January 17, 2000
Minnesota State Bar Association Conflict Management and Dispute Resolution Section
Comments and recommendation on the Proposed Amendment of the ABAs Model Rules of Professional Conduct To Allow Multidisciplinary Practice Organizations.
1. In August 1999, the American Bar Associations Commission on Multidisciplinary Practice recommended that the ABA Model Rules of Professional Conduct be amended to permit lawyers to deliver legal services through a multidisciplinary (MDP) firm owned by lawyers and non-lawyers. There are various facets to this proposal. A key part of the proposal was the expression of 15 core values that should be preserved as part of any MDP plan reaching approval.
2. In January 2000, the MDP Commission issued its Updated Background and Informational Report and Request for Comments.
3. Said Commissions recommendation was based upon its belief that allowing MDP firms was in the best interests of the public, would expand the availability of legal services, and would facilitate the development of a new business structure enabling lawyers to reconfigure their practices to assist clients in resolving multi-disciplinary problems. (Emphasis added.)
4. The Minnesota State Bar Association (MSBA) is evaluating this recommendation and has asked the sections of the MSBA to comment on the recommendation.
5. The MSBAs Section on Conflict Management and Dispute Resolution (CMDR) was founded in April, 1995, in response to the increasing use of Alternative Dispute Resolution (ADR) in the State of Minnesota. In its bylaws, the stated purpose for the Section is to (1) promote the work of the MSBA in the field of Conflict Management and Dispute Resolution and (2) improve the practice, elevate the standards, and advance the cause of ADR in the State of Minnesota. Unlike other sections of the MSBA, membership in the Section is not limited to MSBA members, but includes any interested member of the public. Since the State of Minnesota does not require qualified neutrals to be attorneys, this departure is significant in that it encourages all neutrals in the State of Minnesota to participate actively in the Section.
6. The MDP recommendation raises many issues regarding the practice of law that are beyond our purview. We merely comment on the recommendation insofar as it relates to ADR.
7. The primary motivating forces behind the MDP recommendation do not come from the ADR field. We note, however, that some of the major accounting firms have alternative dispute resolution practices.
8. The premise behind the MDP recommendation is that MDP firms may assist clients in resolving multi-disciplinary problems. But attorneys who act as ADR neutrals do not have an attorney-client relationship with the parties involved in ADR proceedings.
9. The MDP recommendation itself did not include a definition of the practice of law. But the MDP recommendation included possible amendments to the ABAs Model Rules of Professional Conduct, one of which was the following definition of the practice of law, which in turn was based in great part on a District of Columbia rule of professional conduct:
Practice of Law means the provision of professional legal advice or services where there is a client relationship of trust or reliance. One is presumed to be practicing law when engaging in any of the following conduct on behalf of another:
(a) Preparing any legal document, including any deeds, mortgages, assignments, discharges, leases, trust instruments or any other instruments intended to affect interests in real or personal property, wills, codicils, instruments intended to affect the disposition of property of decedents estates, documents relating to business and corporate transactions, other instruments intended to affect or secure legal rights, and contracts except routine agreements incidental to a regular course of business;
(b) Preparing or expressing legal opinions;
(c) Appearing or acting as an attorney in any tribunal;
(d) Preparing any claims, demands or pleadings of any kind, or any written documents containing legal argument or interpretation of law, for filing in any court, administrative agency or other tribunal;
(e) Providing advice or counsel as to how any of the activities described in subparagraph (a) through (d) might be done, or whether they were done, in accordance with applicable law;
(f) Furnishing an attorney or attorneys, or other persons,
to render the services described in subparagraphs (a) through
10. The chair of the District of Columbia committee that drafted its rule has commented that any use of its definition of the practice of law for purposes of MDP should be accompanied by the D.C. commentary on this rule. This commentary included the following statement:
The rule is not intended to cover the provision of mediation or alternative dispute resolution (ADR) services. This intent is expressed in the first sentence of the definition of the practice of law which requires the presence of two essential factors: the provision of legal advice or services and a client relationship of trust or reliance. ADR services are not given in circumstances where there is a client relationship of trust or reliance; and it is common practice for providers of ADR services explicitly to advise participants that they are not providing the services of legal counsel.
11. In response to the Updated Reports request for comments on whether any MDP rule needed to have a definition of the practice of law and whether there should be more enforcement of existing laws prohibiting the unauthorized practice of law, we have these comments:
(a) We believe that any MDP rule should have a definition of the practice of law and that the definition quoted in paragraph 9 of this report is appropriate.
(b) We endorse the inclusion in any MDP rule of the District of Columbia comment that excludes an ividuals providing ADR neutral services from the practice of law because there is no attorney-client relationship.
(c) There are a substantial number of articles discussing whether conducting a mediation is the practice of law and, if it is, whether non-lawyers should be prohibited from being mediators. These articles have seemed somewhat academic because, to our knowledge, there has been no attempt to prosecute non-lawyer mediators for the unauthorized practice of law. These articles also discuss whether real or true mediation is only facilitative, in which case non-lawyer mediators do not have an unauthorized practice of law problem. However, if the mediator is evaluative, then, these articles say, the non-lawyer mediator may have such a problem. All of this discussion would be mooted by adoption of the District of Columbia comment just discussed.
(d) Arbitration, on the other hand, raises different issues. Historically arbitration arose as a means for businesses to have their disputes resolved by businesspersons - arbitrators who were not lawyers. Under the common law of Minnesota (and other U.S. jurisdictions), unless the parties otherwise agree, an arbitrator does not have to base the award on the law. Some organizations, such as the American Arbitration Association, emphasize that their arbitrators are not constrained by the law. Other organizations, like the National Arbitration Forum, however, emphasize that their arbitrators are required to base their awards on the law. In the latter situation, an arbitrator would appear to be practicing law, if that means applying legal principles to facts to resolve a dispute. Here too all of this discussion would be mooted by adoption of the District of Columbia Comment just discussed. The same would be true for other forms of ADR. (See Minn. Gen. R. Practice Dist. Cts. 114.02(a)(2)-(6), (8), (9), (10).)
12. As noted above, the State of Minnesota does not require qualified neutrals in state-court annexed ADR proceedings to be lawyers. There are many individuals from professions other than the law who are on the state-court roster of qualified neutrals. In addition, outside the state-court system, professionals other than lawyers provide ADR neutral services. We are not aware of any complaints that these other professionals as a group are not providing capable ADR neutral services. Moreover, we believe that these other professionals provide valuable perspectives on the alternative resolution of all types of disputes. For example, an accounting firm in Minnesota has a practice group of a lawyer and psychologists and family therapists whose primary practice is aiding family-owned and small businesses cope with succession issues where family and business issues are intertwined; they also provide co-mediation services for resolution of disputes where legal and family issues are mixed. We also believe that there should not be any attempt to prevent such other professionals from providing these services, either by themselves or with lawyers.
13. These multidisciplinary ADR neutral services are being provided without the necessity of any changes in the rules of professional conduct regarding lawyers. We do not know of any circumstances suggesting that there needs to be a change in such rules for this purpose. On the other hand, we cannot say, a priori, that it would be contrary to the public interest, for example, for a firm owned by lawyers, psychologists and accountants to provide dispute resolution services to individuals involved in marriage dissolution proceedings. We believe that new rules could be found to permit such a firm.
14. CMDR has been deeply involved in the development of a code of ethics for ADR neutrals in the Minnesota state-court system. In April 1997 CMDR submitted a report regarding ADR ethics to the Minnesota Supreme Court that stated, in part, as follows:
The Section believes the adoption of a Code of Ethics in conjunction with Rule 114 is very important and necessary to set out clear standards in the burgeoning, interdisciplinary field of alternative dispute resolution. The State Court Roster of neutrals includes individuals from a variety of primary disciplines, including law, business, psychology and social work to name a few. While many disciplines have their own codes of ethics, it is important to have one set of rules to ensure ethical, high quality service when anyone provides service pursuant to Rule 114. . . . It should be a document which is understandable and which contains language that may be evenly enforced.
15. Undergirding our work on ADR ethics has been a belief that attorneys should be encouraged to be ADR neutrals and that they should not be at a competitive disadvantage by having different, and more stringent ethical rules than those who are not attorneys. Similarly we believe that individuals from other disciplines should not be disadvantaged in this area. We think these comments apply as well to any rule permitting MDP firms.
16. We call the ABAs attention to the fact that the American Bar Association joined with the American Arbitration Association and the Society of Professionals in Dispute Resolution to develop the Joint Proposed Standards of Conduct for Mediators.
17. We must emphasize that because ADR is a relatively new field, we in the CMDR Section have been helping to create the new rules governing ADR:
(a) a state-court system of court-annexed ADR and code of ethics;
(b) local ADR rules for the United States District Court for the District of Minnesota pursuant to the Alternative Dispute Resolution Act of 1998;
(c) a proposed revision to the ABA Model Rules of Professional Conduct to add a new section on Lawyer as Neutral;
(d) a brand-new Uniform Mediation Act; and
(e) a major revision of the Uniform Arbitration Act.
18. The rest of the legal landscape facing ADR practitioners and other attorneys is also on the brink of other major changes. The ABA Ethics 2000 Commission is reviewing the entire ABA Model Rules of Professional Conduct to update same for the 21st century. The Restatement of the Law Governing Lawyers is under development. We are in the midst of a global revolution in communications and the availability of information on the Internet. Another centrifugal force affecting lawyers and others in society is the globalization of commerce.
19. At the same time, there are centripetal forces. Some states are trying to put on the brakes against the interstate practice of law and ADR. The United States Supreme Court apparently is in the midst of conducting a constitutional revolution by fundamentally redefining the allocation of power between the federal government and the states and allowing the states greater latitude.
20. As a result, it has been difficult for us to get our hands around the proposal for allowing MDP firms and assessing its impact on the ADR field. In economics, for example, analysis is assisted by the principle of ceteris parabis, i.e., all other things remaining the same. Now, however, there appear to be few fixed and stable points of reference for the legal profession.
21. Moreover, our typical mode of analysis, i.e., thinking like a lawyer, is to argue that a present problem should be analyzed and decided on the basis of what already has been done, starie decisis. Yet as we stand at the brink of the 21st century, this mode of analysis may be insufficient.
22. If all of this is correct, it is possible that all of us will be going through multiple significant changes in how we identify ourselves as lawyers and how we organize ourselves to provide services. Presumably we will continue to practice law in order to make a living for ourselves and our families. There undoubtedly will be a very difficult interregnum between the old order and a not yet defined new order.
23. We need help from planners, futurists and management consultants in negotiating this transition. We believe that the first step is to envision how professional services, including legal and ADR services, could and should be delivered in the 21st century in order for the consumer of such services to have the maximum choice in how to buy such services. Once that is determined, attention should shift to how can we best manage the complicated and difficult transition from the old to the new order. Many of the issues raised by the MDP recommendation, as we see it, relate to how a MDP firm should be structured, managed, and regulated which in its breadth is beyond our purview.
24. One of our worries about this new world is the potential separation of different types of attorneys into different firms with the result that lawyers find it more difficult to obtain the advice of attorneys in other specialties. As a consequence, the ongoing joint task of constantly reweaving the seamless web of the law may be adversely affected. In addition, if litigation lawyers find themselves in barrister-like firms and separated from the firms providing ADR neutral and advocacy services, it may be more difficult to continue to develop the interplay between the various methods of resolving of disputes. The public interest may not be served thereby.
25. CMDR recommends that any amendment allowing MDP firms should be adopted only if the following requirements are met:
* The independence and neutrality of ADR providers, whether
lawyers or other professionals, must be preserved (Proposed Model
Rule for Lawyer as Third-Party Neutral 4.5.3, 4.5.4 (April 1999)
[Mod. R.L. as Neutral]; Minn. Gen. R. Practice for Dist.
Cts. 114 Appendix - Code of Ethics (Rules I and II)).
* The competence of ADR neutrals, whether attorneys or other professionals, must be preserved (Mod. R.L. as Neutral 4.5.1(b); Minn. Gen. R. Practice for Dist. Cts. 114.13, 114 Appendix - Code of Ethics (Rule III)).
* The confidentiality of ADR proceedings and communications must be preserved (Mod. R.L. as Neutral 4.5.2; Minn. Gen. R. Practice for Dist. Cts. 114.08, 114.10 and 114 Appendix - Code of Ethics (Rule IV)).
* The fees of ADR neutrals must be reasonable (Mod. R.L. as Neutral 4.5.5; Minn. Code. Prof. Conduct 1.5, Minn. Gen. R. of Practice Dist. Cts. 114 Appendix - Code of Ethics (Rule VII)).
For purposes of up stream conflicts (i.e., conflicts that might prevent someone from serving as a neutral), a prospective neutral needs to disclose all relationships that might affect impartiality, including those of his or her partners or colleagues in a firm (regardless of profession), with the disputants then deciding, in most instances, whether to hire that person as a neutral (Mod. R.L. as Neutral 4.5.3(b); Minn. Gen. R. Practice for Dist. Cts. 114 Appendix - Code of Ethics (Rule II).)
* For purposes of down stream conflicts (i.e., disabling conflicts of interest after the conclusion of an ADR proceeding), there should be no imputation of conflicts from an attorney or other professional acting as an ADR neutral to other attorneys or other professionals in his or her firm or to the firm as a whole unless the neutral has breached his or her duty of confidentiality and discussed the ADR proceeding with others in the firm (Mod. R.L. as Neutral 4.5.4(b); Minn. Gen. R. Practice for Dist. Cts. 114 Appendix - Code of Ethics (Rule II, Comment No. 6).
* Persons with disputes must have multiple ways of resolving their disputes, including ADR.
* Persons with disputes must be protected against conflicts of interest, biases and influences adverse to the neutrability and independence of ADR neutrals.
Duane W. Krohnke
Faegre & Benson LLP
90 South Seventh Street
Minneapolis, MN 55402
Fax (612) 336-3026