Professional Issues

BY ROBERT TIE

ABA Gives Thumbs Down to Lawyers’ Fee-Sharing

After two years of research and debate, the American Bar Association (ABA) voted in July to reject a proposal that lawyers be allowed to form multidisciplinary practices (MDPs). This continued the group’s long-standing ban on lawyers’ sharing of fees with other professionals.

Such arrangements are increasingly common in Europe, however, where MDPs have met market demands by closely integrating legal services with those of nonlawyers. Nevertheless, despite reportedly strong client interest in the United States, the ABA rebuff has dimmed the prospects for MDPs here. Reflecting the finality of its decision, the ABA discharged the special commission it had convened to study them.

The issue is now being examined at the state level, where the practice of law is actually regulated. However, because many states base their standards on rules issued by the ABA, its move has more than symbolic significance.

The vote, taken during the ABA annual meeting, was far from close, with 75% of the 421 members of the ABA house of delegates casting their ballots for a resolution against MDPs. Delegates from Florida, Illinois, New Jersey, New York and Ohio sponsored the resolution.

Ethical aspects of the controversy were a key issue for the majority. “This was a victory for those who want to preserve the core values of the legal profession,” said Illinois delegate Gary T. Johnson, a partner in the Chicago law firm of Jones, Day, Reavis & Pogue. Johnson said that by combining lawyers and other professionals “under the same roof,” MDPs would make it difficult to avoid conflicts of interest and preserve client confidentiality—fundamental responsibilities in the lawyer’s code of professional conduct.

Others, though, saw the vote as an attempt to maintain the status quo by stifling innovation. Jeffrey Peck, managing director of Arthur Andersen’s office of government affairs in Washington, D.C., characterized the ABA’s action as “clearly anti-competitive and monopolistic.”

Against the tide?

The rejected proposal had originated with the commission on multidisciplinary practice, which the ABA appointed in 1998 to study MDPs. Its research, published last year, showed individual consumers and corporate clients want integrated teams of lawyers, accountants and financial planners to help them address challenges posed by new technologies, the globalization of markets and increased governmental regulation. (See “ E&Y First of Big Five in the U.S. Market to Ally With Law Firm ,” Jan.00, JofA, page 11.)

According to Peck, there was considerable support for MDPs, which heightened expectations the ABA would lift its ban on them. “It’s quite ironic,” he concluded, “that the ABA chose to reject all the evidence it had from a wide range of consumers and the business community.”

Instead of responding to the demands of its clients, Peck said, the ABA delegates decided to erect greater barriers against MDPs, calling for stricter definitions of what constitutes the practice of law and tighter enforcement of unauthorized practice of law statutes. “Those recommendations are designed to limit access to legal services and erect greater barriers to competition,” he said.

But Johnson, defending the ABA decision, said it clearly allows lawyers to collaborate with other professionals in strategic alliances that, unlike MDPs, stop short of being mergers. “Most, if not all, of the asserted client demand for joint services can be met through ‘side-by-side’ cooperative arrangements,” he said.

Peck nevertheless viewed the decision as a missed opportunity. The delegates, he said, had before them “a balanced set of recommendations that would have preserved lawyers’ independence, while at the same time allowing the bar to step into the 21st century and be more responsive to the needs of those who use legal services.”

And Richard Miller, general counsel for the AICPA, said, “I find it unfortunate that the ABA failed to demonstrate any leadership on the MDP issue. It should have kept an open mind until the states finished their review. Instead, it closed the door on further discussion by disbanding the commission.”

Been there, done that

Gary S. Shamis, CPA, principal of Saltz, Shamis & Goldfarb, Inc., of Solon, Ohio, doesn’t think the ABA decision will have an impact on most CPA firms, which he said already are “multidisciplinary” and growing rapidly. His firm meets its clients’ needs by collaborating with investment management and payroll services organizations.

“From the law firms’ perspective, this is all about bringing in accounting,” he said. “But for most CPAs, it includes much more than legal work. My firm has added 15 to 20 new ‘nonlegal services’ in the last few years,” he added.

Meanwhile, as the market for integrated services flourishes, MDP proponents are unlikely to end their campaign, despite the apparent decisiveness of the ABA’s show of hands.

—Robert Tie

SPONSORED REPORT

Year-end tax planning and what’s new for 2016

Practitioners need to consider several tax planning opportunities to review with their clients before the end of the year. This report offers strategies for individuals and businesses, as well as recent federal tax law changes affecting this year’s tax returns.

QUIZ

News quiz: IRS warning on cyberattacks and a change in pension rules

Once again, the IRS sounds the alarm about a threat from cyberthieves. See how much you know about this and other recent news with this short quiz.

CHECKLIST

Bolster your data defenses

As you weather the dog days of summer, it’s a good time to make sure your cybersecurity structure can stand up to the heat of external and internal threats. Here are six steps to help shore up your systems.