MSBA approves plan for MDPs in Minnesota

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At the general assembly meeting that closed the three-day annual Minnesota State Bar Association (MSBA) convention in Duluth, delegates voted to adopt the report and recommendations of the MSBA task force that would allow multidisciplinary practice (MDP).

Under the proposal adopted by the state bar, Minnesota would have to change its lawyers ethics rules to allow attorneys to merge their practices with nonlawyer professionals in MDPs. Lawyers would still need to have a majority ownership interest in any MDP. (The full-text of the proposed changes is available on Minnesota Lawyer’s Web site, www.minnlawyer.com)

For decades, ethics rules have prohibited practicing attorneys from entering into partnerships and other fee-splitting arrangements with nonlawyers in order to maintain their professional independence. The adoption of the task force recommendations is an important step in lifting this prohibition. Still, the process could take years to complete. Any change in Minnesota’s ethics rules would require the approval of state lawmakers and the state Supreme Court.

The vote supporting the MDP task force recommendations surprised some, especially after the three-hour debate the previous day in which several state bar members — some who are also MDP task force members — either vehemently opposed the recommendations or suggested significant changes to the proposal. During the debate — which was set up as a town hall meeting and moderated by outgoing MSBA president Wood R. Foster Jr. — statements from both those in support of and opposed to the task force recommendations garnered applause.

“If you haven’t changed your mind at least three times today then you just haven’t been paying attention,” said Foster toward the end of the debate.

Although proposed amendments were brought to the floor and discussed during the delegates meeting, the task force recommendations were ultimately adopted with only one minor change. The key findings and conclusions presented by the MSBA task force are as follows:

• any solution must be driven by client and public interest;

• some clients prefer MDP arrangements;

• unnecessary barriers to MDPs should be eliminated, and lawyers should be allowed to practice with other professionals;

• lawyers’ independence and core values of loyalty, confidentiality, and pro bono service serve the public interest and should be preserved;

• to maintain core values, lawyers must own a controlling interest in the MDP;

• lawyers should practice only with other professionals who are both licensed and subject to a promulgated code of ethics;

• passive investment by nonlawyers should be prohibited;

• conflicts of interest should be imputed firm-wide;

• lawyers practicing in an MDP should obtain a written agreement that their independent judgment will not be compromised; and

• a definition of “the practice of law” should be written into the code of ethics.

The task force recommendations do not cover in-house insurance defense counsel, contractual affiliations or lawyers in accounting firms, trust companies or banks.

Lawyers facing change

All state bar members were invited to participate in the MDP debate and to make their opinions known before the vote at the delegates’ meeting the following day.

“This is an issue that may forever change the practice of law. The legal profession and the role of the lawyer may never be the same,” said Foster at the June 22 debate. “It is critical that all lawyers understand the forces at work and the proposed solutions. Whether you favor or oppose a particular course of action, it is your duty as a lawyer to participate.”

Although those attending the debate (entitled “Lawyers Facing Change”) earned 3.0 CLE credits, the task force described the session on MDP as a “discussion more than a seminar” and encouraged attendees to use any of three microphones placed around the room to offer their perspectives. Attendees also used wireless keypads to enter demographic information and vote on questions presented by the task force as a way of “track[ing] where we are and spark[ing] creative discussion.”

The debate began with the task force presenting its findings, which had previously been made available in printed materials distributed at the session as well as in various publications such as Bench and Bar and Minnesota Lawyer.

“Our focus is to look at what would be in the best interests not of lawyers, but of clients,” said U.S. Magistrate Judge Arthur J. Boylan, who along with Minneapolis attorney Rebecca Egge Moos co-chaired the MSBA MDP task force. Boylan and Moos went on to propose several key questions to be discussed, including:

• Are client’s interests best served by allowing lawyers to practice in MDP settings?

• Can we preserve our core values in MDP settings or will they be compromised?

• Will pro bono activity suffer if MDP settings are allowed?

• What is the definition of “the practice of law?”

• Is Minnesota Rule of Professional Responsibility Rule 5.4, which requires attorneys to practice in law firms owned by lawyers, too restrictive for the 21st century?

Bar members respond

The seminar was well-attended and represented a well-balanced cross section of the state’s bench and bar. Nine percent of attendees at the debate were judges. While more than half of the participants were from the Twin Cities area, 39 percent were from outstate. A third of those in attendance had been out of law school for less than five years, while 49 percent had been practicing for more than 15 years. Almost 10 percent of the attendees said they practiced in the area of corporate or business transactions, while litigators made up 32 percent of those present.

The wireless keypads allowed instant polling on important issues. Surprisingly, nearly three-quarters of those present agreed with the following statement: regardless of what action the legal profession takes, outside forces will dominate and MDPs will exist in five years.

Just over 60 percent of those present said they would consider partnering with nonlawyers.

Over 60 percent of those in attendance said that the unauthorized practice of law is a serious problem in Minnesota, compared with 87 percent who said unauthorized practice is a widespread problem. Interestingly, 74 percent of those in attendance said that unauthorized practice is a serious problem for attorneys, compared with just over half who said unauthorized practice is a serious problem for clients and the general public.

Nearly half of the participants said they believed that lawyers could exercise independent judgment in an MDP even if they did not own a majority interest, compared with only 35 percent who said they believed lawyers would exercise independent judgment.

As the debate progressed, several bar members spoke out against MDPs generally and against the task force recommendations in particular.

Waconia attorney Allan W. Lamkin compared MDPs with HMOs in the medical profession and commented that if the MDPs are a
llowed, the legal profession would be “essentially committing suicide.” Lamkin observed that other professionals don’t bear the same responsibility to their clients as do attorneys because they often don’t carry malpractice insurance and are not subject to the same ethical rules. He suggested that ethics regulations and malpractice requirements be extended to all people who practice law — whether or not authorized — so that attorneys would have their licenses at stake, and those not authorized to practice law would have their pocketbooks at stake.

Other bar members pointed out that the task force recommendations, if adopted, would mark a shift in the way the legal profession is perceived and the way lawyers perceive themselves.

“Why don’t we just be honest — if we go with MDPs, we are a business, we are no longer professionals,” observed one attendee.

Minneapolis attorney Sebastian J. Stewart agreed, adding that once attorneys operate as businessmen as opposed to professionals, core values — and especially pro bono work — will be greatly compromised.

Bar members also debated over the task force recommendation that lawyers retain a majority ownership interest in MDP entities. Several task force members shared views that differed from the task force recommendation.

Task force member Sen. Ember Reichgott Junge said she disagreed with several of the task force recommendations. Junge opined that the Legislature would not be receptive to increased protection of the legal profession, and added that the legal profession must “keep up with the times” and learn to “solve problems, not just identify them.” She added that the majority ownership requirement proposed by the task force should be eliminated because MDP is “not about turf protection,” but rather, public trust in the profession would be enhanced by being more consumer-friendly.

Proposed amendments

At the end of the three-hour debate, Foster asked that anyone wishing to offer an amendment to the task force recommendations submit the text of the resolution to the General Assembly to be displayed on a projection screen to facilitate the discussion. Two attorneys did so. Neither of the proposed amendments were adopted by the assembly.

The General Assembly first considered an amendment proposed by St. Paul attorney Michael Burke. That proposal suggested deleting the portion of the recommendations requiring that attorneys maintain a majority ownership of an MDP and instead requiring that MDPs have an ethical committee comprised of practicing lawyers to inform and educate members of the MDP about the ethical requirements of the legal profession. Burke’s proposal included a nonretaliation policy prohibiting the entity from retaliating against any member of the entity whose actions or non-actions were the result of a member’s attempt to comply with his or her ethical duties.

Even though several MSBA members spoke in support of Burke’s proposal, the amendment was ultimately defeated.

Minneapolis attorney Phillip A. Cole, a member of the task force, also brought a motion to substitute his proposal for the task force report. According to Cole, the task force proposal is doomed because “once we give up the independent profession, it will be gone forever. … The basic situation is that the unauthorized practice of law is 100 percent tolerated outside of litigation. The monopoly we once claimed is really gone. We need to understand this and then start drawing lines as far as lawyer independence,” said Cole.

Cole proposed that members of the legal profession be divided into two camps — those who belong to the “independent profession of the law” (IPL), who would be subject to guidelines and ethical rules promulgated by the state Supreme Court, and those who render “legal counseling services” (LCS), who would not come under the court’s supervision but also could not hold themselves out as traditional lawyers.

“[T]his proposal institutionalizes the present situation but serves the valuable purpose of clarifying and defining the lines of difference,” said Cole. “[I]t resists the blending of the profession with other pursuits by acknowledging that the profession is more defined by its traditions of independence than by its former monopoly on the now amorphous category of legal services,” he continued.

Task force member Eric D. Larson supported Cole’s proposal and called for a brighter line between those attorneys that adhere to a standard of professionalism as the legal profession defines it and those that don’t.

MDP task force member Edward Cleary of the Lawyers Professional Responsibility Office described Cole’s proposal as “healing the patient by killing it.” The proposal was defeated.

The Assembly did opt to clarify a statement in the proposal pertaining to the affirmative written agreements that MDP members would have to sign. The statement that there will be no interference with lawyers’ independent judgment would have to be “signed by each member of the entity.”