Multidisciplinary Practices: Service Package of the Future?

By Dianne Molvig

he consumer movement and the computer age have spawned a plethora of do-it-yourself legal handbooks and software packages that help consumers do everything from handling their own divorces to applying for patents. Today, yet another movement is knocking on the door of what used to be lawyers' exclusive domain. It's a concept called multidisciplinary practice, and it's now undergoing the scrutiny of the American Bar Association's Commission on Multidisciplinary Practice, formed last August.

Sherwin Simmons, the Miami attorney who chairs the Commission, believes multidisciplinary practice is the most significant issue facing the bar in the 21st century. "You've got the public and the lawyer's ability to practice intersecting, big time," he says. "We're seeing the intrusion of personal service organizations into the practice of law."

The "personal service organizations" Simmons refers to previously were known as accounting firms. Currently, these firms - especially the Big Five, including PricewaterhouseCoopers, Arthur Andersen, KPMG Peat Marwick, Ernst & Young, and Deloitte Touche Tohmatsu - are branching out beyond traditional accounting. They're aiming to be one-stop shops for their corporate clients, offering a full-range of consulting services on taxes, computer systems, employee benefits, human resources ... and legal matters. They are doing things corporations used to hire law firms to do, such as giving advice on mergers and acquisitions, personnel problems, and expert witness preparation.

"To some extent, this is nothing new," points out James Wilber, a principal at the Midwest office in Milwaukee of Altman Weil Inc., management consultants to law firms. "The Big Five have been practicing tax law for years. What is different is that they are moving to openly come above board and become true multidisciplinary practices. In some countries that's legal. In others where it's not legal, they are doing it in all kinds of artful ways."

The Big Five and beyond

A multidisciplinary practice (MDP), in its true form, is a partnership owned by lawyers and professionals from other disciplines who work together to solve client problems. Such associations are allowed in Australia, Canada, and many European countries. There the Big Five professional service organizations are aggressively hiring lawyers, even merging with entire law firms.

In the United States, rules of conduct in all jurisdictions - except one - prohibit lawyers from sharing fees with nonlawyers or owning a business with nonlawyers that involves the practice of law. While true MDPs are prohibited in all 50 states, the Big Five have been hiring hundreds of lawyers onto their staffs. Are these staff attorneys providing legal services for the Big Five's clients? That's an issue of debate. The Big Five and the attorneys working for them claim they do not hold themselves out as providing legal services. Consulting on matters having legal components, they say, does not necessarily involve the practice of law. Skeptics, on the other hand, contend that the "practice of law" is precisely what is going on under the roofs of the Big Five - not just abroad where it's allowed - but also here in this country where, supposedly, it's not.

Besides professional rules of conduct, a key issue hovering over MDPs is the states' unauthorized practice of law (UPL) statutes. Some observers claim the Big Five are engaging in UPL. But that front has seen little action to date. Texas filed a complaint against Arthur Andersen and Deloitte & Touche in 1997, but it was dismissed 11 months later. According to the ABA Commission's "Background Paper" published in January 1999, a UPL charge against Ernst & Young is under investigation in Virginia. "I think a big part of the problem," says Keith Kaap, State Bar of Wisconsin ethics consultant, "is that not only in Wisconsin, but in most states, there is no good mechanism for determining what is or is not the unauthorized practice of law."

In addition to bringing lawyers on staff here at home, some of the Big Five are forming strategic alliances between accounting and law firms, with each entity remaining separate. Many of these alliances aren't well publicized. One exception was the alliance in 1997 between PricewaterhouseCoopers and Washington, D.C.-based Miller & Chevalier, one of the major tax firms in the United States.

Washington, D.C., is the only U.S. jurisdiction that has rules allowing lawyers to be part of MDPs, but with restrictions. The rules allow lawyer/nonlawyer partnerships and fee sharing only if the organization's sole purpose is to provide legal services to clients. It can't be in the business of offering accounting or other services. That in effect has curbed interest in Washington in full-fledged MDPs, in which lawyers and nonlawyers are business partners, according to Susan Gilbert, ethics counsel for the District of Columbia Bar Association. Also tempering enthusiasm there for MDPs is ABA Formal Opinion 91-360, which states that a law firm with offices in more than one jurisdiction cannot have nonlawyer partners in its Washington, D.C., office.

Elsewhere in this country, MDPs don't exist de jure, observers say, but they exist de facto. Which is precisely why this phenomenon is unstoppable, says Wilber. "One reason we think this will be impossible to stop is because this has been going on for years. The Big Five have been hiring lawyers for years. There's more tax law practiced in accounting firms than in all the U.S. law firms, and that's been the case for 20 years."

As the Big Five migrate toward MDP set-ups on an international level - and on a de facto basis in the United States - Wilber surmises others will follow suit, albeit on a smaller scale. "Maybe that's the next step," he says. "For example, regional CPA firms might get into this. Are they looking into it? Who knows. But I can't imagine they're not."

Here in Wisconsin, the Big Five have a smaller presence than in major urban areas like New York, Boston, or Chicago. Still, it's no secret that accounting firms have gradually expanded into handling clients' legal-related matters. "I think they get bolder from year to year in what they're comfortable having their people do," says a Wisconsin attorney who is a former chair of the State Bar Taxation Section. "For example, they haven't been shy about advising clients on legal matters related to mergers and acquisitions and estate planning, and in some circumstances providing suggested forms of documents - things they would never have thought of doing 10 years ago."

In addition, last summer's new law overhauling the Internal Revenue Service (IRS) included a provision for accountant/client privilege in tax matters. Client privilege once was a benefit only lawyers could offer their clients. Accountant/client privilege, however, applies only in limited IRS matters.

Wisconsin rules, fashioned after the ABA Model Rules on Professional Conduct, prohibit outright MDPs. Lawyers can't go into business together with nonlawyers if the partnership practices law; they can't share fees with nonlawyers. They can hold ownership in ancillary businesses - that is, outside law-related operations. Wisconsin has no ancillary business rule, but ethics opinions have allowed such arrangements. "I know of a good number of attorneys who have ownership interest in title companies, real estate brokerages, tax firms, or insurance businesses," says Kaap. The rules prohibit Wisconsin attorneys, however, from bringing any of those services inside their law firms.

But are de facto MDPs cropping up here in Wisconsin? "I'm not sure that's not happening," Kaap says. "But it's a separate question as to whether they're really permitted. Frankly, I think there are a lot of things happening that we're not completely aware of. People do send us inquiries from time to time regarding certain proposed arrangements. We don't know whether or not they just go ahead and do what they're proposing to do, because they don't follow up on getting advice from the (State Bar) Ethics Committee."

Big questions

On the surface, the MDP issue seems to be a fight between the legal profession and the Big Five. But it's much more complicated than that. "This is not a turf battle," emphasizes ABA Commission Chair Simmons. "Our obligation is to the public. Is it in the public's interest to allow lawyers to practice in a multidisciplinary configuration, whether the lawyers put it together or somebody else does? If you get into a turf battle, you're getting down in the gutter arguing about how you stop someone from taking your clients. That doesn't advance the ball for anybody - and certainly it doesn't advance the ball for the public."

In fact, if the debate over MDPs comes across as economic protectionism on the part of lawyers, "the lawyers are going to lose badly," Wilber points out. "To the extent they can show that the problems are problems for clients, they may win some of these battles."

Another misconception about the MDP debate, Wilber adds, is that it's being waged between lawyers and accountants. "That's not what this is about at all," he says. "This is a debate between lawyers who want to practice law in a different setting than they've been able to do to date - that is, in a multidisciplinary practice setting - versus lawyers who think the traditional way is the only way that should be allowed."

Lawyers' opinions on MDPs vary widely. On one end of the spectrum are those who argue that if lawyers participate with nonlawyers in MDPs, the result will be the ruination of the legal profession's core values, such as loyalty to clients, confidentiality, and independent judgment of lawyers. On the other hand, proponents contend that MDPs match with the way organizations like to solve problems in today's world: by bringing together teams of professionals from multiple disciplines. If lawyers can't be part of MDPs, proponents say, they risk becoming dinosaurs. Possible MDP relationships for lawyers include far more than accountants. Financial planners, psychologists, gerontologists, and others are natural candidates for partnership.

The attraction of MDPs doesn't stop with large-firm lawyers. A solo practitioner in Chippewa Falls, for example, may see an advantage in setting up shop with other local professionals, such as a tax specialist, financial planner, or insurance agent. To date, both the ABA Taxation Section and the ABA General Practice, Solo and Small Firm Section have formally endorsed the MDP concept.

Still, complex questions remain. Again, they come back to issues of client benefit and protection. The key benefit for clients is the convenience and economies derived from using one-stop shops for business consulting services. Clients like to get everything they need in one place, with all services condensed on one bill.

But will traditional client protections be the cost? Can a lawyer working for or with nonlawyers preserve his or her independent judgment? Or is there a risk that nonlawyer stakeholders could sway that judgment, putting it second behind profit concerns? How would conflict of interest and client confidentiality standards be maintained when lawyers are partners with other professionals who have no such standards, or at least less stringent ones?

Part of the difficulty in seeking answers is that the legal profession is unfamiliar with the rules of conduct of other professions. What precisely do accountants do, for example, to protect client confidentiality? How do they handle conflict of interest? What are the differences between the legal profession's standards of conduct and those of other professions? Researching that kind of information is one of the tasks set before the ABA Commission. Harold Levinson, Vanderbilt University Law professor and Commission member, has stated that he is in the process of drawing up a side-by-side comparison of professional standards of accountants and lawyers.

Another part of the difficulty is that many clients are unaware of how they benefit from lawyers' professional standards. They don't understand, for instance, what they may be losing if they hire an accounting firm to settle a personnel dispute instead of hiring an attorney. If the dispute ends in a lawsuit, the accountant with whom the client has shared information could be called as a witness - against the client. Lawyers would never be put in that position because of attorney/client privilege rules.

Now, take that a step further into a bona fide MDP setting, where lawyers, accountants, and other professionals are all involved with the client. Does the lawyers' client privilege remain intact? Is the client still protected when other professionals, who have no client privilege standard, also are involved in what is or becomes a legal matter?

Searching for answers to these and many more questions - with the public's best interest in mind - is part of what lies before the ABA Commission and the legal profession as a whole. Accompanying that must be an effort to better inform the public about what lawyers' rules mean to clients. The core values that lawyers talk about preserving must be seen by the public as holding value to them. That means lawyers have to do a better job conveying what they give their clients, points out Steingass. "It's not just an approved tax return or a will to sign," she says. "It's all the preparation, training, currency on legal issues, and professional standards involved that make us competent to serve clients."

"To me," Wilber says, "the real issue here is not whether lawyers should own firms with accountants or not. It's how are we going to give our clients what they want, whatever the rules are?"

Looking abroad

The Big Five accounting firms have succeeded in attracting top attorneys. All combined, they employ more than 5,500 nontax attorneys worldwide (excluding lawyers practicing tax law exclusively within the firm's accounting or tax divisions), according to the November 1998 American Lawyer. PricewaterhouseCoopers leads the way with more than 1,600 lawyers in 39 countries. Only two law firms in the world have more attorneys than PricewaterhouseCoopers.

All of the Big Five are actively pursuing clients - and offering legal services - in markets as diverse as France, Spain, Australia, Canada, and the Confederation of the Independent States of the former Soviet Union.

While many countries allow MDPs, at this time only the state of New South Wales, Australia, has ethics rules specifically addressing MDPs. And those rules require that an MDP remain in the effective control of the firm's lawyers.

So far, only one report of disillusionment among MDP attorneys has surfaced. A recent British legal periodical reported that six highly respected attorneys were leaving MDPs in Spain, Scotland, Hong Kong, and Paris (Commercial Lawyer, issue 27, 1998) to return to traditional law firms. The article says little about their reasons, only mentioning differences of culture between accounting firms and law firms. The article poses questions: "Has the tide turned? Has the forward march of the accountants halted?"

Like the ABA Commission, international bar groups also have grappled with the ethical questions surrounding MDPs. The International Bar Association Council adopted a resolution in September 1998 calling for neither approval nor disapproval of MDPs. "The IBA took the position," Wilber explains, "that protection of client confidentiality, the independent judgment of lawyers, and so on are the bedrock principles of the legal profession. We're not going to tell the regulators not to allow MDPs. We're saying that if you allow MDPs, that wherever lawyers work - no matter if it's a traditional law firm or something that's new - those principles must be protected."

Another international professional group, the Council of the Bars and Law Societies of the European Union, adopted a position opposed to MDPs in 1996. At a November 1998 plenary session, a new proposal attempting to soften that position won a majority of votes. But it failed to pass by the required supermajority.

What is the upshot of all this on a global scale? Some countries allow MDPs; some don't. Some are moving in that direction; others, such as Finland and Denmark, remain stalwartly opposed to MDPs, at least for the time being. Meanwhile, the Big Five seem to be forging ahead with a full head of steam. And banks, insurance companies, securities firms, and others have shown interest in moving in the same direction.

Looking ahead

The ABA Commission continues its process of study. As stated in its January 1999 "Background Paper," "The Commission has not reached even tentative conclusions." To assist in fashioning its eventual recommendations, the Commission has held three sets of hearings (in November 1998 and February and March 1999). Practicing attorneys from the U.S. and abroad, law professors, judges, legal consultants, representatives from the Big Five accounting firms, and consumer representatives have presented their varying points of view. The "Background Paper" and hearings testimony are available on the Commission's Web site. The Commission aims to submit its final report and recommendations to the ABA House of Delegates at the latter's annual meeting in Atlanta in August.

The final recommendations, however, are only a first step. The ABA House of Delegates decides what, if any, action to take. Any recommended changes in professional rules of conduct then must be dealt with in each state by whatever agency has jurisdiction, such as the state supreme court (as in Wisconsin) or the bar.

While the Commission weighs whether current rules should be relaxed to allow creation of MDPs, it is examining various models for delivery of such services. The "Hypotheticals and Models" also can be found on the Web site, and the Commission is inviting comments.

"The models don't telegraph our thinking," Simmons emphasizes. "They state our analysis. These are the kinds of things we could do. Maybe we'll get somebody to come up with a brilliant response to them. We're looking for Solomon."

Dianne Molvig operates Access Information Service, a Madison research, writing, and editing service. She is a frequent contributor to area publications.

Wisconsin Lawyer