Growth Of MDPs a Concern for Profession, Some Say, May/June 1999, The State Bar News, published by the New York State Bar Association

By Liz Lipton

The growth of lawyers practicing in Big Five accounting firms as well as MDPs in Europe and Canada has elicited a growing debate by legal experts. One concern is the regulation of lawyers practicing for accounting firms or MDPs. Another is the benefits and drawbacks of lawyers working in MBPs including how client/attorney confidentiality, conflict of interest and lawyer’s independence are impacted. A third is the question of whether lawyers in accounting firms are practicing law.

Six legal experts addressed these concerns at the Pace University School of Law Symposium entitled, "Lawyers and Accounting Firms: Ethical Concern or Model for the Future" on March 5^th in White Plains.

How important is this issue? Well, NYSBA president James C. Moore, said with the possible exception of the proposals that changed the Tort Laws, there has been no issue that has …raised greater concern than the concept of the multi –disciplinary Practice (MDP).

Professor Gary A, Munneke, of Pace University School of Law in White Plains provided some necessary background on this subject: He said ABA’s rule 5.4 states that "it is …improper for a lawyer to share fees with a nonlawyer, enter into a partnership with a nonlawyer if any of the activities involved constitutes the practice of law, or to allow a nonlawyer to influence the lawyer’s professional judgement."

But these rules, according to Professor Peter C. Kostant, Roger Williams University, School of Law, Bristol, Rhode Island, are basically ignored: "There is no doubt that accounting firms—who don’t like to be called accounting firms any longer--as MDPs are in violation of rule 5.4 in hiring the enormous thousands of numbers of lawyers who are working for them…And it is also entirely true that it makes no difference. Five point four is a …rule that is being ignored because it is a silly rule, and it’s a rule that reflects old-fashioned norm that is no longer accepted by the bar enough to fight about it." Furthermore, according to the ABA Background paper on MDPs there are only two recent enforcement actions against accounting firms involving their lawyers giving legal advice in violation of the states’ UPL statues.

Concomitant with the dearth of UPL cases against accounting firms is an increase of clients seeking legal work by MDPs rather than traditional law firms. Ruben Diaz a tax partner in the Miami office of the accounting, tax, and consulting firm Ernst & Young, LLP, offered some insight on this growth: "Lawyers are saying 'I provide only a service' [but] clients are saying 'I would like to have not just a service, but I would like to [also] have a product"…such as that of training and counseling employees to prevent sexual harassment. "It [the product] is something that the client wants, that the client benefits from that you can provide and that you may not be able to provide in a law firm environment."

And what are the benefits and drawbacks of this growing modality? Moore, a partner at Harter, Secrest & Moore in Rochester, New York, offered a thoughtful detailed analysis of this situation: "I find… that those traditional arguments in favor of the MDP model for delivery of legal services: speed, cost, and efficiency to be superficially appealing. I remain skeptical of how those benefits will actually be achieved over the long term," said Moore, who noted that the issue of MDPs is being studied by the ABA, NYSBA, several other state bar associations, and a handful of larger city bar associations.

While speed, cost and efficiency may be cited as benefits, what do clients give up when dealing with MDP rather than stand-alone law firm? First, lawyers "have no duty to reveal client confidences to the public"; whereas, accountants do have to report their conclusions to their clients and the public, said Moore. Therefore, "clients who find themselves in difficult situations which require the advice of counsel may be somewhat hesitant about seeking that counsel in an MBP setting if the client knows that the lawyer’s partner, an accountant, might feel compelled to reveal that information given to the firm through the lawyer about the client.

"In the process, the notion that a client with great comfort could go to a lawyer and bare his or her soul …would be severely and…adversely impacted.

A differing opinion on confidentiality was offered by Diaz: "Lawyers in MDPs will be able to live within clear rules on confidentiality issues that can be well explained to and understood by clients to ensure that the client’s expectation of confidentiality is not affected."

Regarding conflict of interest, Moore referred to large firms with numerous offices and attorneys, and noted that "the possibility …of conflict of interest with respect to a given client are enormous." He continued, the notion that ‘full disclosure’ …will eliminate any concern about this issue is "utterly naive and unrealistic. I suspect that conflict of interest in the MDP setting will cause clients great distress and generate significant amounts of malpractice litigation."

Conversely, Diaz said, "I don’t think the MDP faces challenges that are significantly different from the challenges faced by large law firms. Don’t say MDP is a bad thing because of conflict rules….The conflicts rules are too harsh…and should be changed."

Moore also discussed the diminution of MDP lawyers’ independence. "Lawyers [in MDPs] will be unable to exercise a high level of independence because they will always concerned about that independence will effect other professionals with whom they work."

On the other hand, Diaz said, "There is nothing to suggest that lawyers would compromise their professional judgement because they are part of an MDP. Lawyers will remain lawyers, regardless of the environment."

Moore also briefly mentioned these concerns:

Moore concluded, "I believe that the independent law firm will not whither and die, but its inhabitants will have to work ever harder and be ever more skillful if they are going to succeed and prosper in a narrower smaller and more competitive legal market place

Another related concern was discussed by Professor Munneke. He said that in large accounting firms with broad national client bases, "at least some of the work that might have been characterized as legal in former days is siphoned off to accountants and other professionals who define the scope of their services more broadly." Munneke added that legal work is increasingly being done by non-legal workers in title and real estate companies and by paralegals and purchasers of legal books and on-line legal materials.

Honorable Charles L. Brieant also spoke about the growth of non-lawyers doing legal work. Brieant, who has served as a United States District Judge in the Southern District of New York since 1971, said, "The IRS now allows us as licensed lawyers, CPAs and …agents… all of us can equally practice before the treasury. And Congress has given to those enrolled practitioners the client-attorney privilege…and really so far the sky hasn’t fallen. The states or Congress could do just the same thing… in other areas in what we think of as law such as divorce…, trust estates, residential title closing, title abstracting, and…a lot others. The experience with the tax practitioners really seems to eliminate the argument that unskilled…non-lawyers will endanger the public interest, The treasury has proved apparently that this isn’t so."