The Florida Bar
Multidisciplinary Practices, Ancillary Businesses and the Legal Profession
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II. Bar Position
IV. Facts and Statistics
According to the American Bar Association (ABA), an ancillary business is one in which an attorney is involved in a legal practice as well as an additional law-related business. Implicitly, ancillary business is not the practice of law as a profession. The provider does not regard the business as within a client-lawyer relationship, and one is not intended to exist. The ABA Model Rule of Professional Conduct 5.7(b) defines "law-related services" as denoting services that might reasonably be performed in conjunction with the provision of legal services, and that are not prohibited as unauthorized practice of law when provided by a nonlawyer. Ancillary businesses differ from multidisciplinary practices (MDPs), in that MDPs incorporate legal services into their practice. MDPs are owned wholly or in part by nonlawyers.
In recent years, foreign countries have begun allowing MDPs to provide myriad services to clients. These foreign MDPs usually consist of attorneys, financial planners, accountants, social workers and psychologists, with professionals from each discipline sharing fees. Foreign MDPs are not regulated by the strict rules found in the U.S. prohibiting such combinations and fee-sharing. In most civil law countries, the functions commonly performed by attorneys in the U.S. are divided among different legal professionals, including notaries, tax advisors, and lawyers with a right of audience.
The discussion regarding MDPs has been prompted by the Big-5 U.S. accounting firms, which are aggressively recruiting lawyers to work on issues for accounting firm clients and developing affiliations with law firms in Europe. This also led to discussion about multidisciplinary partnerships, in which professionals from different disciplines co-own partnerships (e.g., a lawyer and an accountant, a lawyer and a social worker, etc.).
Current rules prohibit lawyers from participating in multidisciplinary partnerships and restrict participation in MDPs to a minimum. The ABA Model Rule of Professional Conduct 5.4 (a) prohibits a lawyer from sharing fees with a non-lawyer, except under limited circumstances. Rule 5.4 (b) prohibits lawyers from joining into an MDP if any of its activities consist of the practice of law.
The majority of arguments against allowing ancillary businesses or MDPs in the U.S. center around maintaining client confidentiality, preventing conflicts of interest, maintaining independent professional judgment, client loyalties and client confidences. Other critics argue lawyers in these organizations have the potential to lose their professional independence, in order to protect the success of the business. Proponents argue that nothing in their affiliations with nonlawyers causes unique or insurmountable ethical problems. Proponents of MDPs point out that "full-service" or "one-stop" practices would best serve the public's interests by providing a variety of inter-connected services under one roof. Advocates of both ancillary businesses and MDPs argue that the organizations serve to enhance the cost-effective delivery of legal services.
II. Bar Position
A. American Bar Association Position:
In 1994, the ABA House of Delegates voted to adopt Model Rule 5.7 of the Model Rules of Professional Conduct as proposed by the House Committee on Ancillary Business. The rule defines the parameters under which a lawyer who provides "law-related services" will be subject to the Rules of Professional Conduct.
In August 1998, the ABA established a 12-person Commission on Multidisciplinary Practice to examine developments in the delivery of legal services, both in the U.S. and abroad. In June 1999, the Commission submitted a Report with Recommendation to the House of Delegates in which it recommends a limited relaxation of the prohibitions against sharing legal fees and forming a partnership or other association with a non-lawyer when one of the activities is the practice of law.
Specifically, the Commission said:
- The legal profession should maintain professional conduct rules to protect its core values, but do not unnecessarily inhibit development of new structures to deliver legal services that are more effective and offer better public access to the legal system.
- Lawyers would only be permitted to share fees in the context of MDPs.
- Allowing lawyers to provide legal services through MDPs would not change the prohibition against nonlawyers providing legal services.
- A lawyer in an MDP should remain bound by the rules of professional conduct, particularly those relating to confidentiality and loyalty, and could not defend misconduct by citing orders from a non-lawyer supervisor.
- All professional conduct rules that apply to a law firm should apply to an MDP.
- All MDP clients should be treated as lawyers' clients when determining potential conflicts of interest.
- If an MDP client is being served by both a lawyer and a non-lawyer on unrelated matters, the lawyer must make reasonable efforts to ensure the client understands that a non-lawyer may have legal obligations to disclose certain information, while the lawyer has the obligation to keep the information confidential.
- If a lawyer and non-lawyer are serving an MDP client on related matters, the lawyer must make reasonable efforts to ensure the non-lawyer conforms to legal professional ethics.
- An MDP could not avoid regulation under lawyer standards by describing legal services rendered by an attorney in the MDP as something other than legal services.
- As a condition of allowing fee-sharing and partnerships between lawyers and nonlawyers, MDPs would be required to certify to the highest court of each jurisdiction in which the MDP performs services that:
- The MDP will not interfere with lawyers' exercise of professional judgment;
- The MDP will enforce procedures to protect the lawyers' exercise of professional judgment;
- The members of the MDP will abide by legal ethics rules when delivering services to a client, any portion of which would be considered practicing law if done by a lawyer in another setting;
- The MDP will respect the unique role of lawyers in society as officers of the legal system and as having special responsibilities for the administration of justice, including rendering pro bono services;
- The MDP will annually review its procedures, amend them as needed, and provide each attorney in the MDP with a copy of the certificate;
- The MDP will permit the highest court in each jurisdiction in which it serves clients to conduct an administrative audit at will;
- MDPs would bear the cost of regulation through an annual certification fee.
The commission heard comments on the proposals on August 8, 1999 and presented its recommendations to the ABA House of Delegates on August 9 and August 10, 1999. The House of Delegates instead approved a proposal, 304-98, by The Florida Bar (see below: Florida Bar Position) urging the ABA to complete further analysis regarding the effects of allowing MDPs before changing its Model Rules of Professional Conduct. The ABA House of Delegates revisited this issue at its July 11, 2000 meeting, rejecting the concept of multidisciplinary practice by a nearly 3 to 1 vote. The ABA House of Delegates instead chose to re-affirm its position that the core values of the legal profession protect the public and are inherently inconsistent with the concept of MDP, adopting the resolution advanced by The Florida Bar and several other state bars.
B. Florida Bar Position
At the February 1999 All Bar Conference, a survey of the delegates' opinions about ancillary businesses was administered, finding that a majority of the delegates was in favor of allowing lawyers to participate in ancillary businesses on the condition that The Florida Bar adopted a rule dealing specifically with the issue. During the conference, delegates made it clear that though they support lawyers expanding the scope of their services, they felt the Bar should provide regulations against lawyers who are effectively rendering legal advice through non-law firms.
In the past, leaders of the Bar have urged members to oppose MDPs, and the members themselves appear divided on the topic. However, some of the Bar's members have gradually swayed towards allowing MDPs, arguing that lawyers need to stay competitive with other professional fields. The Board of Governors voted in 1999 to forward a resolution to the ABA urging it to make no change, addition or amendment to the Model Rules of Professional Conduct unless and until extensive and well-reasoned analysis demonstrates that such changes will further the public interest without sacrificing or compromising lawyer independence and the legal profession's tradition of loyalty to clients. The ABA House of Delegates accepted The Florida Bar's proposal to conduct a closer examination of the potential effects of allowing MDPs before changing its Model Rules of Professional Conduct (see above: American Bar Association Position).
The Board of Governors voted 44-1 at their April 2000 meeting to reject multidisciplinary practices. President Edith Osman appointed a special committee -- The Florida Bar Special Committee on Multidisciplinary Practice and Ancillary Business -- to determine how the Bar should enforce rules against fee-splitting and non-lawyer ownership. President Herman Russomanno appointed a successor special commission in July 2000 to continue monitoring multidisciplinary practice developments in other jurisdictions and to educate Florida Bar members on the ethical use of law firm ancillary businesses. That commission developed two forms for lawyers for use in connection with an ancillary business that are available on the bar's website.
A. American Bar Association
In 1983, the American Bar Association attempted to pass an updated version of its standards of professional responsibility which would have overturned a century-long rule prohibiting non-lawyers from owning law firms. A last minute amendment allowed the 1908 prohibition to remain. Court-imposed lawyer ethics have expressly forbade mixed professional partnerships since 1969.
In the early 1990s, accountants looked for ways to expand their practices when their tax preparation business lagged, as a result of IRS simplification. Large accounting firms such as Arthur Andersen & Co. moved into consulting work, and later into law practice overseas, where the regulations against such practices are more relaxed. The other Big-5 accounting firms, Price Waterhouse Coopers, Ernst & Young, KPMG and Deloitte & Touche, soon followed suit.
International bar associations have recently wrestled with the feasibility of MDPs as well. The International Bar Association (IBA) neither opposes nor approves of MDPs. However, the IBA lays out the principles that should govern MDPs if a jurisdiction should choose to permit them. In 1996, the Council of Bars and Law Societies of the European Union (CCBE) strongly opposed MDPs, and though some members sought to relax the group's opposition to MDPs, its position has not changed.
The Paris-based law association, l'Union Internationale des Avocats (UIA), has proposed universal ethics standards which they say could "serve as a model for the United States and other countries that are considering allowing lawyers to form multidisciplinary practices." Some critics say the standards are unenforceable against nonlawyers, while others say they favor lawyers at the expense of others.
B. The Florida Bar
In July 1997, The Florida Bar created the Special Committee on Ancillary Businesses to study the effect of ancillary businesses on the legal profession. However, a related issue became more pressing, and in May 1999, the Bar created a board-level Multidisciplinary Practices Committee to further probe the possible effects of MDPs on the profession.
The February 1999 All Bar Conference was devoted to the topic of ancillary business, and members of the Special Committee on Ancillary Businesses held a day-long public hearing and reviewed 3,000 pages of information. At the conference, the delegates concluded that attorneys should be allowed to engage in ancillary businesses, but the current rules need to be modified to regulate the practice. Delegates at the conference expressed several concerns, including keeping client confidentiality intact and preventing conflicts of interest. The delegates also said if the legal profession is taken over by businesses, there will be little reason for lawyers to be regulated by the Supreme Court, rather than the Legislature.
In August 1999, The Florida Bar presented its recommendations to the ABA House of Delegates, urging the House not to allow MDPs or ancillary businesses until further study has been conducted. The recommendations noted the following:
The historical prohibition against sharing fees with nonlawyers is to protect attorneys' independent professional judgment and their loyalty to clients. If nonlawyers -- for example, accountants, financial planners, social workers, counselors, health care providers -- are partners or share fees with attorneys, they may direct or control an attorney's representation of the client. It is unrealistic to expect attorneys' independent professional judgment will not be affected by the nonlawyers who employ them and set their salaries and benefits. Client confidentiality, client loyalty and lawyer independence are the core values of the legal profession. Maintaining and protecting those values by our legal system is the greatest American tradition of all.
The Florida Bar Special Committee on Multidisciplinary Practice and Ancillary Business conducted debates and forums to allow the public at large and the Bar at large to have the opportunity to express their opinions and concerns about the issue.
Although the special committee did not agree on specific recommendations to the board of governors, the board voted overwhelmingly to oppose MDPs and to advocate that position to the ABA House of Delegates. The Florida Bar's position was ultimately adopted by the ABA in July 2000 (See above: American Bar Association Position).
IV. Facts and Statistics
- In April 1998, Arthur Anderson & Co.'s 1,500 worldwide lawyers made it the second-largest employer of lawyers in the world.
- In November 1998, Price Waterhouse Coopers employed 1,663 nontax lawyers in 39 countries, and Arthur Andersen employed 1,500 in 27 countries.
- Results of a 1996 survey of IBA Councillors regarding the status of MDPs in their jurisdictions:
- 45% of responding countries reported that they have legislation or regulation regarding MDPs of which three-quarters prohibit them.
- 52 percent had no legislation or regulation, but three-fifths of that group are considering the issue, the one-third of them currently allow MDPs.
- In 20 percent of responding jurisdictions, nonlawyers may own an equity interest in an organization that delivers legal services.
- In 24 percent of responding jurisdictions, nonlawyers can share in fees and profits from the delivery of legal services.
- In 72 percent of responding jurisdictions, organizations other than law firms are currently providing legal service to others
- In 55% of those jurisdictions by accountants
- In 34% by consulting firms
- In 41% by banks
- In 24% by others, including trust companies, licensed conveyancers and trade unions
- In 20% of jurisdictions where organizations other than law firms provide legal services, they do so in violation of rules of professional conduct.
- Remedies available in countries where MDP legislation or regulation exists, include:
- Criminal prosecution -- 10%
- Injunction against unauthorized practice -- 7%
- Civil fine or penalty -- 7%
- In 83% of responding jurisdictions, lawyers can provide services other than pure legal representation (e.g. consulting, economic analysis, etc.)
- In 45% of responding jurisdictions, lawyers can become owners in accounting firms; in 38% of jurisdictions, they cannot.
Prepared by The Florida Bar Department of Public Information and Bar Services with assistance from the Ethics and Advertising Office