Comments On The Interim Report Of The ABA Commission On Multijurisdictional Practice
March 2002
The American College of Real Estate Lawyers ("ACREL" or the "College") submitted a Position Paper to the American Bar Association Commission on Multijurisdictional Practice (the "Commission") in June, 2001. In its submission, the College recommended that the Commission strongly advocate that the ABA actively promote changes to the existing unauthorized practice of law ("UPL") statutes and other rules governing the profession to render them compatible with the realities of today’s interstate practice of transactional law. We encouraged the Commission to adopt a position that transactional lawyers admitted in one state (a "home state") be permitted to represent clients in a state in which they are not admitted (a "host state") so long as (a) their clients have been advised that the lawyer is not admitted to practice in the host state; (b) the lawyer’s presence in the host state is not permanent; (c) the lawyer is acting with respect to a matter that arises out of, or is reasonably related to, the lawyer’s practice in his or her home state, and whether or not the client is located in or the matter is related to the home state; and (d) the lawyer submits to the ethical and disciplinary authority of the host state with respect to matters relating to such representation, including the repercussions of any violation of state competency and ethical standards.
We are very concerned that the Commission’s Interim Report fails to adequately address the legitimate concerns of many transactional lawyers and fails to accept the reality of modern day transactional practice — that clients select lawyers and firms based on expertise rather than geography. These concerns have been voiced to the Commission, both in written submissions and oral testimony, not only by the College, but by a large number of professional groups and ABA Sections.
While the narrow "safe harbor" proposed in Recommendation No. 3.J of the Interim Report, when read in conjunction with the proposed "general rule," would provide transactional lawyers some degree of protection for cross-border representation, such protection would only be available if the transaction involved in-state clients or related to a matter with substantial connection to the lawyer’s home state. As detailed in the Interim Report,
The MJP Commission recommends that, on a temporary basis, a lawyer be permitted to render non-litigation services outside the lawyer’s home state when the lawyer’s work is reasonably related to legal work that is performed in and has a close connection to the lawyer’s home state. Specifically, the work outside the lawyer’s home state would have to be on behalf of a client who is in the lawyer’s home state (e.g., in the case of an individual, the client resides in the jurisdiction, or, in the case of an entity, the client has an office in the jurisdiction), or arise out of or be reasonably related to a matter that has a substantial connection to a jurisdiction in which the lawyer is admitted to practice law. (emphasis added)
Because of this requirement that the matter be connected to the state in which the lawyer is licensed, attorneys engaged in transactions outside of their home states are not adequately shielded from potential UPL claims, and, in our view, the proposed safe harbor fails to advance important interests of clients and overlooks the realities of the current practice of transactional law. Whether the matter being handled has a substantial connection to the home state does not determine the lawyer’s competence in the representation, and indeed many clients select lawyers based on their understanding of the client’s particular business or their extensive expertise or experience in a practice area or transaction type, factors which are completely unrelated to the location of state borders.
Alone, the Commission’s broadly stated general rule, which applies if a proposed transactional representation does not fall within the safe harbor, forces a lawyer to act at his or her peril, uncertain as to whether his or her cross-border activities might be deemed outside the rule:
As a general rule, it is not the unauthorized practice of law for a lawyer admitted in another United States jurisdiction to render legal services on a temporary basis in a jurisdiction in which the lawyer is not admitted if the lawyer’s services do not create unreasonable risks to the interests of a lawyer’s client, the public or the courts.
Since we appreciate the many reasons for the Commission’s proposal of a general rule of this breadth, we also support the Commission’s approach of adopting safe harbors — our only disagreement being with the scope of the safe harbor intended to address transactional work performed outside a lawyer’s home state.
In our view, the argument for an expansion of the safe harbor is buttressed by the ethical obligations imposed under Model Rule 1.1. If, based on our relationships with our clients, our knowledge of our clients’ business goals and practices or our expertise, our clients seek our counsel on a cross-border matter, we should be able to accept the representation without the retention of local counsel if we determine, as we are obligated to do under Model Rule 1.1 for every retention we accept, that we are capable of providing competent legal services; if we determine we cannot, we are ethically bound to seek assistance in the representation, whether from local counsel or other qualified lawyers. Should a complaint against the lawyer subsequently be brought and a determination made by the authorities in the host state that the attorney failed to demonstrate the level of competence required by the host state, the lawyer automatically should be subject to disciplinary action in the host state, just as would be any practitioner licensed in the host state who failed to competently provide legal services.
While we fully support the rights of the authorities of the host state to discipline attorneys licensed in other states for the incompetent representation of clients in their state (whether such clients maintain an office or live inside or outside of the state), we do not believe that such disciplinary authority should extend to a determination that the lawyer who was temporarily or occasionally present was engaged in the unauthorized practice of law.
We respectfully urge the Commission to reconsider its position on the proposed transactional "safe harbor" and to expand the permissible activities to include temporary or occasional presence in the host state even if the client is not located in the lawyer’s home state or the matter does not arise out of or reasonably relate to a matter connected to the lawyer’s home state, as long as the lawyer is acting with respect to a matter that arises out of, or is reasonably related to, the lawyer’s practice in his or her home state.
As an alternative, we have considered and would endorse the Commission’s adoption of the "Common Sense Proposal in Rule 5.5 Format" that has been submitted to you with the support of a number of organizations, or another appropriate expansion of the transactional safe harbor set forth in Recommendation No. 3.J of the Interim Report to address this issue.
Respectfully submitted,
AMERICAN COLLEGE OF REAL ESTATE LAWYERS
Richard A. Cantlin
Past President, ACREL
Mark F. Mehlman
Chair, MJP Working Group