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Private Practitioner Issues With Multijurisdictional Law Practice in Litigation Matters - Center for Professional Responsibility

Private Practitioner Issues With Multijurisdictional Law Practice in

Litigation Matters

Prepared by Robert A. Creamer
Vice President and Associate Loss Prevention Counsel
Attorneys’ Liability Assurance Society, Inc., A Risk Retention Group
Chicago, Illinois

for the

American Bar Association
Symposium on the Multijurisdictional Practice of Law
March 10-11, 2000
Fordham University School of Law
New York, NY


I. The ALAS Perspective

The Attorneys’ Liability Assurance Society, Inc. (ALAS), based in Chicago, Illinois, is a risk retention group composed of almost 300 large law firms throughout the United States. ALAS furnishes professional liability coverage for almost 50,000 lawyers practicing in its member firms. For more than twenty years, ALAS has provided loss prevention services to its insured lawyers through publications, loss prevention audits, in-firm presentations, and telephone consultation services. ALAS’ six full-time Loss Prevention Counsel (LPC), all former lawyers in ALAS member firms, estimate that they receive and respond to over 2,000 inquiries from member firms each year.

In recent years, a number of the telephone, e-mail and other inquiries received by ALAS LPC have related to problems encountered by lawyers in ALAS firms because of state unauthorized practice of law (UPL) statutes and rules. These inquiries are the principal basis for the observations contained in this paper.

II. Scope of This Paper

This paper is written from the perspective of the litigation lawyer working in a private law firm. Typically, such a lawyer lives and works primarily in one jurisdiction, but is often called upon to travel to, and represent clients involved in ligation or other dispute resolution pending in jurisdictions in which the lawyer may not be admitted to practice. As the scope of commerce continues to become increasingly interstate and even international, litigation lawyers are increasingly expected by clients (and required by considerations of efficiency and economy) to appear before courts or other "tribunals" in jurisdictions in which the lawyer is not licensed. Private lawyers engaged in such conduct are frequently concerned that they may be violating the UPL laws or rules of the foreign jurisdictions in which, or with respect to which, they are rendering legal services.

III. UPL Problems for Litigation Lawyers — General

The claims experience of ALAS has been that charges of unauthorized practice of law are only rarely a basis for malpractice claims against our Member Firms. In a few instances, such charges have been included when there are other, more substantive, grounds for a malpractice claim. Such claims are usually "window dressing," but sometimes may be used in an attempt to create hostility against the out-of-state lawyer.

For private litigation lawyers, state UPL laws and rules pose four general areas of risk. The first is exposure to criminal penalties, contempt or disciplinary sanctions in the foreign jurisdiction, or in the lawyer’s home jurisdiction under the home state’s version of Model Rule 5.5(a), or its Model Code predecessor, DR 3-101(B), if the lawyer’s out-of-state conduct is prosecuted or becomes the subject of a complaint to a court or UPL enforcement authority. Although such penalties appear to be rarely imposed for occasional or incidental practice in a foreign jurisdiction, we know of only two states that make express exceptions in their UPL regulations for such incidental practice by out-of-state lawyers. See Michigan Compiled Laws Annotated, § 600.916 (legal services rendered in Michigan by lawyers admitted in another jurisdiction "while temporarily in this state and engaged in a particular matter" do not constitute UPL); and Part 6, Section 1(C) of the Virginia State Bar Rules (a "non-lawyer," who is prohibited from practice in Virginia, does not include a lawyer (1) licensed in another state (2) who renders services in Virginia "on an occasional basis only and incidental to representation of a client whom the attorney represents elsewhere," and (3) who informs the client that the lawyer is not admitted in Virginia).

Second, lawyers are often under pressure from clients to keep litigation costs to a minimum. This consideration militates against retaining local counsel to undertake significant participation in matters in every jurisdiction in which a client may be involved in litigation. While some matters are large enough to justify the retention of local counsel to handle particular local law issues, many matters will not bear such additional costs. When the local law issues are highly specialized ( e.g., local tax, land use, environmental, state securities law), the lawyer and client may have no choice but to retain local counsel to handle these issues regardless of the resulting inefficiency and additional cost.

Third, litigation lawyers worry that inconsistent rules in the jurisdictions in which they are licensed and the forum state could subject them to conflicting standards of conduct. These issues may arise, for example, concerning the confidentiality of client information and the scope of permissible contact with current and former corporate employees. Information that is protected in one jurisdiction may well be subject to mandatory disclosure in another. A former corporate officer may be off limits in one state and fair game in the second.

Finally, the most common UPL concern for lawyers is a client’s UPL defense to the lawyer’s efforts to collect legal fees for work performed for the client in a foreign jurisdiction. Often, such defenses originate with the client’s unhappiness about the cost or quality lawyer’s services that is unrelated to UPL. If the client has been disappointed with the result obtained by the lawyer, it may be reluctant to pay the lawyer’s fee. When the lawyer presses the fee claim, the response will often be that the lawyer is not entitled to a fee because the legal work constituted UPL.

In some cases these defenses succeed. The most prominent recent example is Birbrower, Montalbano, Condon & Frank, P.C. v. Superior Court, 17 Cal 4th 119, 949 P.2d 1, 70 Cal Reptr. 2d 304 (1998). Others include: Perlah v. S.E.I. Corp., 29 Conn. App. 43, 612 A.2d 806, 808 (1992); Lozoff v. Shore Heights, Ltd., 66 Ill. 2d 398, 362 N.E.2d 1047 (1977); and Spivak v. Sachs, 263 N.Y.S. 2d 953, 211 N.E.2d 329 (1965). In other cases they don’t. See, e.g., In the Matter of the Estate of Waring, 47 N.J. 367, 221 A.2d 193 (1966); Lamb v. Jones, 202 So. 2d 810 (Fla. 3d Dist. Ct. App. 1967).

The remainder of this paper discusses these and other UPL issues for litigation lawyers in more detail, and suggests some possible solutions.

IV. Particular MJP Problems for Private Litigation Lawyers

A. Court and Administrative Proceedings. Representation of clients in out-of-state court proceedings is almost always governed by rules of the court in which the matter is pending. These rules usually provide for admission pro hac vice of lawyers admitted to practice in other jurisdictions. Many such rules require that the out-of-state lawyer associate with a local counsel. Some state administrative agencies have similar rules; some do not. When in doubt, the out-of-state lawyer should seek guidance from the agency or tribunal concerned about whether the lawyer may appear before the agency or tribunal without associating with a locally admitted lawyer.

Some states impose limitations on how often a lawyer or firm may appear pro hac vice, or create other obstacles to such admission of out-of-state lawyers. We are aware of such restrictions in Alabama, the District of Columbia, Indiana, Nevada, and West Virginia. There may be more.

Other states defer to a client’s desire to be represented by out-of-state counsel, and recognize a presumption that applications for pro hac vice admission should be granted absent unusual circumstances. See, e.g., Enquire Printing & Publishing Co. v. O’Reilly, 477 A.2d 648 (Conn. 1984). In Enquire, the Connecticut Supreme Court said that a litigant’s request to be represented by out-of-state counsel "should be respected by the court, unless some legitimate state interest is thwarted by admission of the out-of-state attorney." The court went on to opine that economic protection for in-state attorneys "is not, of course, a legitimate state interest." 477 A.2d at 651 and n. 9. However, Leis v. Flynt, 441 U.S. 438, 443 (1979), makes clear that the interest of a lawyer or his client in having that particular lawyer, who is admitted in one state, represent the client pro hac vice in another state is not a right that is protected by the due process clause of the Fourteenth Amendment or any other federal authority.

The consequences of failing to adhere to pro hac vice admission rules can be significant. In Fruin v. Northwestern Medical Faculty Foundation, Inc., 194 Ill. App. 3d 1061, 551 N.E.2d 1010 (1990), a Wisconsin lawyer, without having been admitted pro hac vice, filed a complaint in an Illinois state court just prior to the expiration of the statute of limitations. After the statute ran, an Illinois lawyer filed an appearance for plaintiff. The trial court granted a motion to dismiss the complaint with prejudice, and the appellate court affirmed, on the ground that the complaint was a nullity because no Illinois-admitted lawyer had signed it.

Two recent Maryland disciplinary actions demonstrate other consequences of unlicensed litigation practice. The first is Attorney Grievance Commission of Maryland v. Harris-Smith, 737 A.2d 567 (Md. 1999). Bridgette Harris-Smith was admitted in Pennsylvania, the District of Columbia, Virginia, and the District of Maryland. In 1993, she and three other lawyers formed a firm with offices in Maryland, where she practiced only bankruptcy law. The other lawyers in the firm practiced in other areas, but Harris-Smith was the lawyer responsible for screening all new clients and determining which lawyer would handle the matter. Harris-Smith argued that her practice fell with the "federal exception" to the prohibition against unauthorized practice because she worked only on bankruptcy cases. The court found that in screening clients, Harris-Smith was professionally required to review the facts of the client’s matter and to decide if there were any state contract defenses to the creditors’ claims, creating the danger that the screening lawyer "would be motivated to cant advice artificially in the safe direction." The court also found that there was a danger that an unadmitted lawyer may use the screening procedure "as a shield behind which to conduct an unlimited-in-fact law practice." The court suspended Harris-Smith for thirty days.

In Attorney Grievance Commission of Maryland v. Harper, 737 A2d. 557 (Md. 1999), Harper was licensed in the District of Columbia and the District of Maryland. Kemp was licensed in Maryland. Between 1995 and 1997, the firm of Harper & Kemp operated in Baltimore. (Harper also maintained an office in D.C.). Harper’s practice consisted primarily of representing personal injury plaintiffs. Harper and Kemp initially shared the responsibility of covering the Baltimore office, but after about nine months, Kemp stopped coming to the office. Harper essentially dealt with all of the clients in the Baltimore office. Harper and Kemp did not dispute bar counsel’s argument that a lawyer who is not admitted in Maryland may not practice law in Maryland in partnership with a Maryland lawyer, out of an office in Maryland, unless the Maryland lawyer supervises the work of the unadmitted lawyer. Instead, Harper argued that Kemp provided adequate supervision (maintaining that the amount of supervision needed was inversely proportional to the experience of the unadmitted lawyer). Kemp argued that he had no obligation to supervise Harper because they had never effected a partnership agreement. The court found Harper’s unauthorized practice of law "deliberate and persistent" because there was no reasonable basis on which Harper could have thought that his conduct was lawful. The court also found that Kemp assisted Harper "in presenting himself to the public as a lawyer who was lawfully offering his legal services to all comers out of the [Baltimore] office. . . ." The court suspended Kemp for three years.

B. ADR Proceedings. Arbitrations and other forms of alternative dispute resolution are a middle ground between litigation and transactional representations. When the parties’ agreement specifies that an ADR proceeding is to be held in a particular jurisdiction, the safest course is probably to seek guidance from the arbitrator or mediator or to arrange for local counsel. The case for local counsel would be strongest where, in addition to the proceeding itself being in the foreign jurisdiction, (a) one or both parties to the ADR proceeding are based in that jurisdiction, (b) the ADR agreement specifies that the foreign jurisdiction’s law governs legal issues involved in the ADR proceeding, or (c) the proceeding relates to real or personal property located in the foreign jurisdiction.

Expressly in response to Birbrower, the California legislature in 1998 statutorily authorized out-of-state lawyers to represent parties to California arbitrations by associating with California counsel, who must be "the attorney of record," and by filing a certificate agreeing, among other things, to be subject to the jurisdiction of California courts for disciplinary purposes. California Code of Civil Procedure, § 1282.4 (1999). To implement the new statute, the California Supreme Court adopted a new Rule 983.4 of the California Rules of Court, effective July 1, 1999. The new rule authorizes the State Bar of California to charge a registration fee of up to $50 for out-of-state lawyers who appear in California arbitrations, and directs the bar to maintain records of how often particular out-of-state lawyers or firms file the required certificates. However, this "fix" is only temporary. The statute and Rule 983.4 will both be automatically repealed on January 1, 2001.

The recent California statute described above is the only example we have found of an authority that specifically regulates an out-of-state lawyer’s participation in arbitrations in a state in which the lawyer is not admitted. As noted, that statute expires on January 1, 2001. The General Counsel’s office of the American Arbitration Association has advised that it is unaware of any jurisdiction other than California that regulates appearances by out-of-state lawyers in arbitrations conducted in that state. In Illinois, however, Illinois State Bar Association Advisory Opinion 94-5 (July 1994), held that "regular representation" of Illinois parties to arbitrations in Illinois by a lawyer not licensed in Illinois would violate the Illinois UPL statute.

C. Soliciting legal business from out-of-state clients . Because lawyer advertising rules have rarely been a basis for legal malpractice claims against ALAS member firms, ALAS have not devoted much attention to the effect of these rules on the practice of law. A number of states, however, include in their general UPL regulations a prohibition on holding one’s self out as qualified to practice law in the state if the lawyer concerned is not licensed in that state. Such a prohibition raises the question of whether lawyer solicitations of potential clients in national legal or general circulation publications, on radio or television, through nationwide or more narrowly targeted mailings, or via the Internet may violate particular state UPL prohibitions.

D. Unauthorized practice of law (UPL) defenses to claims for fees . As noted above, the context in which lawyers most often encounter UPL allegations are situations like Birbrower where a lawyer has rendered services in a foreign jurisdiction to a client based in that jurisdiction, almost always at the client’s request and with the client’s knowledge that the lawyer is not licensed there, and a fee dispute develops. A new lawyer for the client recognizes that the client’s best chance of defeating the first lawyer’s fee claim is to assert a UPL defense. Such a defense often makes it unnecessary for the client to plead or prove that the first lawyer’s services constituted malpractice or a breach of fiduciary duty, or were otherwise improper or caused any harm to the client.

The UPL defense alone will often prevent the lawyer from collecting a fee either because the state’s UPL statute itself so provides, or because the state’s common law holds that legal services rendered in violation of the state’s UPL prohibitions do not entitle the unlicensed lawyer to compensation. Sometimes, as in Birbrower, the court disallows the unlicensed lawyer a fee only on a contract theory, but permits the lawyer to proceed on an alternative theory such as quantum meruit. In other cases, the court will permit the unlicensed lawyer to recover on the ground that the alleged UPL involved only "isolated instances" of conduct in the state, In the Matter of the Estate of Waring, 47 N.J. 367, 221 A.2d 193 (1966), or that the out-of-state lawyer’s services related primarily to matters based elsewhere, Appell v. Reiner 43 N.J. 313, 204 A.2d 146 (1964). Often, however, the unlicensed lawyer must run the risk that the client or former client will escape liability for the lawyer’s fees even though the client has received the benefit of the lawyer’s services and can prove no harm from the fact that those services were rendered by a lawyer not licensed in the state where the work was done.

Two court decisions since Birbrower, one by a California appellate court, provide some basis for optimism that courts will find ways to avoid Birbrower’s harsh result. In Fought & Co. v. Steel Engineering and Erection, Inc., 87 Haw. 37, 951 P.2d 487 (1998), the Hawaii Supreme Court held that an Oregon law firm, which did work in connection with litigation filed in Hawaii, was not engaged in the unauthorized practice of law in Hawaii and was entitled to fees for its work. The court distinguished Birbrower on the grounds that (1) the Oregon lawyers did their work in Oregon, not Hawaii, and (2) the client was represented in the Hawaiian courts by Hawaiian counsel.

In Estate of Condon v. McHenry, 65 Cal. App. 4th 1138, 76 Cal. Rptr. 2d 922 (1st Dist. 1998), the court allowed fees to a Colorado lawyer who, along with California local counsel, represented a Colorado resident as co-executor in a California probate proceeding. Both California law and property were involved. The court discussed Birbrower, but distinguished it because (1) the California Probate Code expressly allows out-of-state residents to serve as executors and entitles executors to attorneys’ fees, and (2) because the California UPL statute does not prohibit the award of fees to out-of-state attorneys in California probate proceedings.

V. Reasons for State UPL Restrictions on MJP in the 21st Century

Most state UPL statutes and rules originated at a time when commerce and law practice were mostly local, legal education was often accomplished through apprentice arrangements, admission to practice was far less rigorous and standardized than today, and regulation of the legal profession was sometimes sporadic and might differ markedly from state to state. These statutes and rules usually make no distinction between law practice by persons never trained in the law and lawyers admitted in another jurisdiction. They accord no weight to the preference of a client to be represented by a particular lawyer admitted elsewhere, no matter how close and long standing the lawyer-client relationship, how experienced the out-of-state lawyer, or how closely related the current matter is to other matters on which the out-of-state lawyer has previously represented or is currently representing the client.

States surely have legitimate interests in protecting their citizens from unqualified non-lawyers who purport to offer "legal services" without having the education or experience to do so competently. They also have a legitimate interest in assuring that out-of-state lawyers who render legal services within the state are accountable to courts and lawyer regulators and are, where appropriate, subject to professional discipline within the state if they violate legal and ethical standards applicable to lawyer conduct. Unfortunately, much UPL enforcement activity directed against lawyers admitted in other jurisdictions appears to be motivated not by these interests, but by a desire on the part of local lawyers to protect their franchise, whatever the cost, burden, inconvenience and disruption to clients who may be denied their counsel of choice.

VI . Possible Solutions to the MJP Problems of Private Litigation Lawyers

A. Amend state UPL statutes and rules to distinguish between UPL by non-lawyers, and UPL by lawyers admitted and in good standing in another state . A start on mitigating the problems for private lawyers and their clients caused by state UPL restrictions would be the modification of such restrictions to distinguish between UPL by non-lawyers, and by lawyers licensed in other states. Michigan and Virginia have pointed the way by recognizing an exception for occasional practice within the state by lawyers licensed elsewhere who are present in the state working on particular matters. This simple change, perhaps difficult to accomplish, would resolve much of the present controversy over UPL. Moreover, it would reflect the realities of modern law practice, while reserving proper regard for the police power of the states to regulate those who practice regularly before their courts.

B. Amend state UPL statutes and rules to provide "safe harbors" and disciplinary jurisdiction for lawyers licensed elsewhere . Another possible change in state UPL statutes and regulations would be the define "safe harbors" that describe legal services that may be rendered within the state by foreign licensed lawyers without running afoul of the state’s UPL prohibitions. Section 3 (2) of the soon to be published Restatement of the Law Governing Lawyers, entitled "Jurisdictional Scope of the Practice of Law by a Lawyer," recognizes admission before a tribunal or administrative agency of a foreign jurisdiction or the federal government in compliance with the requirements for temporary or regular admission to practice as a safe harbor.

At least six states (Alaska, Arkansas, California, Maryland, Michigan and North Dakota) have already amended their version of ABA Model Rule 8.5 to assert the authority to discipline lawyers licensed in other jurisdictions who have practiced within the state. See Mary C. Daly, "Resolving Ethical Conflicts in Multijurisdictional Practice - Is Model Rule 8.5 the Answer, an Answer, or No Answer at All?" 36 So. Tex. L. Rev. 715, 749 (1995).

C. Amend Model Rule 5.5 to define "safe harbors." Even if state legislative action such as that described above is too difficult to accomplish, somewhat the same effect might be achieved by amending Model Rule of Professional Conduct 5.5 to provide for UPL "safe harbors" along the lines described above. While ethics rules cannot change statutory law, adoption by a state’s supreme court of an ethics rule on UPL that defines "safe harbors" would be a useful policy statement to lower courts and UPL enforcement authorities about what kind of conduct the state’s highest judicial authority considers should, and should not, be prosecuted, enjoined or otherwise penalized or discouraged on UPL grounds. ABA Commission on Evaluation of the Rules of Professional Conduct, the "Ethics 2000 Commission," has such a modification of Model Rule 5.5 under active consideration.)

D. Encourage state supreme courts to adopt uniform rules or an interstate agreement on UPL. The ABA might draft and recommend to the Conference of Chief Justices a uniform set of rules on the scope of, and preconditions for, permissible legal work within the state by lawyers licensed in another state. As suggested by Professor Gillers and others, such rules could be embodied in a proposed interstate agreement among the highest courts of the several states specifying conditions under which foreign admitted lawyers would be permitted to render limited legal services to clients within a state in which the lawyer is not licensed. Such conditions might include, for example, written agreement by the lawyer (1) to be subject to the jurisdiction of the courts and disciplinary authorities in the foreign state, (2) to provide advance written notice to clients located in that state that the lawyer is not licensed there, (3) not to engage in advertising of legal services specifically directed to residents of the state, and (4) not to open an office in the foreign jurisdiction unless and until the lawyer is admitted to regular practice there.

E. Amend current ABA Model Rule 8.5 . Professor Daly has suggested that two flaws in the current (1993) version of Model Rule 8.5(b)(1) need correction. See Mary C. Daly, "Resolving Ethical Conflicts in Multijurisdictional Practice - Is Model Rule 8.5 the Answer, an Answer, or No Answer at All?" 36 So. Tex. L. Rev. 715, 796 (1995). First, she proposes that the rule should make clear that the ethics rules adopted by a court apply to all other lawyers working under the supervision or control of the lawyer or lawyers who were admitted for a particular matter. This would make all the lawyers on a litigation "team" subject to the same set of rules regardless of their state of actual admission.

Second, she suggests that the rule should identify a framework for judging prelitigation conduct. The proposed amendment would not discipline a lawyer for prelitigation conduct that conforms to the rules of a jurisdiction in which the lawyer is admitted even if the conduct is contrary to the rules of the jurisdiction in which the action is ultimately filed. If the lawyer is admitted to more than one jurisdiction, the lawyer's selection must be reasonable.


Copyright 2000 by the American Bar Association, Stein Center for Law and Ethics at Fordham University School of Law, Attorneys Liability Assurance Society and the American Corporate Counsel Association. All rights reserved.