It's time to look at regulation of 'quasi-legal' work done by lawyers
By David L. Hudson Jr.
Feb 1, 2014, 09:10 am CST
Lawyers occupy just about any job setting these days: They work as trust officers, compliance officers, investment bankers, consultants or accountants. Others take jobs managing hedge funds and major corporations. As more licensed attorneys practice in nontraditional settings, their ambiguous roles in “broadening and blurring the boundary between law and business” require a new look at legal ethics, says University of North Carolina law professor Dana A. Remus.
“An increasing number of licensed lawyers engage in hybrid quasi-legal work, which requires an understanding of law and regulation but does not fit within existing conceptions of legal practice,” Remus says in her article “Out of Practice: The 21st-Century Legal Profession,” to be published in March by the Duke Law Journal.
A “growing number of lawyers occupy roles for which legal training is valuable but licensure is not required,” Remus writes, adding that the legal profession needs to study this changed landscape to address how to regulate and deal with it.
Remus warns of incidents of “ethical arbitrage,” where licensed lawyers in quasi-legal roles help corporate actors to engage in unethical conduct. She also urges caution about “an overwhelming orientation toward corporate interests [that] appears to be eclipsing lawyers’ tripartite duties to clients, the state and the public.” When licensed lawyers engage in misconduct it reflects poorly on lawyers in general, causing greater mistrust of the legal profession, she says.
“My goal is to draw attention to a serious and thus far overlooked problem—and to start a conversation about the best ways of addressing it,” Remus says in an interview. “A critical part of finding a solution is going to be further research—and in particular, empirical research to learn more about lawyers in these roles—who they are, what work they engaged in, what their ethical orientations are.”
She adds that the profession “should start thinking through possible baseline rules. These problems will only grow as increasing numbers of lawyers begin working in quasi-legal roles.”
For example, corporate lawyers help plot business strategy, while lobbyists draft and advocate legislation, and corporate compliance officers seek to avoid scandal.
Remus’ article also gives the example of many licensed attorneys serving as trust officers who interact frequently with bank customers and corporate employees. She writes that many of these customers and employees may believe that “lawyerly duties attach to the relationship,” and asserts that increased disclosure requirements are necessary to prevent consumer confusion.
“There is a strong argument for greater disclosure requirements and regulations,” says Stanford Law School professor Deborah L. Rhode, who teaches professional responsibility and also serves as the director of the Stanford Center on the Legal Profession. This is the area—as Remus points out—“that poses the most significant risks of injuries to third parties,” Rhode says.
She adds that Remus’ article “is a very thoughtful analysis of a problem that hasn’t received sufficient attention. We have seen significant growth in the compliance area with lawyers and nonlawyers practicing in quasi-legal roles. There has been an absence of regulatory attention to the issues of growth in quasi-legal work. I agree there is a need for more empirical study of these issues.”
Peter Joy, who teaches legal ethics at Washington University School of Law in St. Louis, also agrees that “the bar has to begin by understanding better the nature and potential challenges of quasi-legal work and whether changes to the ethics rules are necessary.”
Adds Joy: “The first need is for empirical research to understand the issues before designing an appropriate regulatory response.” Even if problems are not pervasive, he says, “Remus is shining a spotlight on areas where abuses may be occurring and where the bar needs to focus attention.”
Joy questions another aspect of the discussion. “The second part of her thesis—that this leads to ethical abuses and ‘ethical arbitrage by sophisticated corporate clients’—is less convincing to me,” he says. “I do not see the type of cause and effect that Professor Remus posits: That because lawyers fill these corporate roles, it leads to or facilitates ethical abuses. For example, having a lawyer as a compliance officer within a corporation should lead to greater compliance with corporate rules, laws and government regulations rather than less.”
In her article, Remus identifies a first step for the profession: to “re-examine its current formulation of the ‘practice of law.’ ” She writes that the “ABA and state bars must renew their efforts to define legal practice more precisely.” She also writes that the legal profession should develop new forms of professional regulation that include: “(a) heightened disclosure requirements, (b) new rules governing transitions into quasi-legal roles, and (c) new rules creating conduct floors for all licensed lawyers, practicing or not.”
NEW OR NOT?
“I have a fundamental problem with the notion of regulating a ‘quasi-legal’ role, and am not convinced that such roles are especially new,” says Paul Paton, a professor at the University of the Pacific’s McGeorge School of Law and a reporter for the ABA’s Ethics 20/20 Commission.
For a long while, he says, lawyers have been operating in the other contexts Remus highlights in her article, though empirical study will help us better understand how this is changing and identify exactly what the problems are. “Further expanding the reach of what is defined as ‘the practice of law,’ though, risks overregulation without particular purpose and may simply serve to stifle innovation.”
“There may be a need for rules governing transitions into quasi-legal rules,” Joy says. And, as Remus suggests, “any such rules should be based on empirical research into what may be necessary.”
For example, he says, ABA Model Rule 8.4(c) provides: “It is professional misconduct for a lawyer to engage in conduct involving dishonesty, fraud, deceit or misrepresentation.” The rule may need to be re-examined, Joy suggests.
“In terms of new rules creating conduct floors for all licensed attorneys practicing or not, I think Model Rule 8.4 covers a number of situations that apply to all licensed lawyers, practicing or not,” Joy says. “Whether it should be amended is, again, a question that needs to be based on … empirical research.”
Some readers have told Remus she need not worry about quasi-legal roles because such activities face regulation under rules and regulations external to the legal profession.
But, Remus says, “for two reasons, the existence of other forms of regulation does not answer my concerns. First, I think there will still be risk of harm in the situations I highlight. With respect to fiduciary duties, for example, there is significant ambiguity as to how they apply in different contexts, weakening their efficacy in protecting clients and consumers.”
Second, she adds, “and more importantly, professional regulation —as opposed to other forms of regulation external to the legal profession—imposes important protections, not only for unsophisticated clients who don’t have the knowledge or information to effectively monitor their lawyers, but also for third parties and the public—individuals such as shareholders—who need protection against the ways in which sophisticated corporate clients may try to co-opt their lawyers to facilitate excessively aggressive or even illegal business strategies.”
This article originally appeared in the February 2014 issue of the ABA Journal with this headline: “Handling Hybrids: It’s time to look at regulation of ‘quasi-legal’ work done by lawyers.”