Why The Sky Really Is Falling
by Anthony E. Davis
Chicken Little is a figure of ridicule in a children's tale, with his repeated warnings that " the sky is falling; the sky is falling." Similarly, the boy who cried " wolf" too often, though immortalized in wonderful music, is also a figure of fun - notwithstanding that, the last time he cried " wolf" - he was right. As someone who has in recent years been repeatedly and noisily calling similar warnings of the bleak and limited future for our profession if we do not address comprehensively and sensibly the continuing failure to legalize the multijurisdictional practice of law by transactional lawyers, I am both honored and (believe it or not) humbled by this opportunity to make my case.
I also concede and acknowledge that being given the opportunity does not mean that those attending the program are yet convinced, or even accepting of the possibility that my warnings are warranted. Accordingly, this paper should be read as the polemic that it is intended to be. I wish to convince those attending the program of four propositions:
1. That the restrictions on multijurisdictional practice by transactional lawyers are ubiquitous;
2. That these restrictions seriously harm the public; and
3. That these restrictions harm the legal profession - to the point where the profession is likely, if it fails to cure the problem, to lose the ability to regulate itself; and
4. That it is already five minutes to midnight - the wolf is at the door; the sky is about to fall.
While I recognize that this Symposium is about whether there is a problem, and not about solutions - which are to be left to a future body and time - I have found myself unable to avoid dealing with that issue, at least in outline. In deference to the primary purpose of the Symposium, that topic is addressed in a postscript, which I have called the Coda to this paper.
1. RESTRICTIONS ON THE MULTIJURISDICTIONAL PRACTICE OF LAW BY TRANSACTIONAL LAWYERS ARE UBIQUITOUS IN THE UNITED STATES
Some five years ago, in his enormously informed and persuasive article Sneaking Around in the Legal Profession: Interjurisdictional Unauthorized Practice by Transactional Lawyers, (2) Professor Charles Wolfram addressed many of the same issues that are the concern of this paper, as part of another program on the same general theme (3) . I will show that in the beginning segment of his article, where he describes the nature of the problem in general terms, and with some examples, he could not have predicted (and, I imagine, has been surprised at) how, in the intervening five years, the problems that he described have multiplied almost geometrically in both scope and scale, and in their seriousness to the future of the profession as we know it.
The fundamental problem that the profession faces in trying to comprehend the magnitude of the crisis that multijurisdictional practice represents is that while we are confronted with multiple individual examples of the issue, we have thus far failed to "connect the dots." My object in this part of the paper is therefore to catalogue some of the more egregious examples of the problem, and some related phenomena, so as to assemble a comprehensive picture of the crisis that confronts us. While each piece of evidence that there is a crisis may be dismissed as an isolated incident, I hope to show that cumulatively these examples, viewed together, present a challenge that we would continue to ignore only at great peril for the future of an independent legal profession.
Before turning to my catalogue of individual instances and manifestations of the looming crisis, it may be helpful to set the stage with a brief discussion of what the expression "multijurisdictional transaction" might encompass. That there is no single paradigm will quickly become obvious, because there are at least five variables. Let us begin with what is not a multijurisdictional transaction; this might be where a lawyer admitted to practice only in South Carolina advises and prepares a will for resident of South Carolina (the reason for selecting South Carolina will become apparent later). In other words, the law to be applied, the lawyer and the client all involve the same state, and the lawyer and the client are both physically present in that state. Now let us take a different South Carolina lawyer, and suppose that she has two areas of practice concentration (in deference to the proscription on the use of the word "specialization" - though that would be a truthful claim in this lawyer's case), municipal bond financing contracts, and commercial Internet contracts. Here are some of the principal variables which turn her work into multijurisdictional practice:
Case 1. She advises - while remaining at all times within her office in South Carolina - a company located only in South Carolina, on a contract with a Washington State company expressed to be governed by Washington law ( choice of "foreign" state law);
Case 2. She advises the Washington company (instead of the South Carolina company) in the same transaction, still governed by Washington law, but again at all times remains in South Carolina (" foreign" state client);
Case 3. Same facts as 1, but she travels to Washington to negotiate with the Washington company ( transacting negotiations in a jurisdiction where lawyer is not admitted);
Case 4. Same facts as 2, except that the transaction is governed by New York law, and she conducts the negotiations over the Internet and telephone, with the corporate counsel of the South Carolina based company who is located in New York City ( unclear "where" the negotiations are taking place, but clearly not exclusively in South Carolina, and clearly involving "foreign" state law);
Case 5. She is invited to advise two municipalities, one in New Jersey and one in Washington State, on separate proposed bond financing transactions, and the transactions will require her to give an opinion on Federal income tax law; like example 4, she can perform all of the work from her South Carolina offices by telephone, fax and E-mail, except that both of the municipalities have asked her to mail hard copies of her opinion, when complete, to the underwriters in Newark, New Jersey and Seattle, Washington, respectively ( same as 4, except the law involved is purely - or at least principally - Federal law).
Obviously, these do not comprise the entire universe of possible multijurisdictional transactional practices, but they will form a useful baseline as we progress through our review of the regulation of multijurisdictional practice. Notably, many multijurisdictional transactions in real life will involve multiple elements of these cases in different combinations.
As a further necessary preliminary matter, we also need to remind ourselves of the substance of virtually every statute defining the unauthorized practice of law. Since this Symposium is taking place in New York, let us look at section 484 of the New York Judiciary Law; in pertinent part, it reads as follows:
"No natural person shall ask or receive, directly or indirectly, compensation for appearing for a person other than himself as an attorney in any court or before any magistrate, or for preparing deeds, mortgages, assignments, discharges, leases or any other instruments affecting real estate, wills, codicils, or any other instrument affecting the disposition of property after death, or decedents' estates, or pleadings of any kind in any action brought before any court of record in this state .......... unless he has been regularly admitted to practice, as an attorney or counselor, in the courts of record in the state ;....." (Emphasis added).
While other states' definitions of what is included within the practice of law differ, the crucial and fundamental point to note about this and every such definition is that it necessarily includes within its proscription persons admitted and lawfully practicing as "lawyers" in any other state of the United States (unless they have also actually been admitted in the state considering prosecution for unauthorized practice of law, in this case in New York).
Finally, before we begin our survey of the problems facing our South Carolina lawyer (and every other lawyer similarly situated), we should ask ourselves an important preliminary question: Whether, in any of these five cases, the clients, knowing that their chosen lawyer has all of the necessary skills and knowledge to competently represent them in the transactions without assistance, would willingly agree to the engagement of "local" counsel with no particular expertise in the area of law (or at least less expertise than the selected South Carolina lawyer) - which we may assume would add both cost and delay to the completion of the transactions? I expect that most of us would agree that the clients would be unhappy with such a requirement.
With these preliminaries in mind, let us begin our survey.
The Contemporary Regulatory Environment Of Multijurisdictional Transactional Law Practice
1. Spivak v. Sachs (4)
Professor Wolfram begins his discussion of decisional law defining unauthorized interstate practice (5) with a discussion of this New York Court of Appeals decision. Here is Professor Wolfram's summary of the case:
"Mary Sachs, who lived in New York City with her two children, found herself the defendant in a divorce action that her husband, represented by the well-known New York City firm of Sullivan & Cromwell, had filed in Connecticut. Things went poorly, despite the efforts of her New York and Connecticut lawyers. After her husband gained custody of one of the children, she was pressed to accept what she considered a poor property settlement and was confused about what to do. Spivak practiced law in California, where he was admitted, and had met the Sachses socially there, as well as in New York and Connecticut. Presumably from those associations, Mary Sachs called Spivak in California and, in three phone calls, prevailed upon him to come to New York to advise her. Spivak told her that he was not a member of the New York bar and that the most he could do was advise her and recommend other New York lawyers. Spivak flew to New York City and spent fourteen days there on Mary Sachs' case. He reviewed drafts of settlement agreements proposed by her Connecticut lawyer and discussed with her various financial arrangements and custody questions. Spivak then gave his opinion based on, among other things, what he knew of New York law, that the proposed property settlement was inadequate and that she was not being adequately represented. Later, Mary Sachs arranged for Spivak to meet her New York lawyer, and Spivak told him that Connecticut was not the proper jurisdiction for the divorce action. After several meetings with the New York lawyer, Spivak unsuccessfully urged her to fire the New York lawyer and retain one recommended by Spivak. When she subsequently refused to pay his bill, Spivak sued, only to have New York's highest court deny him relief on the ground that his activities in New York constituted the unauthorized practice of law."
What is remarkable about this case when considered today is how similar it is to the Birbrower case (which we will consider next). However, we must also consider precisely what kind of practice Mr. Spivak was engaged in. Was he seeking to litigate - in which event his failure was the avoidance of the pro hac vice system - or was he giving transactional advice? In my view, even though the advice sought related to litigation, he can hardly be viewed as seeking to enter the litigation arena for purposes of New York jurisdiction over his fee claim, since he was merely advising Ms. Sachs in New York regarding a Connecticut law suit. Furthermore, he was not only acting as a transactional lawyer, seeking to advise on the terms of a contract (custody agreement), but also trying to obtain fresh New York counsel to review his work so as to avoid any appearance of appearing in litigation in a jurisdiction where he was not admitted, precisely because - as he had informed her at the outset - he was not admitted here. Thus, here is our first example of a purely exclusionary operation of unauthorized practice laws to prevent a lawyer from one state from advising a client in another, even where he has disclosed his admission status and advised on the additional engagement of local counsel.
2. The Birbrower Case
We must first ask whether this case is different from Spivak v. Sachs, and then - if it is - why the difference is significant. The decision in Birbrower, Montalbano, Condon & Frank, P.C., et al.,Petitioners, v. the Superior Court of Santa Clara County, Respondent; Esq Business Services, Inc., Real Party in Interest (6) has been much discussed and fretted over by lawyers in commercial practice as well as by my own fraternity of professional responsibility lawyers. In the Birbrower case, the California courts - in the exercise of their authority to regulate the practice of law within the boundaries of California - determined that the New York law firm of Birbrower, Montalbano, Condon & Frank, P.C. could not recover legal fees from a client for whom it had undeniably provided legal services because those services (which were principally provided from the firm's New York offices) involved, at least in part, giving advice on a contract governed by California law to a California resident client. That, said the California courts, constituted the practice of law in California - regardless of where the services were actually performed, and of the existence of an express engagement letter. Since the firm had no offices in, and no lawyers admitted in California, the firm's activity was held to constitute the unlawful practice of law (UPL) in California, and therefore the firm was not entitled to receive any fee. This despite the fact that there was no finding that the services were inadequately performed.
The reason that Birbrower is different in kind from Spivak v. Sachs is that the services were delivered in more than one state (multijurisdictional) - including in the lawyers' state of admission (New York) - and that there was a conscious decision by a sophisticated client to select the particular lawyers, regardless of their state of admission, to represent (and not merely advise) the client in both jurisdictions (until the bill arrived). The implication of the decision, whether we like it or not, is that at least some state courts continue to view it as their function to protect local bar monopolies without regard to the changing face of commerce and law practice, well beyond the walls of the states' courtrooms.
So, we begin with two highly visible examples of the protectionist regulation of the legal profession by the states, following - and enforcing - the model that has existed since the Republic was established. While Spivak v. Sachs may have made sense thirty-five years ago, we must ask ourselves whether either of these decisions make any sense whatever in the age of the Internet.
3. New Jersey Opinion 33
Our next example is from a jurisdiction and a practice area that are remote both from California and from participation in arbitrations across state borders. It concerns the attempt - largely successful - by the New Jersey State Bar Association to prevent out-of-state bond counsel from advising local governments within the state. The Committee on Unauthorized Practice of Law (appointed by the New Jersey Supreme Court) stated the issue - and its conclusion - as follows:
"[A]re attorneys who are not admitted to practice law in New Jersey engaging in the unauthorized practice of law when they advise New Jersey governmental bodies in connection with the issuance of state and municipal bonds? There is no doubt that the services provided by bond counsel constitute the "practice of law" as defined by the prior opinions of this Committee and the courts of New Jersey. The ultimate responsibility of bond counsel in connection with the issuance of state or municipal bonds is the rendering of a legal opinion. Bond counsel are lawyers engaged to provide an expert and objective legal opinion with respect to the validity of bonds and other subjects, particularly the tax treatment of interest on the bonds."
Even as revised by the New Jersey Supreme Court (7) , the Opinion gives little comfort to out-of-state lawyers, who may henceforth only be engaged with respect to "certain bond issues [that] may be so complex, novel, or may sufficiently implicate untested legal theories and techniques that the retention by a New Jersey public entity of an exceptionally qualified out-of-state law firm may well serve the public interest." This exception to what the Court otherwise unequivocally determines to be the unauthorized practice of law is based on what the Court decides to be "the public interest." What is quite extraordinary about this decision is that it is flagrantly monopolistic. In setting the stage for its decision, the Court itself states (and accepts without argument) that,
"the Bond Buyers Directory includes a ranking of the top one hundred municipal bond attorneys throughout the country based on the principal amount of long-term issues (maturities of thirteen months or longer) in which the firm was involved. The top-rated firm on the list was involved in 379 bond issues aggregating approximately $24,617,400,000 in principal amount. Three New Jersey law firms were included in the top one hundred firms, and the highest-ranked New Jersey law firm was involved in nineteen bond issues aggregating approximately $1,189,500,000 in principal amount. In addition, six New Jersey law firms were included in the top 100 law firms handling short-term bond issues. The information in the Bond Buyer's Directory suggests that perhaps a group of approximately ten to twenty law firms throughout the country continue to enjoy a significantly greater national recognition for expertise and experience as bond attorneys than that of any New Jersey law firm qualified to perform bond counsel services. The Directory also indicates that of the growing number of New Jersey law firms that have acquired sufficient experience in bond counsel matters to warrant inclusion in the Directory, some of the leading New Jersey law firms appear to have made substantial progress toward achieving broad recognition and stature for their work as bond counsel."
Instead of recognizing that there is thus a national marketplace determining which counsel are providing the appropriate level of skilled services, the Court uses this extrapolation to assert the extraordinary proposition that because there are New Jersey firms on the list, it is now somehow unnecessary for New Jersey to continue to operate within that national marketplace, absent the very exceptional circumstances that the Court attempts to define. If that is not a purely monopolistic ruling, in its deliberate disregard of the benefits of the marketplace, then the word monopoly no longer has any meaning. And thus are all out-of-state firms of bond counsel put on notice that their continued activity in New Jersey will result in their prosecution for unauthorized practice of law unless they can fit within the Court's exceedingly narrow "public interest" exception to the general rule.
There are two additional, related problems with the New Jersey Supreme Court's position as articulated in its revised version of Opinion 33. First, is it not proof of the monopolistic bent of the Opinion that the propriety of the engagement of an out-of-state expert depends only on the absence of a competent lawyer within the state? There is no rational, or even perhaps, moral basis for that position. If the essence of the question is the availability of competent counsel, from a client municipality's point of view, why should the propriety of the engagement of competent out-of-state counsel depend on whether or not there is already a competent in-state practitioner? Second, and from the out-of-state bond lawyers' point of view, why should the possibility of prosecution for unauthorized practice of law depend on whether or not there is a competent in-state practitioner?
Before leaving this case, it is also important to recognize that, if followed elsewhere, as it may be pursuant to normative unauthorized practice of law statutes (see section 1 of this article), lawyers practicing in any specialist area of Federal law (patents, tax, ERISA, military law, immigration, etc.) are all equally vulnerable to having the same barriers raised against them in any state of the United States.
Since it is by now clear that the beginnings of a pattern is developing in the way courts treat multijurisdictional practice - by trying to stop it at their states' borders - let us look at the way states are dealing with the latest version of this "threat," namely not the physical presence of out-of-state lawyers, but their "virtual" presence via the Internet.
4. South Carolina's New Appellate Court Rule 418 - "Advertising and Solicitation by Unlicensed Lawyers"
On May 12, 1999, and with effect from July 1, 1999, South Carolina became the first state explicitly to regulate out-of-state lawyers' activities on the Internet. Here is the text of the provision:
"Advertising and Solicitation by Unlicensed Lawyers
(a) Unlicensed Lawyer Defined.
'Unlicensed lawyer' means any person who is admitted to practice law in another jurisdiction but who is not admitted to practice law in South Carolina under Rules 402, 405, 414 or 415 [of the South Carolina Appellate Court Rules].
(b) Rules of Professional Conduct Applicable.
Any advertising or solicitation by an unlicensed lawyer shall comply with Rules 7.1 through 7.5 of the Rules of Professional Conduct contained in Rule 407, SCACR, when the advertising or solicitation is:
(2) A telephonic communication (to include a facsimile or other electronic transmission) to a potential client at a telephone number in South Carolina;
(3) A letter or other document sent to a potential client through the U.S. mail or a private carrier to an address in South Carolina;
(6) Any other form of advertising or solicitation which is specifically targeted at potential clients in South Carolina .
© Misconduct; Procedure.
For any advertising or solicitation covered by (b) above, it shall be misconduct for an unlicensed lawyer to violate or attempt to violate Rules 7.1 through 7.5 of the Rules of Professional Conduct, knowingly assist or induce another to do so, or do so through the acts of another. The Commission on Lawyer Conduct shall have jurisdiction over allegations that an unlicensed lawyer has committed misconduct. The procedure for investigating and hearing these allegations shall be the same as that provided by the Rules for Lawyer Disciplinary Enforcement contained in Rule 413, SCACR, for allegations that a lawyer admitted to practice law in this State has committed misconduct, to include the immunity and confidentiality provisions contained in those rules.
(d) Sanctions for Misconduct.
An unlicensed lawyer who commits misconduct under this rule may receive a letter of caution or any form of discipline contained in Rule 7 (b) (4)-(10) of the Rules for Lawyer Disciplinary Enforcement. In addition, an unlicensed lawyer who has committed misconduct under this rule may be ordered to refund all fees paid to the unlicensed lawyer pursuant to any contract of employment arising out of the advertising or solicitation. Misconduct under this rule may also be punished as a contempt of the Supreme Court, and the Supreme Court may issue injunctions against future violations.
(e) Unauthorized Practice of Law.
Nothing in this rule shall be construed to allow an unlicensed attorney to engage in the practice of law in South Carolina ." (Emphasis added).
Thus, South Carolina is explicitly warning lawyers from other states that if they "engage in the practice of law in South Carolina" they will be treated as engaging in the unauthorized practice of law (subsection (e)), and that if they violate the State's advertising or solicitation rules by contacting a South Carolina resident, including through the Internet (via modem and telephone line) they are subject to discipline in the State, and other punishment. Apart from subsection (e), the explicit attempt of a single state to regulate communication on the Internet is, I suggest, ludicrous. If there is to be regulation of lawyers' activities on the Internet, particularly regarding what constitutes permissible marketing activities, only national (if not international) regulation makes any sense.
5. The Unauthorized Practice of Law - an Anecdote
I cannot attest to the truth of the following story, but a "reliable source" (i.e., an attorney practicing in the field of professional responsibility law in a Midwestern state - which, like my source, shall be unidentified) originally told it to me in 1999, and reaffirmed that it is ongoing as recently as February, 2000. It appears that a local solo practitioner, needing to hire an associate, recruited a young graduate of the law school of a neighboring state, where the young lawyer was admitted. As soon as the young lawyer accepted the job, the hiring lawyer reprinted his stationery to show his employment of the associate, also showing that the young lawyer was admitted only in the neighboring state. It was the intent of both lawyers that the young lawyer would, in due course, take the bar and be admitted in the state of his new employment. In the interim, however, he worked as an associate in the office, and was billed out as a lawyer, not as a paralegal. Reportedly, both lawyers have had proceedings brought against them; an unauthorized practice of law prosecution against the associate, and disciplinary proceedings against the employer for aiding in the unauthorized practice of law by the associate. As you would imagine, I assume the worst of outcomes for all concerned.
There is already a case, from Florida, dealing with the related question of what is permissible when an out-of-state law firm opens an office in a state but has no locally admitted lawyers in the new office. In The Florida Bar v. Savitt & Stroock & Stroock & Lavan , (8) the firm and its non-admitted resident lawyer were restrained and enjoined from "engaging in any professional activities in Florida" other than those expressly permitted in the order, which were limited to appearance in state or federal court on a pro hac vice basis, and other "incidental" activities to out-of-state transactions, and other non-litigation activities if assisted by a member of the Florida Bar. The order is lengthy and explicit, and this summary does not do justice to the thoroughness with which the Florida Supreme Court attempted to restrict the ability of the firm's office to function other than by or through lawyers admitted in Florida.
The appropriateness of these purely monopolistic uses by the states of the regulatory function over lawyers is discussed in Section 3 of this paper.
6. Washington State's Attempt to Define Law Practice
In July, 1999, the Committee to Define the Practice of Law of the Washington State Bar Association issued a remarkable report. (9) What is striking about this report is not that its drafters have found the magic words to establish a single, all encompassing, inclusive and exclusive definition of law practice - but that they could not do so. Actually, according to a knowledgeable local source, they think that they did succeed - but that success is contradicted by the fact that the list of exceptions that they tabulate is longer, and arguably outweighs, the definition! Thus, the definition that they adopt has four paragraphs - advising or giving counsel; selection, drafting or completion of legal documents; representation of another person in a court etc.; and negotiation of legal rights - but they then identify and itemize ten exclusions (e.g., acting as a lay representative authorized by agencies or tribunals, serving as an arbitrator, etc., participation in labor negotiations, acting as a lobbyist, sale of legal forms, activities preempted by Federal law, etc.). Perhaps most notably from our perspective, the report makes no attempt whatever to deal with multijurisdictional practice. While, according to my local source, this was a conscious decision, it exemplifies the fear of addressing the subject that is at the heart of the profession's wider failure to deal with the problem.
Consider the Washington definition against the five hypothetical cases in section 1 of this article. All that can be said of this definition - and any similar definition that other states might attempt - is that instead of creating clarity it leaves in its wake only uncertainty. Do any (or all) of the five activities described in the five cases at the beginning of this article, constitute either (1) the practice of law or (2) the practice of law in Washington, whether or not the lawyer engaging in the activities is admitted in Washington? If the answer to (2) with respect to any of the hypothetical cases is "yes," then presumably the lawyer is subject to prosecution for the unauthorized practice of law.
7. New York (and Ohio's) Resolution Regarding Enforcement of Unauthorized Practice Laws
The New York State Bar Association adopted, in January, 2000, a series of "apple pie" resolutions (modeled on an Ohio proposal), to be submitted to the ABA Midyear meeting in Dallas: " that each jurisdiction is urged to establish and implement effective procedures for the discovery and investigation of any apparent violation of its laws prohibiting the unauthorized practice of law and to pursue active enforcement of those laws." The final resolution of the series is even more striking in the context of the present discussion: " that the American Bar Association shall establish and support a mechanism for identifying and reporting to state and local bar associations and designated authorities instances of persons and organizations engaging in the unauthorized practice of law in more than one jurisdiction . " (Emphasis added).
Again, since the unauthorized practice of law statutes, including New York's own as we have seen, apply to lawyers from other states, it is quite clear from the latter provision in this resolution that the New York and the Ohio State Bar Associations envisage that this increased enforcement will be directed, at least in part, against lawyers from other jurisdictions having the temerity to engage in their states in some, or all of the activities described in the five opening hypothetical fact patterns.
8. The Prince Jefri case
One of the reasons that the debate we are engaged in about multijurisdictional practice is so important is that the American Bar Association's Commission on Multidisciplinary Practice completely ducked the question (10) . In fact, as we shall see, the two are very closely related, and failure to address the jurisdictional issue will, inevitably and inexorably, leave the legal profession without the means to protect itself against other professions (not to mention banks and insurance companies) as they seek to (and do) provide "one stop shopping" for professional services. The case of Prince Jefri Bolkiah v KPMG (a firm) (11) decided in December, 1998, by the British House of Lords, is an example of how the two issues are intertwined.
In Prince Jefri the House of Lords was confronted with a question that is framed in the opening sentences of the opinion given for the House by Lord Millett without dissent:
"whether, and if so in what circumstances, a firm of accountants which has provided litigation support services to a former client and in consequence has in its possession information which is confidential to him can undertake work for another client with an adverse interest. The question has become of increased importance with the emergence of huge international firms with enormous resources that operate on a global scale and offer a comprehensive range of services to clients."
In other words, do clients' expectations of, and the rules governing confidentiality and privilege that apply to law firms also apply with equal effect to accountants.
Without rehearsing the complex facts of the case, it is sufficient to state that, although involving an accounting firm, they mirrored the well recognized conflict of interest situation in the U.S. when a law firm is asked by one client (A) to prepare to litigate against another client (B) with respect to the same matters upon which the firm had previously advised (B). What is striking and significant is not the decision itself (enjoining the defendant firm from engaging in the complained of conflict), which would almost certainly be the same if the case involved US lawyers and was decided in a US Court, but the fact that the House of Lords assumes that the same standards of confidentiality apply to the international accounting firm of KPMG as would apply to lawyers in the same position. Indeed, all of the cases cited and discussed in Lord Millett's opinion are authorities relating to English solicitors. This treatment of accountants and lawyers in the same way resulted neither from inadvertence nor a failure to consider the issue. In a short concurring opinion, Lord Hope wrote the following:
" I consider that the nature of the work which a firm of accountants undertakes in the provision of litigation support services requires the court to exercise the same jurisdiction to intervene on behalf of a former client of the firm as it exercises in the case of a solicitor. The basis of that jurisdiction is to be found in the principles which apply to all forms of employment where the relationship between the client and the person with whom he does business is a confidential one. A solicitor is under a duty not to communicate to others any information in his possession which is confidential to the former client. But the duty extends well beyond that of refraining from deliberate disclosure. It is the solicitor's duty to ensure that the former client is not put at risk that confidential information which the solicitor has obtained from that relationship may be used against him in any circumstances." (Emphasis added).
Why is this important to our present debate? Because in a number of European countries the accounting firms are also the largest law firms, and because if the House of Lords' analysis is correct, then accounting firms are only a step away from providing legal services, without even the pretense of being a law firm at all (provided that they abide by the rules governing lawyers and law firms). In turn, that is significant to us here because the accounting firms are free to practice without restriction across state lines throughout the United States. In other words, the underlying lesson of Prince Jefri is that if and when multidisciplinary practice is permitted it will, necessarily, make state boundaries redundant in the regulation of lawyers. Multijurisdictional practice will be far more pervasive than occurs at present in the case of law firms with offices in multiple jurisdictions; unlike even the largest law firms with the most offices, the accounting firms are national (and international) and ubiquitous.
9. The Implications of the Treaty Power of the United States Constitution
It is a regrettable jingoistic tendency of American lawyers to reject the lessons of foreign experience - because it is foreign. It is therefore important to recognize that the seeds of the lesson of the Prince Jefri case are already growing in our own soil, by virtue of our very own United States Constitution. We all remember (I expect), from our law school course in Constitutional Law, the matter of the Treaty Power - that the President can enter and the Senate can ratify international treaties, which then become binding on the states. And those treaties can, in turn, determine who may practice law within the United States. Far fetched? Well, not only could it happen - it already has happened (in a small way). NAFTA (the North American Free Trade Agreement) already, in a limited fashion, gives the right of lawyers from one signatory state to open offices and to practice their own national law within the other member states (12) . This means, for instance, that if the Birbrower firm were Mexican or Canadian rather than from New York, and was physically located in California or New York, and only one other fact were different (that Birbrower was advising on a contract governed by Canadian rather than California law) the case would - by virtue of that Treaty - necessarily be decided differently. Apart from the troubling anomaly where Treaty obligations mean that certain foreign firms are entitled to be accorded more rights in California than New York firms, the indications are that the use of the Treaty Power by the federal government will in the long run affect law practice within the United States in ways that are likely to be much more far reaching. The multinational equivalent of NAFTA in this arena is encompassed in the GATT ("General Agreement on Tarriffs and Trade") already being negotiated in the World Trade Organization. Indeed, that Treaty already applies in principle to professional services, and only the detailed regulatory provisions remain to be drafted. Once those provisions are explicit and in place, lawyers from all signatory countries are likely to have similar privileges to those awarded to Mexican and Canadian practitioners under NAFTA. Can Birbrower - or the application of other state-by-state exclusionary regulations against lawyers from other states - survive when lawyers from other nations will not be subject to them? I think not.
Clearly, an immediate counter argument can be made - that those Treaties (past and future) permit only the practice of foreign law. But in these days of multinational trade, just as in the interstate commerce between New York and California involved in the Birbrower case itself, how are we going to define "international" practice, if the parties decide (with the help of their foreign lawyers sitting within our midst, eating our lunch) that the transaction will be decided under, say, English law? And, again, remember those ubiquitous accountants; by being present in every state, they will argue that if they conduct transactions from a place where they are entitled by treaty to do so, they cannot be stopped from providing related services anywhere they have offices, if their client so directs.
10. The Admission Process: A Personal Anecdote
My family and I recently moved from New York to Denver. In anticipation of the move, I inquired about the possibility of being admitted to the Colorado Bar on motion. I read the rules and filed my petition - based on the fact that I had been practicing law in New York for almost twenty years (and before that as a barrister in England). My application was rejected - on the grounds that I had attended a non-ABA accredited law school. The fact that the law school in question was Cambridge University, boasting the oldest continuous law faculty in the English speaking world, may be worthy of note. Even more significantly, the Colorado Supreme Court, in reaching that decision, also had to disregard and, implicitly, to deny "full faith and credit" to an express Order of the New York Court of Appeals recognizing that degree (as well as - regrettably to my biased mind - law degrees from Oxford University), based on which Order I was originally admitted in New York. While admittedly it may serve to protect the public in the great State of Colorado that I was thereby required to take the Colorado bar examination (which I did - and passed), the true purpose of the denial (as I was "informally" advised) was that, if they ("they" being the Justices of the Colorado Supreme Court and the State's administrators of the bar admission process) recognized my degree from Cambridge, that might be used as a precedent to force them to admit on motion candidates from California who had attended un-accredited law schools there. In other words (if those advising me of the reason for the rejection of my motion were correct), the purpose was clearly, and deliberately, part of an exclusionary scheme to limit the number of out-of-state lawyers gaining "easy" admission in Colorado.
We may also discern similar motives behind the requirements in a number of states, including New York and New Jersey, that even if lawyers admitted to their bars wish to practice law, they may not do so unless they have a fully staffed and operational office within the jurisdiction. Again, in the era of the Internet, it is hard to see any justification for these rules except the purely monopolistic one.
"Connecting the Dots"
By these ten items ("dots"), I have tried to demonstrate two propositions: first, that the effort by the states to limit and control multijurisdictional practice is not merely continuing, but building a new head of steam. Second, that inherent in these same efforts are the seeds of the destruction of the regulatory system that the states are endeavoring to reinforce. These items are not presented as an all-inclusive list of how the problem has escalated. Rather, they are intended to show, across a broad spectrum, both geographic and thematic, that the problem has grown, and that the profession has reacted, in most states, in the narrowest, most restrictive manner possible. Most importantly, the profession has failed to recognize that the historic and entrenched process of permitting the states to react in this way is the most destructive of any possible solution - and the most likely, if not corrected, to lead to one of two results - either that others will take the regulation of lawyers away from the states; or that the states will be rendered utterly redundant as their efforts simply fail - as surely as did King Canute's efforts to order the tide to retreat at his command. (13)
As we proceed to analyze the implications of the profession's failure to address the problems we have identified, there is a single fundamental question that we must strive to answer: What, if any, of the restrictive rules we have identified need to be preserved?
2. THE ATTEMPTS OF THE STATES TO RESTRICT MULTIJURISDICTIONAL PRACTICE BY TRANSACTIONAL LAWYERS HARMS THE PUBLIC
What is common to all of the examples of activities that the restrictive practices among the states listed above sought to prohibit is that no one was harmed by the conduct in question, and, perhaps even more importantly, no one was misled. In Spivak and in Birbrower the clients knew of the admission status of their chosen advisers, and in New Jersey, the municipalities knew whence their selected bond counsel came. The effort to restrict multijurisdictional law practice runs entirely counter to the edifice on which the late twentieth century American - and global - economic expansion has been built, namely the inexorable movement toward the removal of barriers to free trade. While this is not the place to embark on a discursive history of how it came about that the Commerce Clause of the U.S. Constitution was not applied to the provision of legal services, clearly the public has benefitted from the enforcement of anti-trust laws generally. It is time to ask the hard question - why should not the same principles be applied to the legal profession? Instead of justifying the status quo, we should be asking why the profession should not be subject to the same rules of economic governance as the wider economy.
It is clearly an inadequate answer to say, paternalistically, that state-by-state regulation of lawyers is for the protection of the public. Indeed, the assertion of that position defies common sense in the world of the Internet. Why is South Carolina (or any individual state) the repository of wisdom on what kinds of advertising are appropriate on the Internet? And why is any state the appropriate regulatory authority for a phenomenon that is not national but global in scope? Merely to suggest these propositions is to be ridiculous. The point is not that some regulation may be appropriate, but that the historic scheme simply cannot work any more. Certainly, the public should be protected from false and misleading conduct (whether by lawyers or anyone else) on the Internet; but the states cannot possibly be the proper agencies to provide that protection. Similarly, while there arguably may be public benefit to be derived from enforcing prohibitions on non-lawyers from providing legal services, the attempt by the states to enforce UPL laws against lawyers serves only to demean those efforts.
The developing European model permitting cross-border professional practice appears to be working. It is being accomplished not by forcing local courts or bars to forego their historic power of regulation, but rather by expanding the definition of who is encompassed by the definition of a lawyer, and by reserving to the local bars only those regulations that affect practice locally. What goes on inside its courtroom is obviously within the purview of a local judiciary. On the other hand, they no longer have the final say, within the European Union, on who is a lawyer - or on how lawyers may advertise. Indeed, under threat of imposition of bureaucrat-drafted regulation pursuant to the treaties governing the European Union, the various national bars themselves adopted, in the 1970's and 1980's, rules that now explicitly permit lawyers from each member country to have unrestricted access to the courts of and to practice law in every other respect in the other member countries. The public is protected, but by continental not local standards. Is it not time that we apply our own Commerce Clause to reach the same result nationally?
Those who follow the regulation of the accounting profession may have noted a similar trend actually playing out today in that profession. The individual (local and national) regulatory arms within the accounting profession have recently been taking a back seat to the Securities and Exchange Commission in the definition and enforcement of the independence rules as applied to the audit function (14) . Surely most of us would agree that the public is likely to be better protected by that kind of national rule making and enforcement than by the accounting profession's previous attempts at self-governance. The recent SEC forced resignation of a group of senior partners at PricewaterhouseCoopers for violating the profession's internal independence rules surely underlines the benefit of national (and external) regulation and enforcement of professional standards.
In short, the states' efforts to justify maintaining local regulation of lawyers in order to protect the public are, in today's economy, so obviously irrelevant to meaningful enforcement of national standards that they no longer even serve as a credible mask for their true purpose, namely the preservation of local monopoly. I am not advocating the abolition of regulation in favor of some purely capitalistic caveat emptor principle; rather, I suggest that what is needed - urgently - is a new regulatory and enforcement structure that bears a real relationship to national and global law practice. The emperor's old clothes have fallen apart, and instead of trying to mend them we must consider whether we need to replace the emperor.
3. THE ATTEMPTS OF THE STATES TO RESTRICT MULTIJURISDICTIONAL PRACTICE BY TRANSACTIONAL LAWYERS HARMS THE PROFESSION
The harm that all of the states' efforts to stem the tide of multijurisdictional practice causes is that the diversion of attention from the profession's real need - to develop a new regulatory framework appropriate to modern circumstances while we still have the freedom to do so ourselves.
The late Dean Robert McKay of New York University School of Law used to say that if the legal profession failed effectively to regulate itself, others would do it for us. The example of the SEC's recent intervention in the accounting profession is a salutary reminder of the potential truth of that aphorism. Quite apart from that example from outside our profession, there is an important recent instance of Congress accepting the need to intervene in the arena of regulation of lawyers. While the McDade Amendment actually enforces the states' right to apply Model Rule 4.2 to Federal government lawyers, it nevertheless supports my theory that others will regulate us if they feel the need to do so. Even though the McDade Amendment enforces local regulation, it may also be seen as representing the willingness of Congress to determine questions of lawyer regulation on their merits, and its willingness to step in (meddle?) if deemed appropriate. While the states were right on the Rule 4.2 issues, sooner or later the absurdity of regulations like South Carolina's attempt to regulate behavior on the Internet are bound to force outside intervention.
However far fetched it seems to many, my own view is that if we as a profession do not address and resolve the issues of multijurisdictional practice, the solution that will ultimately prevail will be imposed not nationally but internationally. It will be the State Department, the Department of Commerce, and then the President and the Senate that will conclude that a qualified lawyer in any member nation of the World Trade Organization will be treated as a qualified lawyer in every member state. When that day dawns (and I do not believe that it is very far off), will the states still seek to prevent Spivak or Birbrower from collecting their fees when a lawyer from England, Canada, or anywhere else could?
While the primary purpose of lawyer regulation is, supposedly, client protection, in this context, I suspect that I can enunciate one principle with which everyone (or at least every lawyer) can agree: Any regulatory scheme that is devised by and for lawyers is likely to be better for lawyers than a scheme devised by non-lawyers.
4. THE END OF THE PROFESSION AS WE KNOW IT IS AT HAND: THE TIME TO ACT IS NOW - OR NEVER
Finally, we must address the relationship between the issue before us and the question of multidisciplinary practice ("MDP"). Indeed, one of the reasons that this conference is necessary is to be found in the following sentences at the end of the original 1999 Report of the ABA's Commission on Multidisciplinary Practice. Under the heading "Interstate and Cross-Border Practice," the Report states:
"The Commission also has considered the ramifications of recommending the amendments described above in the larger context of the practice of law across state borders. Significant problems related to interstate delivery of legal services exist independent of the issues addressed in this Report and the Commission has determined not to consider or address them in the Report.
The Commission is aware that various international treaties, such as the North American Free Trade Agreement and the General Agreement on Trade in Services, and the work of the World Trade Organization, aimed at opening up commerce among nations, may have an impact on the delivery of legal services by MDPs. Nonetheless, the Commission does not believe that it is appropriate to alter its recommendations in anticipation of what that impact might be."
The inescapable fact is that MDPs exist and are thriving in Europe, and assorted attempts are already being made to establish them here. How can we react to the creation of a law firm in Washington D.C. that includes in its name "Ernst & Young" except to recognize that, sooner or later, the dike will be breached in this country (15) in a comprehensive and irreversible way. The consequences of that outcome ought to be obvious. The large accounting firms have offices everywhere; once they are able to engage in multidisciplinary practice, it will be far too late for the legal profession to try to regulate multijurisdictional practice. It is also worth noting that we should fear others than just the traditional accounting firms. It is notable that the American Express Bank has been voraciously acquiring accounting firms and providing accounting services to their, and to the bank's other clients. Surely, they, and other banks, will not stop with accounting firms if MDP becomes possible in this country. Indeed, while large law firms will have the opportunity to join in such megalithic organizations, it is the banks that are likely to prove the greatest threat to small firms and solo practitioners. By way of example of how banks will threaten the livelihood of local solo and small firm practices, it is hard to imagine that the banks would not seek to provide all residential real estate related legal services as an arm of providing mortgage financing, if given the opportunity. Again, the banks, with the deregulation of the financial services industries, are - with their counterparts the insurers - ubiquitous.
Thus, we can easily envisage situations where the lawyer in South Carolina might be precluded from working on the Washington State transactions described in the cases at the beginning of this paper, while her clone or twin - albeit not even admitted to the bar in South Carolina - working in South Carolina inside a large accounting firm, or bank, with offices in Washington State, arguably might be permitted under the guise of "MDP" to provide services that the South Carolina lawyer alone could not. Since most of the activities that are engaged in by transactional lawyers (e.g., negotiation, drafting of contracts, structuring financing arrangements) are often also regularly engaged in by others (whether in violation of current UPL laws or not), lawyers, at least as a free-standing group of professionals in private practice, are likely to be redundant very quickly if MDP's are permitted to do what the lawyers alone are precluded from doing. That result is not far fetched; it is certain if we do not find a way to permit lawyers to do what we may soon permit MDP's to do.
Finally, we should take note of the fact that, as we all know, every one of the five hypothetical fact patterns with which I began this paper are happening everywhere in, between and among every state, every day. In other words, we have a set of rules and regulations (which some wish us to enforce more vigorously!) that, at least when it comes to the definition of the unauthorized practice of law, bear little or no relationship to present reality . For the reasons that I have expressed here, we will either change those rules and regulations to conform theory to practice, or suffer the consequences of losing control over our destiny as a profession.
The tide is coming in; it is almost at our feet. We must either jump out of the way, let it overwhelm us, or find a boat that we can all fit into. The hour is at hand when we must act to develop a national regulatory structure for our profession - or lose the ability to do so.
AN ALTERNATIVE VISION (WHICH PRESERVES A ROLE FOR THE STATES)
This segment of my paper is intended to be a post-script, and is therefore more in the nature of an outline than a fully articulated proposal. However, I believe that it is important, if only to demonstrate that it is possible to devise a regulatory system that builds upon - and does not demolish - our state-by-state structure. In Sneaking Around in the Legal Profession (16) , Professor Wolfram suggests three possible solutions to the problem of how to go about regulating multijurisdictional practice: (1) "Structural Reform Through Universal State-By-State Lawyer Registration," (2) "Structural Reform Through a Truly National Bar," and (3) "Common Law Reform Through Redefining Interstate Unauthorized Practice." Although I disagree with the way he articulates number (3), and also with his rejection of (1), I again commend his article to all readers of this paper.
Professor Stephen Gillers suggested, in his brilliant exegesis on the Birbrower case presented to the 1999 ABA National Conference on Professional Responsibility, that what is needed is a " compact" among the states. I believe that indeed such a treaty-like solution may well be the right approach. However, whether the states, individually, sign onto such a "compact," enact legislation, adopt court rules, revise their laws governing UPL, or amend their rules of professional conduct, in order to achieve the desired result, the following are the elements of two alternative models either of which might form a common basis for resolving the issues of multijurisdictional transactional law practice.
MODEL 1 - REDEFINE THE UNAUTHORIZED PRACTICE OF LAW
This model is simple, and has only two elements:
1. Redefine the term "unauthorized practice of law" to exclude (i.e, not apply to) the practice of law by any person admitted to the bar of any state who remains in good standing in her jurisdiction(s) of admission. This system gets us all directly to the point where "if it looks like a duck, and swims and quacks like a duck, it's probably a duck," (i.e., a lawyer is a lawyer is a lawyer, whatever state originally admitted her).
2. Amend the discipline rules and procedures to provide explicitly that a lawyer is subject to professional discipline (and other relevant regulation) in any state where she engages in practice as a lawyer (in addition to preserving existing reciprocal discipline provisions).
In addition - but optional - would be a third element, in common with item 5 of Model 2, namely the regulation of "holding out." In other words, when lawyers do engage in transactions beyond the borders of their state(s) of admission, they might be required to make disclosure of their admission "limitations" at the beginning to the engagement.
This model, while anathema to economic monopolists and protectionists, accomplishes the goals set forth in this paper. It reconciles practice with theory; it preserves the enforcement of core values in the profession by requiring lawyers to conform to those values wherever they work; it benefits the clients by permitting choice, subject to uniform regulation as to standards; and it benefits the profession by assisting it to compete with other professions and institutions that would use any advantage to substitute themselves for lawyers whenever possible.
MODEL 2 - NATIONAL REGISTRATION
This model is more cumbersome, but achieves the same results as Model 1, and at the same time preserves a greater role (and adds a new revenue stream) to the individual state lawyer regulatory systems.
1. Bar Admission and Registration
Establish a national registry of lawyers; every lawyer admitted in any state would be automatically registered nationally. Note: This would also improve national disciplinary enforcement.
Some may argue that the eventual solution ought to be a truly "national" bar admission process; others that the same result as contemplated in my proposal may be obtained by the less unpalatable (to the states) solution of the adoption by the states of a uniform (and relatively painless) reciprocal admission rule. It is my contention that we can avoid that debate entirely by moving to national registration. This system also gets us all to the point where a lawyer is a lawyer is a lawyer, whatever state originally admitted her, without the states having to give up their separate bar admission procedures.
2. Adoption of Uniform Rules for the Reciprocal Admission of Other States' Lawyers, Equivalent to Those for Pro Hac Vice Admission in Litigation, for Transactional Work
Based on the national registration system the states would develop their own separate registration system for out-of state-lawyers, which would include provisions for revenue generation to cover the costs. For instance, a lawyer (or firm) from State A wishing to advise a client on a single transaction in a given year in State B would register in State B, showing his current good standing in State A, and paying a single transaction filing fee to State B. Issues to be resolved include whether there might be some "multiple transactions per year" fee, and whether the states could agree on limits, above which either engagement of local counsel, or even local admission (if still in existence) might be required.
Amend Model Rule 8.5 to provide, explicitly, that a lawyer who has engaged in multijurisdictional transactional practice pursuant to the registration process shall be disciplined first by the state where he violated ethical rules; and that a lawyer who has engaged in multijurisdictional transactional practice without complying with the registration process may be disciplined by either his state of admission or principal practice or the state where he violated ethical rules. In all cases, reciprocal discipline shall continue as at present. All discipline would be reported to the national lawyers' registry.
4. The Role of Unauthorized Practice of Law
UPL should be expressly limited to persons or organizations not admitted as lawyers in any state (or as defined by treaty). However, under this scheme, a lawyer from another state could still be disciplined for failing to abide by the local registration requirements.
5. Holding Out
Establish a national rule expressing how lawyers may - and must - hold themselves out when practicing in states where they are not formally admitted, but are engaging in transactional practice pursuant to the registration system described above. This might include a requirement of an express provision in a mandated written engagement letter giving notice to the client of the lawyer's admission (or non-admission) in the jurisdiction where the transaction will be located or the advice given.
6. Mandatory CLE Requirements
Lawyers would be required to comply with the CLE rules of the jurisdiction in which they maintain their principal offices.
7. Internet Issues
There are two issues to be resolved: (1) advertising and solicitation; and (2) "virtual" law firms. Advertising and solicitation demonstrably require a single national rule. The "compact" (or other procedural device) will have to incorporate a single rule of universal application. A "virtual" law firm is one with no physical offices other than the desk at which a lawyer (or the desks of lawyers - which may be in many different states) interacts with clients, using the Internet. A uniform rule will have to be devised to determine such lawyers' or firms' "home" jurisdiction for registration and disciplinary purposes.
1. This paper was prepared for the American Bar Association Center for Professional Responsibility Symposium on Multijurisdictional Practice held at Fordham University School of Law, March, 2000
2. 36 S. Tex. L. Rev. 665
3. The program was in the form of a Symposium, held at the South Texas College of Law, and all of the papers, including Professor Wolfram's ( op cit.), were published in a Symposium issue of the South Texas Law Review, November 1995, Vol. 36, No.3.
4. 211 N.E.2d 329 (N.Y. 1965) (4-3 decision).
5. Op. cit., p. 694.
6. 17 Cal. 4th 119; 949 P.2d 1; 1998 Cal. LEXIS 2; 70 Cal. Rptr. 2d 304
7. In the Matter of Opinion 33 of the Committee on the Unauthorized Practice of Law, 1999 WL 511066 (N.J.).
8. 363 So.2d 559 (Sup. Ct. Fla., 1978). I am assured by Florida counsel (I would not want you to take my word as a New York and Colorado lawyer), that this case is still "good law" in Florida.
9. The Final Report, dated July 30, 1999, Robert D. Welden, General Counsel, Reporter, may be obtained by writing to the Washington State Bar Association, 2101 Fourth Avenue, 4 th Fl., Seattle, WA 98121-2330 Telephone (206) 733-5954.
10. See the Report of the ABA Commission on Multidisciplinary Practice, and the discussion (and extracts) at Section 4 of this paper.
11. Decided December 18, 1998; decision may be downloaded at no charge from: http://www.parliament.the-stationery-office.co.uk/pa/ld199899/ldjudgmt/jd981218/prince01.htm
12. See Article 12 and applicable Annexes.
13. Canute was an early English King whose followers believed him to be all-powerful. To prove to them that he was only human, he took them to the sea shore and with great ceremony, ordered the incoming tide to retreat. The tide kept coming.
14. See, e.g, SEC Report Says PriceWaterhouse Violated Conflict-of-Interest Rules, The Wall Street Journal, January 7, 2000.
15. See, e.g., Ernst & Young Will Finance Launch of Law Firm in Special Arrangement, The Wall Street Journal, November 3, 1999.
16. Op. cit., p. 702 et seq.