California Bar Journal
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Should bar members be permitted to enter into partnerships with non-lawyers to provide professional services?
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EDITOR'S NOTE: The American Bar Association Commission on Multidis-ciplinary Practice has recommended that a lawyer be permitted to deliver legal services through a multidisciplinary practice (MDP), defined as a partnership, professional corporation or other assocition or entity that includes lawyers and non-lawyers and has as one, but not all, of its purposes the delivery of legal services to a client(s) other than the MDP itself or that holds itself out to the public as providing nonlegal, as well as legal, services. It includes an arrangement by which a law firm joins with one or more other professional firms to provide services, including legal services, and there is a direct or indirect sharing of profits as part of the arrangement. To accomplish this result the commission suggests amending numerous ABA Model Rules, stating that the legal profession should adopt and maintain rules of professional conduct that protect its core values but should not permit existing rules to unnecessarily inhibit the development of new structures for the more effective delivery of services and better public access to the legal system.
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Demetrios DimitriouSan Francisco attorney Demetrios Dimitriou serves as ethics counsel to individuals and firms; acts as an expert witness on ethics and standard of care issues; represents individual attorneys, firms and clients in fee disputes; and advises firms on internal practice management issues including malpractice risk reviews and firm dissolutions.

The rules should be changed now to reflect the realities of current client and public needs


The principal purpose, justification and focus of the Rules of Professional Conduct should be on the needs of consumers of legal services, the scope of those services and what the profession must do to meet these needs while at the same time protecting legitimate client interests. To the extent existing rules are "lawyer turf protecting" rules, any attempt to continue supporting such rules will ultimately fail.

Some undeniable facts

1. In spite of the existing rules, there is a widespread and pervasive rendering of services by non-lawyers which lawyers have traditionally performed and which lawyers consider to be the rendering of legal services. For example, see the American Bar Association Commission on Non-lawyer Practice Report "Non-lawyer Activity in Law-related Situations" 1995, dealing with paralegal activities, non-lawyer representation before administrative bodies, and typing services [preparation of bankruptcy petitions and divorce documents], among other non-lawyer activities in law-related situations.

2. An increasing number of lawyers are practicing law with financial management firms, accounting firms, consulting firms, insurance firms [life and accident] and banks, to name a few, as employees or equity owners. These lawyers are rendering legal services to their firm clients and the fees charged for these legal services are paid to the firm [fee sharing with non-lawyers]. See item 5 below.

3. There is an increasing tendency by legislatures to permit non-lawyers to render services to the public which services have traditionally been rendered by lawyers, e.g., workers' compensation matters and representation of taxpayers before the U.S. Tax Court.

4. There is no consensus within the legal community with respect to what the unauthorized practice of law entails, e.g., some say that whatever activities a lawyer undertakes, in his/her capacity as a lawyer, is the practice of law. Although the unauthorized practice of law is a crime, it is perceived as a low-level crime and very casually enforced, if at all, by district attorneys in most instances. It is also a violation of California Rule of Professional Conduct 1-300 [Unauthorized Practice of Law], which proscribes attorneys from aiding another in the unauthorized practice of law.

5. All states have a rule of professional conduct patterned after, or similar to, ABA Rule 5.4 - Professional Independence of a Lawyer [proscribing the sharing of fees for legal services with non-lawyers]. The rule in California is Rule 1-320 [Financial Arrangements with Non-Lawyers]. This rule is almost never enforced against lawyers except in instances where an attorney is engaged in "running and capping" activities. An interesting non-running and capping case is Crawford v. State Bar (1960) 54 Cal.2d 659. Also, the activities described in item 2 fall within this rule's proscription.

6. The current activities of lawyers practicing law, even though some insist that they are only acting as consultants, involve the violation of the above rules in addition to the possible violations of Rule 1-310 [Forming a Partnership With a Non-Lawyer], Rule 1-400 [Advertising and Solicitation], Rule 1-600 [Legal Services Programs], Rule 3-300 [Avoiding Interests Adverse to a Client] and Rule 3-310 [Avoiding the Representation of Adverse Interests]. In spite of the above violations, the State Bar does little to enforce these existing rules against those violating them, both lawyers and non-lawyers.

Needs of consumers

Unless we can, as a profession, meet the current and future needs of consumers of legal services, we will become irrelevant as a profession as we know it. A new class of "lawyers" will merge to fill client demands and needs and their economic concerns. Students will be going to law schools and graduating with the necessary legal skills and then going to work for various multidisciplinary practices, (passing bar exams but not being sworn in by courts, thereby not being burdened by arcane rules having little relevance to themselves, their partners, their employers or clients being served). Only lawyers practicing before some courts will be licensed (take the oath), at least until changed by legislation or international treaties entered into with other countries.

The future path

What should we do - change the rules?

Yes! We should change the rules.

At a minimum, the existing rules should be changed and refocused to meet the needs of consumers of legal services.

Those aspects of the existing rules which focus on "turf protection" should be eliminated. The more troubling aspect is the bar's failure to enforce the current rules. It is duplicitous for the bar to have rules which are ignored, unenforced or very selectively enforced.

Our rules should be changed to reflect the realities of current client and public needs and be subjected to rigorous bar enforcement. To have rules, either existing rules or changed rules, which the bar is unwilling to enforce across the entire profession should be untenable.

The bar's continued failure to adequately enforce existing rules results in the public's disrespect for the bar and its members.

How can we justify our alleged right to a "legal monopoly" and right to self-policing/governing if we continue as we have in the past?

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David M.M. BellDavid M.M. Bell, now in private practice, is former State Bar director of professional competence, overseeing rule development and the Ethics Hotline. He can be reached at

With many ramifications, it clearly is too soon to change the rules without having an adequate debate


The ABA Commission on Multidisciplinary Prac-tice has released its report recommending that lawyers be permitted to enter into partnerships with non-lawyers to offer mixed professional services, including legal services, to the public. A multidisciplinary practice (MDP) would provide an efficient, coordinated "one-stop" package of services to a client. Possible services to be offered are myriad and could include, among others, accountancy, architecture, consulting, financial planning, law, lobbying, psychological counseling, social work and tax return preparation. The commission report notes that both clients and lawyers see a need for MDPs and that corporate law firms, as well as lawyers in solo and small firm practices, show substantial interest in forming MDPs.

Different forms

An MDP could come in many different forms, including partnerships, professional corporations and associations. The commission model would permit an MDP to be controlled by non-lawyers, and would allow an MDP to provide legal services as an adjunct, or secondary, service in support of a primary service, such as financial planning. Lawyers in an MDP would be permitted to share legal fees with non-lawyer partners, and to share in the profits generated by the MDP's non-legal divisions. Non-lawyers in an MDP, while permitted to share legal fees, would not be permitted to practice law.

Professional conduct rules create a barrier to the formation of MDPs by lawyers. Current prohibitions against fee sharing and the formation of partnerships to practice law with non-lawyers would need to be relaxed in order to permit lawyers to form MDPs with non-lawyers. In addition, observers agree that confidentiality and conflict of interest rules would require amendment, in order to recognize MDP practice while simultaneously protecting professional independence and client interests adequately. Not unexpectedly, the commission has recommended abolishing the fee sharing and partnership prohibitions regarding lawyer practice in MDPs. It has also suggested a number of ABA rule amendments addressing the other areas of concern.

In California, some say that the debate is closed, that MDPs exist already and are here to stay. The legal profession should recognize reality and bow to the inevitability of the MDP model. As lawyers, we harm ourselves by clinging to old rules that do not recognize modern legal practice or the modern legal marketplace and that hurt our competitiveness as a profession.

Supporters maintain that the professional conduct rules can be amended to accommodate MDP practice in a manner that retains lawyers' "core values" of professional independence, client confidentiality and conflict-free legal representation. Supporters also promote MDPs as potentially providing improved access to legal services by the public.

Ethical concerns

There are, however, profound ethical concerns raised by lawyer participation in MDPs. As numerous observers have commented, MDPs jeopardize the foundation of the attorney-client relationship, that is the fiduciary duty of undivided loyalty owed by a lawyer to each client. The concept of undivided loyalty, embedded in both professional conduct rules and California common law, includes the duty to maintain client confidence and secrets inviolate and to avoid conflicts of interest, including relationships or interests that interfere with a lawyer's independence of professional judgment on behalf of clients.

A fundamental goal of our fee sharing, partnership formation and conflict of interest rules is to protect the independent professional judgment of lawyers. Amending the rules to permit lawyers to form mixed legal/non-legal businesses and share legal fees with non-lawyers will absolutely impact, and potentially compromise, lawyers' independence of professional judgment. Even amending the conflict rules, as the commission has recommended, to treat an MDP the same as a law firm for conflicts purposes (requiring a conflicts check against all clients of the MDP, not just those represented by the MDP's legal division) will not solve a central conflict problem inherent in practicing in an MDP. The conflict of interest presented that may most impact an MDP lawyer's independence of professional judgment is the lawyer's profit motive.

Profit motive

MDPs will change the profit motive for lawyers practicing within them. As Thomas O. Rice, chairman of the New York State Bar Association, has noted, "One of the great risks [of MDPs] is that the profit motive could begin to skew the picture." This is because the MDP lawyer may share in the profits of all MDP divisions, not just its legal division, and because the lawyer's non-lawyer partners may also share in all MDP profits, including its legal profits.

There exists a risk that lawyers' advice and representation may be colored as a result of MDP internal profit-sharing. For example, a non-lawyer-controlled MDP offers financial planning services and products primarily, and legal estate planning services secondarily.

The key profit area of this MDP is its sale of financial products to clients. Where the MDP lawyer, providing legal estate planning services to MDP clients, has financial incentive as an employee of the MDP to promote MDP financial products, the conflict of interest issue is raised. The problem is compounded if non-lawyers controlling the MDP bring pressure on the MDP lawyers to promote profitable MDP financial products to clients, products which net the MDP greater return than its provision of legal services.

An MDP lawyer could also find his or her independence of professional judgment compromised regarding confidential client information. While California lawyers are bound to maintain inviolate confidential client information, members of other professions, such as accountants and psychotherapists, are legally required to disclose certain types of confidential client information. One can envision situations where these incompatible confidentiality obligations, existing within the same MDP, could impede the MDP lawyers' independence of professional judgment in questioning, counseling and representing an MDP client who is receiving mixed MDP services.

In its report, the commission acknowledges that it has no detailed empirical data supporting its position that clients and attorneys favor relaxing the professional conduct rules in order to facilitate the formation of MDPs. Some observers, including the New York State Bar Association Special Committee on Multidisciplinary Practice and the Legal Profession, recommend that empirical evidence is needed to demonstrate the purported benefits of MDPs before specific recommendations can be made, including, for example, evidence of the public's demand for MDPs, the intention and plans of other professions, and the likely risks of changing statutes and ethics rules.

Premature move

Based upon the thorny ethical issues identified, it appears premature at this time to promulgate the sweeping changes to the professional conduct rules necessary to accommodate MDP practice without further empirical study. The commission is to be commended for its groundbreaking work, and its concern for maintaining high ethical standards, but more work needs to be done before the MDP model can be justified, let alone sanctified in the professional conduct rules. As the commission itself concludes in the final sentence of its report: "There is, of course, no assurance that lawyers will choose to practice in MDPs or that clients will prefer to purchase legal services from such providers." This being the case, it is clearly too soon to amend the professional conduct rules, even if MDPs are determined ultimately to be desirable and in the best interests of the public and the profession.