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Birbrower’s Impact On Multi-State Corporate Real Estate Transactions by Michael L. Corbett - Center for Professional Responsibility



Hearings to be held at

Fordham University Law School- 3/30/2001



by Michael L. Corbett

 As lawyers are aware, today’s technology has eradicated many jurisdictional boundaries creating liabilities as well as opportunities. After concluding a recent multi-state real estate financing transaction in Manhattan, several of the attorneys involved asked me whether I thought New York lawyers involved in multi-state financing may in some manner, unwittingly, be engaging in the Unauthorized Practice of Law in other states.

With the recent Birbrower * decision troubling the bar as to whether we will be able to collect fees or possibly face grievance committee proceedings for Unauthorized Practice of Law, the need for the present symposium is self-evident.

This Commission has already listened to many detailed, enlightened broad perspectives on the potential ethical considerations in the multijurisdictional practice of law.

Briefly, I hope to draw this Panel’s focus to a new field, the multi-million dollar commercial mortgage financings now daily closing in Manhattan. In the recent transaction to which I refer, a corporate borrower chose a partner in a New York law firm as counsel. The collateral for the loan were thirteen commercial properties located in eight different states. None of the properties were located in New York State, the only state in which the lawyer is licensed to practice law. Neither the borrower nor the lender maintained offices within New York State.

Three questions were debated that night by my colleagues, after the above loan closed:

Was the Manhattan lawyer practicing law in the eight states in which the mortgaged properties were located?

Was the attorney practicing law in the state in which the corporate borrower or lender maintained their headquarters?

And finally, as has often been suspected, is the primary purpose of Unauthorized Practice of Law regulations merely to keep as much legal business within the grasp of attorneys located in a given state, or are there compelling reasons why the practice of law should remain within state boundaries?

Often the sheer number of variables involved in corporate real estate mega -deals can overwhelm today’s overworked attorney, making it difficult for her to properly dissect and analyze the issues to determine the potential for Unauthorized Practice of Law violations, which lurk in any such transaction.

Let us examine, using the criterion of the recent Birbrower decision, whether the Manhattan lawyer in my example has practiced law in a state other than New York.

Remember, Birbrower’s test of whether Unauthorized Practice of Law has been committed, is the "sufficient contacts" test, whether an attorney not admitted to the state bar, is engaging in "sufficient activities in the state" to constitute practicing law there.

Inspecting my multi-state mortgage example, did our attorney practice law in the eight states in which the properties are located? Let’s briefly delve more deeply into the transaction. In reality, the New York attorney did in fact use local counsel in all eight states in which the mortgaged properties were located, to provide an opinion letter confirming due execution of documents and compliance with local laws. Also, the firm retained a nationwide title insurance company with in house counsel in each of the eight states in which the properties are located.

Did our New York lawyer practice law in the State of Delaware, the location of the borrower’s corporate headquarters?

Always keep in mind the Birbrower decision held:

"one may practice law in the state in violation of section 6125 although not physically present here by advising a California client on California law in connection with a California legal dispute by telephone, fax, computer, or other technological means".

Reverting to our mortgage financing, none of the thirteen properties given as collateral were located in Delaware, the attorney never physically entered the State of Delaware, the closing was held in Manhattan. Thus, arguably, the context and content of the legal advice rendered would have little relation to the law of Delaware, the state in which the corporation is domiciled, thus evading any violation of Unauthorized Practice of Law pursuant to the Birbrower "sufficient contacts" litmus test.

Before today’s panel members arrive at their conclusions and make their recommendations, I respectfully suggest that perhaps the most relevant observation of the Birbrower Court was:

"we do reject the notion that a person automatically practices law "in California" whenever that person practices California law anywhere, or "virtually" enters the state by telephone, fax, e-mail or satellite".

In conclusion, while multi-state corporate transactions admittedly herald a new legal dynamic, involving vast financial resources and increasingly large pools of assets scattered throughout the United States, this new dynamic does not de facto equate to a breach of Unauthorized Practice of Law statutes in states which are often only minimally involved.

 * Birbrower, Montalbano, Condon P.C., et al., Petitioners, v. the Superior Court of Santa Clara County, Respondent; Esq. B Services, Inc., Real Party In Interest, 17 Cal. 4 th 119; 949 P. 2d 1; 1998 Cal. LEXIS 2; 70 Cal Rptr. 2d 304.

Section 484 –New York Judiciary Law (in part):

"No natural person shall ask or receive, directly or indirectly, compensation …. for preparing deeds, mortgages, assignments, discharges, leases, other instruments affecting real estate….unless he has regularly admitted to practice as an attorney or counselor, in the courts of the state;…"

Michael L. Corbett is National Counsel, Stewart Title Insurance Company, headquartered in Manhattan.