Now in Legal Rebels:
Posted Aug 02, 2009 12:10 am CDT
In 2000, the ABA House of Delegates emphatically slammed the door on a recommendation that the Model Rules of Professional Conduct be amended to endorse the principle of permitting attorneys to jointly practice and share fees with nonlawyer professionals.
In fact, the proposal by the Commission on Multidisciplinary Practice, which had studied the issue for two years, never even came up for a vote. Delegates in the ABA’s policymaking body flocked to support a recommendation by a coalition of state and local bar associations to uphold the ban on partnerships and fee-sharing with nonlawyers set forth in Rule 5.4 of the Model Rules.
But much has changed in the legal profession—and the world—since then, and the ABA may be ready to crack open the door again and take another peek at MDP.
ABA President-elect Carolyn B. Lamm recently announced creation of an Ethics 20/20 Commission. The name recalls the Ethics 2000 Commission that conducted a full review of the Model Rules, but Lamm says the new commission will have an even broader mission.
While the 20/20 commission will review the Model Rules, Lamm says she wants it to also look at the larger issue of how the U.S. legal profession is regulated in the context of globalization. That means, she says, the commission should consider developments at the state level, regulatory activities of the federal government, the impact of international agreements like GATS (the General Agreement on Trade in Services), and changes in how other countries govern their lawyers.
“The law is in a vastly different place than it was even five years ago, let alone 10, 15 or 20 years ago,” said Lamm when she described the mission of the new commission on May 27 at a conference in Chicago on globalization and regulation of the legal profession. The gathering was sponsored by the ABA’s Center for Professional Responsibility and the Georgetown Center for the Study of the Legal Profession.
Lamm, a partner at White & Case in Washington, D.C., who begins her one-year term as ABA president on Aug. 4, emphasized that the commission should consider how the regulatory structure can enable U.S. lawyers to compete with legal providers in other countries while continuing to protect the public and the core values of the profession.
In a follow-up interview, Lamm indicated that multidisciplinary practice may well be one of the topics of consideration for the commission. Referring to the “5 series” in the Model Rules—the provisions that address law firm operations—she says, “Obviously, someone needs to look at that and determine whether any changes need to be made.”
Lamm did not advocate directly for changes in the Model Rules regarding MDP, but, she noted, “a lot of places have implemented it, and the sky has not fallen.”
Burnele V. Powell, who served on the ABA’s earlier ill-fated MDP commission, welcomes the possibility of taking another look at the issue.
“It’s at least clear the issues did not go away, and our failure to address those issues did not keep others from doing so,” said Powell, a professor at the University of South Carolina School of Law in Columbia. “Will we now exercise our historic leadership, or eventually accept a fait accompli?”
At the conference, speakers described how multidisciplinary practice is being incorporated into the regulatory structures of some other countries.
In the United Kingdom, for instance, the Legal Services Act of 2007 created a new regulatory structure that permits legal disciplinary practices—law firms whose professional rosters may be up to 25 percent nonlawyers—and alternative business structures, which will encompass multidisciplinary practices, external ownership of legal businesses, and just about any combination of lawyers and nonlawyers in between. Rules for LDPs went into effect earlier this year, while ABS rules won’t go into effect until at least late 2011, said Russell Wallman, director of governmental relations at the Law Society of England and Wales. (Click here for questions and answers about the LSA; click here for a glossary of LSA terminology.)
Even earlier, laws were adopted in Australia that allow multidisciplinary practices and incorporated legal practices with outside ownership. In 2007, Slater & Gordon in Sydney became the world’s first publicly traded law firm. (Click here for an introduction to incorporated legal practices.)
“Under our system, there is no ‘one-size-fits-all’ approach,” said Steven Mark, the legal services commissioner for New South Wales, whose office shares regulatory authority with the statewide bar organizations for solicitors and barristers. Law firms are allowed to develop their own systems for meeting 10 measures of compliance with appropriate management systems. Firms that employ a self-assessment approach experience about a third fewer client complaints than other firms, he said.
“Nothing is more profitable than good ethics,” Mark said. “People who don’t recognize that worry me.”
The picture is more mixed in the European Union, said Jonathan Goldsmith, the secretary general of the Council of Bars and Law Societies of Europe, which represents more than 700,000 lawyers from 41 countries through their national bar associations. While outside ownership of law firms is generally prohibited in member nations of the EU, he said, various MDP structures are permitted in a number of countries, including Belgium, France, Germany and Italy.
Goldsmith said it’s impossible to predict what direction lawyer regulation will ultimately take in the EU, but he noted that, in France, a report on legal services reforms issued in April by the Darrois Commission calls for external investment in law firms, multidisciplinary partnerships and greater flexibility to associate with foreign lawyers.
The Darrois report could be a significant precedent for the Continent, said Goldsmith. “The U.K. is often viewed as something of an economic maverick, but when France makes changes, other nations are likely to follow,” he said.
These developments will have a dramatic impact on lawyers in the United States, and it will be hard for even practitioners at small firms in seemingly out-of-the-way places to avoid them, warned several speakers at the conference.
“The globalization genie is out of the bottle, and it’s impossible to put it back in,” said James W. Jones, managing director of Hildebrandt International in Washington, D.C., and chairman of the Hilde-brandt Institute.
The ability of U.S. law firms to compete with increasingly agile legal providers in other countries is certainly one cause for concern. “The American legal profession will lose influence because of the freedom afforded to countries in other nations,” said Anthony E. Davis, a partner at Hinshaw & Culbertson in New York City and a past president of the Association of Professional Responsibility Lawyers.
There also is a crucial ethics overlay to how U.S. law firms compete. Some speakers noted, for instance, that under ABA Model Rule 5.4, which is widely followed by the states, a U.S. firm likely would have to withdraw from business arrangements with a foreign firm that has nonlawyer managers or owners, and the U.S. firm could not share fees with that foreign firm.
But other speakers maintained that as long as a U.S. firm bills separately for its work, there should be no conflict with Rule 5.4. “It’s easy. Just plug in a flat fee for the U.S. firm’s work. Story over,” said Stephen Gillers, a professor at New York University School of Law.
If that and other discussions at the conference are any indication, putting multidisciplinary practice back on the agenda may foster the same kind of intense debate that occurred a decade ago.
Some elements of the profession, especially firms that do extensive international work, may push harder than ever to make U.S. lawyer regulation more compatible with the rules that govern key foreign competitors. Some even suggest that the traditional state-based regulation of lawyers should be replaced with a more uniform national system, even if it takes an act of Congress.
“It simply doesn’t work in the modern world for law firms to operate under a multijurisdictional regulatory system,” Davis said. “We need regulation on a national basis, a uniform structure, on which U.S. law firms can compete with their global competitors.”
Others clearly are not ready to go that far. They maintain that seismic changes in the current structure would threaten the core ethical values of the U.S. legal profession.
“The state-based system for regulating lawyers in the United States is admired around the world,” said Michael S. Greco, 2005-2006 ABA president, in a luncheon speech at the conference.
Greco, a partner in the Boston office of Kirkpatrick & Lockhart Preston Gates Ellis, said, “My position is this: While mindful of the growing competitive pressures on the U.S. legal profession, we must nonetheless devise solutions that preserve the core values of a profession that has served the public well for more than 200 years.”
Some see the need for incremental change—if it doesn’t go too far. “I don’t think we’ll ever see a time when we abandon state-based regulation completely,” said William P. Smith III, general counsel for the State Bar of Georgia and a member of the ABA Task Force on International Trade in Legal Services. “It should be challenged in its entirety very carefully.” But, he said, “don’t crucify the need to consider globalization on a cross of national regulation.”