they have also significantly expanded their consulting services in the United States.

Acknowledging the importance of this debate on the delivery of legal services, Philip S. Anderson, the President of the American Bar Association (ABA), appointed a twelve-person Commission on Multidisciplinary Practice in August, 1998. 1 Its members include a cross-section of the legal profession including distinguished practitioners, judges, and academicians. (Appendix A: News Release contains the President 's charge; see page i for a complete list of the Commission members.) The Commission met in executive session in September, November, and December and held two days of public hearings in November. Twenty-one witnesses testified during those two days. 2 During the 1999 Midyear Meeting, it will hold three additional days of public hearings and meet for a fourth day in executive session.

The complexity of the debate on multidisciplinary practice has prompted the Commission to take the unusual step of submitting this background paper to the House of Delegates at the 1999 Midyear Meeting. The paper 's purpose is to inform the members of the House of the Commission's charge, to introduce generally the topic of multidisciplinary practice, and to solicit responses to the questions set forth below. 3 Since the Commission 's work is on-going, the paper neither contains recommendations nor seeks action by the House. The Commission anticipates submitting a final report with recommendations at the 1999 Annual Meeting. The Commission invites the public, members of the House of Delegates, ABA entities, and all other interested persons and organizations to respond to these questions before April 1, 1999. 4

1. How would clients be harmed or benefitted by amending the ABA Model Rules of Professional Conduct (Model Rules) to permit a lawyer to enter into a partnership with a nonlawyer or enter into other arrangements that permit fee sharing with a nonlawyer? Can any specific instances of harm to a client by such a change be identified in either the United States or a foreign jurisdiction? If the benefit to clients would outweigh the harm, what restrictions, if any, should the Commission recommend? Should the restrictions follow or differ from those adopted in Rule 5.4 of the Washington, D.C. Rules of Professional Conduct? 5

2. How, if at all, would a lawyer 's independent professional judgment be impaired by changing the Model Rules to permit a lawyer to enter into a partnership with a nonlawyer or enter into other arrangements that permit fee sharing with a nonlawyer?

3. How, if at all, are the professional standards that govern the conduct of accountants and accounting firms different from those that govern the conduct of lawyers and law firms? How do any differences in professional standards impact on the protections offered to clients and the public?

4. If the Model Rules were amended to permit a lawyer to deliver legal services to the clients of a non-law firm entity at which the lawyer is employed or of which the lawyer is a partner ( i.e., accounting firm, gerontological consulting firm, engineering firm, etc.)

(a) what changes, if any, should be made (1) to protect client confidentiality, i.e., information relating to the representation (Rule 1.6); and (2) to assure the lawyer's avoidance of conflicts of interest (Rules 1.7-1.9)?

(b) what changes, if any, should be made to the general rule on imputed disqualification (Rule 1.10)? Should all the clients of the non-law firm entity be treated as if they were the clients of the lawyer?

(c) what changes, if any, should be made to the rules on the responsibilities of a partner or supervisory lawyer (Rule 5.1), the responsibilities of a subordinate lawyer (Rule 5.2), the supervision of nonlawyer assistants (Rule 5.3), the unauthorized practice of law (Rule 5.5(b)), the responsibilities regarding law-related services (Rule 5.7); and on advertising and solicitation (Rules 7.1-7.5)?

(d) should the Model Rules be amended to permit the discipline of law firms and/or MDPs?

(e) what changes, if any, should be made to other Rules?

5. Is an entirely new regulatory framework needed? If so, how should it be structured?

Because multidisciplinary practice is more common outside the United States, Part I of this paper provides a comparative backdrop, describing the delivery of legal services by accounting firms principally in Europe. Part II examines the initiatives by accounting firms in the United States with respect to legal services. (While this paper focuses on the legal services initiatives of the Big-5 accounting firms, it should be noted that other entities are entering or are actively interested in entering the same market including banks, insurance companies, securities firms, etc.). 6 Part III discusses the current ethical framework that governs multidisciplinary practice in the United States. 7

Part I. The Delivery of Legal Services by

Accounting Firms Outside the United States

In some foreign countries accounting firms are often able to offer legal services directly to the firm's clients, conduct that is clearly prohibited in all fifty states. 8 These services include advising clients on the direct application of the law to specific facts, negotiating transactions, and drafting legal documents. The accounting firms ' ability to do so is the result of the unique historical evolution of the legal profession within each foreign jurisdiction. In the United Kingdom, for example, there is no prohibition analogous to the prohibition found in U.S. jurisdictions concerning the unauthorized practice of law by laypersons. A layperson is free to offer legal advice but may not misrepresent his or her credentials. 9 In most civil law countries, the functions commonly performed by lawyers in the United States are divided among different legal professionals ( e.g., notaries, tax advisors, lawyers with a right of audience, etc.). 10 The bar is sometimes functionally divided in the common law countries as well ( e.g., barristers, solicitors, conveyancers, etc.). 11

It is beyond the purview of this paper to explain in any detail how these differences have facilitated the delivery of legal services by accounting firms outside the United States. 12 However, a brief look at changes in the legal profession in France provides a useful example of one country's experience. For the purposes of this paper, the most important distinction in France was the historical one between the avocat, a litigator, and the conseil juridique, an advisor who drafted documents and negotiated transactions but was not licensed as an avocat and need not have attended law school. Because avocats only had a monopoly on courtroom work, non- avocats, including U.S. lawyers and the major international accounting firms, were able to offer a wide range of services that U.S. lawyers would refer to as "legal services." 13 In the case of the major accounting firms, they were supported by the assistance of the firms' accountants, economists, and business and technology consultants. The avocat law firms concentrated on providing litigation-related services and were sometimes unable to compete successfully with conseils juridiques for transactional work. 14 The New Reform Act of 1992 merged the two professions of avocats and conseils juridiques into one profession, that of the avocat. The existing conseils juridiques were "grandfathered in" as avocats. In response to other provisions of the Act, some of the former conseils juridiques who were now avocats formally separated from the accounting firms and formed new law firms. However, these new avocat firms are " networked " with the accounting firms. In the case of PricewaterhouseCoopers in Paris, for example, the avocats own the law firm, but they also share the same client base as the accounting firm, work very closely with it, and benefit from volume cost savings within the PricewaterhouseCoopers network that result from leasing space in the same office building as the accounting firm, bulk buying, the common use of telephone and computer systems, etc. 15

The effect of these and similar captive law firm arrangements 16 in some other countries is that the international accounting firms are providing legal services including litigation in ways that are fundamentally indistinct from law firms. 17 As the partner in charge of the Paris office of Archibald Andersen Association d 'Avocats remarked, "We provide all the typical services of a business law firm." 18 The head of Price Waterhouse's European Union law unit in Brussels stated, "We're not some kind of secondary citizens here . . . . We're doing more commercial agreements, M&A work and capital markets. The hope is to expand." 19 The international accounting firms have publicly stated their intention to become major players in the marketplace for legal services around the globe. 20 The American Lawyer reported in November 1998 that PricewaterhouseCoopers employed 1,663 nontax lawyers in 39 countries; Arthur Andersen, 1,500 in 27 countries; KPMG, 988 in an unidentified number of countries; Ernst & Young, 851 in 32 countries; and Deloitte Touche Tohmatsu, 586 in 14 countries. When compared to the largest law firms, these figures placed PricewaterhouseCoopers and Arthur Andersen third and fourth, respectively, in total number of lawyers employed worldwide, behind only Baker & McKenzie and Clifford Chance. 21 The accounting firms are actively pursuing clients in markets as diverse as those of France, Spain, Australia, Canada, and the Confederation of the Independent States of the former Soviet Union. 23

Issues relating to multidisciplinary practice have not escaped the attention of regulators and bar associations in other parts of the world. Witnesses before the Commission described on-going studies in Canada, the U.K., and Australia 23 and the present extent of regulation in France and Germany. 24 From a global perspective, it appears that the Law Society of New South Wales, Australia is the only regulator that has adopted ethics rules specifically directed to multidisciplinary practice. Those rules, however, require that multidisciplinary partnerships remain in the effective control of the law firm 's lawyers. 25

Two international bar associations have wrestled with multidisciplinary practice questions as well. The position of the International Bar Association (IBA) is finely nuanced. The Resolution on Multi-disciplinary Practices adopted by the IBA Council in September 1998 neither approves nor disapproves of multidisciplinary practices. Instead, it lays out the principles that should govern if a jurisdiction chooses to permit their establishment. These principles include transparency, avoidance of conflicts of interest, special protection for confidential client information, and submission of the entire multidisciplinary practice organization to the regulatory and disciplinary authorities of the legal profession. 26

In 1996, the Council of the Bars and Law Societies of the European Union (CCBE) adopted a position strongly opposed to multidisciplinary partnerships between lawyers and nonlawyers. 27 A proposal to soften that position received a majority of votes cast at the November 1998 plenary session of the CCBE. But it failed to carry since it did not meet a supermajority requirement.

Part II. Initiatives by Accounting Firms in

the United States with Respect to Legal Services

It is beyond the scope of this paper to examine the extent to which federal regulation of tax practice before the Internal Revenue Service and Tax Court preempts state limitations on the unauthorized practice of law. 28 The legal profession has generally acknowledged the right of an accounting firm to provide services to its clients that call for an understanding and application of federal law relating to the taxation of property, goods, and services. 29 In recent years, the accounting firms have become more aggressive in the kinds of tax-practice services they provide to clients. According to anecdotal information, these services include the offering of representation to clients by employee/lawyers in federal district court or the court of federal claims, forums historically reserved to independent lawyers. The accounting profession successfully lobbied Congress in support of the new federal tax practitioner-client privilege. 30 Moreover, accounting firms have been vigorously recruiting lawyers, persuading prominent tax partners to resign from their law firms to join accounting firms. 31 Law school recruiting by accounting firms has also increased. 32 Finally, some accounting firms are entering into "strategic alliances" with prominent tax law firms to offer coordinated tax controversy services to U.S. and foreign corporate clients. 33

The size and number of services offered by accounting firms in the United States have greatly expanded in the past ten years. 34 From a strict revenue perspective, the importance of the attest function has diminished. 35 Accounting firms now derive significant revenue from the consulting services they offer their clients. These consulting services are not necessarily related to tax services ( e.g., litigation support, ERISA, regulatory compliance, etc.). While concern has been raised that the consulting services, especially when provided by lawyer-employees of the accounting firms, often involve as a component the giving of legal advice in violation of states ' unauthorized practice of law (UPL) statutes, there are records of only two recent enforcement actions against accounting firms. In 1997, a complaint was filed with the UPL Committee of the Supreme Court of Texas against Arthur Andersen and Deloitte & Touche. 36 The complaint against Arthur Andersen was dismissed eleven months later. 37 The status of the second investigation is unclear. The Commission understands that a UPL charge against Ernst & Young is being investigated in Virginia. 38

The paucity of enforcement actions may be partially attributed to a lack of regulatory resources and to the failure of the courts and regulatory authorities to formulate a workable definition of the practice of law and to a lack of regulatory resources. The Model Rules do not define the practice of law, treating it as a matter of state law. 39 The Standing Committee on Lawyers' Responsibility for Client Protection concluded after conducting an exhaustive state-by-state survey in 1994-1995 that:

The unauthorized practice of law is among the most complex, controversial problems facing the legal profession. Few issues have received such varied treatment from jurisdiction to jurisdiction. Strict rules in some jurisdictions delimit the activities in which nonlawyers may engage and are accompanied by a full panoply of sanctions, including: injunctive relief, civil liability and criminal penalties. Other jurisdictions impose less serious restrictions and provide fewer remedies. Still others currently have no mechanism to investigate or to restrict the unauthorized practice of law . . . allowing nonlawyer delivery of legal services to the public to run rampant. 40

Part III. The Current Ethical Framework

that Governs Multidisciplinary Practice

A central purpose of the codes of legal ethics throughout the history of the United States has been to preserve and protect the exercise of a lawyer's independent professional judgment in service to the client. To that end, the Canons of Professional Ethics, the Model Code of Professional Responsibility, and the Model Rules of Professional Conduct contain a number of precepts designed to limit the influence of third parties. 41 Of particular importance to the issue of multidisciplinary practice are those found in Model Rule 5.4(a), (b), and (d). 42 Those provisions essentially prohibit a lawyer from sharing fees with a nonlawyer, except under limited circumstances (Rule 5.4(a)), from forming a partnership with a nonlawyer if any of the activities of the partnership consist of the practice of law (Rule 5.4(b)), and from practicing in a professional corporation or association if a nonlawyer is a corporate director or officer or has the right to direct or control the professional judgment of the lawyer (Rule 5.4(d)). There is nothing in those rules that prohibits a lawyer from working with a professional trained in another discipline if such cooperation is needed to solve the client's difficulties. A lawyer may directly employ such a professional on the lawyer's staff, retain an unaffiliated professional with the client's consent, or assist a professional who is separately retained by the client. A lawyer may also own a company employing a professional or offering certain products created by the nonlawyer professional. 43 What is forbidden is an MDP, an integrated practice in which a lawyer shares fees with a nonlawyer or enters into a partnership or an analogous relationship with a nonlawyer to deliver legal services to clients.

The prohibition against MDPs is rooted in the perception that it prevents a layperson from exercising undue influence over the independence of a lawyer in the representation of a client in attempt to subordinate the protection of clients to the pursuit of profit. 44 The ABA Commission on Evaluation of Professional Standards (the Kutak Commission) originally proposed relaxing these prohibitions. But the House of Delegates rejected its proposal. 45 Among the objections raised were that

(1) the Commission proposal would permit Sears, Montgomery Ward, H & R Block, or the Big Eight accounting firms, to open law offices in competition with traditional law firms; (2) nonlawyer ownership of law firms would interfere with the lawyer's professional independence; (3) nonlawyer ownership would destroy the lawyer's ability to be a >professional' regardless of the economic cost; and (4) the proposed change would have a fundamental but unknown effect on the legal profession. 46

Critics of the current Rule 5.4 argue that it impedes the development of "full-service" or "one-stop " practices in which professionals from different disciplines work together to solve multidisciplinary problems. 47 While not dismissing concerns about preserving the independent professional judgment of lawyers, critics note that many law practices are run as businesses today and that the Rule's enforcement promotes the lawyers' market monopoly. They deny the claims of the Rule's defenders who argue that a client can achieve the benefits of a full-service or one-stop practice by hiring professionals from different disciplines to work with a lawyer. They note the refusal of many professionals to work as employees of a law firm on the grounds that employee-status devalues their professional skills and knowledge and deprives them of the opportunity to share in the profits generated by the service products they have helped to create. The critics of Model Rule 5.4 argue that "" encourages more efficient investment in resources, better focused delivery models for services, and more comprehensive solutions to client problems.

In response to the prohibitions on nonlawyer partners and fee sharing, some law firms have established separate ancillary businesses in which lawyers and nonlawyer partners provide professional services to clients. 48 These ancillary business clients may or may not be the law firms' clients, depending upon the particular engagement or subject matter expertise. Presumably, if the ban on partnerships with nonlawyers and fee sharing were rescinded or modified, some of these law firms would incorporate the ancillary businesses directly into their practices, naming the nonlawyers as partners. Still others might decide to keep the two separate but share fees. It is interesting to note that while ancillary businesses and multidisciplinary practice are often popularly portrayed as issues of great concern to larger, corporate law firms, an informal survey of the opinions of state bar association ethics committees issued over the course of the past ten years suggests that the overwhelming majority of the inquiries on this subject were submitted by lawyers in solo or small firms. 49 Prior to 1980, sole practitioners in non-urban settings, not large corporate law firms, were the principal providers of ancillary businesses. 50 A survey of its members by the Law Society of Upper Canada 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. 51

Only one jurisdiction in the United States, the District of Columbia, has modified Rule 5.4 to permit partnership and fee sharing with nonlawyers, 52 although even that rule would not permit the type of multidisciplinary practice offered by some of the Big-5 firms outside the United States. The D.C. rule does not give blanket approval to a multidisciplinary practice. It restricts lawyer and nonlawyer partnerships and the sharing of legal fees to organizations that provide legal services to clients. In other words, it does not permit an accountant and a lawyer to enter into a partnership or share legal fees, if a purpose of the organization is to provide non-legal services. But, as the Comments to the rule make crystal clear, it does permit a certified public accountants to work in conjunction with tax lawyers or others who use accountants' services in performing legal services." 53 Other examples cited with approval in the Comments include economists working in a firm with antitrust or public utility practitioners, psychologists or psychiatric social workers working with family law practitioners to assist in counseling clients, and nonlawyer lobbyists working with lawyers who perform legislative services. The Comments explicitly state that the rule does not permit partnership for the purpose of investment. 54

In light of its charge, the Commission was especially interested in learning the extent to which law firms had taken advantage of the Washington D.C. version of Rule 5.4. At the November hearings, Susan Gilbert, the Ethics Counsel for the District of Columbia Bar Association, testified that very few firms appear to have nonlawyer partners. According to Ms. Gilbert, two factors contributed significantly to the absence of law firm interest: first, the requirement that the law firm have as its "sole purpose" providing legal service to clients, and second, the limitations imposed by ABA Formal Opinion 91-360, which concluded that a law firm with offices in more than one jurisdiction could not have a nonlawyer partner in its Washington, D.C. office. 55


As President Anderson has emphatically pointed out, the mandate of this Commission is to study the issues relating to multidisciplinary practice from the standpoint of the public's best interests. See Appendix A: News Release, dated August 4, 1998. The Commission has not reached even tentative conclusions with respect to that mandate. It is continuing to study the numerous and complex issues surrounding the delivery of legal services in a multidisciplinary practice setting. Once again, it invites the public, members of the House of Delegates, ABA entities, and all other interested persons or organizations to comment on its mandate and to respond to the questions identified in the Introduction to this paper by April 1, 1999.


1. A multidisciplinary practice is one in which a lawyer is associated with one or more professionals from a different discipline ( e.g., accounting, financial planning, social work, gerontology, etc.). A multidisciplinary partnership (MDP) is a partnership owned by professionals in different disciplines ( e.g., a lawyer and an accountant, a lawyer and a social worker, etc.).

2. The paper will cite the testimony of specific witnesses by name and the date ( e.g., Testimony of Michel Gout, Nov. 11, 1998). Summaries of the witnesses’ testimony are available at the Commission on Multidisciplinary Practice home page,

3. While this paper principally addresses the issue of multidisciplinary practice in the context of private sector legal services, multidisciplinary practice is also an issue of concern for legal services lawyers whose clients may need the counseling of professionals in other disciplines ( e.g., social workers, psychologists, etc.). See, e.g., Randye Retkin, Gary L. Stein & Barbara Hermie Draimin, Attorneys and Social Workers Collaborating in HIV Care: Breaking New Ground, 24 Fordham Urb. L.J. 533 (1997); Heather A. Wydra, Note, Keeping Secrets Within the Team: Maintaining Client Confidentiality While Offering Interdisciplinary Services to the Elderly Client, 62 Fordham L.Rev. 1517 (1994).

Multidisciplinary practice arrangements may also raise issues of concern for government regulators, especially the Securities and Exchange Commission. See generally Melody Petersen, Regulators Express Concerns On Independence of Auditors, N.Y. Times, Dec. 9, 1998, at C8; Melody Petersen, When An Auditor’s Hats Clash, N.Y. Times, Jan. 7, 1998 at C1; Michael Schroeder, SEC Increases Accounting-Fraud Probes, Wall St. J., Dec. 9, 1998, at B8; SEC Today (CCH) 97-238, News Digest, McLucas Says Auditor Independence Today More Important Than Ever, Dec. 11, 1997, at 1; SEC Today (CCH) 97-237, News Digest, Auditor Independence an Issue at AICPA Conference on SEC Developments, Dec. 10, 1997, at 1; SEC Sees Firms Ignoring Red Flags, Nat’l Ass. St. Bds. Accountancy, Nov. 1, 1998, (visited January 3, 1999) <http:/>.

4. Please direct all comments to Arthur Garwin, Professionalism Counsel, Center for Professional Responsibility, 541 N. Fairbanks Court -- 14th Floor, Chicago, IL 60611-3314; tele: (312) 988-5294; fax: (312) 988-5280;

5. Rule 5.4 of the Washington, D.C. Rules of Professional Conduct restricts lawyer and nonlawyer partnerships and fee sharing to organizations that have as their sole purpose providing legal services to clients. See infra notes 52-55.

6. In addition, the structure of the accounting industry is itself changing radically as American Express and Century Business Services purchase and consolidate regional accounting firms. These firms in turn are transforming themselves into professional services firms modeled on the Big-5. See generally John Gibeaut, Squeeze: As Accountants Edge into the Legal Market, Lawyers May Find Themselves Blindsided by the Assault But Also Limited by Professional Rules, A.B.A.J., Feb. 1998, at 42, 42.

7. For a thorough and comprehensive analysis of the ethical issues raised by MDPs in the United States, see Laurel S. Terry, What If . . . ? The Consequences of Court Invalidation of Lawyer-Accountant Multidisciplinary Partnership Bans, Chapter 9, Private Investments Abroad--Problems and Solutions in International Business in 1998 (Matthew Bender 1999).

8. See supra note 5. See generally Gianluca Morello, Note, Big Six Accounting Firms Shop World Wide for Law Firms: Why Multi-Disciplinary Practices Should Be Permitted in the United States, 21 Fordham Int’l L.J. 190 (1997).

9. Testimony of Alison Crawley (Nov. 12, 1998). This is also true in many civil law countries. Testimony of Michel Gout (Nov. 12, 1998). However, laypersons are generally not permitted to appear on behalf of third parties in court proceedings.

10. See MaryAnn Glendon, et al., Comparative Legal Traditions 152-59 (2d ed. 1994); The Legal Professions in the New Europe (Allan Tyrell & Zahd Yaqub eds. 1993).

11. Testimony of Alison Crawley (Nov. 12, 1998). See Richard L. Abel, The Legal Profession in England and Wales (1988); Richard L. Abel, England and Wales: A Comparison of the Professional Projects of Barristers and Solicitors, in Lawyers in Society: An Overview 39-91 (Richard L. Abel & Philip S.C. Lewis, eds. 1995).

12. How the accountants transformed themselves from marginal players into central actors is a complex story:

The accounting firms had always been an important source of tax advice for business, a field which old European legal professionals largely stayed away from. The Big Six were able to use their expertise in tax as a base for the expansion of their claims to legal expertise . . . .

As international restructuring and the corporate merger and acquisition (M&A) wave began to hit Europe, the accountants were well positioned to gain a major share of the market. They could offer business global coverage (they were global conglomerates) and full service on all aspects of business planning and strategy. Thus the accounting firms recruited higher profile lawyers, and expanded from taxation to complete legal/financial/economic consulting. . . . Moreover, the accounting firms offered more standardized service packages, and, as a result, were better able to compete on price, since they offered their services at a cost somewhat below those of the higher-priced legal multinationals. Thus when they moved into the market for full-service legal and financial "engineering" services, the Big Six were able to capture a significant portion of the market, especially in the lower segment where price was more important and in southern Europe where the "business lawyer" was less well known.

David M. Trubek, et al., Global Restructuring and the Law: Studies of the Internationalization of Legal Fields and the Creation of Transnational Arenas, 44 Case Western L.Rev. 407, 434-35 (1994). See also Richard L. Abel, Transnational Legal Practice, 44 Case Western L.Rev. 737, 747-48 (1994).

13. See generally Sydney M. Cone, III, International Trade in Legal Services: Regulation of Lawyers and Firms in Global Practice §§ 9.2 & 9.7.3 (1996).

14. Id. at § 9.2.

15. See The Accountants in France in Michael Chambers, Patrick Wilkins & Tony Yorke, Jilted: The Inside Story of the Wilde Sapte-Garretts Breakdown, 25 Commercial Lawyer 16 (1998); Testimony of Gerard Nicolay, managing partner of Coopers & Lybrand Juridique et Fiscal (Nov. 12, 1998).

16. For a description of some of these arrangements, see testimony of J. Rob Collins (Nov. 12, 1998); testimony of Alison Crawley (Nov. 12, 1998); testimony of Andrew Scott (Nov. 13, 1998); testimony of Thomas O. Verhoeven (Nov. 13, 1998).

17. See generally supra note 6, at 42.

18. Chris Klein, Gold Rush, Thin Stakes: U.S. Branches Face Fierce Competition From U.K. Solicitors, Accountants, Nat’l L.J., Aug. 12, 1996, at A1. As of 1996, Archibald Andersen Association d’Avocats employed 240 lawyers in its Paris office, offering a full corporate law and intellectual property practice, areas of expertise that neatly complimented the tax practice of Arthur Andersen. Id.

19. Id.

20. See, e.g., Phillippa Cannon, The Big Six Move In, 50 Int’l Fin. L. Rev., Nov. 1997 at 25; Phillippa Cannon & Adrian Preston, Europe’s Top Tax Advisors, available under Topics/Legal Profession at Int’l Fin. L. Rev. Home Page, (last visited Dec. 1998); Nick Ferguson, Portugal’s Lawyers Resist Accountants’ Rise, Int’l Fin. L. Rev., Oct. 1997, at 49; Paul Lee, Canadian Firms Prepare for Foreign Invasion, Int’l Fin. L. Rev., Jan. 1998, at 33; 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; Samantha Wigham, Norwegian Firms Await Inevitable Invasion, Int’l Fin. L. Rev., July 1997, at 35; Arthur A ndersen’s Trojan Horse, Legal Business, May 1994, at 27; Price Waterhouse Adds Polish and Belgian Law Firms, Int’l Fin. L. Rev., April 1998, at 3; see also John Flood, The Cultures of Globalization: Professional Restructuring for the International Market, in Professional Competition and Professional Power: Lawyers, Accountants and the Social Construction of Markets 139-69 (Yves Dezalay & David Sugerman eds. 1995).

21. The Global 50, Am. Law., Nov. 1998, at 47. These figures exclude lawyers practicing tax law exclusively within the firms’ accounting or tax divisions. See also Elizabeth MacDonald, Lawyers Protest Accounting Firms’ Hiring, Wall St. J., Aug. 22, 1997, at B8.

22. Testimony of Ward Bower (Nov. 12, 1998); testimony of J. Rob Collins (Nov. 12, 1998); testimony of Alison Crawley (Nov. 12, 1998); testimony of Andrew Scott (Nov. 13, 1998). See Ward Bower, Multidisciplinary Partnerships--The Future, in Global Law Practice 155 (J. Ross Harper ed. 1997); John E. Morris, King Arthur’s March on Europe: Arthur Andersen Is on a Mission to Conquer the Continent’s High-End Legal Markets. Can the Accountants Beat the Lawyers at Their Own Game?, Am. Law., June 1998, at 49; Melody Petersen, Paris Lawyers Are Seeking Barricades Against the Big 6: Accounting Giants Get Legal Work Abroad, N.Y. Times, June 8, 1998, at D2; Hans von Leerwen, Andersen’s giant step towards world law, Australian Fin. Rev., May 21, 1997, at 3.

23. E.g., testimony of J. Rob Collins (Nov. 12, 1998); testimony of Alison Crawley (Nov. 12, 1998); testimony of Andrew Scott (Nov. 13, 1998).

24. E.g., testimony of Michel Gout (Nov. 12, 1998); testimony of Thomas O. Verhoeven (Nov. 13, 1998).

25. See testimony of J. Rob Collins (Nov. 12, 1998).

26. The Resolution states that "such rules [on the integrated co-operation between lawyers and non-lawyers] should contain:

(a) a requirement to clearly disclose to regulatory and disciplinary authorities and to the public the manner in which integrated co-operation with non-lawyers is affected, and the interests represented in the organization concerned;

(b) a requirement for submission of the entire organization in question, including its non-lawyers, to the regulatory and disciplinary authorities of the legal profession;

(c) a requirement for giving of clear notice to clients as to the limitations inherent in forms of integrated co-operation and the risk attaching thereto;

(d) precise requirements on the avoidance of conflicting interests which exclude the possibility of combining auditing services with consulting services or legal representation;

(e) precise rules on restriction of access to confidential information; and

(f) provisions setting out the minimum degree of ownership and/or voting control which lawyers must hold in MDPs and the maximum degree of ownership and/or voting control which non-lawyers may hold in MDPs.

Resolution on Multi-disciplinary Practices adopted by the Council of the International Bar Association, Sept. 13, 1998. "Transparency" is a legal concept frequently associated with expressions of civil law jurisprudence and is reflected in items (a)-(b).

27. Testimony of Michel Gout (Nov. 12, 1998).

28. See generally Sperry v. Florida, 373 U.S. 379 (1963); testimony of Linda Galler (November 13, 1998); letter dated November 13, 1998 to Sherwin Simmons, Esq. from Linda Galler; Ronald E. Friedman, Multidisciplinary Partnerships: Attorneys Working in Professional Service Firms, ABA 24th National Conference on Professional Responsibility (1998); see also Mark H. Ely, Multidisciplinary Partnerships: Accounting Firms and the Practice of Law, ABA 24th National Conference on Professional Responsibility (1998).

29. In 1981, the ABA and the American Institute of Certified Public Accountants (AICPA) adopted a statement in which the two organizations agreed that accounting firms could provide tax planning advice to clients, but would not draft legal documents. See National Conference of Lawyers and CPAs, Lawyers and Accountants: A Study of Interprofessional Relations 3 (1981). See generally Charles W. Wolfram, Modern Legal Ethics § 15.1, at 826 (1986).

30. Section 3411 of the Internal Revenue Service Restructuring and Reform Act of 1998 added Section 7525 to the Internal Revenue Code, creating a new privilege for certain communications between certified public accountants and other federally authorized tax practitioners and their clients. See American Law Institute-American Bar Association, The New Tax Practitioner-Client Privilege that Protects Tax Advice from Disclosure: What CPAs, Enrolled Agents, Enrolled Actuaries, and Clients Need to Know (1998).

31. See Jeffrey L. Jacobs, Multidisciplinary Recruiting War. . . The Tax Brain Drain to Accounting Firms Intensifies, 17 Of Counsel 7 (1998); Government Loses Four Corporate Tax Experts to Accounting Firms, Daily Tax Highlights & Documents, Sept. 17, 1997, at 3333.

32. See generally Elizabeth MacDonald , Lawyers Protest Accounting Firms’ Hiring, Wall St. J., Aug. 22, 1997, at B8.

33. The existence and terms of the strategic alliances are often not well publicized. One exception, however, is the alliance between Price Waterhouse and Miller & Chevalier. See Phillippa Cannon, The Big Six Move In, Int’l Fin. L. Rev., Nov. 1997, at 25; 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.

34. See generally Geoffrey C. Hazard, Accountants vs. Lawyers: Let’s Consider Facts, Nat’l L.J., Nov. 9, 1998, at A21; Geoffrey C. Hazard, The Ethical Traps of Accounting Firm Lawyers, Nat’l L.J., Oct. 19, 1998, at A27.

35. Of course, the attest function may well be an indirect source of considerable revenue. The auditors’ presence within the client is pervasive, enabling them to identify a wide range of problems. This provides them with a powerful "edge" in recommending that the audited companies retain consultants employed by the same accounting firm or a related company to solve these problems.

36. See Elizabeth McDonald, Texas Probes Andersen, Deloitte On Charges of Practicing Law, Wall St.J., May 28, 1998, at B15. See also Anna Marie Kukec, North Carolina, Texas scrutinize accounting firms; address possible UPL violations, ABA Bar Leader at 4 (May 1998). Though North Carolina bar leaders met with representatives from Big-5 accounting firms to discuss concerns about the unauthorized practice of law, there has been no report of a complaint being filed against any of the firms.

37. Excite News, Texas Panel Dismisses Complaint Against Arthur Andersen, July 29, 1998, While one Commission witness strongly criticized the dismissal, the fact remains that the Committee concluded that Arthur Andersen had not engaged in the unauthorized practice of law. William D. Elliott (Nov. 13, 1998); see William D. Elliott, Unauthorized Practice of Law: Failure of Proof or Failure of Will?, Tax Notes Today, Oct. 26, 1998, 98 TNT 208-23.

38. See Message posted on December 28, 1998 by James M. McCauley, Ethics Counsel, Virginia State Bar on the Legal Ethics List Serv maintained by the Washburn University School of Law.

39. Ethical Consideration 3-5 of the Model Code of Professional Responsibility specifically declined to provide a "single, specific definition," finding it "neither necessary nor desirable." However, it did offer the following observation:

Functionally, the practice of law relates to the rendition of services for others that call for the professional judgment of a lawyer. The essence of the professional judgment of a lawyer is his educated ability to relate the general body and philosophy of law to a specific legal problem of a client . . . .

Model Code of Professional Responsibility EC 3-5.

The Commission has not yet considered whether or to what extent any particular consulting activities by the accounting firms constitute the unauthorized practice of law. Among the questions these consulting activities raise are: 1) is the advice being delivered by competent, legally trained individuals; 2) is the advice tainted because it is being delivered in a firm dominated by nonlawyers; and 3) if so, what problems does that domination create?

40. Standing Committee on Lawyers’ Responsibility for Client Protection, 1994 Survey and Related Materials on the Unauthorized Practice of Law/Nonlawyer Practice vii (1996).

41. This paper refers only to the Model Rules. Approximately forty-one jurisdictions have adopted a version of the Model Rules. With the exception of the District of Columbia (discussed infra at 52-55), prohibitions substantially identical to those contained in Model Rule 5.4(a), (b) & (d) are found in the ethics codes of the fifty states. See ABA/BNA Law. Man. Prof. Conduct 91:401. The prohibitions possess a distinguished pedigree, moreover, dating back to addition of Canons 33-35 to the Canons of Ethics. Canon 33 provided "[p]artnerships between lawyers and members of other professions or non-professional persons should not be formed or permitted where any part of the partnership’s employment consists of the practice of law." Canon 34 proscribed fee sharing with nonlawyers. Canon 35 cautioned lawyers against being "controlled or exploited by any lay agency, personal or corporate, which intervenes between client and lawyer."

The Model Code of Professional Responsibility, adopted in 1969, not only continued the prohibitions, but also strengthened them by expressing the bar against partnerships with nonlawyers in mandatory rather than precatory language. See DR 3-103; see also DR 3-102 & DR 5-107. See generally Thomas R. Andrews, Nonlawyers in the Business of Law: Does the One Who Has the Gold Really Make the Rules?, 40 Hastings L.J. 577 (1989). See also Barlow Christensen, The Unauthorized Practice of Law: Do Good Fences Really Make Good Neighbors--or Even Good Sense, 1980 Am. B. Found. Res. J. 159 (1980); Deborah L. Rhode, Policing the Professional Monopoly: A Constitutional and Empirical Analysis of Unauthorized Practice Prohibition, 34 Stan. L. Rev. 1 (1981).

42. Rule 5.4 provides:

(a) A lawyer or law firm shall not share legal fees with a nonlawyer, except that:

(1) an agreement by a lawyer with the lawyer's firm, partner, or associate may provide for the payment of money, over a reasonable period of time after the lawyer's death, to the lawyer's estate or to one or more specified persons;

(2) a lawyer who purchases the practice of a deceased, disabled, or disappeared lawyer may, pursuant to the provisions of Rule 1.17, pay to the estate or other representative of that lawyer the agreed-upon purchase price; and

(3) a lawyer or law firm may include nonlawyer employees in a compensation or retirement plan, even though the plan is based in whole or in part on a profit-sharing arrangement.

(b) A lawyer shall not form a partnership with a nonlawyer if any of the activities of the partnership consist of the practice of law.

(c) A lawyer shall not permit a person who recommends, employs, or pays the lawyer to render legal services for another to direct or regulate the lawyer's professional judgment in rendering such legal services.

(d) A lawyer shall not practice with or in the form of a professional corporation or association authorized to practice law for a profit, if:

(1) a nonlawyer owns any interest therein, except that a fiduciary representative of the estate of a lawyer may hold the stock or interest of the lawyer for a reasonable time during administration;

(2) a nonlawyer is a corporate director or officer thereof; or

(3) a nonlawyer has the right to direct or control the professional judgment of a lawyer.

Model Rules of Professional Conduct Rule 5.4 (1998).

43. Such ownership may raise other ethical issues such as using the company as a "feeder" for the lawyer’s legal practice. See, e.g., ABA/BNA Law. Man. on Prof. Conduct, 91:601; 81:2001 & 3001. For a comprehensive bibliography, see ABA Annotated Model Rules of Professional Conduct (3d ed.) at 462-63.

44. See generally testimony of M. Peter Moser (Nov. 13, 1998); M. Peter Moser, Summary of Legal Ethics Issues, in Course Materials, ABA Section of Business Law, Accountants and Lawyers: Strategic Allies or Competitors, 1998 ABA Annual Meeting. The justification for the prohibitions is often expressed in terms similar to those found in Informal Opinion 86-1519:

[T]he public interest is best served by assuring that clients are represented by lawyers who, as members of a regulated profession, are an arm of and subject to the courts, are committed to court approved standards of ethical and professional conduct, are not subject to conflicting interests or divided loyalties and are protected against possible control by others in the exercise of their professional judgment.

ABA Comm. on Ethics and Professional Responsibility, Informal Op. 86-1519 (1986); see generally ABA Comm. on Ethics and Professional Responsibility, Formal Op. 87-355 (1987).

45. See generally American Bar Association Center for Professional Responsibility, The Legislative History of the Model Rules of Professional Conduct: Their Development in the House of Delegates 159-64 (1987).

46. See Andrews, supra note 41 at 594.

47. See, e.g., Geoffrey C. Hazard, Jr. & W. William Hodes, The Law of Lawyering: A Handbook on the Model Rules of Professional Conduct, § 5.4:201, at 801 (2d ed. 1990 & 1994 Supp.); James M. Fischer, Why Can’t Lawyers Split Fees? Why Ask Why, Ask When!, 6 Geo. J. Legal Ethics 1 (1992); Gary A. Munneke, Dances with Nonlawyers: A New Perspective on Law Firm Diversification, 61 Fordham L. Rev. 559 (1992); John Quinn, Multidisciplinary Legal Services and Preventive Regulation, in Lawyers and the Consumer Interest: Regulating the Market for Legal Services at 329 (Robert G. Evans & Michael J. Trebilcock eds. 1982).

48. In 1991, the House of Delegates adopted Model Rule 5.7 prohibiting law firms from providing nonlegal services ancillary to the practice of law unless the services were provided by law firm employees to firm clients in connection with the provision of legal services. See ABA Report to the House of Delegates, Report No. 121 (1991); see also Dennis J. Block, Irwin H. Warren & George F. Meierhofer, Jr., Model Rule of Professional Conduct 5.7: Its Origin and Interpretation, 5 Geo. J. Legal Ethics 739 (1992). The House repealed Rule 5.7 the following year, and no state has adopted it. In its place, the House adopted the current version of Rule 5.7, Responsibilities Regarding Law-Related Services:

(a) A lawyer shall be subject to the Rules of Professional Conduct with respect to the provision of law-related services, as defined in paragraph (b), if the law-related services are provided:

(1) by the lawyer in circumstances that are not distinct from the lawyer's provision of legal services to clients; or

(2) by a separate entity controlled by the lawyer individually or with others if the lawyer fails to take reasonable measures to assure that a person obtaining the law-related services knows that the services of the separate entity are not legal services and that the protections of the client-lawyer relationship do not exist.

(b) The term "law-related services" denotes services that might reasonably be performed in conjunction with and in substance are related to the provision of legal services, and that are not prohibited as unauthorized practice of law when provided by a nonlawyer.

Model Rules of Professional Conduct Rule 5.7 (1998). Five states, Pennsylvania, Maine, North Dakota, Indiana, and Massachusetts, have adopted the new Rule 5.7. Pennsylvania has modified it slightly. See Laurel S. Terry, Pennsylvania Adopts Ancillary Business Rule, 8 Prof. Law. 10 (Nov. 1996). See generally Ted Schneyer, Policymaking and the Perils of Professionalism: The ABA’s Ancillary Business Debate as a Case Study, 35 Arizona L.Rev. 363 (1993).

49. Many of them 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." See Squeeze, supra note 6, at 46.

50. Fischer, supra note 47 at 48 n. 157.

51. 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).

52. See ABA/BNA Law. Man. Prof. Conduct 91:401 (May 18, 1994). The D.C. Rule provides in relevant part:

(a) A lawyer or law firm shall not share legal fees with a nonlawyer, except that:

(1) Sharing of fees is permitted in a partnership or other form of organization which meets the requirements of paragraph (b).

(b) A lawyer may practice law in a partnership or other form of organization in which a financial interest is held or managerial authority is exercised by an individual nonlawyer who performs professional services which assist the organization in providing legal services to clients, but only if:

(1) The partnership or organization has as its sole purpose providing legal services to clients;

(2) All persons having such managerial authority or holding a financial interest undertake to abide by these rules of professional conduct;

(3) The lawyers who have a financial interest or managerial authority in the partnership or organization undertake to be responsible for the nonlawyer participants to the same extent as if nonlawyer participants were lawyers under Rule 5.1.

(4) The foregoing conditions are set forth in writing.

District of Columbia Rules of Professional Conduct, Rule 5.4. See generally Susan Gilbert & Larry Lempert, The Nonlawyer Partner: Moderate Proposals Deserve a Chance, 2 Geo. J. Legal Ethics 383 (1988).

53. District of Columbia Rules of Professional Conduct Rule 5.4 cmt.7. The District of Columbia Rules of Professional Conduct, like the ABA Model Rules, have adopted a format resembling that of the Restatements of Law, consisting of black letter rules followed by explanatory comments. The comments’ purpose is to "provide guidance for practicing in compliance with the Rules." Cf. Model Rules of Professional Conduct Scope (first paragraph). See generally Charles W. Wolfram, Modern Legal Ethics § 2.6 (1986).

54. The Comment states:

Paragraph (b) 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.

Id. [cmt. 8].

55. Testimony of Susan Gilbert (Nov. 12, 1998). The opinion reasoned that to comply with the ethical rules in the other jurisdiction the law firm had to establish two partnerships, the lawyer/nonlawyer partnership in Washington, D.C. and an all lawyer partnership in the other jurisdiction(s). See ABA Comm. on Ethics and Professional Responsibility, Formal Op. 91-360 (1991).