Status of Multidisciplinary Practice Studies by State
(and some local bars)
(April 2, 2003)
The Alabama State Bar has a 25-member multidisciplinary practice task force that has been divided into pro and con subcommittees, which submitted reports on June 2, 2000. The bar has asked for comments on the reports from its members.
Has no formal study underway.
Arizona (http://www.azbar.org/AttorneyResources/mdp_recommends.cfm)
The Board of Governors, on May 19, 2000, approved the majority report of the State Bar of Arizona Task Force on the Future of the Legal Profession, which supported MDPs.
The Task Force majority recommended the following policies:
1. Recognize that multidisciplinary practices already exist de facto in the United States, including in Arizona.
2. The Bar and the Court must participate in the regulation of legal services delivered by lawyers in MDPs to assure that clients who receive those legal services receive the levels of professionalism and protection as clients of lawyers who are not in MDPs.
3. Reaffirm that lawyers and others providing legal services must abide by the Rules of Professional Conduct whenever they are providing those services, regardless of their practice setting receive.
4. Require lawyers to take reasonable steps to ensure that any entity through which they provide legal services ensures that non-lawyers do not engage in the delivery of legal services unless authorized to do so by the Supreme Court of Arizona.
5. Clarify the definition of the "practice of law" as used in Supreme Court Rule 31(a)(3) and the definition of "legal services" to include: preparing legal documents, giving legal advice, negotiating legal matters for a client, or representing a person in a court or administrative proceeding.
6. Modify the Rules of Professional Conduct, specifically ER 5.4, to permit non-lawyers to have an ownership or equity interest (but not passive investment) in firms that engage, at least in part, in providing legal services, as long as the lawyers have sufficient authority to protect client interests and maintain their ethical obligations.
7. Require lawyers in MDPs to provide legal services clients with written disclosures regarding the different duties of confidentiality (and/or disclosure) that each profession in the MDP must follow.
8. Require lawyers in MDPs to provide legal services clients with written disclosures about the financial benefit that the lawyer will derive if the legal services client engages the services of other professionals in the firm and that legal services clients are not obligated to use the other professionals in the MDP and are free to retain the services of professionals outside of the MDP.
9. Require that a lawyer in an MDP must consider all clients of the MDP as clients of the lawyer for conflict purposes.
10. Continue to encourage all lawyers and any other authorized legal service providers to provide pro bono assistance.
11. Assure that the Rules of Professional Conduct continue to require lawyers to maintain all of their ethical obligations including maintaining the confidentiality of all information related to the lawyers’ representations and exercising their independent professional judgment.
12. Provide educational programs for lawyers regarding their ethical obligations when working in any practice setting, including MDPs.
13. Provide public service programs about the regulation of legal services in Arizona.
14. Prohibit MDPs from providing to a legal client both legal services and any other professional services (such as auditor functions) that may have an affirmative duty of disclosure that would conflict with the lawyers’ duty of confidentiality.
15. Direct further review of the MDP issue, particularly with respect to: a) evaluating specific modifications of the Rules of Professional Conduct; b) clarifying who may provide legal services under the Supreme Court’s jurisdiction; and c) considering the availability of and need for liability coverage for MDPs to protect the public and whether such coverage should be mandatory.
16. Approve the Recommendations of the ABA’s Commission on MDP as attached hereto.
The Task Force has drafted proposed Rule amendments (1.6,1.7,1.10, 1.15, 1.16, 5.3, 5.4,5.5, 7.1, 7.3, 7.5 and 8.3) that were presented to the Board of Governors in November 2001. On April 18, 2002 the Board deferred a vote on the proposals indefinitely.
The House of Delegates of the Arkansas Bar Association rejected a proposal to allow attorneys to engage in multidisciplinary practices with other professions. At its June 17, 2000 meeting it adopted a motion similar to the one adopted by the ABA House of Delegates, which urges each state to revise its laws governing lawyers in order to implement certain principles and to preserve the core values of the legal profession.
The Task Force filed its report on June 29, 2001. In August 2001 the California Board of Governors put the report out for comment.
1. In considering MDP, it should be viewed as just one point in the critical process necessary to evolve, develop and advance the systems by which legal services are delivered to the public with the goal of making legal services and the administration of justice accessible to all.
2. Although legitimate questions remain regarding how compelling the consumer demand for MDP is and how much MDP will advance the goals of improving the accessibility and quality of legal services, these questions were not considered to be within the Task Force’s charge. The charge of the Task Force was to develop, as best it could, MDP models which would allow MDP and preserve the legal profession’s "core values." The findings of the Task Force should be viewed in this context.
3. There are existing practice models through which a form of indirect MDP currently exists in California and there are potentially viable models for permitting a "pure form" of MDP to exist in California.
4. To enhance existing indirect MDP models and implement a viable "pure form" MDP model in California, modifications of Rules of Professional Conduct and other authorities, including amendments to existing prohibitions against fee-sharing and partnerships with nonlawyers, can be effectuated without compromising the legal profession’s "core values."
5. The "core values" of the legal profession must and can be maintained in an MDP environment. "Core values" can be effectively maintained through continued individual accountability of lawyers for fulfilling their professional responsibilities in all respects and through a required certification process for entities which seek to engage in a "pure form" of MDP.
6. As the administrative arm of the California Supreme Court in the certification of persons and entities authorized to practice law in California, it is appropriate for the State Bar of California to establish and administer a certification program for a "pure form" MDP model including rules and regulations which will bind MDP entities and subject the entities to decertification in the event of noncompliance with the governing rules and regulations.
7. The five MDP models identified by the ABA MDP Commission are not a definitive description of all possible MDP forms. Associations by which lawyers practice law are not static and will continue to evolve. The Task Force acknowledges the dynamic nature of the forms of practice by which professionals provide services to the public, and that the distinctions between the MDP models made by the Task Force cannot correspond perfectly to the dynamic actuality of the professional services market place. Nevertheless, the Task Force adopts the five MDP models identified by the ABA MDP Commission, described below, as the basis for its findings here.
8. In doing so, the Task Force deems three of these models to be indirect MDP models that are within existing standards, fully viable and currently extant without the need for significant changes in existing authorities. It deems the fourth model to be another indirect MDP form, finds it to be viable also, but currently prohibited under existing California authorities, requiring changes in existing authorities. It deems the fifth, Fully Integrated Model, to be a "pure form" MDP and is prepared to explore this model under a State Bar MDP Certification Demonstration Project where the integrated MDP entity would be certified by the State Bar, initially on an experimental basis, to engage in the practice of law.
9. The models, described in more detail, are as follows:
The Cooperative Model: This model involves the rendition of legal services on a "stand alone" basis in "cooperation" with other nonlawyer service providers. This is the status quo in most states. While it allows for multidisciplinary services, it is not considered a "pure form" MDP by the Task Force. Fee-splitting and co-principal relationships with nonlawyers are prohibited. Lawyers are free to employ nonlawyer professionals under the lawyer’s control to assist in providing legal services to clients. Lawyers are also free to work with nonlawyer professionals employed directly by clients. But the lawyers’ services ultimately "stand alone" from all other services. Maintenance of the status quo allowing this practice to continue can occur consistent with "core values." This requires no changes in existing authorities.
The Ancillary Business Model: This model permits a law firm to own and operate an ancillary business entity that renders nonlegal services to clients of the law firm and to others. The entities, however, operate on a non-integrated basis. Legal services are provided on a "stand alone" basis. ABA Model Rule 5.7 on ancillary services, requires that recipients of the ancillary services understand that the ancillary business exists as an entity separate and distinct from the law firm. California does not currently have an ancillary business rule, but this model is not prohibited in California, subject to existing restrictions that assure that the separateness between the legal and non-legal services are adequately understood by the public. Although this also allows for a form of multidisciplinary services, it is not considered a "pure form" MDP by the Task Force. Clarifications in existing authorities to enhance the viability of this model in California can occur consistent with "core values."
The Contract (Strategic Alliance) Model: This model contemplates an express agreement between a law firm and a professional service firm setting forth various mutually beneficial terms. For example, the agreement might state that: (1) the law firm agrees to note its affiliation with the professional service firm on its law firm letterhead, business card, and other materials; (2) the law firm and the professional service firm will engage in mutual client referrals on a nonexclusive basis; or (3) the law firm agrees to purchase goods and services from the professional service firm such as equipment, communications technology, and staff management. This model, also called a " strategic alliance," like the above models, operates without fee-splitting and common equity interests. The legal services are provided on a "stand alone" basis. Although this model also allows for a form of multidisciplinary services, it is not considered a "pure form" MDP by the Task Force. This model is currently not prohibited by California authorities. Maintenance of the status quo allowing this practice to continue can occur consistent with "core values." This requires no changes in existing authorities. However, clarifications in existing authorities to enhance the viability of this model in California may be appropriate."
The Command and Control Model: This model reflects the situation that currently exists in Washington, D.C., under its variation of ABA Model Rule 5.4. Lawyers are permitted to share law firm fees and equity interests with nonlawyers subject to specific limitations, including requirements that: (1) the activities of the firm be limited to the provision of legal services; (2) the involved nonlawyers agree to comply with the lawyers’ rules of professional conduct; and (3) the lawyers, who are principals or who have management authority, take responsibility for the acts of the nonlawyers. Although fees and equity interests are shared with nonlawyers, all services are controlled by lawyers and relate directly to the rendition of legal services. Although this model also allows for a form of multidisciplinary practice within the confines of lawyer-controlled legal services, it is not considered a "pure form" MDP by the Task Force. This model requires changes in California’s existing prohibitions on fee-sharing and partnering with nonlawyer professionals which the Task Force finds can be made consistent with "core values" to allow this model to be viable in California.
The Fully Integrated Model: This model is a single fully integrated professional services firm. The single firm has organizational components that provide legal services, consulting services, accounting services, and/or other professional services. It is marketed as a one-stop shopping center for clients interested in legal services and other professional services. The various services may be provided to a single client on a single matter or on multiple related or unrelated matters. Legal services may be provided independently of other services, and vice-versa, and may involve the lawyers seeking professional services for the client from the other professionals and vice-versa. This model is considered by the Task Force to be a "pure form" MDP model. It is now prohibited in California. The Task Force finds that this model can be explored on a Demonstration Project basis, subject to State Bar certification, and that changes can be made to existing authorities to allow such an entity to exist consistent with the legal profession’s "core values."
10. In the Fully Integrated Model, the Task Force finds that the "core values" of the legal profession not only can be maintained, but can be reaffirmed, through the principle that all professionals involved may not, by virtue of their integration with other professionals, reduce their responsibilities below those which apply to a non-integrated environment. The basic premise of the Fully Integrated Model adopted by the Task Force is two fold: First, is the cross-imputation of the values of all participating professionals to each other, without diminution, when integrated services are provided to consumers; Second is a presumption from the outset of the consumer’s relationship with an integrated MDP, that integrated legal and non-legal services are being sought so that cross-imputation of values is the rule. Only when the consumer affirmatively "opts out" of legal services will the lawyer values cease to apply.
11. In considering the viability of making legal services more accessible through authorized new delivery systems like MDP, the Task Force also finds that it would be beneficial to develop, through a rule of court or rules of professional conduct, a concise definition of what constitutes the practice of law as is currently being considered by the State of Washington.
12. It is also considered necessary, in conjunction with the development of such new systems of legal services delivery, that the Board consider how to enhance protection of the public by stricter enforcement of the unauthorized practice of law as a consumer fraud issue.
13. The Task Force is also of the opinion that passive investment in a multidisciplinary, or other legal practice, should not be permitted.
14. The Task Force recommends that this Report be published for a ninety-day public comment period which actively seeks comment from consumers of legal services, so all interested parties can be heard regarding this important subject. Upon analysis of the public comment received, and in consultation with the California Supreme Court, the Task Force is prepared to assist the Board, as it determines appropriate, in moving forward with an implementation plan for these models.
The Orange County (CA) Bar Association (http://www.ocbar.org/multidis.html)
Task Force on Multidisciplinary Practice has issued a report that concludes:
The Task Force is unable to reach a concrete conclusion of a thumbs up or thumbs down on the Commission’s recommendation and MDPs. We generally lean towards a thumbs down because of the many unanswered questions raised by the recommendation.
However, we did reach one unanimous conclusion. California has remained independent of the ABA in terms of its own rules of professional responsibility. The case should be no different in the face of the current movement of allowing MDPs. The OCBA could consider focusing on a strong recommendation to the California State Bar to remain independent and not allow MDPs until questions and issues can be adequately addressed. Let some other jurisdiction undertake the risks associated with MDP formation and be the guinea pig. The consumers of legal services in California and the attorneys here will benefit from that approach in the long run.
San Diego County (CA) Bar Association [SDCBA Additions to ABA Commission Recommendations are underlined] (May, 2000) (http://www.abanet.org/cpr/sandiegobarmdp.html)
RESOLVED, that the American Bar Association amend the Model Rules of Professional Conduct consistent with the following principles:
1. Lawyer should be permitted to share fees and join with nonlawyer professionals in a practice that delivers both legal and nonlegal professional services (Multidisciplinary Practice), provided that the lawyers have the control and authority necessary to assure lawyer independence in the rendering of legal services. "Nonlawyer professionals" means members of recognized professions or other disciplines that are governed by ethical standards.
2. This Recommendation must be implemented in a manner that protects the public and preserves the core values of the legal profession, including competence, independence of professional judgment, protection of confidential client information, loyalty to the client through the avoidance of conflicts of interest, and pro; bono publico obligations.
3. To protect the public interest, regulatory authorities should enforce applicable rules and adopt such additional enforcement procedures as are needed to implement the principles identified in this Recommendation.
4. This Recommendation does not alter the prohibition on nonlawyers delivering legal services and the obligations of all lawyers to observe the rules of professional conduct. Nor does it authorize passive investment in a Multidisciplinary Practice.
5. Rules permitting Multidisciplinary Practices should be adopted which provide for self-funded regulation.
6. Before a lawyer joins a Multidisciplinary Practice with a member of any nonlawyer profession: (A) That lawyer’s regulatory authority should identify the ethical issues raised by that particular combination; (B) The rules of professional conduct governing legal practice should be modified as appropriate; and (C) The rules governing the ethical conduct of that nonlawyer profession should be modified as necessary for consistency with those of the legal profession.
Colorado (http://www.cobar.org/static/mdp/index.cfm)
The Denver Bar Association Board of Trustees and Colorado Bar Association Board of Governors have adopted resolutions in support of MDP as recommended by their joint Multidisciplinary Task Force. A subcommittee of the Task Force is drafting proposed new rules and rules amendments to permit MDPs.
On May 6, 2000, the Board of Governors of the Colorado Bar Association adopted the following Resolution:
RESOLVED, that the Board of Governors of the Colorado Bar Association Accepts the Report of the CBA/DBA Joint Task Force on Multidisciplinary Practice;
FURTHER RESOLVED, that the Board of Governors of the Colorado Bar Association recommends that the Colorado Rules of Professional Conduct and other Colorado rules should be amended to accommodate multidisciplinary practices, provided that this recommendation must be implemented in a manner that protects the public and preserves the core values of the legal profession, including competence, independence of professional judgment, protection of confidential client information, and loyalty to the client through the avoidance of conflicts of interest.
FURTHER RESOLVED, that the CBA/DBA Joint Task Force is authorized to continue to study issues relating to multidisciplinary practice and with due deliberation to make further recommendations to the Board of Governors, including recommendations as to specific amendments to the Colorado Rules of Professional Conduct and other rules as needed to implement the Task Force Recommendations.
Connecticut (http://www.ctbar.org/public/mdpreport.doc)
The Connecticut Bar Association Study Committee on Multidisciplinary Practice filed a report dated May 2000 that contained the following:
"Fully Integrated MDP
The majority of the Committee recommends at this time that the CBA oppose changes in the Code of Professional Conduct which would permit fully integrated MDP’s.
MDP Controlled by Lawyers in Supermajority
The majority of the CBA Study Committee at this time is of the opinion that real control of a professional firm is dependent on the production of billings regardless of the mechanics of voting and the paper records of ownership, particularly in the small firm.
[T] he Committee recommends that the CBA continue to study the issue and monitor the developments in other states and at the ABA level with a committee of its most learned members in ethics and unauthorized practice of law."
A new Committee on Multidisciplinary Practice has been appointed. The task of the committee is to investigate possible changes to Rule 5.4 and to determine whether there should be changes in the law governing lawyers to respond to the guiding principles set forth in the resolutions adopted by the ABA House of Delegates on July 11, 2000.
Adopted May 11, 2000
RESOLVED, that the Board of Trustees of the Denver Bar Association accepts the Report of the CBA/DBA Joint Task Force on Multidisciplinary Practice;
FURTHER RESOLVED, that the Board of Trustees of the Denver Bar Association recommends that the Colorado Rules of Professional Conduct and other Colorado rules should be amended to accommodate multidisciplinary practices, provided that this recommendation must be implemented in a manner that protects the public and preserves the core values of the legal profession, including competence, independence of professional judgment, protection of confidential client information, loyalty to the client through the avoidance of conflicts of interest, and pro bono publico responsibilities.
FURTHER RESOLVED, that the CBA/DBA Joint Task Force is authorized to continue to study issues relating to multidisciplinary practice and with due deliberation to make further recommendations to the Board of Trustees, including recommendations as to specific amendments to the Colorado Rules of Professional Conduct and other rules as needed to implement the Task Force Recommendations.
Committee determined that MDP should not be permitted in Delaware beyond current practices of law firms associated with incorporation businesses, etc. However, if the ABA changes its position, Delaware will reconsider.
\On Oct. 19, 2001 the Special Committee on Multidisciplinary Practice unanimously approved its report, which stated that existing restrictions on lawyer participation on multidisciplinary practice should be substantially reduced. On May 14, 2002, the Bar Board of Governors voted to approve the report. The Board transmitted the report and its recommendation for approval to the D.C. Court of Appeals. The Court is currently reviewing this matter.
Florida (http://www.flabar.org/newflabar/organization/committees/scanc.html)
(Pro report http://www.flabar.org/newflabar/organization/committees/promdp.pdf)
(Con report http://www.flabar.org/newflabar/organization/committees/conmdp.pdf)
The Florida Bar Special Committee on Multidisciplinary Practice issued a con report in Dec. 1999 and a pro report on Jan. 7, 2000. The Florida Bar Board of Governors adopted a resolution opposing MDPs on June 2, 2000 (http://www.flabar.org/newflabar/images/downloads/resoltfb.pdf).
The Florida Bar has appointed a successor commission, the Special Commission on Multidisciplinary Practice and Ancillary Business. The mission statement for the special commission is as follows:
The mission of the Special Commission on Multidisciplinary Practice and Ancillary Business is to protect the public interest by:
1. Enabling lawyers to participate in business ventures not engaged in the practice of law in conformance with The Rules Regulating The Florida Bar, through research and development of business models, prototype forms, ethical guidance and educational programs; and
2. Monitoring developments affecting the practice of law and new methods for the delivery of legal services, the protection of the core values of the profession and the enforcement of the Rules Regulating The Florida Bar and disseminating this information to the members of The Florida Bar and its Board of Governors.
Georgia (http://www.gabar.org/mdpreport.asp)
On February 8, 2001, the State Bar of Georgia Multidisciplinary Practice Committee submitted a report containing the following recommendation:
The Georgia Rules of Professional Conduct should be amended to allow the association of lawyers and nonlawyer professionals in MDP to provide legal services, and to share fees, whether as partners, co-owners, members or shareholders, with the following limitations:
A. Only licensed lawyers in the MDP may practice law.
B. Lawyers in the MDP shall remain vicariously liable for nonlawyers who assist in providing legal services, and all who assist lawyers in providing legal services through an MDP shall comply with the Georgia Rules of Professional Conduct.
C. All clients of the MDP shall be protected by the conflicts of interest rules that protect the clients of lawyers.
D. Protection of funds held by the MDP in "fiduciary capacity" shall include all funds held for clients of the MDP.
E. The MDP must not offer legal and attest (audit) services to the same client.
F. The MDP must be majority owned and controlled by licensed lawyers.
G. The MDP shall not have passive investors.
The Hawaii State Bar does not have any committee specifically looking into the issue of MDP. They value the expertise of the ABA and larger jurisdictions that have more resources to devote to this subject.
The Idaho Bar Commission appointed a committee from the bar and business to study the issue. The Committee has voted to disband.
(Pro report http://www.illinoisbar.org/mdppro.html)
(May 17, 2000)
(Con report http://www.illinoisbar.org/mdpcon.html)
(May 10, 2000)
The Illinois State Bar Association Task Force on Multidisciplinary Practice submitted pro and con reports to its assembly. The assembly voted to file (with the New Jersey State Bar Association) a Report and Recommendation to the ABA House of Delegates for the July 2000 Annual Meeting stating that:
The American Bar Association shall make no change to any of the Model Rules of Professional Conduct to permit lawyers to share legal fees with non-lawyers or to permit law firms directly or indirectly to transfer ownership or control to nonlawyers over entities practicing law.
Lawyers should be permitted to enter into interprofessional contractual arrangements with nonlegal professionals and nonlegal professional service firms for the purpose of offering legal and other professional services to the public, either on an ad hoc or on a systematic and continuing basis, provided no nonlawyer has any ownership or investment interest in, or managerial or supervisory right, power of position in connection with, the practice of law by any lawyer or law firm.
Indiana (http://www.inbar.org/default2.asp)
The Indiana State Bar Association Multidisciplinary Practice Committee has filed a report that concludes that concluded that: (i) MDPs may be good for Indiana citizens, and therefore for Indiana lawyers; and (ii) the current Rules of Professional Conduct should be amended to permit MDP, but in a way to ensure that the core values of the legal profession are preserved. On Jan. 24, 2002 the House of Delegates voted against the recommendation the text of which follows:
1. The "practice of law" must be defined. The Committee encourages the amendment of the Preamble to Rule 5.5 of the Rules of Professional Conduct to define what constitutes the practice of law as determined by the Indiana Supreme Court in its various decisions including, but not limited to the following activities: a) providing legal advice to clients; b) preparing legal documents for clients; c) representing clients in legal proceedings; and d) conducting the business management of a law practice. By defining the activities that constitute the practice of law, clients should be better protected from the unauthorized practice of law.
2. Rule 5.4 should be amended to permit nonlawyers to become owners of an MDP, but any such nonlawyer owner of an MDP must be a member of a regulated profession, subject to a code of ethical conduct, and the percentage ownership of an MDP by nonlawyers be limited to a minority which cannot assert control over the MDP.
These changes to the Rules of Professional Conduct will permit MDP so that clients who want legal services from an MDP have the opportunity to obtain them. They also ensure that the core values of the legal profession are maintained for the benefit of clients and that legal services do not become yet one more of the array of "consulting services" offered to clients by an MDP.
Committee filed report on January 19, 2001 that recommended that it continue monitoring developments relating to MDP.
On June 10, 2000, the Kansas Bar Association Board of Governors accepted the recommendation of the Task Force on Multi-Disciplinary Practice, which asked the Board to:
-- oppose the authorization of multidisciplinary practice groups either in Kansas or by amendment of the Model Rules of Professional Conduct by the ABA, and
-- take action to study and to pursue enforcement of sanctions for violation of Model Rule 5.4 and the unauthorized practice of law within the State of Kansas.
The Kentucky Bar Association Committee on Multidisciplinary Practice voted unanimously on June 9, 2000 to recommend to the KBA Board of Governors to oppose MDP in any form, to oppose any rule changes designed to allow MDP and to strengthen and broaden KBA enforcement of rules prohibiting the unauthorized practice of law and the sharing of fees with non-lawyers.
Louisiana State Bar Association found no interest among its members on the issue. The bar sees a need for extensive member education. The ABA delegates comprise an informal task force to monitor the issue.
The Maine State Bar Association Task Force on the Future of the Practice of Law has issued a Preliminary Report to the Maine State Board of Governors. The Report recommends that:
[A] prompt review of [the Maine Rules] be undertaken with the ultimate aim of allowing layers to share fees when associated with other professionals and disciplines either on a permanent basis or on a case by case basis to provide a client with a greater range of services so long as lawyers control the MDP and are responsible for adherence to the Bar Rules by all persons engaged in the enterprise and for the preservation of the core values of the profession.
The Maryland State Bar Association Task Force on Multi-Disciplinary Practice filed a report that recommended that:
1. Lawyers be permitted to share fees and join with non-lawyers in a practice that delivers both legal and non-legal services provided that the lawyers have the control and authority necessary to assure lawyer independence in the rendering of legal services.
2. Regulatory authorities enforce existing rules and adopt such additional enforcement procedures as would be needed to implement the principles identified in the recommendations.
3. Non-lawyers in the MDP not be permitted to deliver legal services and all lawyers in the MDP be required to observe the Rules of Professional Conduct. That passive investment by non-lawyers not be permitted.
4. An MDP not be permitted to offer legal and audit services to the same client.
5. The Maryland State Bar Association institutionalize a special committee whose purpose would include education of the bar and public as to the existence and function of MDP's, the monitoring and evaluation of MDP's and a reporting requirement to the bar's Board of Governors relating to the above.
6. The Rules of Professional Conduct be revised to conform with the recommendations above.
The Board of Governors rejected the recommendations on September 18, 2000 by a vote of 20-11.
Massachusetts Bar Association Multidisciplinary Practice Center.
Boston Bar Association (http://www.bostonbar.org/gr/adhoc/mdphd.htm#DraftPart1)
BBA MDP Task Force issued an interim report on June 7, 2000 in support of changing the rules to permit MDPs subject to the following:
The Task Force proposes a three-pronged means of ensuring that lawyers actually control an MDP. The Task Force believes that adherence to the Rules of Professional Conduct (and, concomitantly, preservation of the core values of the legal profession) may be assured by requiring in an MDP setting that lawyers: (1) are the beneficial owners of a majority of the outstanding voting shares or other equity interests in the MDP; (2) control the MDP (meaning that they have the power to make and enforce the MDP's policies); and (3) exercise managerial authority over the MDP. If lawyers possess these three hallmarks of control over an MDP, then those persons in charge of the MDP are not only obliged to comply with the Rules of Professional Conduct, but also are subject to disciplinary proceedings should they fail to comply with those rules.
Michigan (http://www.michbar.org/committees/multidisciplinary/multidisciplinary.html)
In July 2000 the State Bar of Michigan Multidisciplinary Practice Committee published its report and recommendation. On February 10, 2001 the Representative Assembly postponed consideration of the recommendations until at least September 2001. The Executive Summary of the report states that:
The Committee proposes amendments to the Michigan Rules of Professional Conduct that would clarify the obligations of a lawyer when offering law and nonlaw services to a client, either through an ancillary service or jointly with other nonlaw service professionals. The proposed amendments would permit lawyers to exchange referrals with nonlawyers without compensation, and would permit lawyers serving a client under a joint agreement to share fees with nonlawyers outside the firm, if the client is advised of and does not object to the participation of the lawyers and nonlawyers.
The proposal does not permit lay ownership of law firms, "fully integrated" multidisciplinary services [MDPs], delivery of legal services from nonlaw entities, nor indiscriminate sharing of legal fees with nonlawyers. The Committee recommends continued study of those concepts.
Specifically, the committee recommends:
That the Michigan Rules of Professional Conduct be amended to add a Rule [Proposed 2.4] pertaining to Multidisciplinary Practices, and that existing Rules 5.4 and 7.2 be amended consistent with that change, as set forth below. [New language underscored.]
Proposed Rule [2.4]. Multidisciplinary Practice
(a) Ancillary Services. A lawyer may invest in or operate a nonlaw business offering services to clients of the lawyer provided that:
the relationship between the lawyer and the nonlaw business is disclosed in writing to the client or nonlaw business customer;
there is no interference with the lawyer’s independent professional judgment regarding the client’s representation; and
client and customer information is not shared between the law and nonlaw businesses unless the client consents in writing to disclosure or use of specific information. A blanket waiver or advance consent to disclosure or use of information that does not specify the information to be shared, is not adequate to satisfy this requirement.
(b) Joint Services. A lawyer may offer or make an agreement with one or more other service providers to deliver services to existing or future clients of the other in a specific matter or on an ongoing basis prospectively, or may participate with one or more other service providers in bidding for prospective business involving the services of each, provided that:
1. the relationship between the lawyer and the other service providers is disclosed to the client;
2. there is no interference with the lawyer’s independent professional judgment regarding the client’s legal representation;
3. confidences and secrets are not disclosed or used except as permitted or required by Rule 1.6;
4. the scope of the legal representation is set forth;
5. the fees for lawyer services are separately stated from other fees to be charged to the client; and
6. the client consents, preferably before legal services begin.
(c) Division of Fees. A division of a fee between lawyers and nonlawyers delivering services to a client may be made only if
1. the fee arises under an arrangement for multidisciplinary services as permitted by paragraphs (a) or (b); and
2. the client is advised of and does not object to the financial participation of the lawyers and nonlawyers involved.
Comment
Lawyers may employ nonlawyer professionals on their staffs to assist them in advising clients. Lawyers may work with nonlawyer professionals whom they directly retain or who are retained by the client. To the extent that the lawyer retains, controls, or has supervision over the nonlawyer, the lawyer must comply with Rule 5.3.
When the nature of an engagement requires, or the client would benefit from, advice or service from service providers in addition to lawyers, a lawyer may participate with other service providers to meet the client’s needs. In so doing, the lawyer and the client must be aware of the limits of the participation of each service provider. Laws or rules of other professions may circumscribe how lawyers and other professionals may provide services. A lawyer’s services may not be used to further illegal or improper activity of a service provider, even if a client requests the service or consents to it. See, e.g. Rule 1.2(c), counseling a client concerning illegal or fraudulent activity; Rule 5.5, aiding the unauthorized practice of law; Rule 8.4(b), conduct involving dishonesty, fraud, deceit or misrepresentation.
Generally, if the lawyer does not retain, control or supervise the nonlawyer service provider, the lawyer is not responsible for the acts or omissions of the other service provider. Ordinarily, conflicts of interest of other service providers would not impute to the lawyer, and vice versa. The terms of a particular engagement may change these general duties. It is the lawyer’s responsibility to ensure that the client understands the lawyer’s duties, and to correct any misunderstanding that may arise among the service providers regarding the lawyer’s obligations. A written understanding between the lawyer and the other service providers and a written agreement with the client, although not required, assists in clarifying and determining respective roles and responsibilities. Where client consent is required, written consent is preferable.
When delivering services with other professionals, a lawyer should take special care that the lawyer’s obligations under these Rules are fulfilled. If the lawyer is one of several professionals involved in a service project, and not the leader of the project, there may be more pressure or incentive for the lawyer to share confidences and secrets with the other members of the service team, or to allow the goals and ideas of other members of the service team to improperly influence the lawyer’s independent professional judgment regarding the client’s legal representation.
Lawyers have special responsibilities regarding fee arrangements under Rule 1.5, and regarding money handling under Rule 1.15. These obligations do not apply to other service providers. A prudent lawyer will arrange the terms and mechanics of an engagement to facilitate the lawyer’s compliance with those obligations.
MRPC Rule 7.2 Advertising.
a. Subject to the provisions of these rules, a lawyer may advertise.
b. A copy or recording of an advertisement or communication shall be kept for two years after its last dissemination along with a record of when and where it was used.
c. A lawyer shall not give anything of value to a person for recommending the lawyer's services, except that a lawyer may:
i. pay the reasonable cost of advertising or communication permitted by this rule;
ii participate in, and pay the usual charges of, a not-for-profit lawyer referral service or other legal service organization that satisfies the requirements of Rule 6.3(b); and
iii pay for a law practice in accordance with Rule 1.17; and
iv agree to exchange referrals.
Comment
To assist the public in obtaining legal services, lawyers should be allowed to make known their services not only through reputation but also through organized information campaigns in the form of advertising. Advertising involves an active quest for clients, contrary to the tradition that a lawyer should not seek clientele. However, the public's need to know about legal services can be fulfilled in part through advertising. This need is particularly acute in the case of persons of moderate means who have not made extensive use of legal services. The interest in expanding public information about legal services ought to prevail over considerations of tradition. Nevertheless, advertising by lawyers entails the risk of practices that are misleading or overreaching.
A lawyer may agree to receive referrals from, refer clients to, or exchange referrals with, a professional or group of professionals, as long as there is no compensation or other fee shared or exchanged. A lawyer may share fees pursuant to Rules 5.4 and [2.4].
Neither this rule nor Rule 7.3 prohibits communications authorized by law, such as notice to members of a class in a class action.
Record of Advertising
Paragraph (b) requires that a record of the content and use of advertising be kept in order to facilitate enforcement of these rules.
MRPC Rule 5.4 Professional Independence of a Lawyer.
(a) A lawyer or law firm shall not share legal fees with a nonlawyer, except that:
1. an agreement by a lawyer with the lawyer's firm, partner, or associate may provide for the payment of money, over a reasonable period of time after the lawyer's death, to the lawyer's estate, or to one or more specified persons;
2. a lawyer who purchases the practice of a deceased, disabled, or disappeared lawyer may pay to the estate or other representative of that lawyer the agreed-upon purchase price pursuant to the provisions of Rule 1.17;
3. a lawyer or law firm may include nonlawyer employees in a compensation or retirement plan, even though the plan is based in whole or in part on a profit-sharing arrangement;
4. a lawyer or law firm may have an agreement as permitted by Rule [2.4].
Minnesota (http://www2.mnbar.org/mdp/convention_mdp/mdp_report_5-3-00.pdf)
Minnesota State Bar Association Multidisciplinary Task Force issued a pro MDP report on May 23, 2000 that was adopted by the MSBA General Assembly on June 23, 2000. On September 17, 2002 the Supreme Court entered an order denying the Bar's petition to adopt specific rule amendments to allow for MDP.
III. RECOMMENDATION
The MSBA Multidisciplinary Practice Task Force (the "Task Force") recommends that the MSBA Board of Governors adopt the following resolution:
Resolved, that the Board of Governors recommends to the General Assembly that the Minnesota delegates to the ABA House of Delegates be encouraged to communicate the following position to the ABA House of Delegates and to take action consistent with such position in any ABA proceedings:
1. General Position. The Model Rules of Professional Conduct should be amended to permit lawyers to practice law in an entity at least partially owned by licensed professionals who are not lawyers, subject to the limitations set forth below. The limitations are intended to ensure that the multidisciplinary entity operates consistently with applicable Rules of Professional Conduct, as amended, and the core ethical values reflected therein, and with statutory prohibitions on unauthorized practice of law.
2. Definitions.
a. The ABA should amend the Model Rules of Professional Conduct to include a definition of "practice of law" to clarify which lawyers are subject to the Model Rules, including any limitations on multidisciplinary practice, and to clarify which services provided by a permitted MDP entity may only be provided by its lawyers. For instance, "practice of law" could be defined to mean:
(1) rendering legal consultation or advice to a client;
(2) appearing on behalf of a client in any hearing or proceeding or before any judicial officer, arbitrator, mediator, court, public agency, referee, magistrate, commissioner, or hearing officer unless the rules of the tribunal involved permit representation by nonlawyers;
(3) appearing as a representative of a client at a deposition or other discovery matter; and
(4) engaging in other activities that constitute the practice of law as provided by statute or common law.
b. "Professionals" means "individual licensed professionals who are governed by promulgated codes of ethical conduct."
3. Limitations on Permitted Multidisciplinary Practice.
a. The nonlawyer owners must be actively practicing their professions in the entity and may not be passive investors. Only lawyers may practice law within the entity.
b. A majority percentage of ownership in the entity must be held by lawyers licensed to practice law and practicing law in that entity. In addition, the lawyers practicing law in the entity must ensure that they retain the control and authority necessary to assure lawyer independence in the rendering of legal services. A substantial minority of the Task Force opposes this particular recommendation.
c. The lawyers practicing law in the entity in any state must be licensed to practice law in that state and abide by the Rules of Professional Conduct in effect in that state, including the rules governing client confidentiality and conflicts of interest. Conflicts will be imputed firm-wide for purposes of applying applicable Rules of Professional Conduct to lawyers practicing in a permitted MDP entity. No change is intended with respect to Rule 8.5 regarding application of the Rules of Professional Conduct to lawyers providing services outside of the state.
d. The lawyers practicing law in the entity must obtain an affirmative written agreement signed by each member of the entity that there will be no interference with the lawyer’s independence of professional judgment or with the client-lawyer relationship.
The MDP Task Force has been disbanded.
Missouri (http://www.mobar.net/news/boardmdp.htm)
The Report of the Board of Governors of The Missouri Bar on the Multidisciplinary Practice of Law, issued June 30, 2000, includes the following statements:
The conclusion of the Board of Governors of The Missouri Bar is that neither the latest recommendations by the ABA Commission nor the MacCrate Committee are acceptable. (Report 117 and Report 100 respectively on the House of Delegates' agenda) . . .. The aspirational goals of the MacCrate Report contained in Report 100 are more consistent with the recommendations of The Missouri Bar Special Committee . . .. The Missouri Bar Special Committee did not endorse either of the proposals (Report 100 and Report 117) . . .; neither did the Special Committee rule out absolutely the concept of MDP.
The Board of Governors believes that any proposal for MDPs must be considered in light of specific language, including amendments to the Model Rules, where appropriate. Specific language, if proposed, should include consideration of at least the following points:
If MDPs are allowed, they should be controlled by lawyers, meaning that lawyers should constitute at least 51 percent of the ownership of MDPs. Passive investment in MDPs should not be permitted.
In jurisdictions where state supreme courts regulate the legal profession, the courts must continue to maintain that control over the profession.
Any regulation of MDPs should be by a comprehensive rule dealing with all aspects of MDPs, not simply fee-splitting.
The independent judgment of lawyers must be maintained.
Consideration should be given to the exclusion of litigation services from MDPs in order to maintain attorney/client confidentiality.
The protection of the client's interests should be paramount, and there should be recognition that MDPs can put the client's interests at risk, and the unsophisticated clients may be more at risk than sophisticated ones, such as corporations with in-house counsel. In any proposed regulation of MDPs, consideration should be given to additional protection for ordinary consumers, including more detailed disclosures and more explicit waivers of potential conflicts of interest. (It may be appropriate for MDPs to treat different types of clients differently. One suggestion that could be considered would be to adopt a concept similar to that of the "accredited investor," which is used in the securities industry to distinguish sophisticated institutional investors from others. A similar concept could be developed to distinguish sophisticated from unsophisticated clients in terms of the duties, disclosures, waivers, etc., that may be required by MDPs.)
Any rule regulating MDPs should include provisions for funding the necessary regulatory oversight, with the cost to be borne by the MDPs.
There should be a clear definition of either "the practice of law" or of what actions only lawyers are permitted to undertake or perform.
There should be a list of or detailed criteria describing the professions that can participate with lawyers in an MDP.
The standard applicable to lawyers regarding imputation of conflict of interest should also apply to all members, lawyer and non-lawyer, of the MDP.
The Bar Association of Metropolitan St. Louis
Report of the Multidisciplinary Practice Task Force (adopted by the Board of Governors, April 8, 2000)
Because of the lack of hard data to show the feelings of the membership, the Task Force will not take a position either supporting or rejecting MDPs as the way to solve the problem. Nevertheless, there appears to be a need to express the views of BAMSL to the Commission and to the ABA House of Delegates as to the nature of the "core values" we feel should be included in any rule promulgated to regulate multi-disciplinary practice, and time is now of the essence.
This Task Force believes that even those who favor MDP recognize the need to preserve the core values of the legal profession, and the need for some regulation of MDPs. The Task Force recommends to the Board of Governors of BAMSL that it adopt five principles that any change of rules permitting MDPs should contain. They are as follows:
The highest Court of each State must continue to regulate and control the practice of law. Nothing should be done that would in any way indicate a willingness to accept regulation by State legislatures.
Any MDP must be owned and controlled by lawyers, i.e. lawyers must own at least 51% in the entity and control and manage the operation of the entity.
A rule that only is directed toward fee sharing is insufficient to deal with the problem of MDPs. A new special rule relating to MDPs should be promulgated. Such a rule should require other professionals to be governed by rules relating to conflict of interest, confidentiality and loyalty.
The rules relating to unauthorized practice must be vigorously enforced. This has not been done in the past, and with new responsibility being placed on Bar counsel, adequate resources must be made available and if necessary, laws changed, to give the bar and attorneys general more authority to enforce these rules.
Any rule authorizing MDPs must be implemented in a manner that protects the public and preserves the core values of the legal profession, including competence, independence of professional judgment, protection of confidential client information, loyalty to the client through the avoidance of conflict of interest, and pro bono publico obligations.
The State Bar of Montana's Multidisciplinary Practice Committee continues to study the issue. It had aimed at having a recommendation ready for the State Bar Board of Trustees’ December 2000 meeting but may not rush to meet that timetable in light of the ABA action.
The Nebraska State Bar Association Unauthorized Practice Committee delivered a report on April 20, 2000 that has been passed by the NSBA House of Delegates. The Report states:
The NSBA finds no credible evidence or pervasive argument that it would be in the public interest to amend the rules regulating the Nebraska Bar or the Code of Professional Responsibility to allow the formation of MDPs which would include lawyers, and the consequent sharing or splitting of fees for legal services among lawyers and nonlawyers.
Nevada (no information available)
New Hampshire (http://www.nhbar.org/barnews/parser.cgi?FILE=data/4/data.373)
The New Hampshire Bar News has asked for comments on MDPs and the ABA's stance toward changes in the Model Rules of Professional Conduct.
New Jersey (http://www.abanet.org/cpr/njsba.html)
The New Jersey State Bar Association has an MDP Committee that issued a report opposing changes in RPC's to permit lawyer formation or participation in MDP's. The report was approved by NJSBA Board of Trustees on July 16, 1999. Further, the Board voted to file (with the Illinois State Bar Association) a Report and Recommendation to the ABA House of Delegates for the July 2000 Annual Meeting stating that:
The American Bar Association shall make no change to any of the Model Rules of Professional Conduct to permit lawyers to share legal fees with non-lawyers or to permit law firms directly or indirectly to transfer ownership or control to nonlawyers over entities practicing law.
Lawyers should be permitted to enter into interprofessional contractual arrangements with nonlegal professionals and nonlegal professional service firms for the purpose of offering legal and other professional services to the public, either on an ad hoc or on a systematic and continuing basis, provided no nonlawyer has any ownership or investment interest in, or managerial or supervisory right, power of position in connection with, the practice of law by any lawyer or law firm.
Task force report is expected by November, 2001.
New York (http://www.nysba.org/media/newsreleases/2000/mdp.html)
The New York State Bar Association Special Committee on the Law Governing Firm Structure and Operation (MacCrate Committee) issued a report in April 2000 that calls for permitting two forms of multidisciplinary practice (MDP) with nonlawyers, but partnerships with nonlawyers and multidisciplinary practice in which nonlawyers have any degree of ownership or control over the practice of law would be prohibited.
Lawyers and law firms would be permitted to provide ancillary nonlegal services and to provide services to clients in cooperation with nonlegal firms, while providing safeguards for the public to protect against the risks of nonlawyer involvement in the practice of law. The NYSBA House of Delegates approved the report on June 24, 2000.
Under existing ethics rules, ancillary businesses are permitted in New York. The new rule, however, is framed by reference to the relationship between the ancillary business and the client, as seen from the client’s perspective. Recommended rule changes expressly impose upon the lawyer a duty to educate the client about the nature of the nonlegal services being provided.
The report recommends amendments to the New York Code of Professional Responsibility. These changes include two new disciplinary rules and 10 new ethical considerations. In addition to the ancillary business amendment, other proposed changes include:
A revised rule to permit lawyers to advertise truthfully the fact that they provide nonlegal services, either directly or through a lawyer owned and controlled entity.
Recommending that the practice of law be clearly defined.
A call for vigorous enforcement of the prohibition against the unauthorized practice of law which ensures that nonlawyers do not injure the public by claiming to provide legal services.
On November 4, 2000, the NYSBA House of Delegates approved the two new Disciplinary Rules and ten new Ethical Considerations.
Association of the Bar of the City of New York (http://www.abcny.org/mdprep.htm)
Issued a Statement of Position on Multidisciplinary Practice in July 1999:
Thus, we believe that MDPs should be permitted, but only under a regime that requires MDPs to respect and preserve the core values of the legal profession — independence of judgment, loyalty to the client, preservation of confidences, competence, avoiding improper solicitation, and support for pro bono legal services and improving the legal system. To make sure that such a regime is properly designed, we believe that these issues should be fully discussed at the 1999 ABA Annual Meeting and voted upon at a subsequent meeting.
New York County Lawyers’ Association (http://www.nycla.org/publications/multi.htm)
Special Committee approved concept of MDPs, if lawyers retain full control, including at least 66 2/3 % ownership. Approved by Board of Directors on June 14, 1999.
Bar Association of Nassau County
Ad Hoc Committee on Multidisciplinary Practice issued a report that supported the New York State Bar position. The Board of Directors passed a resolution supporting the report.
The Suffolk County Bar Association
Has developed a task force to study the MDP issue.
North Carolina (http://www.barlinc.org/legal_prof/committees/mdp/mdpreport/index2.asp)
The North Carolina Bar Association Multidisciplinary Practice Task Force issued a report on September 13, 2000 with the following recommendations:
RESOLVED, that the North Carolina Bar Association supports the following principles, concerning business forms for the practice of law including, if appropriate, amending the North Carolina Rules of Professional Conduct and other laws and rules governing lawyers consistent with the following principles:
1. Any changes to the laws governing lawyers and the Rules of Professional Conduct must be implemented in a manner that protects the public and preserves the core values of the legal profession.
2. No change should be made to the law that now prohibits lawyers and law firms directly or indirectly from transferring ownership or control to nonlawyers over entities practicing law except as provided below. Any further demand that exists for greater integration of legal services with those of other professions may be satisfied by permitting lawyers to enter into strategic alliances and other contractual relationships with nonlegal professional service providers, as well as by permitting lawyers to own and operate nonlegal businesses. Passive investment in a firm providing legal services should not be permitted.
3. Lawyers should be allowed to deliver legal services in conjunction with nonlawyer professionals as long as the arrangement is one in which lawyers (who practice law) have the control and authority necessary to assure lawyer independence in the rendering of legal services and to assure compliance with ethical standards. The following non-traditional arrangements are examples of ones in which lawyers have sufficient control and authority:
a. Cooperative Model. Lawyers may employ nonlawyer professionals on their staffs to assist them in advising clients or work cooperatively with nonlawyer professionals whom they directly retain or who are retained by a client. To the extent that the nonlawyer professionals are employed, retained, or associated with a lawyer, the partners in a law firm and any lawyer having direct supervisory authority over a nonlawyer professional must take steps "to ensure that the person’s conduct is compatible with the professional obligations of the lawyer," especially with respect to the obligation not to disclose information relating to the representation.
b. Ancillary Business Model. Lawyers and law firms should be permitted to provide legal and nonlegal services to clients or other persons, directly or through affiliated entities, provided that the nonlawyer or nonlegal entity involved in the provision of such services does not direct or regulate the professional judgment of the lawyer or law firm in rendering legal services to any person. Specifically, a law firm may operate an ancillary business that provides professional services to clients. The law firm must take great care to assure that its clients understand that the ancillary business is affiliated with, but distinct from, the law firm and does not offer legal services. Lawyers and nonlawyer professionals may be partners in the ancillary business, sharing fees and jointly making management decisions. The lawyer-partners will provide consulting services not legal services to the clients of the ancillary business. No nonlawyer or nonlegal entity involved in the provision of such services should own or control the practice of law by a lawyer or law firm or otherwise be permitted to direct or regulate the professional judgment of the lawyer or law firm in rendering legal services to any person.
c. Contract Model. Lawyers and law firms should be permitted to enter into interprofessional contractual arrangements with nonlegal professionals and nonlegal professional services firms for the purpose of offering legal and other professional services to the public, on a systematic and continuing basis, provided no nonlawyer has managerial or supervisory right, power or position in connection with, the practice of law by any lawyer or law firm. Specifically, a professional services firm may contract with an independent law firm. A typical contract might include terms such as (1) the law firm agreeing to identify its affiliation with the professional services firm on its letterhead and business cards, and in its advertising; (2) the law firm and the professional services firm agreeing to refer clients to each other on a nonexclusive basis; and (3) the law firm agreeing to purchase goods and services from the professional services firm such as staff management, communications technology, and rent for the leasing of office space and equipment. The law firm will remain an independent entity controlled and managed by lawyers and accept clients who have no connection with the professional services firm. These arrangements must be non-exclusive and there must be full disclosure.
d. Modified Command and Control Model. Lawyers should be permitted to share fees and join with nonlawyer professionals in an entity that delivers both legal and nonlegal professional services provided that the lawyers (who practice law) have the control and authority over the entity necessary to assure lawyer independence in the rendering of legal services, which control must represent at least a 51% controlling interest, in law and in fact, in the entity. "Nonlawyer professionals" means members of recognized professions or other disciplines that are governed by ethical standards. Specifically, lawyers (who practice law) may form a partnership with a nonlawyer and share legal fees subject to certain clearly defined restrictions. The nonlawyer professionals must agree "to abide by the rules of professional conduct" and the lawyers with a financial interest or managerial authority must "undertake to be responsible for the nonlawyer participants to the same extent as if nonlawyer participants were lawyers under Rule 5.1." A significant purpose of the entity must be the provision of legal services. These conditions must be set forth in writing. This model will require changes to the Rules of Professional Conduct including Rule 5.4. Such changes must provide specific restrictions including direct supervision by the State Bar of such fee splitting arrangements.
4. The North Carolina Rules of Professional Conduct should be revised to assure that there are safeguards in the Rules relating to strategic alliances and other contractual relationships with nonlegal professional service providers. Such changes should include provisions similar to the following:
Rule 5.7. Ancillary Services
(a) A lawyer who provides nonlegal services to a recipient that are not distinct from legal services provided to that recipient is subject to the Rules of Professional Conduct with respect to the provision of both legal and nonlegal services.
(b) A lawyer who provides nonlegal services to a recipient that are distinct from any legal services provided to the recipient is subject to the Rules of Professional Conduct with respect to the nonlegal services if the lawyer knows or reasonably should know that the recipient might believe that the recipient is receiving the protection of a client-lawyer relationship.
(c) A lawyer who is an owner, controlling party, employee, agent, or is otherwise affiliated with an entity providing nonlegal services to a recipient is subject to the Rules of Professional Conduct with respect to the nonlegal services if the lawyer knows or reasonably should know that the recipient might believe that the recipient is receiving the protection of a client-lawyer relationship.
(d) Paragraph (b) or (c) does not apply if the lawyer makes reasonable efforts to avoid any misunderstanding by the recipient receiving nonlegal services. Those efforts must include advising the recipient that the services are not legal services and that the protection of a client-lawyer relationship does not exist with respect to the provision of nonlegal services to the recipient.
Rule 5.8. Contractual Relationships Between Lawyers and Nonlegal Professionals
(a) A lawyer or law firm may enter into and maintain a contractual relationship with a nonlegal professional or nonlegal professional service firm for the purpose of offering to the public, on a systematic and continuing basis, legal services performed by the lawyer or law firm, as well as other professional services, provided that:
(1) The profession of the nonlegal professional or nonlegal professional service firm is a profession listed by the North Carolina Supreme Court pursuant to Rule 5.8(b); and
(2) The lawyer or law firm neither grants to the nonlegal professional or nonlegal professional service firm, nor permits such person or firm to obtain, hold or exercise, directly or indirectly, any ownership or investment interest in, or managerial or supervisory right, power or position in connection with, the practice of law by the lawyer or law firm except as otherwise provided in these Rules.
(b) For purposes of Rule 5.8(a):
(1) Each profession on the list maintained by the North Carolina Supreme Court shall have been designated by it, or shall have been approved by it upon the application of an individual or firm in this State, upon a determination that the profession is composed of individuals who, with respect to their profession;
(i) have been awarded a Bachelor’s Degree or its equivalent from an accredited college or university;
(ii) are licensed by this State; and
(iii) are required under penalty of suspension or revocation of license to adhere to a code of ethical conduct that is reasonably comparable to that of the legal profession.
(2) The term "ownership or investment interest" shall mean any such interest in any form of debt or equity, and shall include any interest commonly considered to be an interest accruing to or enjoyed by an owner or investor.
(c) Rule 5.8(a) shall not apply to relationships consisting solely of non-exclusive reciprocal referral agreements or understandings between a lawyer or law firm and a nonlegal professional or nonlegal professional service firm.
(d) Notwithstanding Rule 5.4(a), a lawyer or law firm may allocate costs and expenses with a nonlegal professional or nonlegal professional service firm pursuant to a contractual relationship permitted by Rule 5.8(a).
5. The Rules of Professional Conduct should be further amended to permit the practice models described above which will include changes to Rule 5.4 and other changes to provide proper safeguards for the public in the provision of legal services.
6. The North Carolina Bar Association should continue vigorous study of developing business practice forms nationally and internationally to assure that North Carolina lawyers can best provide legal services to meet the needs of the public.
RESOLVED, FURTHER that the North Carolina Bar Association supports the following principles concerning the practice of law by lawyers and others:
- The law governing lawyers was developed to protect the public interest and to preserve the core values of the legal profession, which values are essential to the proper functioning of the American justice system.
- All lawyers are members of one profession subject to the laws governing lawyers.
- The prohibition on nonlawyers delivering legal services and the obligations of all lawyers to observe the Rules of Professional Conduct should not be altered.
- North Carolina should retain and enforce laws that generally bar the practice of law by entities other than law firms and individuals other than lawyers.
- Regulatory authorities should enforce existing laws and rules and adopt such additional enforcement procedures as are needed to implement these principles concerning the proper practice of law to protect the public interest.