October 05, 2011

Written Comments of Judge Frederick D. Pepple

As a former member of the ABA, and a sitting state trial judge, I have noted with interest this commission's work. It would appear that we are well down the path of allowing interdisciplinary organizations to employ attorneys for the purpose of doing legal work for clients. I have read some of the testimony, and the issues seem to be focused upon the accounting/business advising industry. I understand the direction being taken. While I believe that the legal profession would best serve its clients independently of the other professions, it would appear that decision has already been made in light of the wave of opinion and your commission's existence.

At the same time, there are major developments in another area--torts and insurance, domestic relations, criminal law-- which should be considered as your draft for the 1999 Conference approaches.

Insurance companies are now "owning law firms" by establishing in name only entities which do not really exist. Recently, it came to my attention that Nationwide Insurance Company, Wausau Insurance Company and a list of other insurance companies, were in a joint venture known as the "Nationwide Enterprises" which owns offices in Ohio (and apparently other states including Florida) wherein each such office is called "The Law Offices of (e.g. John Smith)" wherein a "lead attorney" for the company in that city places his name on the firm as if it was his law offices. The in-house firm thus hides its identity as a firm owned by an insurance company. In-house lawyers represent insureds when they are sued in personal injury cases.

Court files only indicate that the named defendant is represented by an individual attorney, and all pleadings are done only in the name of the individual attorney assigned to the case, without mention of any affiliation of the attorney signing the pleading. The telephones are answered with merely the phrase, "Law Offices." Stationary is printed using letterhead of "The Law Offices of [lead attorney's name]" with all associated listed down the left side of the letterhead. At the bottom, they added the phrase " Employees of the Nationwide Enterprises, and not a partnership", but even that phrase does not disclose who or what Nationwide Enterprises is. As it turns out, Nationwide Enterprises is not a legal entity but only a trade name that these insurance companies are using for this purpose. They admit that they do not wish to have their correspondence indicate the words "insurance company" on it, so that letters to doctors and expert witnesses will not make it into the hands of jurors and disclose who they are.

My concern is the direction of the multidisciplinary commission being applied in other areas that may leave consumers at risk, and may make it impossible to discipline misconduct in the practice of what has been and should be the practice of law. For example, the supervisor of trial attorneys for the insurance "enterprises" is not licensed to practice in this state. Yet he has supervisory duties over attorneys as they proceed, and he has authority over settlements. Is it reasonable to conclude that the recent law graduate he hires will conduct himself ethically if told by his supervisor to do something clearly against the Code of Professional Responsibility?

The answer lies in the evidence in front of me. When I asked a young attorney questions about the ethics of his situation, he assured me that, while he didn't exactly know about some of these things, that he had talked to his "Vice President" who was the supervisor, and had been assured that there had been research into this matter and was no problem. In fact, there had been a formal advisory opinion issued by the Commissioners on Grievances and Discipline ruling that such conduct was not permitted. How does this state discipline the supervisor when he is not a practitioner licensed to practice here? What if he was not a lawyer at all, but an accountant? (In my case, he is licensed to practice in another state.)

The insured obtains "counsel and advice" from the trial lawyer in a case where the insured is being sued: preparation for testimony includes trial preparation and working closely with the attorney. The "client" should have independent counsel in order to preserve attorney/client confidentiality. What about conversations with that attorney about medical conditions, AIDS, other sensitive personal material? The insurance company may have other considerations as to what may happen to that information affecting other "divisions" of the insurance company's business. There are a myriad of possible conflicts which can best be avoided by complete separation, and not allowing attorneys to associate with non-lawyers or to work for "firms" which are owned by non-lawyers. These safeguard the client, not just the profession.

If an accounting firm can hire lawyers and offer legal services, why not a brokerage house? If a brokerage house, why not real estate agents and brokerages and banks? Why not an insurance company? If those, then why not Sears, or Wal-Mart? How about employee benefit groups, including not only unions (which currently do provide limited services in these areas) but also other member groups, churches, political action groups, or other groups? Why can't individual businessmen and -women offer legal services through their business? Can accountant John Smith hire a staff of lawyers to provide legal services for his customers?

What if John Smith is a private investigator who wants to offer legal services for his customers who need divorce lawyers, or criminal defense lawyers, or patent infringement lawyers, or defamation lawyers? If that sounds far out, maybe it is. But why should large security firms doing investigations of corporate spying and theft of intellectual property, customer lists, or other corporate misdeeds not expand their services to offer legal services to their customers? Aren't they in the same position to argue what the accounting firms are doing is no different?

What about Sam's Club offering a membership benefit of discount attorney fees for coming into its stores and signing up? Those stores offer cellular telephone services at a separate booth, why not legal services. Why not hire a staff of lawyers on salary to work for Sam's Club members, the same way Sears and JCPenneys have opticians and photographers? Is this the direction we are headed?

All this may be good for everybody--until someone has a problem with the ethics of the practices used. The young lawyer relies upon his boss (a non-lawyer) and does what he is told. The practice violates the Code, and who suffers? Not those responsible, only the young lawyer. He can be replaced with another young lawyer who needs a job and will do what he is told. What does this do to the profession? Where does this leave the clients or others who may be damaged by the practices involved? Who do the governing bodies discipline when those in control are not licensed?

To those drafting language for proposed changes in what is ethical when it comes to lawyers "associating with" non-lawyers, and changes in the concept of the unauthorized practice of law, I only wish to remind you that our profession has seen a lot of changes in the past 20 years. Many of those changes have been driven by the financial forces and pressures of "doing business." Yes, the practice of law is a business. But if it is to remain a profession, answer how the profession will restrain itself, and restrain its own member, from disregarding all professional rules if they get in the way of profit? How does the profession support its members who try to stand up to unethical practices in the face of pressure from non-lawyer employers?

While our profession takes the hits for unethical practices, is it not true that a percentage of clients gravitate towards lawyers who they perceive will do anything towards getting done what they want to get done? Is this not a societal problem escalating everywhere? What will be our profession's response, especially when non-lawyers will not just be clients, but will be employers who will control promotion, wages, benefits, locations and daily work conditions of lawyers?

Thank you for your consideration.

Judge Frederick D. Pepple
Court of Common Pleas
Auglaize County, Ohio