Real Property, Probate and Trust Law Section Comments on Multi-jurisdictional Practice - Center for Professional Responsibility

January 23, 2001

Harriet E. Miers, Chair
Commission on Multijurisdictional Practice
c/o John A. Holtaway
ABA Center for Professional Responsibility
541 No. Fairbanks Ct.,14th Floor
Chicago, Illinois 60611

Re: Real Property, Probate and Trust Law Section
Comments on Multi-jurisdictional Practice

Dear Ms. Miers:

        We are pleased to submit the following comments by the Real Property, Probate and Trust Law Section (the "Section") supporting the revision and rationalization of the law and ethical considerations governing the multi-jurisdictional practice of law. These comments have been adopted by the Section's Executive Committee and represent the official position of the Section.

        Our Section has approximately 30,000 members and is the third largest section of the American Bar Association. We have two divisions: the Real Property Division and the Probate and Trust Division. Section members may participate in either or both divisions.

        The members of the Real Property Division assist clients with matters relating to real property, including the development of real estate (addressing the myriad of land use, title insurance and environmental regulations attendant with the ownership, management and development of real estate), negotiation of the terms of real estate acquisitions and sales, financing and leasing of real property, decisions involving the choice of the appropriate entity (and the state of formation of such entity) to develop or own real estate, and issues of taxation and bankruptcy associated with real property. Lawyers practicing in the real estate arena often find themselves counseling clients in transactions or disputes that involve property located in states other than the states in which the lawyer is licensed, with buyers, sellers, tenants, property managers and lenders based in different states, and with laws of various jurisdictions controlling different facets of the matter.

        The members of the Probate and Trust Division emphasize the practice of estate planning, the administration of trusts and estates, planning for disability, and the implementation of conservatorships, guardianships and other protective proceedings. Division members devote extensive amounts of time advising clients with respect to national and state estate, gift, income and other tax laws, regulations and decisions.

I. REAL ESTATE, PROBATE AND TRUST LAWYERS OFTEN ARE RETAINED BY CLIENTS IN MATTERS INVOLVING THE LAWS OF AND PARTIES FROM OTHER STATES.

        Contrary, perhaps, to common belief, attorneys practicing in the "dirt" and "death" areas frequently find themselves involved in cross-border transactions. A client of a real estate lawyer may be, for example, a developer based in one state that acquires, develops, finances and sells property located in many other jurisdictions and, perhaps, other countries. Such transactions may involve tenants, lenders, consultants and property managers located in states other than the states in which the property or the client is located, and in many instances the acquisition and sales documents, leases and financing instruments involved in a single transaction may be governed by the laws of more than one state.

        Thus, a real estate developer based in California may specialize in developing retail stores for a select group of national credit tenants. The developer may regularly acquire, improve and lease property in a variety of states for such tenants. The developer may be governed by organizational documents executed under Delaware law, which dictate the rights of constituent members, shareholders or parties residing in a number of states throughout the country. The sellers of the property, the tenants of the prospective development, the design consultants, contractor and subcontractors engaged by the developer, the lender and the ultimate purchaser of the completed development may all be located in different states. The lease form may require the terms of the lease to be construed pursuant to the laws of the tenant's home jurisdiction, while the land acquisition and design and construction contracts will typically be governed by the laws of the state where the property is located, and the loan documents often are governed by a combination of the laws in which the lender is venued and the laws of the state where the property is located.

        Counsel to the developer may well be asked to review and negotiate all of the documents involved in the transaction, regardless of the governing law provisions of the documents, and such negotiations may occur telephonically or by electronic transmissions, through the mail or other courier services, and may occur in the offices of the lawyer, the offices of the lender or its counsel or in a national or local office of the title company involved in the transaction. Attorneys representing the other parties will be asked to perform similar "cross-border" services on behalf of their clients. Additionally, in-house counsel of larger tenants, lenders and developers regularly advise their clients on issues of law that arise in a variety of jurisdictions.

        Estate planning clients in today's society are increasingly mobile and many individuals literally have residences in two states. Witness, for example, the annual migration of "snow birds" from northern climates to jurisdictions such as Florida, Arizona and California. In the intensely personal estate planning area, such clients typically wish to continue to rely on advice given and estate planning documents provided by their longtime attorneys who are usually based and licensed to practice in only one jurisdiction. Even "non-migratory" clients typically have estate plans that implicate the protection and transfer of assets in other states and such clients do not wish to duplicate legal services in connection with the work related thereto. Similarly, in the estate and trust administration context, it is not uncommon for a lawyer to represent a fiduciary who resides in one state but has duties requiring the fiduciary to act in another state or states. Also, a lawyer named as trustee or executor often is required to perform duties in more than one state.

II. UNIFORM LAWS, STANDARDS AND METHODS MAKE THE PRACTICE OF REAL ESTATE, PROBATE AND TRUST LAW MORE SIMILAR THAN DISSIMILAR FROM STATE TO STATE.

        In planning estates and trusts, the problems to be faced and resolved are predominantly national in scope, implicating the federal transfer (estate and gift) tax and income tax systems. Even in smaller, less tax-intensive estate plans and administrations, uniform state laws make the practice area often more similar than disparate from state to state ( e.g., the Uniform Principal and Income Act, the Uniform Trust Act, the Uniform Transfers to Minors Act, the Uniform Health Care Decisions Act, the Uniform Statutory Rule Against Perpetuities and the like.)

        Similarly, in the real property context, the reliance upon uniform title insurance policy forms and survey standards promulgated by the American Land Title Association, standardized forms for construction and design contracts published by the American Institute of Architects and the Association of General Contractors, and uniform laws (such as the Uniform Commercial Code and the general application of basic contract law) make the practice of real estate law more alike than dissimilar from state to state. Moreover, title companies located in the state where the property is located (with their own in-house lawyers and outside counsel) are often retained to draft the conveyance documents and the state-specific transfer declarations, to prepare the affidavits necessary to satisfy local law requirements and to collect and disburse the appropriate amounts of transfer fees and conveyance and financing taxes.

III. ENHANCED ACCESS TO LOCAL LAW AND THE CURRENT STANDARD OF        COMPETENCE PROTECT CLIENTS FROM INADEQUATE OR IMPROPER ADVICE.

        Notwithstanding the trends toward uniformity outlined above, the Section acknowledges that laws affecting the practice of real estate, probate and trust law traditionally have varied from state to state. We note, however, that a lawyer's ability to access the statutes, rules, case law and local ordinances of another state have been enhanced greatly in past years. Furthermore, a board-certified estate planning specialist licensed in State A is more likely to identify the possible nuances of State B's probate and trust laws than an attorney licensed in State B who is not experienced in providing estate planning services for clients. The State A specialist also is more likely to know when local counsel knowledgeable in estate planning in State B should be engaged to address complicated local law issues, in contrast to the inexperienced State B lawyer who may not be able to identify such issues. Thus, the standard of competence imposed by Model Rule 1.1, which imposes the duty to gain whatever knowledge of local law the task at hand requires (whether by research or consultation with competent local counsel), protects the consumers of legal services from receiving inadequate or improper advice far better than the current scheme of state-by-state licensing.

IV. REFLECTIVE OF OUR NATIONAL AND INTERNATIONAL ECONOMIES, CLIENTS         REQUIRE THEIR ATTORNEYS TO ACT IN MULTIJURISDICTIONAL CONTEXTS.

        Many of the state laws governing the unauthorized practice of law ("UPL") were crafted in an era when a lawyer typically was asked to apply the law of only one state on behalf of a client, typically an individual, who lived and conducted business in only one state, being the same state in which the lawyer was licensed to practice law. (Bruce A. Green, Assisting Clients with Multi-State and Interstate Legal Problems: The Need to Bring the Professional Regulation of Lawyers into the 21 ^st Century (ABA Center for Professional Responsibility, June 2000).) Today, clients often reside in more than one state, often conduct business in more than one state, and often contract with others with places of business in multiple states. Lawyers, too, find themselves employed by firms or as in-house counsel to clients with offices in more than one state, and attorneys are engaged by their clients to represent them in a variety of contexts that reflect our commercially small world, evidenced by the examples cited above in the case of real property, probate and trust lawyers.

        Clients frequently are disinclined to engage "local" counsel when their business takes them outside the state in which their attorneys are licensed, even when counseled by their attorneys to do so, for a variety of reasons that may include the lawyer's knowledge of the client's business, the client's recognition of the lawyer as an expert in his or her area of practice, the client's historical relationship with the lawyer, the fast-paced nature of the transaction, the client's desire to control legal costs and the availability of other non-lawyer resources to assist with local issues. Clients generally demand to be represented by an individual lawyer or single firm of their choice in a cost-effective and timely manner, and prefer to avoid the burden and complexity of dealing with a disparate group of lawyers whose only reason for selection was their location in a particular jurisdiction. (For a more comprehensive discussion of the multijurisdictional forces affecting real property, probate and trust lawyers, see Joseph Lundy, Private Practitioner Problems with Multijurisdictional Law Practice in Transactional and Other Non-Litigation Matters, Symposium on the Multijurisdictional Practice of Law (March 10-11, 2000).)

IV. TO ADEQUATELY REPRESENT CLIENTS IN MATTERS OF DISPUTE RESOLUTION, REAL PROPERTY, PROBATE AND TRUST LAWYERS MUST CROSS STATE BORDERS.

        Litigation lawyers in the real property and probate arenas commonly face multijurisdictional practice issues. Exclusive of pro hac vice admission, which solves potential UPL problems only in formal court proceedings located in another jurisdiction (and which always requires association of "local" counsel who may have little or no contact with or involvement in the case), lawyers constantly must cross state borders to interview witnesses, review documents, conduct depositions, engage in settlement negotiations, mediations and, often, arbitrations (the latter being the practice area giving rise to the New York law firm's problems in the California Birbrower decision). Moreover, a document negotiated well before a dispute arises frequently will dictate the venue for a dispute, requiring the lawyer to appear in a jurisdiction in which the lawyer is not licensed, even though the dispute may involve few, if any, local law issues or be governed by the laws of the lawyer's licensing state.

        As is true with transactional, estate planning and estate administration matters, attorneys representing clients in litigation and other dispute resolution proceedings are under considerable pressure to keep legal costs to a minimum. While the magnitude of some disputes justifies retention of multiple counsel to address particular issues, including local law issues, many litigation-related matters will not sustain such additional costs. The varying state UPL laws put both the attorney and the client at risk: the attorney may face sanctions for engaging in the unauthorized practice of law; the client may be forced to utilize a lawyer not of the client's choice or to pay multiple attorneys to resolve the dispute.

V. THE CURRENT UPL RESTRICTIONS MUST BE CHANGED TO PERMIT LAWYERS TO PRACTICE TEMPORARILY IN OTHER STATES WITH THEIR CLIENTS' INFORMED CONSENT.

        As noted above, client demands and the changing nature of the way Americans conduct themselves and their business force lawyers to practice in cross-border situations on almost a daily basis, subjecting lawyers to the varying, and sometimes archaic, state rules against the unauthorized practice of law. Professor Green noted in his article ( Assisting Clients with Multi-State and Interstate Problems: The Need to Bring the Professional Regulation of Lawyers into the 21st Century, supra), two principal problems with the existing, state-based UPL restrictions. "First, these UPL laws vary considerably from state to state. . . Second, none of these UPL provisions explains precisely what an out-of-state lawyer may or may not do in relation to the state." Although the different states' UPL laws rarely are enforced against out-of-state lawyers "temporarily" engaged in practice in the state in question, such lack of enforcement hardly is an appropriate philosophical justification for permitting the present situation to continue.

        The client's right to competent representation by counsel of the client's choice is a core principle of the profession which should be recognized across state lines. The bar's interest in protecting the public from inadequate counsel should be met if the lawyer consistently maintains the level of competence required by Model Rule 1.1.

        The Section nevertheless recognizes the legitimate state interest in protecting a state's residents from the incompetent or unlicensed practice of law, and thus, the Section recommends that the present UPL system be rationalized to permit cross-border practice by an out-of-state lawyer duly admitted to practice in another state and competent in the area of law at hand, so long as the client understands that the attorney is not licensed to practice in the jurisdiction in question and provided the lawyer submits to the disciplinary authority of the state in which he or she is temporarily practicing. ¹

        The Section supports the changes to Model Rule of Professional Conduct 5.5 proposed by the Ethics 2000 Commission, but believes the changes should be expanded to permit a lawyer, without retention of local counsel, to perform the following services as long as the lawyer abides by the requirements of Model Rule 1.1 (requiring competence):

        We are confident that the above Rule will not impede a lawyer from exercising his or her professional judgment in deciding whether or not retention of local counsel in a particular matter is necessary and appropriate.

        The Section's recommendations reflect not only the current nature of our practices and our clients' expectations to engage counsel of their choice, but also incorporate UPL exceptions that have been adopted by certain states. For example, under the Michigan UPL statute, legal services rendered in Michigan by lawyers "duly licensed and authorized to practice law in another state while temporarily in this state and engaged in a particular matter" do not constitute the unauthorized practice of law in Michigan. (Mich.Comp.Laws Ann. § 600.916.)

        Similarly, the Virginia State Bar Rules except from the definition of a "non-lawyer" prohibited from practice in Virginia any lawyer who provides legal advice or service in Virginia as long as (a) the attorney is admitted to practice and in good standing in any other state, (b) the attorney provides such services on an occasional basis only and incidental to representation of a client whom the attorney represents elsewhere, and (c) the client is informed that the attorney is not admitted in Virginia. (Va. State Bar Rule, Pt. 6,  §1(C).)

        The Section notes that most of the changes to Model Rule 5.5 proposed by the Ethics 2000 Commission reflect conduct permitted by Section 3 of the Restatement (3d), The Law Governing Lawyers, entitled "Jurisdictional Scope of the Practice of Law by a Lawyer," which permits a lawyer admitted in one jurisdiction to provide legal services to a client in another jurisdiction "to the extent that the lawyer's activities arise out of or are otherwise reasonably related to the lawyer's practice" in the admitting jurisdiction or before an out-of-state tribunal or administrative agency before whom the lawyer is admitted. The expansion of the proposed changes now advocated by the Section meets the spirit of the Restatement and is consistent with the commentary to Section 3 of the Restatement and the illustrations set forth therein.

Respectfully submitted,

Louis A. Mezzullo,
Chair of the Real Property,
Probate and Trust Law Section
of the American Bar Association

David K.Y. Tang, Chair-Elect

____________________

Endnotes

1.    The Section appreciates the practical difficulties inherent in implementing a "top down" approach to the regulation of multijurisdictional practice as identified in Professor Giller's letter of December 23, 2000 to the Commission. The Section believes, however, that ultimately it would be in the best interests of the profession, the public and practicing attorneys to implement a national system of mutual state recognition of the licensing of attorneys by other states, with the usual qualifications of attorney competence and adherence to the ethical requirements of the non-licensing jurisdiction.