Black Market Law Firms

Abstract

In business and in competition, value exists in striking first. Accountants, the so-called hawks of the professional world, have made the first move. In September 2017, the global accounting giant PwC opened a law firm in Washington, D.C. called ILC Legal. ILC Legal not only provides legal services on non-domestic matters, but also acts as a multidisciplinary provider (“MDP”) and offers other professional services, such as tax-planning, business consulting, and marketing, throughout its 90-country network. In June 2018, Deloitte quickly followed suit, the second of the Big Four accounting firms to enter the U.S. MDP market, partnering with a U.S. immigration law firm in San Francisco. With accountants now having the “first mover” advantage, the legal profession must respond.

Restricting any competitive response are the legal profession’s current ethical rules. Two weaknesses in the legal profession’s integrity system—the self-regulatory market monopoly over legal services and the ethical treatment of all lawyering acts under a unified profession of law—have restricted collaborative innovations between lawyers and non-lawyers. No more pronounced are larger impacts of these weaknesses to the overall competitiveness of the legal profession than when viewed through the exemplar of Model Rule of Professional Conduct Rule 5.4, which protects the professional independence of a lawyer through prohibiting non-lawyer ownership of law firms. This rule has not stopped accountants, however, from hiring lawyers en masse to deliver legal services to their business and tax clients; nor has the rule stopped enterprising lawyers from collaborating with non-lawyer professionals in an attempt to keep pace and to provide more holistic and comprehensive legal services to clients.

This Article calls for recognition and regulation of MDPs because the legal profession must now overcome the accountants’ first mover advantages. Despite this initial competitive setback, the legal profession is also now in a position to leverage its current self-regulatory monopoly over legal services to market a higher quality, ABA and state ethics board accredited MDP services to clients. This Article then proposes a regulatory framework for recognizing and regulating MDPs based on a classification scheme which categorizes MDPs based on the potential risk that the ownership and control structure could undermine a lawyer’s independent judgment. This novel classification scheme categorizes MDPs as either white, gray, or black market law firms depending on the percentage of non-lawyer majority ownership and control of the MDP. Based on those categories, this Article argues that we should revise Rule 5.4 to allow for unlimited associational forms between lawyers and non-lawyer professionals but prohibit lawyers from providing legal services in black market MDPs, or MDPs which are majority owned and controlled by non-lawyers.