Preserving the Core Values of the American Legal Profession
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PRESERVING THE CORE VALUES OF THE AMERICAN LEGAL PROFESSION The Place of Multidisciplinary Practice in the Law Governing Lawyers Report of the New York State Bar Association Special Committee on the Law Governing Firm Structure and Operation The Special Committee is solely responsible for the contents of this report. Unless and until adopted in whole or in part by the Executive Committee and/or the House of Delegates of the New York State Bar Association, no part of the report should be considered the oficial position of the Association. Albany, New York April 2000 Special Committee on the Law Governing Firm Structure and Operation Robert MacCrate, Esq., Chairperson, New York, NY Sydney M. Cone, 111, Esq., Vice Chairperson, New York, NY Steven C. Krane, Esq., Vice Chairperson, New York, NY Members Robert E. Brown, Esq., Rochester, NY Robert E. Curry, Jr., Esq., New York, NY Clover M. Drinkwater, Esq., Elmira, NY A. Thomas Levin, Esq., Mineola, NY Robert L. Ostertag, Esq., Poughkeepsie, NY Erin M. Peradotto, Esq., Buffalo, NY Joshua M. Pruzansky, Esq., Smithtown, NY Kenneth G. Standard, Esq., New York, NY Reporter Prof. John David Leubsdorf, Rutgers School of Law-Newark, NJ Advisors Prof. Eleanor M. Fox, New York University School of Law, New York, NY Prof. L. Harold Levinson, Vanderbilt University Law School, Nashville, TN Executive Committee Liaison Thomas 0. Itice, Esq., Brooklyn, NY NYSBA Staff Liaison John A. Williamson, Jr., Esq., Albany, NY Table of Contents Page Introduction The Mission. Process and Report of the Special Committee ..............1 PART ONE APPRAISAL OF THE AMEFUCAN LEGAL PROFESSION IN THE YEAR 2000 ............................................... 5 Chapter 1 The Salient Changes in the Demography .............................7 1. Explosion in Numbers and in Use of Legal Services ..............7 2 . Change in the Profession's Gender Make-up ...................9 3 . Opening the Profession to Minorities ........................ 12 Chapter 2 The Profound Effects of Specialization. Information Technology. Advertising and Law Practice Management ............... 15 1. The Spread of Specialization ............................... 15 2 . Information Technology in the Law .......................... 18 3 . Advertising and Marketing Legal Services ....................21 4 . Managing the Business of Lawyering ........................26 Chapter 3 The Differentiation in Practice Settings ............................. 31 1. The Variety of Practice Setting .............................31 2 . The Core .Sector of Traditional Practitioners ................... 37 3 . The Development of Legal Service Organizations ..............46 4 . The Burgeoning of Entrepreneurial Practice ................... 71 5 . The Newly Pivotal In-house Counsel ........................89 6. Lawyers for Government ..................................91 Chapter 4 Cooperative Arrangements With Other Professionals ..................97 1. Ad Hoc Cooperation Between Lawyers and Nonlawyer Professionals ...........................................98 2 . Nonlegal Businesses of Law Firms and Dual Practitioners ........ 98 3 . Ancillary Businesses Conducted as Law Firm Subsidiaries ......100 4 . Ancillary Businesses in Which Autonomous Noniawyers Have a Financial Interest ................................. 103 5 . Law Firms in Which Nonlawyers Have a Financial Interest ......106 Chapter 5 The Organization. Education and Maintenance of a Single American Legal Profession .....................................109 Chapter 6 The Articulation and Enforcement of Professional Values .............117 1 . The Bar and the Courts ..................................117 2 . The Multiple Channels of Professionalization ................. 122 PART TWO THE CHALLENGES TO MAINTAINING A SINGLE PUBLIC PROFESSION OF LAW ............................... 139 Chapter 7 Marketing Legal Services as Part of a Multidisciplinary Practice ......................................................141 1 . The Metamorphosis in the Accounting Profession ............. 141 2 . The "Big Five" Phenomenon ..............................146 3 . The Regulation Today of the Discipline of Accountancy ........ 154 4 . Lawyer Recruitment and Employment By Accounting1 Professional Services Firms ...............................169 Chapter 8 The Globalization of American Law Practice .......................177 1 . The Modest Beginnings ..................................177 2 . The Expansion Abroad of U.S. Law Firms ...................178 3 . Professional Regulation ..................................181 Chapter 9 A Survey of MDP in Selected Jurisdictions Abroad ..................185 1 . Europe ...............................................188 2 . France ................................................192 3 . United Kingdom ........................................216 4 . The Netherlands ........................................223 5. Germany ..............................................229 6 . Other European Jurisdictions (Austria, Belgium, Italy, Spain, Sweden, Switzerland) ...................................271 7 . Ontario, Canada ........................................282 8. New South Wales, Australia ..............................285 9 . Conclusions Regarding the Survey ............: ............287 Chapter 10 Identifying and Appraising the Factors Looking Toward Change .....................................................293 1 . Increasing Transactional Complexity .......................293 2. The Growth of the Theory of "Market Regulationwand Consumerism .........................................-294 3 . The Advance of Expert Systems ...........................298 4 . The Difficulty of Defining the "Practice of Law" ..............301 5 . The Desire for Liquidity of Professional Interests ..............303 6 . The Economic Power of Proponents of MDP .................304 PART THREE ANALYSIS OF THE PRINCIPAL ISSUES AND RECOMMENDATIONS ..................................307 Chapter 11 Clients. the Public. Law Firms. and the Professional Responsibilities of Lawyers .....................................309 1. Fiduciary Duties to Clients ...............................310 2 . Duties Arising From Lawyers' Roles in the Adversary and Governmental Systems .................................. 318 Chapter 12 In The Public Interest. What Changes Should Be Made in the Law Governing Lawyers and Law Firms? ....................... 325 1. With Respect to Ancillary Services Offered by Lawyers andLawFirms ......................................... 326 2 . With Respect to Interprofessional "Strategic Alliances" and other Contractual Relationships Between Lawyers and Nonlawyers ........................................342 3 . With Respect to Lawyers Who Work for Organizations that Provide Consulting Services and Financial Products tothepublic ...........................................359 4 . With Respect to the Unauthorized Practice of Law .............367 5 . With Respect to Nonlawyer Investment in Entities Practicing Law ..........................................377 6 . With Respect to Transfers to Nonlawyers of Ownership or Control Over Entities Practicing Law .....................380 New York Code Appendix ..................................... A- 1 Model Rules Appendix .........................................B-1 iii Introduction The Mission, Process and Report of the Special Committee In June 1999 the American Bar Association Commission on Multidisciplinary Practice recommended numerous changes to the law governing lawyers, one of which would have permitted lawyers to participate with nonlawyers in the creation of business entities owned or controlled by nonlawyers to engage in multidisciplinary practice. On June 26, 1999, the New York State Bar Association's House of Delegates adopted a resolution (1) opposing any changes in existing regulations prohibiting attorneys from practicing law in MDPs in the absence of a sufficient demonstration that such changes are in the best interest of clients and society and do not undermine or dilute the integrity of the delivery of legal services by the legal profession; and (2) urging further studies of the matter. 1. The Mission of the Committee Pursuant to the NYSBA House of Delegates resolution, President Thomas 0. Rice, on July 28, 1999, created this Special Committee on the Law Governing Firm Structure and Operation, charging it to consider the present law and its effectiveness, whether there is a need for any changes in the law, the evidence in support of such changes, and whether potential advantages from such changes outweigh potential detrimental effects. On August 10, 1999 the ABA House of Delegates adopted the following resolution by a vote of 304 in favor to 98 opposed: RESOLVED, that the American Big Association make no change, addition or amendment to the Model Rules of Professional Conduct which permits a lawyer to offer legal services through a multidisciplinary practice unless and until , additional study demonstrates that such changes will further the public interest without sacrificing or compromising lawyer independence and the legal profession's tradition of loyalty to clients. 2. The Committee's Process At its organizational meeting on September 8,1999, this committee identified six subject areas for concentrated study and established working groups of committee members to whom initial responsibility for carrying forward each project was assigned. Over the ensuing six months, the Committee examined in depth each of the following subject areas: A. the changes since World War