Attorney Privilege

Then, too, there is nothing inherently wrong with maximizing profits. Naturally, like any other firm, an MDP should not be allowed to profit through negligence or wrongdoing. But by the same token, an MDP–even one that is publicly owned–shouldn’t be penalized for keeping costs low, doing its job efficiently, and working hard to meet its clients’ needs.

*MDPs permit nonlawyers to practice law. "The practice of law" is a notoriously vague and largely outdated concept. The only place it makes sense is in the courtroom, but court appearances constitute only a tiny slice of the legal services pie. Most legal services relate to transactional matters in which many nonlawyer professionals know at least as much about the relevant law as lawyers. Even accounting for the courtroom context, clients aren’t stupid. They don’t need much to figure out whether a service provider has the minimum experience to do the job; they need only a little more to determine whether the provider will do it well. MDP critics should not so cavalierly dismiss their clients’ initiative and judgment.

* MDPs would allow disbarred attorneys to oversee other attorneys. The principal flaw in this argument is its failure to account for a firm’s reputational incentives. Firms have no interest in hiring personnel who will alienate clients. The argument also condones a form of double jeopardy by assuming that a disbarred attorney can never perform any task honestly. Nevertheless, the threat seems easy enough to cure with a rule that may be overkill but should certainly quell all fears: Disqualify from the practice of law for some period of time any firm, including an MDP, that knowingly employs an ineligible attorney in a professional service capacity.

* MDPs create conflicts of interest. Lawyers may not represent two clients with adverse interests, even on unrelated matters. This is a sensible rule, but it has been extended improperly by another rule: imputed disqualification, which forbids one firm from representing two clients with adverse unrelated interests even if the work is performed by two different attorneys. MDPs might be disqualified from many assignments as a result.

Procedures have long existed to address this issue. Conflicts in an MDP can be resolved exactly as they have been historically: by informed client waivers, structural separation, and Chinese walls (procedures that prevent information flows between firm members). Not only have law firms used these methods internally for decades, but so have accountants and consultants. The Big Five would never have attained their present size without these procedures; applying them to lawyers does not dilute their effectiveness.

* MDPs improperly combine legal and auditing services. MDP critics cite a tension between a lawyer’s duty of confidentiality and an auditor’s duty to disclose. The SEC has strictly disallowed auditors from certifying the financial statements of a client for whom their firm also provides legal representation, and as of this writing it has indicated that it will disallow multidisciplinary practice by administrative rule.

This concern, too, misunderstands the market process. Just because multidisciplinary practice is allowed does not mean every firm will engage in it. Some firms will choose to remain independent because their clients will pay extra for an added layer of apparent objectivity. In any case, the clients alone should be left to judge the wisdom and reputational effects of using a particular firm.

Furthermore, the obligations of both attorney and auditor remain fixed whether or not they belong to an MDP. Structural separation allows the attorney to invoke privilege; the auditor may qualify his opinion or even resign if the client tries to conceal fraudulent activity. Investors and other interested parties understand that such actions suggest problematic information and will adjust their expectations accordingly.

* MDPs are not in the best interest of the client or the public. The client should control his decisions. If the client prefers not to use an MDP, he can go elsewhere. Forbidding MDPs eliminates a host of possible synergies that could bring immeasurable benefits to the marketplace, such as those between environmental lawyers and engineers, divorce lawyers and psychiatrists, criminal defense lawyers and detectives, or labor lawyers and personnel firms.

* MDPs benefit mostly rich or sophisticated clients. My own experience as an attorney in a legal clinic for low-income entrepreneurs convinces me that exactly the opposite is true: Low-income individuals stand to benefit the most from MDPs. People who have limited resources or education, who distrust lawyers or the legal system, or who have no social network that includes professionals need the cheaper, more comprehensive, and more user-friendly service that MDPs can provide.

The transition to an MDP world may present some challenges, but the legal profession only hurts itself by resisting the inevitable. The bar can learn from last year’s repeal of the Glass-Steagall Act, which for years prohibited the combination of banking and commercial enterprises until Congress finally realized that the ban dampened innovation, restricted client choice, increased costs, and hurt American competitiveness. Clients are calling for MDPs. The bar should listen.