Florida Bar Journal, March 2000 v74 i3 p12
Facing the inevitability, rapidity, and dynamics of change. (multidisciplinary practice of law)(Florida) Howard J. Berlin; Jean A. Bice; Edgar M. Dunn Jr.; Charles F. Robinson; Ronald Rosengarten; Marsha Rydberg; Roberta Stanley; Donald Tescher.
Full Text: COPYRIGHT 2000 Florida Bar
This report was prepared in accordance with the mandate of The Florida Bar Special Committee on Multidisciplinary Practice [the "full committee"]. The full committee is charged by the president of The Florida Bar with the responsibility of reviewing the Report of the American Bar Association's Commission on Multidisciplinary Practice,(1) published by posting on the commission's website, on June 8, 1999, as amended, and recommending to the Board of Governors of The Florida Bar the position it should take as a unified bar, and suggesting what position its representative members of the House of Delegates should take, on the ABA commission's recommendations for change to the Model Rules of Professional Conduct.
Believing that the truth is frequently best illuminated if strong advocates of differing sides present the best arguments for their respective positions, the full committee directed the Pro-MDP Subcommittee to prepare and defend a report advocating the adoption of some form of MDP in Florida, and the Con-MDP Subcommittee to advocate in a similar manner the rejection of the MDP practice concept.
On the surface, the positions of the two subcommittees are mutually exclusive. But as polarized as the two subcommittees' views may at first appear to be, the essence of the competing reports are facts and assumptions on which both subcommittees appear to agree. Not unlike the two sages attempting to describe an elephant, with each focusing on a separate limb of the animal, the two subcommittees have described the novel, complex, and illusive changes that have occurred in the marketplace for legal services from different points of view.
The Con-MDP Subcommittee submitted its report, Facing the Tide of Change, in December 1999. We commend the con subcommittee on a thoughtful and sincere report. Moreover, it should be emphasized at the outset that we agree with much of the con subcommittee's report.
We agree with those parts of the con report that speak to the historical evolution and contemporary significance of the so-called "core values" of the legal profession. We agree with the con report on:
1) The origin and importance of fee splitting prohibitions;
2) The policies designed to preserve the independent judgment of a lawyer;
3) The importance of the lawyer's duty of confidentiality;
4) The need to preserve the attorney-client evidentiary privilege;
5) The importance of the lawyer's duty of competence;
6) The significance of a lawyer's duty of loyalty to his or her client;
7) The importance of professionalism to the practitioner and to the profession;
8) The enforcing authority's duty (if not advisability) to enforce unauthorized practice of law and ethical proscriptions against those "lawyers in MDPs" who are engaging in "civil disobedience."
We share the desire of the Con-MDP Subcommittee for continuity--for the preservation of ethical values and traditions deeply rooted in the psyche of our profession.
Our disagreement is not based on opposite views, but rather on views that are the poles of the same argument. They see the practice of law from the perspective of the profession that it once was. We see the practice of law primarily through the prism of a modern day business:
* A business that is susceptible to the same market-driven forces as any other service business in the postindustrial, information-based global economy;
* A business that is subject to the same management principles and practices that are applicable to any other business of similar type or character;
* A business that is so impacted by the increasingly pervasive and rapid waves of change in technology and communication as to be almost overcome by the challenges and opportunities presented by such change.
Our view is that the con report fails to "face the tide of change," because it fails to understand the significance or implications of the dramatic and pervasive change in the marketplace on the practice of law as we have known it. Times have changed, and so has the delivery of legal services.
The con report favors the maintenance of the status quo, and argues that changes in the Model Code of Professional Conduct, as recommended by the ABA commission, should not be made unless there is presented "creditable evidence" or "persuasive argument" that such changes are in the public interest. The con report examines the reality of the current marketplace and "finds" no such creditable evidence or persuasive argument.
We believe the current marketplace is replete with creditable evidence and compelling argument supporting the ABA commission's recommendations and the related recommendations we have made in this report. Consider, for example, the following:
The free market is the best (indeed, the only) testing ground for a new product or service. As Peter F. Drucker(2) teaches, "The customer never buys what the supplier sells."(3) Quality and value are in the mind of the consumer; the supplier's perception of those matters is never the same as the consumer's. In a society where people have choices about goods and services, therefore, there is no sure way of accurately estimating whether the market will favor a new type of service until that service is actually available. The supplier's perception, let alone the perception of the governmental regulators of the legal profession, counts for little at this point. The jury is out until the consumer has a chance to vote with his or her pocketbook.
Some suggest that the market for legal services has not yet sufficiently demonstrated a "need" for an MDP-type of service delivery system; therefore, there is no reason to sanction any form of MDPs. But while the scarcity of empirical evidence(4) of a demonstrated market need is candidly acknowledged, it must be understood that the development of such empirical evidence has been severely hampered by the fact that MDP-type delivery systems are presently inhibited (if not prohibited) under the current Model Rules of Professional Conduct. No true measure of market need can be creditably done until the "taint of illegality"(5) has been removed and the market left "free to choose."(6)
If the market for legal services chooses not to purchase bundled services, or utilize the "one stop shopping" options made available by an approved MDP delivery system, then we will know "that the market, and not the legal profession acting as a regulatory gatekeeper, has found this delivery option wanting."(7)
The present number and scope of MDP-type practices throughout America (in Western Europe, in Canada, and in Australia) even in spite of the questionable legal and ethical footing on which such practice forms are currently based ("in the shadow of the law"(8)), demonstrates not only a need but also a rapidly growing one at that.
The positive support of the MDP delivery system(9) from such organizations as the American Corporate Counsels Association, consumer groups, two ABA sections and other groups who appeared before the ABA commission, and the support (possibly the endorsement) of four or more sections of The Florida Bar, must be seen by the skeptics as persuasive evidence of support for the MDP delivery system.
The uncontradicted opinion testimony of acknowledged experts in the disciplines of management, economics, strategic planning, and marketing collectively demonstrate that the delivery of legal services is a client-driven enterprise. The governmental regulators of the legal delivery system no longer control (if they ever did) the design, price, or efficacy of a legal product or service. The de facto emergence of MDP-type delivery systems--on the scale that presently exists in America--demonstrates that those regulators have but limited control over the structure of the delivery systems through which those products and services are presented to the market.
We view the opinion testimony of experts and the other supporters of the MDP concept, coupled with the number and scope of existing MDP "practices" already in the marketplace, as ample and persuasive argument in favor of our recommendations.
More importantly, however, we believe the debate over authorizing MDPs is a metaphor--in a sense concealing, but in reality describing, a more pervasive and urgent need for the profession to transform itself, or to use the proper management term, to "reinvent" itself--to reinvent the practice of law as an economic endeavor and the governmental system designed to regulate the practice of law in the public interest.
We believe that complete, systemic reinvention is required--if the profession and its surrogate in Florida, The Florida Bar--are to be capable of leading the public and the profession into the uncharted waters of the postindustrial, information-based, global economy.
The Pro-MDP Subcommittee was charged with developing a report to advocate the adoption of some form of MDP in Florida. Our review of the ABA MDP Commission's report and research into the many changes taking place both within and outside the practice of law convince us that MDP is not only needed, but also is inevitable. Indeed, MDP is already a reality. The question is: How will the lawyers of Florida respond to the dynamic new marketplace for legal services? How will The Florida Bar, as an institution directly implicated by the ABA commission's recommendations, deal with the leadership opportunity presented to it and its officers and governing board?
We believe that The Florida Bar should focus on strategies that will enlarge the scope of law practice, as opposed to unnecessarily depleting the Bar's resources and energies by fighting over smaller and smaller segmented areas of practice. We must recognize that lawyers are in competition with those from other professions who recognize the need to change. More and more, consumers of professional services present lawyers with problems that are multifaceted and multidisciplinary in nature. Such problems require competent, efficient, and cost-effective one-stop solutions. The marketplace is replete with examples of cooperating professionals using their skills and knowledge to best serve their clients. These combinations of cooperating professionals--ad hoc as they may be under current law--have discovered that strategic decisionmaking, coordination, and teamwork are often fostered when professionals from different disciplines work cooperatively within a single service organization for the same clients. To that end, the Pro-MDP Subcommittee makes the following recommendations to The Florida Bar.
Recommendations to the Board of Governors
The subcommittee believes that the Special Committee on Multidisciplinary Practice should make the following recommendations to the Board of Governors of The Florida Bar for action on or before June 1, 2000.
1) The Florida Bar, through its delegates to the American Bar Association's House of Delegates, should actively support the amendment of the Model Rules of Professional Conduct so as to permit a lawyer and a nonlawyer to form a partnership or other business entity for the provision of legal services to the public, subject to certain restrictions and limitations.
These restrictions and limitations should include:
a) The Model Rules should acknowledge the diversity in the marketplace for legal services and the right of each jurisdiction to protect the public interest and to preserve the continuity of the "core values" of the legal profession (including lawyer competence) that are implicated by the MDP amendment, in ways consistent with the realities in the marketplace and the state's traditions and sound judgment.
b) The Model Rules should select and adopt recommended models of MDP so that the structure of MDP in the United States will be as uniform and consistent from one jurisdiction to another as practicable.
c) During a transition period of at least five years from the final approval of the MDP rule, the Model Rules should continue to prohibit strictly passive investment by nonlawyers in the equity of law firms.
d) The Model Rules should include two functional definitions of the practice of law, one designed to guide the implementation of the Model Rules permitting nonlawyers to work in MDP settings, and the other designed to protect the public from incompetent and potentially injurious conduct. The definitions must acknowledge the transjurisdictional nature of some legal services.
2) The Florida Bar should recognize that the MDP issue has broader significant implications, that the MDP issue is a metaphor for the dramatic, pervasive, and rapid change that has bewildered the marketplace for legal services in recent years. The Florida Bar should take the following actions:
a) As the profession's legal representative and as the principal advisor to the courts on matters involving the Code of Professional Responsibility and the profession, The Florida Bar should become a "change leader," and--by its example and the implementation of new policies and norms--prepare for, accept, and assist lawyers and the public in understanding and dealing with change--in the paradigm of practice and in the marketplace generally.
b) On a national level, The Florida Bar should recommend to the ABA and to other state bar associations the creation of, and be the sponsoring organization for, a Pound-type commission, having as its sole purpose the reinventing of the practice of law for the 21st century.
c) On the state level, in concert with the Florida Supreme Court, The Florida Bar should create a state-level study commission the purpose of which is to describe the current paradigm of the practice of law, to articulate the assumptions upon which the paradigm is based, to identify the "core values" of the profession that are implicated by the new paradigm, and to suggest actions which should be taken to accommodate such changes, including without limitation, changes in the role and scope of The Florida Bar itself.
d) Subject to antitrust constraints, The Florida Bar should adopt a leadership role in working for a coordinated and interdisciplinary resolution of the problems of overlapping professional jurisdiction. This could best be done with a study commission appointed by the Florida Supreme Court and containing representatives of the stakeholders.
3) Independent of the consideration of MDP rules, The Florida Bar should conduct a comprehensive "sunset-type" review (with substantial participation by nonlawyers) of the Rules of Professional Conduct to determine, in light of the changed and changing paradigm of the practice of law. These rules should be immediately amended or repealed, in order to:
a) Eliminate regulations that are unnecessary for the protection of the public.
b) Permit lawyers to compete more effectively in the marketplace.
c) Reduce the cost of legal services to the public.
d) Enhance access to legal services to those currently unserved or underserved citizens.
Amendments, which should be considered as cost-effective alternatives or improvements on the existing rules, include:
a) Requiring mandatory malpractice insurance for all Florida lawyers in the active private practice of law.
b) Requiring all Florida lawyers with trust accounts to be bonded.
c) Requiring all retention agreements be in writing in order to be enforceable.
4) Contemporaneous with the study to "reinvent" the practice of law, The Florida Bar as a public agency should appoint a study commission having the purpose of reinventing The Florida Bar as a public agency/nonprofit member-service organization(10):
a) Reinventing The Florida Bar as an organization that is mission-driven, that defines its clients as "customers," that empowers its members, and that pushes control out of the bureaucracy into the community.
b) Reinventing The Florida Bar as an organization that measures performance based on outcomes rather than inputs and that implements "performance-based budgeting."
c) Reinventing The Florida Bar as an organization that applies the best management principles and practices with respect to all of its functions and roles.
d) Reinventing The Florida Bar as an organization with an effective and accountable governance system that institutionalizes a policy of "systematic innovation," by which the entire organization sees change as an opportunity.
The Writing on the Wall
In August 1994, the Board of Governors of The Florida Bar met at the foot of Stone Mountain in Georgia, with the Board of Governors of the State Bar of Texas. The meeting was a planning retreat, a "learning experience." The introduction of American Bar Association President-elect Roberta Ramo and her remarks were punctuated by a 40-minute presentation by Ward C. Bower, president of Altman Weil Pensa and a nationally recognized management/marketing consultant and futurist, specializing in the "legal industry." At that time, Bower was the ABA's principal advisor on the future of the profession. Bower's remarks, "Economic, Demographic and Marketplace Trends and Their Implications on Bar Associations," were poignant but foreboding. In substance, he warned the assembled leaders:
* Bar leaders cannot continue to view the practice of law principally through the historical prism of a regulated "profession."
* The practice of law has become a business; indeed law practice has evolved as the delivery system for a global legal services industry.
* On a local level or in a global setting, legal services are no longer designed, priced, and offered to the public based on what the profession deems suitable or appropriate.
1) Now, consistent with the classical business model, such decisions are based predominately on market-driven forces, that is, on what the consumer of legal services wants and is willing to pay for.
2) Market conditions now dictate a new paradigm for the practice of law has emerged, a paradigm in which the client drives the price, delivery, and efficiency of legal services.
The transformed functional model of the practice of law was for Bower the "window" through which he and others performed accurate and relevant analyses of the practice. In this context, viewing the delivery of legal services in the context of accepted management principles and practices applicable to any other organization. Conclusions drawn from these analyses demonstrate that the legal industry in the United States is a "mature industry," essentially, one in which the supply of legal services has outgrown the demand, in much the same way as the "smokestack" industries matured ("topped out") at the turn of the last century.
According to Bower and other commentators, the legal services industry at the end of the 20th century was experiencing and could in the future expect to experience slower growth in fee revenues, diminished profitability per lawyer, and declines in profit margins. In Bower's opinion, the industry displayed characteristics of "maturity," including:
* Fierce competition based on price;
* Diminished importance of the quality of services;
* Marginalization of ethical and professional standards associated with those services and with the profession generally;
* Greatly enhanced level of consumer (client) sophistication in all aspects of practice;
* Large numbers of supplier (law firm) consolidations and contractions;
* Evolution of trade or "brand names";
* Increased market segmentation into distinct practice areas;
* Supplier (law firm) differentiation and specialization;
* Geographic expansion to find so-called "new" or underserved markets; and
* Decreased legal and financial barriers to entry into the profession.
Many of these characteristics have alarming and unfortunate repercussions beyond the economics of law practice. Some are the driving force behind lawyers "cutting of corners," with the resulting increase in disciplinary problems, diminished civility and common courtesy in the day-to-day practice, diminished respect for the court and its ministers, and diminished participation in pro bono politico service, public service, and other uncompensated services to others.
Bower concluded his presentation to the combined boards of governors with an alarming prediction: If the leaders of the legal profession do not get their collective heads out of the sand, move beyond their present state of denial, and accommodate and deal with these market-driven forces--in the interest of the public and the profession--the inevitable result will be that the practice of law will be consumed by the so-called Big-Five accounting firms as yet another "consulting service."
The combined boards of governors warmly and politely received Bower's remarks. The remarks even made for interesting and provocative discussion during coffee breaks and dinner. But Bower's message fell on deaf ears. Few in the profession had the foresight to fully appreciate the gravity and urgency of the challenge facing the profession. Fewer still sounded the church bells and rode off into the night toward Lexington and Concord.(11)
There are some "generic" reasons, if not excuses, for the profession's inaction. Lawyers are not "constitutionally" inclined to act on a report of a futurist like Ward Bower or act in response to conferences like Seize the Future. Among lawyers and judges, cows rule. From their days in law school, lawyers are rewarded with success if (and infrequently when) they can find that elusive case that is on "all fours" with the case at hand. (A case on all fours--having the "same" facts, controlling law, rationale, and holding--is a "cow case.") Lawyers and judges make their living day in and day out looking back in history to find precedent, to find the experience-based rule that will control the adjudication in the case at hand. By training and experience, therefore, lawyers and judges do not find the inferential decision-making process, which is based on future trends and predictions of a futurist, to be either competent or comfortable.
Consistent with the images of the current MDP debate, lawyers appear to be driving down the information superhighway into the 21st century at flank speed, but with their eyes transfixed on the rear view mirror.
We take exception to the con report (without intending any criticism of our esteemed colleagues who wrote it) on this very point. The whole focus of the con report is retrospective. Without a word about the dynamics of change facing the practitioner at the dawn of the 21st century, the con report proposes the solutions to problems of the past as the solutions to the problems of a dynamic future.
From the Writing on the Wall to a Flashing Neon Billboard
If Ward Bower's 1996 admonition was the "writing on the wall," the dramatic transformation of the professional services industry over the ensuing six years has become a flashing neon billboard, proclaiming the emergence of a new economic era.
In November 1997, the American Bar Association and Lotus Development Corporation sponsored a watershed conference entitled, Seize the Future. The conference was by invitation only to the top 150 most influential leaders in the legal profession.
* John Naisbitt, author of Megatrends and a number of other books about the future, challenged the profession to be entrepreneurial, to see the "global paradox," which tells us that the bigger the economy, the smaller the unit of service.
* Antonio Garrigues spoke about his experience and analysis in deciding to merge his 300-plus lawyer firm into Andersen Consulting and his experience in the MDP setting.
* Joel Barker's book Paradigms is still the leading resource for understanding how our rules change, particularly in our fast-paced society at the end of the 20th century. Barker facilitated the attendees' discussion of the implications of MDPs to the profession. In less than 45 minutes over 400 implications were fleshed out (see the Seize the Future website, www.futurelaw.com). There was attendee consensus that MDPs will be a major player in the future delivery of legal services.
* Jennifer James, author of Thinking in the Future Tense, talked about "lodge cultures" in the professionals' marketplace. She argued that "the lodge" is not capable of dealing with change--the more dramatic the change, the more resistance from nostalgic past-worshippers. Visionaries are not welcome in the lodge.
Seize the Future attendees have reported that lessons learned at that 1997 conference have followed them ever since. They find it impossible to engage in such insignificant debates as MDP pro and con. Reinvention of the law practice to provide relevant 21st century services has become the issue in the marketplace and must become the issue for bar leaders as well. Nostalgia and protectionism have no place in a strategic vision of the future or in the decision to enforce the ethics and unlicensed practice of law rules against the lawyers "practicing" in accounting and consulting settings.
All discussion about public harm from an MDP-type delivery system is theoretical. There have been no complaints reported to The Florida Bar, either under the ethics rules or under the unlicensed practice of law regulations, from any person in Florida who claims to have been injured by a violation of the Rules of Professional Conduct by a lawyer delivering legal services in an accounting or consulting firm. The con report seems to encourage The Florida Bar to do what no other state bar has done, to embark on a massive, costly enforcement effort against the lawyers who are practicing law under the guise of offering consulting services in accounting and consulting firms in this state. The con report suggests that if an aggressive ethics enforcement program does not deter the violations, then the improper practices should be enjoined under the banner of the unauthorized practice of law. All this in the absence of demonstrable harm to the public or even an actionable complaint from an aggrieved person.
A second conference entitled Seize the Future H was held in November 1999, and was again sponsored by the ABA's Law Practice Management Section and Lotus. This conference had a much deeper sense of the urgency, a broadly shared view that our profession must wake up to change, not incrementally but totally. Tom Peters and Gary Hamel were two of the keynote speakers. Peters is still the most quoted and most recognized writer and lecturer on management and future issues. His theme was the need for an innovation revolution for everyone in business, particularly professional service industries. Gary Hamel is a professor at the London School of Economics and Harvard Business School. He is the managing principal in Strategos, a consulting firm devoted to strategy for the future. His book, Competing for the Future,(12) is listed as one of the top three business books on the market today. Hamel deeply respects the legal profession and believes the rule of law is the greatest single contribution to our society's success. He sees great danger for the profession in the changing business environment and classifies law as one of many vulnerable "legacy businesses."
These are crazy times. We are living at the end of the industrial revolution in a new information-based economy of global scope. Gary Hamel predicted that the industrial revolution would come to an "official" end on December 31, 1999. Books have titles with a new sense of urgency, such as Blur, The Death of Distance, Business @ the Speed of Thought, Faster, and As We Work Closer and Closer to Real Time. It is impossible to predict the future with great accuracy, but it is safe to predict that it will be radically different from today's world.
Changes in the Marketplace as of 2000
Business leaders and strategists recognize the dynamics of change currently affecting the marketplace, and advise companies to create, manage, and master such changes. The players, rules, and requirements for survival in the merging digital economy are all changing, and protectionist tactics to stave off change and to preserve power will only lead to failure.
* "We are in the midst of the most profound change since the beginning of the Industrial Revolution, over two centuries ago ... perhaps the most profound change since the Chinese more or less invented hierarchy thousands of years ago." --Tom Peters, Fast Company
* "It's not that the business environment is changing. Change is the business environment. And it's not that every company is undergoing change. Change has overtaken every company. Creating change, managing it, mastering it, and surviving it is the agenda for anyone in business who aims to make a difference." --Wired Magazine (January 1998)
* "Time is the only truly scarce commodity. Networks tend to leach power out of traditional institutions, including polities and the state. Guardians of the old order are trying their best to hold back change and preserve their power." --Dee Hock, Founder of Visa
* "We are at that very point in time when a 400-year-old age is dying and another is struggling to be born--a shifting of culture, science, society, and institutions enormously greater than the world has ever experienced." --Dee Hock
* "Why do great companies fail? 1) Inability to escape the past. 2) Inability to create the future." --Hamel and Prahalad, Competing for the Future
* "The information technology revolution. The Internet is changing the way everyone does business in dramatic ways." --Don Tapscott, The Digital Economy
* "Today we are witnessing the early, turbulent days of a revolution as significant as any other in human history. A new medium of human communications is emerging, one that may prove to surpass all previous revolutions--the printing press, the telephone, the television, the computer--in its impact on our economic and social life. Interactive multimedia on the so-called information highway, and its exemplar, the Internet, are enabling a new economy based on the networking of human intelligence. In this digital economy, individuals and enterprises create wealth by applying knowledge, networked human intelligence and effort to manufacturing, agriculture and services. In the digital frontier of this economy, the players, dynamics, rules and requirements for survival and success are all changing. Such a shift in the economic and social relationships has occurred only a handful of times before on this planet. It is causing every company to think far beyond the likes of `re-engineering' to `transform itself.' A new enterprise is emerging--the internetwork business--which is as different from the corporations of the 20th century as the latter was from the feudal craft shop." --William Knoke, Bold New World
Global Trends to Watch
Our profession must recognize several trends as we debate the MDP issues:
* The change from a producer-driven economy to a consumer-driven economy. Evidence of this trend is overwhelming.
* The move from producer-at-center orbited by consumer to consumer-at-center orbited by producers.
* The old model was based on order, logic and conformity, appropriate to a system where change came slowly. The new model is moving at Internet speed.
* We are going through a seismic shift to intellectual capital from capital investment.
If clients want one-stop shopping, we must provide one-stop shopping or risk the future. There are business, societal and market forces that are shaping our future.
The End of Borders
* Twentieth century job skills are increasingly irrelevant.
* Established economic theories no longer apply.
* Even nations are becoming obsolete.
* Online securities trading is expected to move from its current 37 percent of all trades to 50 percent by this time next year.
* Sixty percent of Americans were on the Internet as of December 31, 1999.
Fifteen months ago, the CEO of a large insurance company remarked, "Insurance is too complex. I think people will always need agents." Today, insurance companies are moving to the Internet at flank speed in an effort to survive. Too many bar leaders are still saying, "Law is too complex. People will always need lawyers." If the con report prevails in the MDP debate, those statements will serve as the bar's epitaph. Gary Hamel says that we are "on another planet if we believe we have a vested right to continue business as usual." --Gary Hamel, in a speech on November 6, 1999.
The most remote part of the world is now one-half second away on the Internet. This globalization is the first trend identified by Simon Chester and Merrilyn Tarlton in their article, "The Territory Ahead: 25 Trends to Watch in the Business of Practicing Law (25 Trends)," Law Practice Management Magazine, July/August 1999.
The Death of Legacy Businesses
Gary Hamel believes that never in history has incumbency been worth less. Sears invented the catalog sales business and can't compete in today's growing catalog sales businesses. The problem with legacy businesses (stare decisis driven) is not how to get new innovative thoughts into our minds; it is how to get the old ones out. As firms look for talent, one of the survival skills is to disavow history and incumbency. Jennifer James refers to the legal profession, among others, as a "lodge culture." A lodge is "a cooperative alliance of almost any kind in which the members bond together for power or protection or both. Traditional lodges don't do well during periods of rapid change because they are rarely visionary." --Thinking in the Future Tense, 1996.
The First White Collar Revolution in History
* We have always tried to increase productivity by replacing blue-collar workers with machines or by requiring twice as much work from fewer blue-collar employees. Tom Peters believes we are in the most profound revolution in over 500 years and that this revolution places over 90 percent of the white-collar workers' jobs in jeopardy over the next decade.
* What color collars do lawyers wear?
* Is there some kind of a lawyer exception to this white-collar revolution?
* Is there a "lawyer exception" for change?
* Peters believes that the 10 percent who survive will make it because they have reinvented their work to be full of passion, excitement, emotion, and dreams (and a few noble fiascoes here and there). Is it "unprofessional" to believe that the legal profession must change in the same way as the rest of the world must change?
The New Paradigm of the Practice of Law
If the legal services industry is to deal with the realities of the postindustrial, knowledge-based, global economy--which has washed away with hurricane force the old order, "yielding place to new,"(13) a new paradigm--then the legal services industry must reinvent itself. It must reinvent itself so that it can avail itself of the new vistas of opportunity and challenge presented by the new economic conditions.
Market conditions now dictate a new paradigm in which the client drives the design, the price, the delivery system, and, indeed, the efficiency of legal services. But what is this "new paradigm" and what does it mean to the practicing attorney, to the organized bar, to the public? To find answers to these questions, one must start with an understanding that the enterprise known as the practice of law (the legal services industry, if you will), including all its forms (sole practitioners, small firms and large firms) is an organization.
Each of the governmental agencies or the not-for-profit entities that regulate the practice of law is also an organization. "Management is the specific and distinguishing organ of any and all organizations."(14) These organizations--whether business or nonbusiness in purpose--are influenced and controlled by the same general principles and practices of the discipline of management that are applicable to other businesses, and to governments, armies, churches, women's soccer teams, and so on.(15) What, then, are the general management principles and practices influencing the organizations for the delivery of legal services and the organizations regulating the delivery of those services?
The first principle has to do with the organization's paradigm--its philosophical and theoretical framework within which its theories of mission and purpose, rules of conduct, and other generalizations are formulated. A "paradigm" is a set of basic assumptions that the discipline makes about reality. These assumptions are usually held subconsciously by the scholars, writers, teachers, and practitioners of the discipline.(16) "Yet," as Peter F. Drucker argues, "Those assumptions largely determine what the discipline--scholars, writers, teachers, and practitioners--assumes to be reality."(17) A discipline's assumptions about reality become the reality. The assumptions become what the discipline focuses on, what it considers "facts," and what it considers its role and purpose. Practitioners of a discipline tend to act and behave as the discipline's assumptions tell them to.(18)
In the social science disciplines, the assumptions are susceptible to continuous change.(19) This means that in social science disciplines, an assumption that was valid yesterday may have changed today. The assumption may have become invalid (or at least totally misleading) overnight. The discipline's paradigm--its prevailing general theory--being premised on such an assumption has thus become outmoded, obsolete, and unreliable as a description of the basic reality.
The assumptions underlying the paradigm of law practice have changed--and most importantly--are changing, indeed rapidly, as Bill Gates maintains, "at the speed of thought." Gates begins his book with the sentence: "Business is going to change more in the next ten years than it has in the last fifty."(20) These changes have or are transforming the practice of law, even in the absence of a practice reinventing itself.
The Old Reality: Law Practice Is a Profession, Not a Business
The most debated of those basic assumptions has to do with the nature of the enterprise we call the practice of the law. One of the arguments advanced by the con report(21) is that the practice of law is a "profession" not a "business," citing as "authority" a statement from a 1954 Florida Supreme Court case involving the appeal of a lawyer discipline matter.(22) The report seems to argue that because the court in 1954 said "[the practice of] law is not a business" that the court's assumption of reality in 1954 continues to accurately reflect reality today.
Such an argument is based on a historical (indeed, backward-looking) perception of reality. It is premised on the assumption that the practice of law at the beginning of the 21st century is the same as it was when the profession was created, when the Bar was integrated in 1950, or when Murrell(23) was decided in 1954, etc. This assumption is so far removed from today's reality that it has become an obstacle to fully understanding the theory and practice of law in the 21st century.
Unfortunately, this issue seems to frame much of the MDP debate. The argument is a potentially divisive one, and the emotions of advocates of both points of view run high. At worst, it is an argument that bespeaks the clash between the new paradigm and the admittedly idealized paradigm of yesteryear. At best, it is an argument misguided by one's personal perception of reality. A fair comparison of the two requires that one ask the right questions.(24)
Historically, the practice of law evolved as a closely knit and noble profession, but times have changed and significant decisions from outside the "profession" have greatly reduced the profession's ability to market and price its services, to regulate the size and to some extent the level of competence of its members, and in many ways to control its own destiny. Decisions of the United States Supreme Court in the fields of antitrust and competitive negotiations on the price of services,(25) and commercial free speech involved in advertising, solicitation, and freedom of association(26) have resulted in the practice of law being considered a business more than a profession per se. The practice of law continues to have some attributes of a profession, as do some other historic professions active in the marketplace. But the practice of law has now become, fundamentally,(27) a business.
The New Reality: Principles Applicable to the New Paradigm
What is the context of the MDP debate? What discipline controls? What are the rules that govern the discipline? Who makes the rules? In his recent book, Management Challenges for the 21st Century, Peter F. Drucker, the most respected authority in the discipline of management, argues convincingly that all modern enterprises--whether business, civil service, university, hospital, large church, or military--are organizations, and all organizations are guided by certain universal principles and practices of management.
Each of Drucker's principles(28) applies to the modern enterprise of the practice of law and is implicated in the crosscurrents of the MDP debate and the larger issue of the need to reinvent the practice of law. The discipline of management, the general rules governing the management of organizations, and the special rules applicable to legal service organizations--all apply to the MDP debate, and, in our opinion, provide a contextual framework within which the MDP debate can be understood. Here follows the general rules applicable to all organizations, including legal service organizations.
The mission of the enterprise defines its strategy. The mission of an individual or an organization designed to practice law, for example, is the delivery of competent legal services to clients who contract for those services. Legal services in this context include all those services that are usually and customarily performed by a licensed attorney and counselor-at-law. A strategy for accomplishing that mission is defined and adapted to that stated mission.
The strategy of the organization . dictates its structure. The strategy of the organization dictates the structure of the organization, through which the strategy is best implemented.
There is no one "right" organization. There is no single organization that is "right" for all enterprises, even in the same industry. There is no exclusively "right" way to organize for the delivery of legal services. The organization and its structure are best dictated by the task to be performed. The marketplace is replete with differing forms of organizations involved in the delivery of legal services: from the simplicity of the sole practitioner, to the efficiency of a small law firm with a boutique focus, to the medium size firm that specializes in employer-employee relations law, to the large size firm that offers comprehensive legal services on a regional or global basis. The strategy adopted by the enterprise and the tasks that emanate from that strategy dictate the organization of the enterprise.
Technologies and end-users are not given. The old assumption was that technology was unique to one's own industry, and that technology outside of one's industry did not matter. The only technology that mattered was the technology created in one's own company.(29) Now that assumption has been overtaken by change. The new reality is that the technologies likely to have the most impact on a company and the industry of which it is a part are those outside the company's own field.(30) The communication technologies, to cite one example, have drastically changed the law practice. Now your practice is antiquated if you cannot use the information superhighway with ease. You might well consider yourself "behind the curve" if you do not have an office electronically capable of communicating with fellow lawyers and the court, housing your firm's website, conducting Internet-based legal research, filing pleadings and papers electronically, or signing papers via digitized signatures.(31) Lawyers did not invent the new technologies, but their presence has transformed how lawyers (and their clients) communicate and do business.
"Since WWII, end-users are not uniquely tied any more to a certain product or service."(32) The same want is being satisfied by different means. For example, persons in need of news are no longer tied to newspapers or magazines or, indeed, to any printed materials. In the new reality, news as a service is provided in print, digital and graphic forms, over the air, through the air, and under the ground.
The end-user of legal services is no longer uniquely tied to the services of a lawyer. Thousands of litigants in our courtrooms today have chosen to satisfy their need for legal services by doing it for themselves. Hence the emergence of the most expansive example of "sell help" since the Chinese "invented" alternative medicine, the pro se movement.(33) Others in want of legal services are finding them in other settings, like Big-Five accounting firms, paralegal clinics and the like. "Increasingly the same want is being satisfied by very different means. It is the want that is unique, and not the means to satisfy it."(34)
"The customer never buys what the supplier sells."(35) Quality or value in the mind of the customer or client is different--sometimes radically so--from the way the supplier perceives "quality" or "value" with respect to the same products or services. Therefore, "the starting point for management can no longer be its own product or service, and not even its known market and its known end-users for its products and services."(36) The starting point must be what the consumer considers of value or quality, not what the governmental regulator of professional standards considers of value or of quality.
The scope of the enterprise should not be limited by its legal definition. The legal definition of an organization is inadequate and too limiting to be used as a basic assumption of management of an organization, although historically such was the case. The legal definition of the enterprise, a corporation, partnership or whatever the legal description, forms the inner circle of command and control for the organization, but the organization cannot survive in the current realities if it does not extend the boundaries of its influence beyond the inner circle of its "legal self."
The Japanese are credited with inventing the term "Keiretsu"--a management concept in which the suppliers to an enterprise are tied together with their main customer for strategic planning, product or services development, cost control, and related purposes. Throughout corporate America, Keiretsu is a best management practice. To be successful today, an organization must realize that the sophisticated consumer is being advised by his or her management to extend the boundaries of the consumer to include the suppliers of products and services consumed by that consumer. When this concept was evolving, it took the form of highly integrated corporate organizations.(37) There are many other examples of this type of integration into a single management system that is linked economically rather than controlled legally.
Nowadays, the integration is not as formal as the vintage GM model. Now more equal partners do the integration, by joint ventures, by "strategic alliances," by "regional trading sectors" and by "networked communities,"(38) on a permanent or a project-by-project basis, etc., but the scope of the enterprise is extended, nonetheless. The participating organizations are tied together for strategic planning, product or services development, coordination of multi-tasked functions, cost control, access to technology and capital, and related purposes. Keiretsu is practiced. Does this sound like MDPs?
To cite one example, some sophisticated consumers of legal services, such as banks, are interested in sitting down with their suppliers of legal and related services to determine how best to handle the documentation of loans. Banks may divide the loan documentation function into discrete tasks, such as, application review and approval, underwriting review, communication to customer, document drafting, forms preparation, title examination, legal compliance review, loan closing, and similar functions. By doing so the bank can perform the tasks within its organization or outsource the discrete tasks to competent individual providers. Obviously, some tasks require the involvement of an attorney, but most of these tasks do not. If the bank follows best management practices, it may seek to out-source the entire loan documentation function, to one or more providers, but to do so under terms that permit the bank to take advantage of the benefits flowing from Keiretsu-type relationships, such as strategic planning, coordination, and cost control.
Restrictions in the Model Rules on "partnering" with nonlawyers--the essence of the MDP debate--impair innovation and flexibility in the delivery of legal services. Refusal to modify those rules in a timely fashion may relegate the legal profession to the same economic junk heap as the "mature" smokestack industries of yesteryear, if history is an accurate teacher.
Lawyers cannot remain frozen in time, viewing themselves as deliverers of only "legal services," however one defines the term. If the railroads had seen themselves as a transportation business as opposed to a railroad business delimited by steel rails, today we would be flying the friendly skies of Union Pacific Airlines. The same is true of our perception of the law practice. Lawyers are not just in the business of drafting legal documents; in some practice settings lawyers should consider themselves in the larger business of supplying loan documentation services, for example.
The ecology of the enterprise is not defined by political boundaries. Industries are increasingly organized, not along political boundaries, but along functional ones. Large corporations are run on a worldwide basis, with individual tasks such as research, design engineering, development, testing, manufacturing and marketing, organized on a transnational or global basis. As a regulated profession, the practice of law is presumed to operate in a local ecology. That assumption is at best problematic in the postindustrial, information-based, global economic environment. Lawyers are now in cyberspace and clearly beyond the political borders, if not practical and legal reach, of "independent" states. Jurisdictional differences in the provision of legal services are likely to exist for many years, until those differences Balkanize an otherwise unobstructed global marketplace or until the World Trade Organization's influence is exerted in earnest. In the meantime, jurisdictions would be wise to minimize jurisdictional differences in the impact of its regulation system to maintain a competitive parity.
Changes Within the Profession
Obviously, a lot has happened in the world during the six years since Ward Bower's admonition. A lot has happened within the legal profession as well. First, Bower's "mature" market prediction is holding true. According to The Florida Job Bank 2000, which claims to be the "#1 Job Directory Series for 20 Years,"
[p]rospective lawyers will continue to face intense competition through the year 2006, due to the overabundance of law school graduates. Consequently, fewer lawyers are working for major firms, and are working instead for smaller firms, corporations, and associations (citing the U. S. Department of Commerce data). Firms have reduced their support staffs, while large corporations are establishing in-house legal departments to avoid paying for the services of expensive, big-name law firms.
The Florida Job Bank 2000, 13th Ed., Adams Media Corporation (1999), p. 235.
Another evidence of a mature market is the growing pro se movement in Florida. It is a strong signal that many traditional legal services are not value-added from the client's perspective. According to The Florida Bar News, there are over 45,000 pro se litigants in the Florida court system on any given day. Over 80 percent of the final hearings in dissolution of marriage cases are now pro se. The Florida Supreme Court has adopted Rules of Family Procedure (pro se) to allow the court system to function. How long will it be before the Florida Rules of Civil Procedure have a consumer version? The Florida Supreme Court has made it clear that it is not a lawyer protectionist court and that pro se is a positive consumer movement.
Also in keeping with a mature market, new law school graduates are having a difficult time finding work in the legal profession. The average debt out of law school in the United States is over $60,000.
Coupled with the market-driven changes discussed above, leaders in the legal profession recognize that a new paradigm for the practice of law now exists, and that the new paradigm acknowledges the delivery of legal services as part of a compendium of professional/consulting services linked by a common business objective.
Does the Consumer Prefer One-Stop Shopping?
From the individual consumer to the largest multinational corporation, consumers of legal services often present lawyers with problems that are multidisciplinary in nature (i.e., require the active evaluation and counsel by more than one professional) and extensive in scope. Such problems require competent, efficient, and cost-effective one-stop solutions.
* Surveys indicate a strong preference for the MDP environment.
* Financial Times reported on September 9, 1999, that more than half of the big corporate buyers of legal services in the U.K. and U.S. would be willing to use a firm that combined lawyers and accountants.
* In U.S. financial organizations, over 75 percent were willing to use such firms.
* According to a National Association of Realtors 1997 survey of over 5,000 home buyers, over two-thirds of the people who had recently purchased a home would, in the future, select a company that is able to provide every service they need under one roof.
* The survey has proven the need for realtors, lenders, title insurance agents, and any other service provider to be part of a one-stop entity.
* Does the Florida real estate attorney have a chance of survival without an MDP relationship?
Although never officially labeled "MDPs," de facto MDPs have existed in the marketplace for a long time. As the MDP report found:
* Lawyers in accounting firms, in consulting firms, in financial institutions, in insurance companies, in American Express, in H&R Block, in Century Business Systems, and hundreds of others, lawyers are being employed as lawyers and they are performing "consulting services," such as consulting services in tax, in mergers, in acquisitions, in business transactions, in human resource management, in employment law, in labor law, in intellectual property law, in environmental law, in real estate transactions, in telecommunications, in media and entertainment, law, in health care law, in construction law, in mediation matters, in arbitration matters, and a in a variety of similar services.
* They are performing "litigation support services" such as pretrial preparation, investigation, legal research, preparation of interrogatories, preparation of deposition questions, preparation of witnesses, outlining arguments, preparing discovery plans, and preparing litigation budgets.
In the U.S., we have never segregated the practice of law from other businesses as practices were segregated within the English barrister system and the French avocat. The formal evolution to MDPs is no more than a logical step in a process that goes back a long way.
ABA's Ancillary Business and MDP Proposals
Two practice changes have burst into the consciousness of lawyers in the six short years since Ward Bower's "writing on the wall." First, in 1994, the ABA adopted Model Rule 5.7, which defines the parameters under which a lawyer who provides "law-related services" (ancillary business services) will be subject to the Rules of Professional Conduct. Second, in August 1999, the MDP commission recommended a limited relaxation of the prohibitions against sharing of legal fees and forming a partnership or other association with a nonlawyer when one of the activities is the practice of law. (Note the number of articles in the American Bar Association Journal and The Florida Bar News in the last 18 months, for example.) The MDP report reflects exhaustive and insightful work by a blue ribbon panel. We believe the report and findings of the MDP commission should be given great weight. It is important to review what the commission said and did in its recommendations, as amended by the Commission Update Report. Some of the key features of the commission's proposal are summarized as follows:
1) The legal profession should maintain its Rules of Professional Conduct to protect the profession's core values, but that these rules should not unduly or unnecessarily inhibit development of new structures through which a lawyer might deliver legal services to the public more effectively and offer better public access to the justice system.
2) Lawyers would not be permitted to "share" fees with nonlawyers in any context other than MDPs as those delivery systems would be identified under the Model Rules.
3) Allowing lawyers to delivery services through MDPs would not change the prohibition against nonlawyers providing legal services.
4) A lawyer in an MDP should remain bound by the Rules of Professional Conduct, particularly those relating to confidentiality and loyalty, and could not defend misconduct by citing orders from a nonlawyer supervisor.
5) All Rules of Professional Conduct that apply to law firms would apply to MDPs.
6) All MDP clients should be treated as lawyers' clients when determining potential conflicts of interest.
7) For a list of other key features of the commission's report, see The Florida Bar Bar-Related Issues Background Papers, July 1999, Multidisciplinary Practices, et al., published on The Florida Bar website, www.flabar.org.
According to the commission, the Model Rules fail to reflect the marketplace realities imposed by the modern law practice, irrespective of size or scope. Many of the protections in the current Model Rules are unnecessary and inappropriate in a consumer-driven society.
Importantly, the MDP proposals have carried with them a critical focus on the forces within and without the legal profession that are provoking changes in the rules governing the conduct of law practice. Examples of these forces include:
* The Big-Five professional service firms have thousands of lawyers on their current payrolls.
* Rogers & Wells, a large U.S. law firm, Clifford Chance, a large UK law firm, and Punder, a large German MDP, announced a merger to become the largest law firm in the world with well over 2,000 lawyers. If one applies the current attribution rules, the firm is engaging in the unlicensed practice of law.
* Morrison & Foerster has formed an alliance with KPMG, according to a CALLAW stow of August 5, 1999.
* King & Spaulding has lost much of its tax department to Ernst & Young. See Wall Street Journal and other articles.
* The new firm McKee Nelson Ernst & Young is moving into Ernst & Young office space in Washington, D.C. This new firm is really an MDP in "ancillary business" clothing.
* It is difficult for law firms to find LLMs in tax as the Big Five continue to out recruit major law firms.
* American Express Investors and Century Business Services provide comprehensive tax planning and financial planning services. The lawyer's role is diminished to a relatively inexpensive word processing service.
* Big-Five firms as well as other nonlawyers are providing litigation support and alternate dispute resolution including mediation, arbitration, and more sophisticated methodologies aimed at more effective dispute resolution than that provided by the judicial system. The costs of traditional litigation have become obscene.
* Competition by nonlawyer providers is fierce for many traditional legal services.
Implementing MDP and Other Changes in Florida
The marketplace realities and the forces within and without the legal profession simply must be addressed. Ignoring them will not make them go away. Changes in the Model Rules should be made in order to allow practitioners the flexibility they need to respond to those realities and forces, without compromising the "core values" of the profession. The issue that confronts us now is whether the practice of law--from the firm with the global reach to the firm with the small town touch--can be reinvented to provide relevant legal services in the 21st century marketplace. Many persons outside the legal profession recognize the urgency of the lawyers' date with destiny, and some--such as the accounting profession--set in motion a comprehensive process of self-examination, leading to the design and reinvention of professional practice paradigms for certified public accountants. Whether law practice paradigms may be similarly reinvented requires an examination of the roles performed by The Florida Bar, and the processes of the practice of law.
Are MDPs Right for You? Options for the Practitioner, Large and Small
Consumers of professional legal services--from the individual consumer to the largest multinational corporation--increasingly present lawyers with problems that are multifaceted, multidisciplinary in nature (i.e., require the active evaluation and counsel by more than one professional) and extensive, even global, in scope. Such problems require competent, efficient and cost-effective one-stop solutions. More and more we are seeing synergistic combinations of professionals marshalling intellectual and other resources to best serve the client's needs and to expand the client's access to the justice system. Examples of these possible combinations include the following:
* Litigation attorneys--teaming with certified public accountants, actuaries, and economists to provide multidisciplinary support to a client in complex litigation such as antitrust, RICO, money laundering, and similar cases.
* Patent attorneys--teaming with civil and electrical engineers to provide a full range of patent law and related services.
* Environmental attorneys--teaming with biologists, geologists, hydrologists, urban land planners, and civil engineers to provide environmental permitting services.
* Design-build construction attorneys--teaming with architects, engineers, land surveyors, landscape architects, general contractors, and urban land planners to provide design-build construction services to the single owner.
* Criminal attorneys--teaming with investigators, social workers, and psychologists to provide not only the best defense but also the start of rehabilitation prior to government-imposed rehabilitation.
* Family law attorneys--teaming with accountants, financial planners, and family counselors to provide comprehensive services to assist clients in their adjustment to life as single persons.
* Elder law attorneys--teaming with financial advisors, insurance agents, social workers, and geriatric care managers to provide holistic care to chronically ill elders and their families.
These combinations of cooperating professionals--ad hoc as they may be under the circumstances of current law--have realized economies of scale in planning, marketing, and service delivery. They have discovered that strategic decisionmaking, coordination, and teamwork are often fostered when professionals from different disciplines work cooperatively within a single service organization for the same client and for the same client objective. "Clients of many nonlegal firms would benefit if those firms had, under the same roof, skilled and experienced lawyers who were available for consultation on legal questions." The MDP is already here, well beyond critical mass. The only question remaining is how the bar will deal with it. Professor Terry has presented for us a logical and reasonable implementation strategy. We commend it to the Board of Governors.
Checklist for Change
Professor Laurel S. Terry, who teaches at Penn State Dickinson School of Law in Pennsylvania., has written extensively on MDPs. She is currently on sabbatical in Germany, studying MDPs in Europe. She testified before the ABA Commission on Multidisciplinary Practice on March 12, 1999, providing the commission with a checklist of issues to be considered in examining whether the rules should be changed to allow MDPs. Professor Terry divided her checklist into three main sections: 1) the initial questions to be asked; 2) how MDPs should be structured; and 3) what should be considered in changing the current ethics rules.
* Initial Questions--Standards, Core Values, and Rules
Professor Terry proposed that the primary standards upon which a decision regarding MDPs should be based are "client protection" and in the "public interest," as opposed to protecting the economic interests of attorneys, ensuring regulation of all attorneys, or allowing the market to decide the form of attorney practice. She identified "core values of the profession" as being "competence, independent legal judgment, confidentiality and loyalty." Regarding application of the rules, she determined that identical rules should apply to all lawyers regardless of the size of the firm in which they practice. The standard of proof recommended by Professor Terry was clear and convincing evidence, and she placed the burden of proof on those who recommend the status quo because the current Rules of Professional Conduct "restrict both lawyer and client autonomy." She posited that there is at least some evidence that clients are in favor of multidisciplinary practice and that MDPs currently in existence are providing legal services. She also pointed out that the commission had heard some evidence of harm by MDPs, such, as failure to disclose the nature of the services offered, incompetence, conflicts of interest and "steering" clients to other services. She concluded, however, that the Rules of Professional Conduct should be amended to allow MDPs, thus allowing clients the ability to choose the form of professional services they require, because she remains unconvinced that lawyers within MDPs would not fulfill their ethical obligations merely because of the type of organization within which they offer their services.
* How MDPs Should be Structured
Professor Terry then turned to the question of how MDPs should be structured. She indicated that form should not be elevated over substance, and concerns over ethics issues should be addressed directly, rather than indirectly by limiting the structure within which attorneys practice. She concluded that the appropriate model is the fully-integrated model, one in which lawyers would be allowed to form MDPs with any other person, as opposed to being limited to only other "professionals"; practice in MDPs whose main purpose is providing services other than legal services (as opposed to the D.C. model); and practice under the name of the MDP.
Regarding control of the MDP, Professor Terry recommended that the rules should not require majority ownership of MDPs by lawyers, but should ban "passive investment" in MDPs in which lawyers practice. She concluded that one of the greatest problems faced by lawyers in MDPs is what she describes as the need for "transparency," which she maintains should be resolved by full disclosure to clients of the lawyer's interest and role in the MDP and a full disclosure of the MDP's partnership agreement to a regulating agency.
* Changing the Rules
Finally, Professor Terry discussed the issues of changes to and application of the Model Rules to address MDPs. She concluded that a lawyer whose practice is fully integrated into an MDP, to the extent that client information is shared with all members of the MDP, should not be permitted to represent clients who are being provided audit services of the MDP. She also proposed that all lawyers practicing in MDPs should be bound by the Rules of Professional Conduct, and that nonlawyers working directly for attorneys in MDPs in the provision of legal services should be bound by those rules as well. When conflicts arise between rules of different professions within an MDP, Professor Terry argues that MDPs must be prepared to decide which rules will prevail, although an attorney should be required to withdraw should the resolution of the conflict cause the attorney to violate the Rules of Professional Conduct. She also recommended that attorneys be required to carry professional liability coverage. She proposed that knowledge be imputed from lawyers to nonlawyers in an MDP, and that lawyers recognize loyalty obligations to customers of the MDPs nonlawyers, so that attorneys must address conflicts of interest regarding customers of nonlegal services of the MDP as well as clients of legal services of an MDP.
The American Institute of Certified Public Accountants' "vision project" helped CPAs in small as well as large firm practices identify new areas for CPA 21st century practice. Many of these "assurance practices" compete with lawyers for legal services. While we debate the pros and cons of MDPs, and are precluded from competing because of outdated ethical rules such as Model Rule 4-5.4, our practices are being stripped away from us by other professionals who are laughing up their sleeves at our inability or unwillingness to see the present, much less the future of our profession. For example, take the position of the International Academy of Mediators in commenting on the draft Uniform Mediation Act. "One important goal of the IAM is the general acceptance, especially among the business and professional community which utilizes commercial mediation services, of mediation as a separate and distinct discipline and profession. While commercial mediation often involves consideration of legal issues ... it is not the practice of law." (See appendix, "Letter presented to the Uniform Mediation Act authors on behalf of the International Academy of Mediators," which can be found on the Bar's website, www.flabar.org).
Organizational structure should not be considered a per se loss of the independent professional within the MDP anymore than it is for other professions. Is the insurance defense counsel less independent because he or she cooperates with the insurance company representative over scope of services? Likewise, doesn't the judge advocate general officer exercise independent professional judgment prosecuting or defending a client, even when on the direct order of the JAG officer's superior?
We believe that MDP is a metaphor for the need to substantially reform, to re-invent, the practice of law and the regulation of it. Changing the Model Rules to permit MDPs is not enough. The leaders of the legal profession must be agents of change, "change leaders"--to use Drucker's description--to blaze the trail of renewal as the profession enters the new millennium, to cause the profession--from the grassroots up--to reinvent itself. The reinvention would create a future for the practice of law, but it would require, in Hamel's terms the "reengineering [of the legal services] industry itself."(39) Here follows some examples of reengineering of the process and client relationships, as a beginning point for change.
From Reengineering to Reinvention of the Practice of Law
For years, in Europe and later throughout corporate America, total quality management has been welcomed as one of the "self-improvement" remedies that really works. The Section on General Practice of the International Bar Association began in 1994 to debunk the myth that TQM concepts did not apply to service industries like the practice of law. In the quarterly Report to Legal Management, to its large-firm clients (many of the most prominent law firms in America), Altman Weil Pensa's Ward Bower argued that the concepts imbedded in TQM can and should be applied to law firms. These TQM concepts, which over the past six years have become truisms in the discipline of management, are summarized as follows:
1) Law firms must become "client-driven."(40) Client-driven organizations use client surveys, client audits, client focus groups, client interviews, and even matter-by-matter assessments to obtain feedback to improve performance and to meet or exceed the clients' expectations. They ask clients on a frequent and continuing basis, "How are we doing?" and "What can we do better?" And they actually listen to client responses and use the feedback to improve their performance.
2) Law firms must make continuous improvements in their clients' perceptions of the quality of their legal services. The objective of continuous improvement requires the use of statistical measurement in benchmarking and monitoring performance, and in measuring the quality of legal services.
3) Law firms must redesign and "reengineer" the process of the delivery of legal services. By the use of "process mapping" (flow charting) legal services by case type, for example, a firm's management practices can be evaluated and improved with the purpose of enhancing the clients' perceptions of the quality of service. What steps are required to deliver the legal service task? What steps or processes are redundant, unnecessary, or not cost-efficient? What steps could be delegated to lower competent staff (i.e., partner work that could be done by associates, associate work by legal assistants, etc.)? How could automation and technology be used effectively to reduce the human resources required, to facilitate communication within the firm and with the client, and to improve the competence level of the legal task being performed? What system of compensation, other than hourly rates, might more competitively but fairly compensate the firm for its services?
4) Law firms must redefine their relationships with their clients as partners. "Partnering" relationships between law firms must be based on trust, on the sharing of each other's business objectives, on effective lines of communication, and on foundations designed for the long term. Partnering initiatives include: client surveys, seminars for clients, "reverse seminars" presented by clients, shared staffing, joint CLE, technology integration (e-mail, voice mail, direct access to billing information), electronic access to client documentation, and firm research resources.
5) Law firms must institutionalize the goal of quality performance. Client perceptions of quality are markedly different that those of most lawyers. Clients' perceptions are influenced more by service factors (i.e., responsiveness, timeliness, frequency and responsive of communication, etc.) rather than by product quality (i.e., the perfect brief, cross-examination, or contract). Improving service factors requires a team effort, for the factors are shared responsibilities among the lawyer and his or her staff Achieving service quality in a law firm requires multilevel improvement teams, the empowerment of staff, and the removal of the barriers of a hierarchical organization in favor of a more functional and "horizontal" structure of the organization.
Reengineering the process of delivering legal services is indicated from a public interest perspective as well. Providing access to the courts and serving the unserved or underserved clients of our civil justice system may require re-engineering of the delivery system for legal services: indeed, the "unbundling of legal services."(41) In her very thoughtful article, Vernetta Walker questions the "full service or nothing" assumption on which the legal practice paradigm is based. Rules governing "professional responsibilities" in the practice of law, including the Code of Professional Responsibility and standard of care rules in a malpractice settings, assume that the client wants and has contracted for the full service array of services typically provided in similar circumstances.
For example, in the typical litigation retention, the lawyer is expected to advise the client regarding the applicable cause of actions, defenses, remedies, alternative resolution options, and substantive legal issues and procedural implications; conduct a fact investigation to confirm certain facts, prepare legal documents and pleadings, conduct discovery, advise the client regarding the progress at critical phases of the litigation, conduct negotiations for settlement, and represent the client in all hearings at the trial court level, just for a start.
Walker argues that the unbundling of services from the "full-service" package would give the client the right to select a portion of the services from the package that he or she actually wanted and could pay for. The type and depth of services selected would depend on a number of factors including the "extent and accuracy of information given to the client, the personality of the client, the complexity of the tasks, and the cost and availability of resources."(42) Walker suggests that many of the unserved clients who cannot afford the full service package would be greatly benefited by more targeted cafeteria-type selection of legal services. (Not unlike the concept endorsed by Chief Justice Rehnquist(43) when he counseled that a criminal justice system that could not afford to provide Cadillac-type services to everyone, should stop deluding itself about "equal access" and "equal justice" and provide a Chevrolet-type services within everyone's means.)
Walker describes these services as including any one of the discrete tasks of the typical full service package, but also including such services as ghostwriting of letters and court pleadings, review or comment on what the client has prepared, acting as a coach in mediation and negotiations, and similar services. The Walker article is complete with a model limited-scope engagement attorney counseling service agreement. While the unbundling of legal services presents some obvious problems, it is innovative and entrepreneurial and has great promise particularly in serving the nonclients of the current civil justice system. It is one of many innovative models that should be considered and authorized. Change must include the machinery by which the profession is regulated in the public interest.
Reinvention of The Florida Bar as an Organization
The Florida Bar is an agency of the judicial branch of Florida government. It is an "arm" of the court system. As an agency of the Florida Supreme Court, The Florida Bar performs two essential roles.
As an agency of government, The Florida Bar is the essential vehicle through which the practice of law is regulated in the public interest. Through dues from its members, The Florida Bar funds and administers the largest and most efficient professional regulatory system in Florida government. The standards and ultimate control of the system are vested exclusively in the administrative of the Florida Supreme Court, but The Florida Bar plays an essential and important role.
In addition to its role as a partner in the process of lawyer regulation, The Florida Bar performs the role of representative of the legal profession. Consistent with the limits placed on it as a mandatory dues organization,(44) The Florida Bar represents the profession on such key public policy issues as revision of Article V (the judicial article) of the Florida Constitution, equal access to Florida's civil and criminal justice systems, merit retention and selection of trial court judges, mandatory CLE for attorneys, the review and revision of rules of court, and a host of other policy issues.
As the representative of the legal profession, The Florida Bar has also assumed the member-service role of "voluntary" bar associations. In this context, and primarily through its divisions and sections, The Florida Bar provides member services designed to improve all aspects of the practice of law and to enhance the public's perception of the practice of law as a time-honored profession, of the court system, and of the civil and criminal justice systems.
Of the dual roles of The Florida Bar, the public role--as an agency of the judicial branch--is paramount. Like the court itself, The Florida Bar's primary role in a traditional institution like an integrated bar is to act on behalf of the public in preserving continuity of institutional values and norms (i.e., the "core values") while at the same time being agents of change. "Change and continuity are ... poles rather than opposites."(45)
In matters involving the regulation of the practice of law, The Florida Bar, if not a "gatekeeper," is the "eyes and ears" of the court. In this capacity, The Florida Bar has a unique and important responsibility to serve as what Peter F. Drucker calls a "change leader," an organization that makes a special effort to be receptive to change and one that is able to change.
As an organization, therefore, The Florida Bar has the responsibility to assist the court in striking that all-important balance between continuity of the values and norms of the profession and change and their effects on the assumptions upon which the paradigm of the profession is based.
Compromise is required, notwithstanding the apparent reluctance of the con report to even speak of it. The famous British political philosopher Edmund Burke (1729-1797) was eminently correct when he observed, "All government--indeed, every human benefit and enjoyment, every virtue and every prudent act--is founded on compromise and barter."(46)
The Pro-MDP Subcommittee believes that The Florida Bar has not measured up to its responsibilities. It has not acted as a change leader during the six years since Ward Bower's "Writing on the Wall." With few exceptions, the regulation of the practice of law has not changed in material part over the last 22 years, since the Karl Commission, which had as its purpose the restructuring of the disciplinary process. Even the adoption of the "new" Rules of Professional Conduct in 1986 was done with little regard for the changing paradigm of practice. With notable exceptions, there has been little done to prepare the bar and its members for the enormity of the challenges now facing the The Florida Bar, the attorneys of Florida, and the public.
Change is the most significant driving force affecting our lives and our practices. The Florida Bar should recognize the need to act as a "change leader." The Florida Bar should institutionalize adaptation to change. This must include a process for the continual or at least periodic review of regulations affecting the practice of law, i.e., sunset provisions.
The Florida Bar should adopt standards for the review of the Rules of Professional Conduct and modify or repeal rules that are anti-competitive, unnecessary for the protection of the public, and irrelevant in a market-driven economy.
The business landscape of Florida has passed through one, or by now even two, phases of corporate mergers, consolidations, downsizing, and reinventions and "re-engineering" of themselves, their products, and their procedures. Governmental functions, like economic development, have been privatized. Federal, state, and local governments have embraced the notion of the inevitability of change and have adopted legislation and executive policies rooted in the need to find their new roles in the changing paradigms created for them in the Information Age. Government decisionmakers are reinventing their roles and functions and are reengineering processes at all levels of government, but surprisingly little has changed in The Florida Bar.
By adopting the Taxation and Budget Reform Commission's Revision of Article III of the Florida Constitution in 1992, the people of Florida required the implementation of a total quality management and accountability program "[t]o ensure productivity and efficiency in the executive, legislative, and judicial branches [of state government]." Since 1993, all departments and agencies of Florida's government (including the judicial branch) have been required to develop and implement a strategic plan that is vertically integrated into a single "state planning document."(47) The Florida Supreme Court has adopted a strategic plan and has recently adopted an integrated operational plan, consistent with the objectives of an enlightened state government. But The Florida Bar in its role as an agency of government or in its role as a voluntary bar association has done very little, even to keep pace with other agencies of government.
If it is to deal with the realities of the postindustrial, knowledge-based, global economy has washed away with hurricane force the old order. The old order has changed, yielding presence to a new. The Florida Bar should be encouraged to appreciate the practice of law in the new paradigm--for example, as part of a compendium of professional services linked by a common business objective, thus permitting attorneys to be part of a multidisciplinary system for the delivery of professional services.
What The Florida Bar needs is a strategic plan that recognizes the changed paradigm of law practice, that will serve as the basis for the reengineering of the regulatory process, that will serve as the basis for the reinvention of the practice of law as a regulated profession, that will provide the basis for The Florida Bar taking a more proactive and supportive role to attorneys, and that will provide The Florida Bar as an organization with a road map for the delivery of member services in the future.
An enlightened The Florida Bar must focus on the strategies that will enlarge the scope of law practice, as opposed to depleting our resources and energies by fighting over smaller and smaller specialized areas of practice while competing with those professionals who recognize the need to change.
Lawyers are skilled at taking highly complex information and translating it so the information makes sense to clients. Twentieth century services may be of marginal benefit to 21st century clients. However, the opportunity to serve the 21st century client with new 21st century services is nearly unlimited.(48) There is no question as to whether there is going to be a revolution. The question is, "Who is going to lead it?" This report is presented to the Board of Governors. We believe it is time for that institution to lead Florida's 67,000 lawyers and the public who depends on the lawyer's services to protect their rights and preserve their liberties.
The Pro-MDP Subcommittee wishes to express its sincere appreciation for the assistance of Charlie Robinson, an esteemed practitioner whose elder law practice is based on Clearwater, has given so untiringly to the drafting of this report. Charlie is the subcommittee's leader who is deeply committed to our profession's core values and their continuity, but he who is also a visionary, a futurist among colleagues whose eyes rarely reach the horizons of future opportunity. He has been an inspiration.
We would also like to thank Susan Trainor, who served as the unofficial editor of all of the early (and more difficult) drafts of this report. Elizabeth Tarbert is the sole staff assistant for both subcommittees. She has done a very admirable job in keeping us on track; at least, our delays have not been her fault. She has been the Bar's point person in staying abreast of the actions by other bar associations and the pros and cons to the ABA Commission's report. We thank Nancy McDaniel, who forgot more about desktop publishing than most of us ever knew, for her labors at the desktop on our behalf. Finally, we thank Dale DeHart-Grigas, who at the last minutes in the preparation of this report has added value to the report by her critique and suggestions from a long range planning point of view.
(1) "Report to the ABA House of Delegates," the final report of the Commission on Multidisciplinary Practice, posted, at website: www.abanet.org/ cpr/multicom.html, on June 8, 1999. See also "Updated Background and Informational Report and Request for Comments," a supplemental report of the commission, posted at the same website on December 15, 1999.
(2) Drucker, Peter F., Management Challenges for the 21st Century (Harper Business, New York (1999)), p.9 [hereinafter Drucker Challenges.] See Drucker's position as discussed in this report.
(4) Although it should be noted that this report includes the finding of the recent customer survey conducted by the National Association of Realtors regarding the concept of single stop shopping. See infra.
(5) ABA Commission on Multidisciplinary Practice, Updated Background and Informational Report and Request for Comments, dated December 15, 1999, by posting on the commission's website: www.abanet.org\\cpr\febmdp.html.
(6) [hereinafter the "ABA commission's update"].
(6) From the point of view of this report, these words are not without deeper meaning. See generally FRIEDMAN, MILTON AND ROSE, FREE TO CHOOSE, (Harcourt Brace Jovanovich, New York and London (1980)); and THUROW, LESTER C., THE FUTURE OF CAPITALISM, HOW TODAY'S ECONOMIC FORCES SHAPE TOMORROW'S WORLD (William Morrow and Company, Inc., New York (1996)).
(7) Drucker Challenges, p. 6.
(8) As described by the ABA commission's update, p.5.
(9) An MDP like delivery system includes one that offers "a broader range of choice for clients to select from providers capable of formulating comprehensive solutions which address not only the legal aspect of their problems, but various other facets as well. Subject to resolving important issues of ethics and professionalism in the best interest of the client and the public, such a broader range of choice could include multidisciplinary practices, wherein lawyers are affiliated with non-lawyers." Resolution supporting MDPs, adopted by the American Corporate Counsels Association.
(10) See generally OSBORNE, DAVID AND GAEBLER, TED, REINVENTING GOVERNMENT (HOW THE ENTREPRENEURIAL SPIRIT IS TRANSFORMING THE PUBLIC SECTOR) (Penguin Group, New York (1992)).
(11) We should not be too critical of our leadership, however--at least up to this point--because there were only a handful of activists within the whole of the organized bar who recognized the gravity and urgency of Bower's challenge.
(12) HAMEL, GARY AND PRAHALAD, C. K., COMPETING FOR THE FUTURE (BREAKTHROUGH STRATEGIES FOR SEIZING CONTROL OF YOUR INDUSTRY AND CREATING THE MARKETS OF TOMORROW) (Harvard Business School Press, Boston (1994)).
(13) Alfred Tennyson (1809) may have had it right when he said: "The old order changeth, yielding place to new; and God fulfils himself in many ways, lest one good custom should corrupt the world." --"The Passing of Authur" BARTLETT'S FAMILIAR QUOTATIONS, 9th Ed. www.bartleyby.com/99/424.html.
(14) Drucker Challenges, p.9.
(15) That is not to say that there are not differences in management from one organization to another. The mission of an organization defines its strategy. The strategy of an organization defines its organizational structure. An army differs from a computer manufacturer, from a church or synagogue, from a small law firm--because their respective missions are different.
(16) Drucker Challenges, p. 3.
(18) Id. at 4.
(19) In the natural science disciplines, assumptions are, by definition, based on "natural laws" about the physical universe; these assumptions change little over centuries.
(20) GATES, BILL, BUSINESS @ THE SPEED OF THOUGHT (USING THE DIGITAL NERVOUS SYSTEM) (Warner Books, New York (1999)), p. i.
(21) See con report at 12.
(22) State ex rel. The Florida Bar v. Murrell, 74 So. 2d 221 (Fla. 1954).
(24) What are the attributes or characteristics of a profession, of a service business? Who makes decisions regarding the nature, scope, and quality of services, and on what basis are these decisions made? The regulator of the profession or the consumer? How do those attributes impact the design, development, delivery, cost, and pricing of legal services and what is the organizational form through which these services are best delivered to the consumer? On what theoretical basis are market choices made?
(25) Goldfarb v. Virginia State Bar, 421 U.S. 773 (1975) (a minimum fee schedule for attorneys enforced through the prospect of professional discipline by the state bar association and the state supreme court violated the Sherman AntiTrust Act).
(26) Bates v. State Bar of Arizona, 433 U.S. 350 (1977).
(27) Id. at n.9.
(28) For those who would like a more detailed explanation, see chapters II and III of Drucker Challenges.
(29) During the period when that assumption accurately reflected reality, the company that managed to have the best, most creative and innovative research and development department succeeded while others failed. Examples of such companies are Siemens, the German chemical industry leader, the 1950s version of IBM and the Bell Labs.
(30) The pharmaceutical industry is a good example. That industry, once just a chemical industry, now depends on technologies that are fundamentally different than the technologies on which the "original industry" was based. The technologies that differentiate companies' performance in the industry are those that apply technologies in such fields as genetics, microbiology, molecular biology, medical electronics, etc.
(31) See Georges, Richard M., The Impact of Technology on the Practice of Law--2010, 71 FLA. B.J. 36 (May 1997).
(32) Drucker Challenges, p. 24.
(33) See, Garcia, Mike Jay, Key Trends in the Legal Profession, 71 FLA. B.J. 16 (May 1997).
(34) Drucker Challenges, p. 26.
(35) Id. at 29.
(37) For 30 years General Motors, for example, enjoyed a 30 percent cost advantage over Ford and Chrysler, because it bought up and operated as separate divisions the suppliers of 70 percent all of the parts and accessories that went into GM's automobiles.
(38) See McNaughton, Ann L., "Corporate Use of Assisted Negotiation Strategies: Expanding Your Practice through Multidisciplinary Problem-Solving," The Accountants Are Coming, A Practical Lawyer's Survival Kit (1999).
(39) Hamel Competing, p. 19.
(40) Altman Weil Pensa, Report to Legal Management, article by Ward Bower, "Putting TQM In Perspective: Four Things That Work." vol. 20, no. 9, June 1994.
(41) See Vernetta L. Walker, "Legal Needs of the Public in the Future," Fla. Bar. Journal May 1997 at 42.
(43) In his remarks at the Holland Law Center during the dedication of the Geer-Bruton Hall.
(44) By such cases cited in In Re. Amendment to Integration Rule of The Florida Bar (Political Activities of the Bar), 439 So. 2d 213 (Fla. 1983), and The Florida Bar re. Thomas R. Scharz, 526 So. 2d 56 (Fla. 1988) and Keller v. State Bar of California, 496 U. S.1 (1990).
(45) Drucker Challenges, p. 90.
(46) Barlett's Familiar Quotations, 9th Ed., www.bartleby.com/99/276.html.
(47) Art. III, [sections] 18, Fla. Const. (1968 Rev.)
(48) See, e.g., Naisbitt, John, Global Paradox (The Bigger the World Economy, the More Powerful its Smallest Players) William Morrow and Company, Inc. (1994).