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April 30, 2000

BOG: Core values trump MDPs

By Gary Blankenship
Associate Editor

For more than two years, the issue of multidisciplinary practices has been
one of the stickiest controversies facing The Florida Bar.

Among other groups, an All Bar Conference and a town hall meeting failed
to reach a consensus about what the Bar should do, and even a special
committee was unable to make a strong recommendation after two years
of study and deliberations.

But after hearing four hours of reports and frequently contradictory advice,
the Board of Governors voted 44-1 at its April 7 meeting in Tampa to affirm
that lawyers may not practice law in settings where they share fees with
nonlawyers, the firm is partially or entirely owned by nonlawyers or where
the core values of the profession — including independence and protection
of client confidences — are compromised.

The board also approved in concept a motion to provide guidance to
Florida lawyers and the Bar's representatives to the ABA House of
Delegates, which is also studying the issue. The draft resolution calls for,
besides protecting core values, continued study on the future of the
practice of law and for the Bar to help members who want to operate
ancillary businesses.

And by a third vote, the board established a special three-member
committee to look at how the Bar's grievance and unlicensed practice of
law programs can ensure that Bar rules — including those against fee
splitting and nonlawyer ownership of law firms — can be enforced.

"I want to get the core question answered without bogging down," said
board member William H. Phelan, Jr., who immediately after the
presentations ended made the motion against fee sharing and nonlawyer
ownership. He said the motion was intended to oppose both any changes
to Florida Bar rules and to ABA model rules.

Board member John Hume suggested an amendment that the motion
include that "it is in the public interest to preserve a lawyer's undivided
loyalty to a client," as well as preventing fee sharing, and that the Bar
should "vigorously" enforce its rules, including prohibitions against fee
sharing and nonlawyer ownership. Board member John Cardillo said the
motion should specifically say no rule would be acceptable which would
change a lawyer's duty to protect client confidences.

Phelan accepted both as a "preamble" to his motion.

Board member Ed Dunn, who chaired the "pro-MDP" subcommittee of the
Special Committee on MDP/Ancillary Business, offered a substitute
motion that would allow lawyers to practice in an MDP as long as lawyers
owned a majority interest in the company. He noted an ABA commission
studying the issue has endorsed that position, as had the pro
subcommittee.

The board rejected Dunn's substitute by an overwhelming voice vote. It
then endorsed Phelan's motion 44-1 in a roll call vote, with Dunn casting
the sole negative vote.

The board next voted to approve in concept a proposal from the "con"
subcommittee, known as Alternative C, to give guidance to Bar members
and others of the Bar's position on the issue. The board attempted to craft
a final resolution based on the subcommittee proposal, but finally decided
to send it back to the subcommittee and reconsider the issue at its June 2
meeting in Naples.

"If this is a document that is going to conceivably be attached to lawsuits
[challenging the Bar's action], it needs to be a perfect document," said
board member Louis B. Vocelle, Jr.

The subcommittee's proposals ask that the ABA make no changes to
model rules to allow MDPs to give legal advice unless additional studies
guarantee that will further the public interest and won't compromise
lawyers' traditional independence and loyalty to clients.

It recommends the Bar take any and all steps to preserve lawyer
independence and loyalty to clients, including investigating MDPs and
prosecuting any violations found.

The Bar should also promote ancillary businesses for members to expand
their opportunities, the subcommittee recommended, and also study the
increasing globalization of the economy and how the legal profession
should react to that.

After the board took that action, board member Arthur Rice moved that a
special committee be created, to report back at the board's June 2
meeting. That panel will "work with the [Standing] UPL Committee to
determine the scope of the [MDP] problem, if any, that is currently not
being prosecuted, and if there is a problem determine whether present
resources are adequate, and if not adequate, make a recommendation on
what [resources] may be necessary," Rice said.

"It is not right for us simply to say, `All right, we're not going to split fees
and we're not going to permit nonlawyers to own law firms' and then move
on to the next item. There's more to do here."

Board member William Kalish suggested the committee also consider
what resources might be needed from the Bar's grievance process, since
that could be involved in any prosecutions. Rice agreed.

The motion passed unanimously, and Bar President Edith Osman named
Rice, Kalish and board member John Yanchunis, a former chair of the UPL
committee, to the panel.

Although their debate on the subject was limited, board members left no
doubt they were seeking to send a strong message about MDPs.

"The barbarians are not at their gate; they're eating off our plates," board
member James Lupino said. "I think we have to take an active approach in
enforcing the rules right now."

And member Anthony Abate argued there was no rush for the board to
redraft Alternative C merely so Bar members and others would know the
board's position.

"I think a 44-1 vote gives a sense of where The Florida Bar is on this
issue," he said.

The board did not lack for advice.

The special MDP committee submitted two reports, one each from the pro
and con subcommittees. It submitted a combined recommendation that
the Bar enforce its rules and also give guidance to lawyers seeking to
provide ancillary services to clients.

Reports were made on behalf of both subcommittees, as well as individual
committee members. And the Trial Lawyers; Elder Law; Real Property,
Probate and Trust Law; Business Law and Tax sections made
presentations, as did the Young Lawyers Division and the Dade County
Bar Association.

President Osman announced at the start she would not entertain motions
to table or end debate until all positions had been aired.

Board member Richard Gilbert, co-chair of the special MDP committee,
said the pro and con subcommittees differed mostly on a matter of
emphasis.

"The con view says you preserve the core values," he said. "You may
address change [in legal practice], but first of all you preserve the core
values and whatever change you accept is subject to that core value.

"The pro position essentially says it places slightly less emphasis on core
values. It says we are not going to exist unless we accommodate change,
and you preserve what core values you can once you have accommodated
that change."

If the board opposes MDPs, Gilbert said, then it will have to address the
costs of seeking to enforce Bar rules and address anti-trust and public
relations implications. If it favors them, then it will have to look at how to
preserve core values and guarantee lawyer independence in an MDP
setting, including ensuring that legal decisions are not made by nonlawyer
employees, he said. Those questions could include what type of
professionals would be allowed to partner with lawyers in MDPs.

The committee, Gilbert said, deadlocked 9-9 on the recommendation of
the con subcommittee to not allow MDPs, and then voted down the pro
committee's recommendation 7-11. The only agreement, he said, was to
recommend that the Bar enforce its existing rules, including Rule 4-5.4
which prohibits sharing fees with nonlawyers, and that the Bar should
provide guidance to lawyers who want to open ancillary businesses.

Among presentations to the board were:

Mike Tanner, chair of the Trial Lawyers Section, who said that
section opposes MDPs because they are a threat to the core
values of lawyers. He said the independence of lawyers has been a
strength of this country.

"Why is it necessary to fee share?" Tanner asked. "What's wrong
with the model of lawyers working together with other disciplines to
solve whatever the clients' problems are, but at the end of the
engagement, instead of one bill, the client gets two bills. That way
the client gets to one-stop shop, yet the lawyer remains a separate
economic entity."

Another possibility is a dual system like Britain, he said, where
solicitors can be in MDPs, but barristers, who do the trial work,
cannot.

Business Law Section Chair Howard Berlin, a member of the
special committee, said it is too early to write off MDPs.

"It's pretty obvious that the one-stop service entity has gained
tremendously in our market and our population is asking for it and
demanding it," he said. "The public is voting with its feet. It is not
just the man on the street, but also all the way up to the U.S.
Congress."

He added that the Bar's long-range plan calls for studying
alternative ways to deliver affordable legal services.

"The number one goal was to shape the practice of law to the legal
needs of the public," Berlin said, noting MDPs meet that goal. He
also said the issue needs considerably more study to work out how
rules would be imposed to protect core values, but added that is
not a reason to oppose the idea.

Elder Law Section Chair Mary Alice Jackson said an elder practice
by its nature is interdisciplinary because the lawyer usually has to
involve financial planners, health care professionals, insurance
agents, and frequently guardians and other professionals to best
serve the clients.

"Nonlawyer professionals and nonprofessionals are packaging
services for our clients and telling clients our services are
superfluous," she said. "They cannot do what we can do. What
happens to those clients and the people we are committed to serve
is they get royally misdirected? They will get back to us with an
incredible loss of service and loss of money.

"Consumers and clients these days have looked for one-stop
shopping. They will utilize our services if we can offer them an
environment that can also offer other services."

Tom Smith, chair of the Real Property, Probate and Trust Law
Section, said the section took a more middle-of-the-road approach
that seeks to preserve core values, but also "permit a lawyer and a
nonlawyer to form a partnership or other business entity to offer
services to the public, subject to restrictions and regulations."

The section also supports the latest recommendation from the
ABA's MDP commission that lawyer and nonlawyer partners in
such a firm would be bound by legal ethics and that nonlawyer
partners would not be allowed to practice law, he said.

Tax Section Chair David Bowers said accounting firms are now
hiring the best and brightest law school graduates, especially from
LL.M programs, under the guise of improving their consulting
services. The firms are not providing the mentoring and training
lawyers traditionally get from law firms, but they are using the new
lawyers to do legal work and give advice "to clients they will never
see."

The section, he said, favors enforcing Bar rules, but has not yet
directly addressed MDPs, although it plans to do so at a May
meeting.

Young Lawyers Division President Greg Coleman said the YLD
Board of Governors had trouble reaching a consensus. That board
opposed the pro position 22-7 but also voted down the con position
20-9. But they, he said, did urge the Bar to vigorously enforce all
existing regulations.

Dennis Kainen, president of the Dade County Bar Association, said
the association's governing board voted unanimously to oppose
allowing MDPs, or making any change that compromises the
profession's core values.

Miami attorney and former board member Mike Nachwalter, chair of
the con committee, said it is only special interests, and not the
public, that are seeking MDPs. He argued that MDPs cannot
function without violating the profession's core values and that
problems with MDPs are beginning to surface.

He said the Securities and Exchange Commission is moving to ban
audits by MDPs because of potential conflicts of a company getting
its legal and financial advice from one firm. And one of the big five
accounting firms, which is getting into MDPs, was sued by a client
for conflict of interest.

"I would say `no' to MDPs, not at this time," Nachwalter said. "I
don't think we can take a `try it' approach." He did say he
supported appointing another panel to study the future of the
profession.

Sam Ullman, another member of the MDP committee, said MDPs
are already a fact.

"As much talent and intelligence and good will is in this room, this
Board of Governors will not make that decision [about allowing
MDPs]," he said. "The marketplace will make the decision, as it
always has about everything."

While he's convinced lawyers in consulting companies are
practicing law, Ullman said it would be nearly impossible to make a
case against them for UPL.

"The challenge before us is very simple. It's happening. Stop
debating about whether we have it," he said. "The question is how
we're going to regulate it. The question is whether we want
thousands and thousands of lawyers outside the regulatory tent, as
they currently are."

Martin Garcia, co-chair of the MDP committee and a former board
member, said he thinks MDPs may be only a fad that won't last.

"The fundamental premise of the proponents of the MDP model is
that if we as a profession do not bundle our services with other
professions, we will become extinct," he said. "I have to tell you, I
don't believe it. I haven't seen sufficient or credible enough evidence
to support it."

Garcia said he rarely practices law and instead spends his time on
business activities. He said he considered taking his company
public a couple years ago, and made sure he got separate legal,
financial and accounting advice rather than relying on one
"consulting" firm.

"I don't want to go to an advisor who is selling me products," he
said. "I want to go to a lawyer who renders independent advice."

He added he sits on the board of a public company, and the
company president has the same outlook, having rejected offers
from consulting companies to do all those services.

Dunn, chair of the con subcommittee, said lawyers are wrong to
think they continue to monopolize information about legal services
and problems in this age of widespread Internet access.

"We are the last profession to recognize that the market is
dominating what we do," he said. "A customer never buys what the
seller sells; the customer buys what the customer wants."

And while lawyers may worry that clients could compromise their
confidentiality by getting legal services from a consulting firm, that's
a decision for consumers to make, he said.

"If my client wants to go down to the accounting firm and retain the
lawyer in that accounting firm and is willing to accept less in those
protections, am I the one to tell the client he or she is
incompetent?" Dunn said.

He said the pro subcommittee's proposal to allow MDPs with at
least 51-percent lawyer ownership was a reasonable compromise
that recognized new economic trends. The group also wants a
full-time commission to help reinvent the legal practice in Florida in
light of economic pressures, Dunn said.

Board member Carol Brewer, a member of the special MDP
committee, said a disbarred lawyer could become a nonlawyer
partner in a MDP, and continue to practice.

"In my opinion, the public doesn't know what it wants," she said.
"Why require people to go to law school and to take the bar exam if
we're going to let the market dictate whether they want someone
with certain qualifications or not?"

President-elect designate Terry Russell, also a member of the
special committee, said he started out in favor of MDPs, but
changed his mind, calling them the "Wal-Martization of our
profession."

"I was being asked to recommend the most significant change in
American legal history, and I could not find a reason for such a
change," Russell said of MDPs. He added that MDPs would be set
up not just by the big five accounting firms, but also by financial
institutions and unlicensed legal technicians.

He urged the board to support the con subcommittee's Alternative
C proposal, and estimated there are only 2,000 to 3,000 lawyers
nationwide, and a few hundred in Florida, working in an MDP
setting. Russell said it's time for the Bar to serve the interests of
the vast majority of its members who aren't part of MDPs.

Board members asked several questions and made several
observations to those testifying.

Public board member Dr. Alvin Smith warned that MDPs could do
for lawyers what HMOs did for doctors — take away their ability to
decide what is best for clients.

Yanchunis said it's a false impression that the Bar won't prosecute
and the Supreme Court won't act on cases involving sharing fees
with nonlawyers. He said there are at least 10 recorded decisions
where the court has enforced the rule.

The RPPTL's Smith, in response to a question, said prosecuting
consulting firms for UPL will be difficult because they will claim they
are performing legal-related work and avoiding UPL by having
attorneys do the document drafting.

And the Business Law Section's Berlin warned the Bar's UPL
budget of just over $1 million isn't nearly enough to address the
MDP issue.

"If you are going to take that approach, then $1 million . . . is a spit
in the ocean to prosecute that type of conduct that is going on all
over the country and on the Internet," he said.

Board member David Welch said he agreed that $1 million might
not be enough to effectively prosecute MDPs, but he disagreed with
the assessment that such prosecutions would be difficult.

"If an estate planner goes on the Internet and says he will prepare
the estate plan . . . that's UPL and can be prosecuted," he said.

[Revised: 09-29-2014]