Fully Integrated MDP is Good for Lawyers

Monday, July 31, 2000

Introduction

The New Jersey Supreme Court, which defines and regulates legal practice in our state, has repeatedly determined (including through its Committees on Unauthorized Practice, Professional Ethics, and Attorney Advertising) that the purpose of regulation is public protection, not economic protectionism. In my view, consumer protection is the best and only real argument for regulation of multi-disciplinary practice (“MDP”).

According to the ABA’s Commission on MDP, two of the three types of MDP are currently available and perfectly legal in all American jurisdictions; the third is legal only in Washington, D.C., and in other countries.

In the face of ethics rules “strictly” prohibiting fee sharing between lawyers and members of other professional groups, what has actually happened? Practitioners of different disciplines often share common clients, work on problem solving together, and bill clients separately. Practitioners of one discipline frequently hire full-time employees from another discipline, perhaps as non-shareholders in name, but subject to various economic rewards that are clearly tied to company profits. Professional entities from different disciplines sometimes share resources, costs, information, and support personnel, and may be tied in all but name. In Washington, D.C., Canada, Australia, and a number of European nations, there is outright integration of once-distinct professional practices, such that fully integrated MDP has become the cultural “norm”.
We live in an age in which technology and complexity overwhelm regulation. The rules of the road have to change when the road goes from dirt to macadam to air and then outer space. In cyberspace, where do transactions take place geographically? When computer-authorized signatures document real estate and mortgage loan agreements among lenders, buyers, and sellers in different states or countries transacting about New Jersey real estate, how do we credibly talk about “local practice”? The issues shift from MDP to national and international practice standards to defining exactly what it means to be a lawyer anymore.

Practitioners’ reactions to MDP depend entirely on our world view and parochial experiences. Transactions attorneys and business counsel have far less trouble with the idea of fully integrated MDP than litigators do. Transactions attorneys have far more in common and far less conflicts of interest with CPA’s and other business and financial professionals than they do with trial counsel. Unlike legal practice even 20 years ago, today we communicate very little when we advise people that we are “a lawyer”. Our “profession” is actually multi-disciplinary within itself. We have become highly specialized and even isolated within our immediate and extended professional community and certainly from our clients’ perspective.

Let’s look at current examples of fully integrated MDP in our midst. Corporate counsel, serving in-house, is a law firm or individual practitioner within a company, with full power under current New Jersey law to conduct business transactions and litigate matters on behalf of “the client”. Corporate counsel gets a salary, stock options, pension, and other benefits, and shares fully in the profits and losses of that company, right along with CPA’s, MBA’s, economists, engineers, insurance executives, and support staff.

Perhaps a more interesting example is posed by captive law firms within insurance companies who, under UPL rulings and decisions by our Supreme Court, are permitted to perform unrestricted litigation services on behalf of insureds, while employed by a “professional services company” that sells insurance. Such lawyers may own stock in the company, participate fully in firm profits and losses, and share ownership with non-lawyer professionals from other disciplines and even with non-professionals. Why is fully integrated MDP o.k. in “that” setting, but not more generally?

Another example of fully integrated MDP is a professional services group all of whose members are lawyers but each of whose members also has another professional license. A CPA licensed lawyer is a fully participating partner with an engineer licensed lawyer, a mental health practitioner licensed lawyer, and a medical doctor licensed lawyer. If we strip away the law license of all but one of those professionals, and have the group members continue in exactly the same function as before, why is it all of a sudden not o.k. for those professionals to practice together?

At the recent ABA Dispute Resolution Section Annual Meeting, a panel on MDP noted that, quite apart from MDP considerations, it is becoming increasingly difficult for transactions professionals to co-exist within the same entity as litigation professionals and vice versa. Does this mean that transactions professionals from CPA firms and law firms actually have more in common than transactions lawyers and litigators? Should transactions professionals from different disciplines be permitted to join forces in the service of clients and, along the way, share profits and losses if they so choose?

The basic skillsets of the legal community are communication and advocacy; our roles are those of scrivener and enforcer. We are not alone in those endeavors. CPA’s, MBA’s, mental health professionals, economists, insurance professionals, engineers, and architects are expert communicators and executors in their areas of expertise, often in ways more effective than ours. As lawyers, whether scriveners or enforcers, we have to learn the substance before we can perform our work. All of our communication is second hand. We are agents, not principals. Other professional services people often give us the substance we need to write it up or fight it out.

The essence of professional service is not “lawyer”, “CPA”, “mental health provider” or “engineer”. Those are just labels. In the world of professional communication, transactions, and advocacy, the essence of what we do is problem-solving. If that is not our essential function, then why in the world are people paying us? They are looking for added value.

In our present construct, how are lawyers doing? Not so very well, in my view. As litigation types, we deliver a product most clients don’t want, often out of time, and vastly overpriced relative to perceived value, a “lose-lose” outcome not desired by any providers of goods or services.

Fully integrated MDP looks at the world through a different lens, the lens of problem-solving. Within the professional world, here is what lawyers as communications and advocacy professionals do best: identify and establish rules of conduct and enforce them. To integrate these functions with other professional crafts is both efficient and essential. The goal? To achieve the clients’ legitimate aims quickly, cost effectively, and qualitatively.

In the United States, the “Big 5” PSO’s are hiring lawyers at a rate that outpaces all but the biggest national law firms. Price Waterhouse Coopers is the Year 2000 Official Consulting Sponsor of the ABA Litigation Section. What do CPA’s and MBA’s bring to the MDP table? In other parts of the world, professional services organizations (“PSO’s”) include financial and legal experts who integrate functions very efficiently and effectively. The largest of them produce revenues in the tens of billions of dollars annually. They are clearly doing something right financially and their public approval rating is tremendously higher than the public’s current view of the legal profession, which is losing its market share and for good reason.

Mental health professionals bring a different skillset to the table. They look at the emotional underpinnings of every human interaction. They are communications experts trained in ways that the traditional legal community largely ignores (to its detriment). They are trained to assess and work on improving the emotional climate of organizations. Why should the public be deprived of the added value of these functions?

So what is the struggle over fully integrated MDP? The fight is first and foremost over identity and self-preservation. What does it mean to be a “lawyer” if non-lawyers (read, “everyone else”) are allowed to resolve disputes? What does it mean to be a “therapist” if non-therapists are permitted to create interventions in which people heal their relationships? What does it mean to be a “CPA” if non-CPA’s are able to evaluate complex financial information and render advice about it?
Beneath the identity issue rests a deeper set of issues, such as the preservation of existing systems, customs, and comfort levels – both emotional and financial. The accounting field confronted this issue several years ago, when American Express fought for (and won) the commercial right to hire and share fees with CPA’s, while competing with “traditional” firms for consumer business. Managed care has rocked the mental health profession, in which unlicensed gatekeepers have been accused of directing and limiting professional prerogatives. The State Bar Association here in New Jersey has at various times accused CPA’s, realtors, independent paralegals, do-it-yourself forms services, non-lawyer ADR providers, and even Philadelphia lawyers of encroaching upon its turf.

When the ABA’s MDP Commission began exploring the nuances of MDP and its effects on the “traditional” practice of law, many practitioners (including this one) concluded that MDP is already here; that the exceptions have largely swallowed the rules limiting or prohibiting joint practice and fee sharing arrangements by multiple professions; and that to maintain integrity and credibility with the public, other professions, and ourselves we would be better off shaping change rather than resisting it or, worse, pretending it wasn’t there.

The MDP debate also raises a more fundamental question for the affected professions: who are we, why are we here, what value do we add, what are our core attributes and values, what parts of our past should we retain, and what should we discard? By pressing for professional redefinition, we will more powerfully connect with our peers, our clients, and ourselves.

I believe the biggest impediment to fully integrated MDP is not impossibility of action, but rather failure of nerve. In the age of the genome project, surely we can create an appropriate regulatory structure for recombinant professional groups. How would we go about this if it were something we all supported? If the issue is enforcement of multiple ethics and disciplinary codes, then we should commit ourselves to creating effective solutions, such as making the professional entity responsible for the acts of its members and answerable to all professional boards represented within the MDP.

If the issue is consumer protection, then owners of the MDP and the entity itself could be made answerable in damages for the negligent professional acts of any member. As a condition of legal recognition, the MDP could be required to maintain a minimum amount of professional liability insurance, ensuring that all represented professionals are covered for their acts. Licensed employees could be required to supervise non-licensed employees, non-licensed owners and employees could be directed not to interfere with licensed professional judgment, and licensed professionals could be required to exercise independent judgment.

If the issues are financial protectionism, fear of competition, or fear of change, then we professionals must adjust and adapt ourselves to current marketplace realities, recognizing that no business can immunize itself from the effects of the marketplace.

As the ABA’s MDP Commission recommended in its 1999 Report, in a comment applicable to all professions, the … profession should adopt and maintain rules of professional conduct that protect its core values, independence of professional judgment, protection of confidential client information, and loyalty to the client through avoidance of conflicts of interest, but should not permit existing rules to unnecessarily inhibit the development of new structures for the more effective delivery of services … .

I believe that, as in technology development, the “imaginable” becomes “the inevitable” and develops a momentum of its own. I also believe that MDP’s will create and encourage certain market efficiencies and team building opportunities that current non-integrated systems lack. We simply lack an understanding of what these genetically engineered professional “animals” will look like once they are created.

With MDP, no one doubts that the issues are complex, the feelings run deep, the financial and professional identity stakes are high, and that it will take a lot of time and careful thought to work things out. However, at the end of the day, it is my firm belief that fully integrated MDP will become a set of economic and practice realities for all of us.

In my mediation practice, when faced with seemingly insoluble challenges, I often turn to Abraham Lincoln’s evocative pre-Civil War description of ultimate struggle. For the United States to maintain slavery, he said, was like holding a tiger by its tale: “You can’t hang on and you can’t let go.” As in any good negotiation, with MDP we need to find the third path. We have no real choice. We have to make friends with the tiger.