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Comments for American Bar Association Commission on Multi-jurisdictional Practice, Larry E. Ribstein - Center for Professional Responsibility

Comments for American Bar Association Commission on Multi-jurisdictional Practice

Public Hearing, Friday, March 30, 2001, Fordham University School of Law 140 West 62nd Street, Room 430 New York, NY 10023-7407

Larry E. Ribstein
Foundation Professor of Law, George Mason University School of Law

State regulation of lawyers has failed to keep pace with the increased complexity and geographic scope of law practice. A particular problem is that lawyers in the branch office of a multi-jurisdictional firm are subject to the ethical rules of the state in which the branch office is located, thereby potentially subjecting the firm at least indirectly to inconsistent regulation in the various states in which it has branches. This especially concerns "structural" rules whose primary effect is on the firm as such, including rules regarding the firm's name, advertising, ownership by non-lawyers, imputation of conflicts of interest, enforceability of non-competition agreements, and limited liability. Current choice-of-law rules force multi-jurisdictional firms to comply with either uniform rules or the rules of the most restrictive state. This means that structural rules do not accommodate the many differences among firms as to size, structure, market, and other factors. It also produces a single rule from a flawed political process rather than allowing for competition or evolution of rules.

Law firms, particularly large, multi-jurisdictional firms, seek to maximize the market value of their reputational and other assets, including by finding ways to motivate the firm's members to serve its clients. See Ribstein, Ethical Rules, Agency Costs and Law Firm Structure, 84 Virginia Law Review 1707 (1998). Forcing firms to comply with uniform or restrictive state ethical rules relating to such matters as capital structure and non-competition agreements may perversely hurt the very clients such rules are supposed to protect by interfering with law firms' ability to adopt optimal governance and incentive structures.

I propose addressing this problem by permitting multi-jurisdictional law firms to agree to application of a single state's ethical rules that relate to law firm structure. This would offer the same advantages that "internal affairs" choice-of-law rules currently provide for non-professional firms. Specifically, I propose that Model Rule 8.5 be made subject to a new subsection (c) providing for determination of the rules applicable to a law firm providing as follows:

A firm may provide in its agreement for the application to the firm and its members of the rules of disciplinary conduct of a jurisdiction in which the firm maintains a branch office. This provision shall be enforced as to the matters covered in Rules 1.10, 5.1-5.7, and 7.1-7.6, provided that the firm gives notice of the applicable jurisdiction in its name and as otherwise required by the applicable jurisdiction.

For further information about this proposal, see my article, Ethical Rules, Law Firm Structure, and Choice of Law, presented March 9 at the University of Cincinnati Corporate Law Symposium, and to be published in the University of Cincinnati Law Review. A current draft of the article is available on my website,