ABA Special Commission Endorses MDP with Conditions

In the United States, nearly every jurisdiction currently prohibits lawyers from joining with nonlawyers in a partnership or other organization to provide legal services for profit. In particular, ABA Model Rule 5.4 bars lawyers from practicing law in a for-profit firm if a non-lawyer owns an interest, is a corporate officer, or has a right to direct a lawyers' professional judgment. Thus, accounting firms here in the United States cannot offer legal services to their clients.

These market restrictions, though, face a challenge from the rest of the world. Revolutionary advances in technology and information-sharing, globalization of capital and financial services markets, and more expansive government regulation of commerce have combined to reshape the demand for legal services. In Europe and elsewhere, that new demand is being met by, among others, accounting and consulting firms that employ lawyers.

In response to these pressures for changing the rules of the game here in the United States, American Bar Association President Phil Anderson announced on August 4, 1998 the creation of an ABA commission to study the issue of multidisciplinary practice ("MDP"). Its charge was to examine the extent to and manner in which professional service firms operated by accountants and other nonlawyers ought to provide legal services to the public. Sherwin Simmons, a Miami partner in the Florida Law firm of Steel, Hector & Davis was appointed to serve as chairman of the MDP Commission. Simmons is a past chairman of the ABA Section of Taxation and a former member of the ABA board of governors. Other members of the Commission include:

  • Judge Carl O. Bradford, Maine Superior Court;
  • Judge Paul L. Friedman, U.S. District Court for the District of Columbia;
  • Professor Phoebe A. Haddon of Temple University School of Law;
  • Professor Geoffrey C. Hazard of the University of Pennsylvania School of Law, who serves as the reporter for the ABA Model Rules of Professional Conduct;
  • Ms. Roberta Reiff Katz, Senior Vice President, General Counsel and Secretary of Netscape Communications;
  • Ms. Carolyn Lamm of the law firm of White and Case;
  • Mr. Robert H. Mundheim, Senior Executive Vice President and General Counsel of Salomon Smith Barney Holdings;
  • Mr. Steven C. Nelson of the law firm of Dorsey & Whitney;
  • Mr. Michael Traynor of the law firm of Cooley Godward;
  • Dean Burnele V. Powell, of the University of Missouri at Kansas City Law School, who serves as chairman of the ABA Center for Professional Responsibility Governing Committee; and
  • Mr. Herbert S. Wander of the law firm of Katten Muchen & Zavis, who is a past chairman of the ABA Section of Business Law.

Members of the Commission heard testimony from lawyers, accountants, and representatives of various business and consumer groups. In total, the Commission heard sixty hours of testimony from fifty-six witnesses with a wide variety of perspectives. Through this testimony, the Commission considered the client demand for professional services and the influence of MDP on the ethical rules and principles by which lawyers are governed. Proponents of relaxing MDP restrictions maintained that clients would benefit from "one-stop shopping;" opponents feared a change in the ABA Model Rules of Professional Conduct would compromise the independence of the legal profession as well as client confidentiality. A number of witnesses were open to allowing MDP, but only with added oversight and regulation of the lawyers and accountants engaged in such mutually beneficial arrangements.

After extensive analysis, the Commission concluded that there is significant client interest to warrant the delivery of legal services by lawyers engaged in MDP arrangements. In pertinent part, the unanimously adopted report and recommendation issued by the Commission this past month defined an MDP as a partnership, professional corporation, or other association or entity that includes lawyers and non-lawyers and that has as one of its purposes the delivery of legal services to clients other than the MDP itself. The Commission found that an increasing number of U.S. lawyers with significant practice experience are leaving law firms to join such organizations to provide a variety of professional services.

The Commission's recommendations stress that the legal profession should maintain rules of professional conduct that protect independence of professional judgment, client confidentiality, and loyalty to the client through avoidance of conflicts of interests. The Commission further recommended, however, that existing rules should not inhibit the development of new structures for the more effective delivery of services and better public access to the legal system. Lawyers should be permitted to share legal fees with a nonlawyer, subject to certain safeguards that prevent the erosion of the core values of the legal profession. For example, in response to concerns about the independence of the legal profession, the Commission suggested that a lawyer in an MDP should be bound by the rules of professional conduct and that all rules of professional conduct that apply to a law firm should also apply to an MDP. The Commission also recommended that, in connection with the delivery of legal services, all clients of an MDP should be treated as the lawyer's clients in judging conflict of interest matters. And lawyers should be required to make reasonable efforts to ensure that a client sufficiently understands that the lawyer and nonlawyers may have different obligations with respect to disclosure of client information and that the courts may treat the client's communications to the lawyer and nonlawyer differently.

Appendix A to the Commission report provides possible amendments to the model Rules of Professional Conduct, Appendix B lists the witnesses at the Commission hearings, and Appendix C contains the notes of the Commission's reporter, Fordham Law professor Mary Daly.

The following is a summary of the key findings and conclusions contained in the report of the Commission:


2001 The Federalist Society