So Multidisciplinary Practice Doesn't Affect You? Maybe It Should
by Teresa Schmid
(County Bar Update, September 2000, Vol. 20, No. 8)


So Multidisciplinary Practice Doesn't Affect You? Maybe It Should

By Teresa Schmid, Esq., LACBA Director of Professional Services, and former assistant chief trial counsel at the Office of Trial at the State Bar of California. Schmid submitted this article at the request of the Law Practice Management Executive Committee. The views expressed are her own.

At the July 2000 meeting, the American Bar Association's House of Delegates formally rejected the resolution of the ABA's Commission on Multidisciplinary Practice (MDP) that the Model Rules of Professional Conduct be modified to permit lawyers to share fees with nonlawyer professionals. The resolution was defeated after two years of study by the Commission, but before many of the state and local bar associations, including the State Bar of California and the Los Angeles County Bar Association, completed their own MDP evaluations. While the House's action did not kill the controversy, it ensures that the ABA will not have a chair at the table where the issues will be played out, that is, in the individual states where standards for lawyer conduct are actually set.

Still, it is difficult for many lawyers to see any relevance of MDPs to their practices. The MDP model most commonly debated is one in which lawyers and accountants render legal and non-legal services under a single roof and share the fees. If that type of MDP is the wave of the future, then it's likely a distant future, at least in California. But there's another MDP model that's not only alive and well but also ripe for development: the ancillary business.

For many, it has become apparent that having multiple streams of income is the key to thriving in the new economy. In the practice of law, the same economic pressure is driving diversification of practice areas. It is also driving law firms to expand their practices to include non-legal services, such as consulting. While these ancillary businesses also have ethical constraints, they are not only feasible but have the potential to be highly profitable.

On May 2, 2000, the New York State Bar released its own 412-page report on MDPs in which the association firmly opposed the fee-splitting model of MDP. However, the report strongly supports the development of ancillary businesses as means of creating new economic opportunities for law firms within existing ethical guidelines. The report proposes changes in New York's ethical rules to clarify the standards and facilitate the development of these new businesses. Most importantly, the report discusses related ethical issues and examples of successful ancillary businesses, including corporate training, scientific assessment of environmental risks, technology consulting and private investigation. The full report is available on the association's Web site at

California has long taken a tolerant position toward ancillary businesses so long as the ethical formalities are observed. State Bar Formal Opinion 1995-141 is still the definitive discussion of related ethical issues, including the need for appropriate disclosures and waivers when the ancillary business renders non-legal services to a client of the law firm. When the ancillary business serves only non-clients, the ethical concerns are greatly diminished. For a more recent discussion of the ethical issues arising from providing both legal and non-legal services to clients, see State Bar Formal Opinion 1999-154. Both opinions are available on the State Bar's Web site at

There is one type of ancillary business, however, whose dangers are overlooked by many lawyers. Taking an ownership or equity interest in a client, however small that interest may be, triggers the full spectrum of protective action required by the California Rules of Professional Conduct before a lawyer may enter a business relationship with a client. See RPC 3-300 and Passante v. McWilliam(1997) 53 Cal.App.4th 1240, 62 Cal.Rptr.2d 98, 302.

While the MDP controversy still rages, lawyers can and should inventory their existing skills and others that may be readily acquired for their income-producing potential as ancillary businesses. This is one economic opportunity whose time has come.

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