President's Perspective

Where Do We Stand on MDP?

by Gary L. Bakke

The Business Law Firm Model No Longer Works for Us

"I am an officer and director of a company with headquarters in Golden, Colo., and offices in Milwaukee and California. From that perspective, I am concerned that the traditional business lawyer and business law firm could disappear rapidly as today's business environment evolves."

"We do business in the United States and Europe. We fax and email around the globe every day. Our business literally changes week to week. Many times, the big law firms we hire cannot keep up with developments in our market, our technology, or our increasingly international business. We don't have time to educate our lawyers as to the nuances of our markets. We need experts who know more about our markets than we do. We spend huge sums of money on hourly work that does not provide much value because it's not integrated with financial and tax considerations. We look at a $25,000 legal bill as a capital expenditure, and we look for a 25 percent-plus return on that capital.

"Some law firms cannot grasp that. Often, they get back to us in days or weeks when we need help in hours. When they do get back to us, it's in Word Perfect when we need Word and Office to be global. Some senior partners can't even use email. The business law firm model no longer works for us. We need integrated solutions to do business globally.

"So we look for alternatives. This is happening with companies all over the globe. Most law firms cannot provide the strategic financial advice and strategic partnering that other entities provide. They are only allowed to opine. The Big Six and other consulting firms provide much more value in tax planning, capital raising, strategic relationships, and certain regulatory issues. Lawyers practice there, too, and they make multiples of the income law partners make. I think business lawyers of the future will either become micro-specialists or they will work for consulting firms that are not burdened by the strict one-size-fits-all regulatory model of the State Bar. It may be more efficient in the future for us to use European consulting firms that can provide integrated financial, banking, and legal services that are all coordinated.

"If lawyers cannot offer modern, global universal services to clients, the CPAs and consultants will. Is it good for the legal consuming public to NOT be able to one-stop shop? I think not.

"The Microsoft case is a good example of the problem of our increasingly obsolete legal system. By the time the Justice Department obtains a final order, Linux may well be the dominant operating system and Microsoft will be two or three businesses down the road. The final result won't matter anymore. Regulatory results are less and less relevant in a lightning-fast world. As a former regulator, I know the frustrations firsthand, and so does business. Why litigate when hoards of other competitors, who are smart enough to avoid litigation, capture your market share?

"I would like to be a part of the solution, but I fear there is not much time for debate."

Our Profession is in Crisis

That opinion, multiplied thousands of times, is a fact that we must acknowledge and deal with. Ours is a profession in crisis, and the crisis is all the more dangerous because few lawyers truly understand the seriousness of the challenges we face. I believe that we may have a short window of opportunity in which to respond. My main purpose is to convey to you a sense of urgency.

Multidisciplinary practice has been the most contentious issue confronted by the ABA in my memory. At the July meeting in New York, the House of Delegates passed a very strongly anti-MDP resolution by a wide 3-1 margin. The actual resolution proposed by the ABA Commission on Multidisciplinary Practice did not even make it to the floor. Wisconsin's delegates voted unanimously with the majority; however, the Wisconsin delegation casts a unanimous vote in favor of the position supported by a majority of our delegates. I understand that sentiment was not unanimous. At our September meeting, retired Chief Judge Patrick Sheedy, the Milwaukee Bar Association's delegate to the ABA, told the Wisconsin Board of Governors that the ABA House of Delegates is composed almost exclusively of very successful, old, white males who are probably not in a very good position to anticipate and respond to rapidly changing economic reality.

Those who saw this vote as a victory proudly proclaimed that our profession is not for sale. Many who saw it as a defeat fear that our profession is on the road to irrelevancy.

My view is that the MDP debate and resulting ABA resolution is a sharp wake-up call to state and local bars that the ABA has forfeited its leadership role for our profession, at least on this issue. Now, Wisconsin and other states need to take a leadership role. Would I like to go back to the profession that I joined in 1965? Certainly, I loved it. Would I like to be 25 years old again? Sure. Neither one is going to happen. We need to deal with reality, not nostalgia. The reality is that many other businesses and professions are going to be doing what we have traditionally thought was the practice of law. No, not going to – they already are. We must respond, not only for our own self-interest, but for the public. We need to find a way to compete in this new arena while preserving our core values and our professionalism.

The MDP debate about whether lawyers can practice law in an entity that is not owned and controlled by lawyers, interesting as it is, is of little consequence if nonlawyers are permitted to do what lawyers now do. The key question is, "What is the practice of law?" If nonlawyers can do estate planning, of what significance is whether an estate-planning lawyer practices in an MDP setting? If our ethical rules permit or require a lawyer to relinquish his or her license to practice in order to do estate planning for an accounting firm, have we advanced the interests of either the public or the legal profession? The unintended consequence of a no-MDP stand will be to assure that our competitors are not subject to our training, our professional standards, or our ethical rules.

Face the Economic Realities

To date, most of the MDP debate has been conducted without reference to the economic realities of our rapidly changing economy. We cannot successfully ignore the obvious. The MDP Commission report to the ABA House of Delegates crisply describes the problem:

"The forces of change are bearing down on society and the legal profession with an unprecedented intensity. They include: continued client interest in more efficient and less costly legal services; client dissatisfaction with the delays and outcomes in the legal system as they affect both dispute resolution and transactions; advances in technology and telecommunications; globalization; new competition through services such as computerized self-help legal software, legal advice sites on the Internet, and the wide-reaching, stepped-up activities of bankers, investment companies, and financial planners providing products that embody a significant amount of legal engineering; and the strategy of Big Five professional service firms and their smaller-sized counterparts that has resulted in thousands of lawyers providing services to the public while denying their accountability to the lawyer regulatory system.

"The Commission believes that the legal profession must take a proactive role in regard to these events in order to best serve the public interest and maintain its crucial role in the maintenance of a democratic society. Amending the Model rules in accordance with the Commission's recommendation is the most progressive, preservative, and practical way to accomplish these goals. The recommendation recognizes the realities of a changing marketplace, opens up new avenues of service to clients, responds to the suggestions of consumer advocates, and provides new opportunities for lawyers."

Remember the email I quoted at the beginning of this column? Can you guess who is the author of this message? Typical business school graduate? Someone with an anti-lawyer bias? Someone who does not understand our ethics or their importance to our clients? It was Dan Eastman, the current chair of the State Bar's Business Law Section. He was Wisconsin Commissioner of Securities, now the Department of Financial Institutions, and was a commissioner of the Public Service Commission. Think about it.