Let me explain my perspective. In my first career as an urban planning consultant, it was very common to find planners, architects, landscape architects and engineers -- all "licensed professionals" -- practicing together. In some states, they were allowed to form partnerships. In others, where multiprofessional partnerships were not permitted in some or all of those fields, the nature of the arrangements were principally strategic alliances and joint ventures. It was the most efficient way to serve clients: by providing the comprehensive solutions they needed. It was common. It was accepted. It worked.

So, What’s New?
When I started getting involved with law-firm ancillary business activities in the mid-1980s, it seemed sensible that similar arrangements would come to the legal profession, albeit gradually. To be sure, the profession can be slow to change. However, in gathering data for my firm’s database on ancillary business activities and in writing on the topic, I discovered that these ventures were not so new -- even for law firms, even back then.

In fact, long before Arnold & Porter drew attention for establishing four ancillary businesses as separate entities, firms around the country -- particularly small firms -- had established entities to handle such things as real estate brokerage, tax services, trust services and other services, either specifically for their clients or as additional revenue streams. For the most part, they flew beneath the radar screen until Arnold & Porter’s activities drew scrutiny. When the American Bar Association focused its attention on this, perceiving it -- erroneously -- as a Washington, D.C.-based, large-firm phenomenon, some members of the bar staked out strong positions, and it became a hot issue.

In doing further research in 1986, I found that it was not particularly uncommon for law firms to employ, within the partnership structure, economists, doctors, nurses, lobbyists, public-relations specialists and all sorts of technical people to work on client matters. It simply made sense.

Again, this usually was done quietly, without major publicity efforts that would draw attention to the practice. Given the profession’s commitment to its self-regulatory traditions, most firms did not want to spotlight activity that many lawyers considered to be controversial, even though it was legal and, within adherence to professional canons, ethical. Tracking these entities since 1985, my firm has identified about 40 different types connected to law firms of all sizes throughout the country.

Creeping Invasion
Fifteen years later, however, there has been no radical shift inside the profession on this issue. A growing minority of firms have established ancillary businesses, but the movement never became an avalanche. The District of Columbia has been the lone jurisdiction to enact legislation to permit fee-sharing and partnerships with nonlawyers, and less than a handful of D.C. firms have exercised that authority. There had been no earthquakes or bolts of lightning; the status quo was more or less undisturbed until law firms awoke to the long-pending threat of territorial encroachment from the large accounting and consulting firms.

While law firms have been striving to compete with rival law firms, they largely have ignored the creeping invasion of their turf from a host of other professions and service businesses, including:

Decorum Be Damned
In most of these examples, there was a genteel division of labor and roles between lawyers and other experts. Amid growing pressures for more revenue and for new services to compensate for those less in demand, however, the lines are becoming blurred and the competition is exercising decidedly less decorum. Call it "MDC": multidisciplinary competition.

The threat that has gotten the most attention in recent years is the formation of MDPs by large accounting/consulting firms in foreign jurisdictions, particularly in Europe, where they are permitted. Although this is not yet allowed in the United States, Ernst & Young appears to be attempting to form a "captive" law firm -- McKee Nelson Ernst & Young -- with former King & Spaulding lawyers in Washington. Though not technically "owned" by E&Y, which is funding it, this is potentially more than an ancillary business.

We are seeing more strategic alliances being formed by law firms, not just with other law firms, but with accounting firms, such as the alliance of the SALTNET (State and Local Tax Network) firms -- Morrison & Foerster, Horwood Marcus and Walter Hellerstein -- with KPMG to strengthen their state and local tax practices. KPMG told the allied firms, by the way, that it does not wish to become a law firm. Another example is Miller & Chevalier’s alliance with PricewaterhouseCoopers a few years ago. These could be models for the future.

Market Forces
Ancillary business activities and strategic alliances are not true MDPs, which permit fee-sharing between attorneys and nonlawyers, as well as full, multiprofessional partnerships practicing under one roof and letterhead. They incorporate much of the essence, spirit and client-focused purpose of MDPs, however. In reality, therefore, the MDP phenomenon has occurred, regardless of whether or when the organized bar and state legislatures sanction them. If the marketplace embraces MDPs, lawyers should take the lead in shaping them to meet the profession’s standards of ethics and integrity.

The sky is not falling. The question is whether lawyers will embrace the market or cling to a traditional business environment that limits creativity and talent in the service of clients, despite immense pressures that already are transforming it.