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Wendy R. Leibowitz · Live From London
The Bar and MDPs: Reality Bites
A Report From the Floor of the ABA Annual Meeting

July 28, 2000 (SmartPros) Reality bites, as the saying goes. American Bar Association members now are feeling the bite of reality in their House of Delegates’ recent 314-106 vote against multidisciplinary practices (MDPs) at phase I of the ABA annual meeting in New York.



According to Joseph M. Manko, "they are waking up and saying, ‘Ouch! What have we done?’" He considers the expertise of the staff engineer at his environmental law firm to be an essential resource for counseling clients.

Some lawyers, speaking a week after the vote at the subsequent London portion of the annual meeting, were harsh in their evaluation of the MDP vote. "The ABA’s actions are an embarrassment," said Daniel R. Fischel, dean of the University of Chicago Law School. "They talk about lofty ideals of client service. Behind the ideals, they’re behaving like the most protectionist trade union."

The ABA’s vote reinforced the ethical ban against sharing fees with nonlawyers, such as accountants, engineers, consultants and other experts retained in the course of advising clients. "In a world of increasingly complicated transactions, what possible difference does it make to the client if the expert is a member of the law firm, or retained separately?" asked Dean Fischel. The issue is one of control.

The outcome of the vote, which the ABA called necessary "to preserve the core values of the profession," iterated that lawyers must not transfer ownership or control to nonlawyers. Arguably, attorneys do precisely that by working in large accounting or consulting firms.

Indeed, as the Big Five accounting firms absorb whole law practices, the issue of loss of control and lawyer independence may be much more psychologically difficult than the issue of "fee-sharing," which can be -- and routinely is -- circumvented with creative accounting. "We have had pension experts, who are not lawyers, for a long time," said Judith Mayhew, a partner in the London office of Clifford Chance Rogers & Wells. "We call them directors, and we pay them a salary and a bonus, instead of a partnership draw, but it’s an artifice really."

The issue is not confined to large, international firms like CCR&W. Mr. Manko, the environmental lawyer, would like to launch an MDP. Actually, he already works in one, in virtually all but name. He left a prominent law firm and, with two other lawyers, established Manko Gold & Katcher in Bala-Cynwyd, Pa. According to the firm’s Web site (www.mgklaw.com ), it is a "full service environmental firm." Assisting the 24 lawyers in providing full service to clients is an engineer, Darryl D. Borrelli.

"The clients love the engineer," said Mr. Manko. "Half of the time I think they come for the engineer, not for me. But to attract and retain such qualified professionals, the firm must offer them full partnerships. Otherwise, it always feels as if the engineers work for us."

The strong reaction to the ABA vote may be surprising, given that it is not binding on individual lawyers. ABA membership, after all, is voluntary. It is the state bar associations that draw up rules governing their members, and that can take action --up to disbarment -- against members who run afoul of those rules.

South Carolina and the District of Columbia bar associations explicitly permit MDPs, enabling Washington, D.C.-based Arnold & Porter to run both a legislative consulting arm and a public-relations firm to assist clients. Ernst & Young, the accounting firm, shares space and fees with the lawyers in its practice in Washington. "So what?" asked Dean Fischel. "There is no evidence that clients are harmed by this."

Some lawyers note that MDPs have existed for quite some time. Patent agents, who take a separate exam to qualify for the patent bar, need not be lawyers, and tax lawyers have worked beside accountants for years. "The MDP issue is not new," noted incoming ABA President Martha W. Barnett, who is a tax attorney in Holland & Knight’s Tallahassee, Fla., office, and who also specializes in ethics issues.

Ms. Barnett spoke in favor of a substitute motion on the floor of the ABA House of Delegates, urging further study of the issue rather than a yes/no vote on MDPs themselves. Her motion failed.

Who Needs Clients?
The driving force behind the MDP phenomenon is the client seeking "one-stop shopping" for legal and other services. "This is market-driven," said Samuel DiPiazza, a senior partner in the tax and legal services department of PricewaterhouseCoopers in New York. Mr. DiPiazza said he receives at least two calls a month from law firms wanting "to do something" to hook up with accountants and consultants. "The ABA will be forced to amend the [ethics] rules."

Indeed, of the eight members of the London panel, "MDPs: The Future is Now," none was opposed to MDPs, although one -- Hon. E. Norman Veasey of the Chancery Court in Wilmington, Del. -- was neutral. "I can say that I am uncomfortable with fee-sharing with nonlawyers -- there’s a rule against it," said the judge.

The Model Rules of the ABA, and its Canon of Ethics, carry significant weight in the profession. "Those engaged in MDPs right now are engaged in civil disobedience," said Irwin L. Treiger, a tax attorney with Dorsey & Whitney in Seattle. "MDP practices will grow and have the same consequences that civil disobedience had in the United States several decades ago."

Mr. Treiger said he had changed his position "180 degrees" after studying the MDP issue. At first, he resisted the idea of large accounting firms moving into the practice of law. "I thought these guys were going to eat my lunch," he said. "But I changed. The tax lawyer in the Big Five does exactly what I do. No difference."

He now is untroubled by the new competition, because it is the same as the old competition. Issues of control, or of the independence of lawyers, are smokescreens. To say that the lawyer-accounting firm violates legal ethical rules, or that accountants are somehow offering inferior services to clients is "arrogant and short-sighted," he stated.

Information technology also is driving MDP formation. John Tredennick, a litigation partner and chief information officer at Denver’s Holland & Hart, also heads the firm’s technology business, which is called Trial Partners. Marvin Chavis, in the Winston-Salem, N.C., office of Womble Carlyle Sandridge & Rice, has spearheaded information technology innovations through a separate department within the firm. This ClientPlus Technology Services Group offers technology services and consulting to the firm’s clients.

It is only a matter of time before a large technology company offers technology plus legal services for a litigation matter. If lawyers are not in control of the business, employing the nonlawyer technology partners in a subservient role, the techie-lawyer partnership would violate ABA ethical rules.

Bend the Rules? Change the Rules?
Chairing the MDP panel discussion in London was Herbert S. Wander, an attorney with Chicago’s Katten Muchin & Zavis. Mr. Wander said the profit motive seemed to be driving much of the move toward MDPs. "Lawyers don’t want to be deprived of opportunities." Clients also seek the convenience of having a multiprofessional team available for large transactions. When client service meshes with the profit motive, what else is the lawyer to do?

Mr. Wander said he framed the issues two ways. First, he asks, "How will lawyers continue to offer top services to clients in a competitive environment, within the ethical rules? Or should the rules be changed?" His second query is "Will the public be harmed by the perception that lawyers are not independent?"

The answer, it seemed, was to change the rules. Many panelists perceived that the ethical rules appear to be written with litigators in mind. Accordingly, the rules appear to ignore transactional lawyers seeking to provide multiprofessional teams to handle global deals.

The issue, said Ms. Mayhew, calls into question the very nature of "practicing law." For many attorneys, it is not litigating, but providing advice to clients to avoid litigation. This frequently requires consulting nonlawyers who specialize in other areas.

Ancillary Concerns
Also of concern to MDP opponents are the issues of attorney-client privilege, which is sacred, and of avoiding conflicts of interest. Client confidentiality is handled through separate contracts with nonlawyers on the team, said those involved in MDPs. Litigators facing conflicts, moreover, have long sought written waivers from clients, or have established "ethics walls" (formerly known as politically incorrect "Chinese Walls") among different members of the firm.

These arrangements raise eyebrows, but exist apart from the MDP issue -- that is, they exist within lawyer-only partnerships as well. Client confidence in the legal profession, then, rests not exclusively with lawyer-only firms, but rather on the maintenance of high ethical standards within any partnership.

Worst of all, said the panelists, is that the ethics rules seem to assume that only lawyers have ethics. "The ethical standards of other professions seem unimportant to the ABA," noted Ms. Mayhew. Harmonizing legal ethics rules with accountants’ ethics rules is possible, but only if MDPs are authorized.

Ms. Mayhew warned that MDPs are just the beginning. Australia allows MDPs and is already moving forward to new issues, such as whether law firms can be floated on the stock exchange.

The ABA has not addressed that issue -- yet.

Please send comments, questions and article proposals to information@smartpros.com.

2000, Smartpros Ltd. All Rights Reserved.

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