M E M O R A N D U M
To: Bar Leaders
From: Harriet E. Miers, Chair Commission on Multijurisdictional Practice
Date: November 1, 2000
Re: Multijurisdictional Practice of Law Issues
To illustrate why the ABA and its current President Martha Barnett have brought great focus to multijurisdictional practice issues by the creation and funding of a broad-based Commission, we want to describe a case (with which most likely you have some familiarity) that added fuel to the national debate about the difficulties associated with the interstate practice of law. That debate led to a symposium to examine the questions presented in the debate. That in-depth and scholarly review of the issues then, in turn, led to the creation of the Commission.
In the early 1990s, a New York law firm entered into a written fee agreement to represent a California company in an arbitration to be held in California and governed by that states law. The California company was a subsidiary of a New York client of the firm. Firm lawyers, none of whom was admitted in California, made three brief trips to the state. When there, they advised their client, engaged in negotiation with the opponent, and interviewed possible arbitrators. The firms lawyers also worked on the matter back in New York.
The dispute was eventually settled, but the California company and the law firm had a falling out. The client claimed malpractice. The law firm counter-claimed for its fee. In January 1998, the California Supreme Court held that the firm could not get paid for work its lawyers did while physically "in" California because that work was the unauthorized practice of law (UPL). Even work the lawyers did in New York could constitute UPL in California, the court ruled, if the lawyers were "virtually" in California via "modern technological means," such as "telephone, fax, [or] computer." But not all virtual presence would amount to UPL in the state. It was a question of degree. The court declined to be more specific.
The court also held that it did not matter that the client knew the lawyers were not licensed in California. It wrote, too, that the result would have been the same even if the lawyers had associated with California counsel.
Because the lawyers were entitled to compensation for work they did while physically in New York, at least if the work was not virtually in California, the case was remanded. Birbrower, Montalbano, Condon & Frank, P.C. v. Superior Court, 17 Cal. 4 th 119, 949 P.2d 1 (1998), cert. denied, 525 U.S. 920 (1998).
Soon after the courts decision, California enacted a law providing for pro hac vice admission in arbitration and the California Supreme Court adopted an implementing rule. Calif. Civil Proc. Code §1282.4; California Rules of Court, Rule 983.4. The law will sunset at the end of this year unless extended. And everyone readily admits that dealing with multijurisdictional practice issues piecemeal is not the right approach to this very serious set of issues confronting the legal profession.
The Birbrower decision raises questions that go far beyond its immediate facts. Ethical rules forbid lawyers to engage in UPL or to aid the unauthorized law practice of others. American Bar Association, Model Rules of Professional Conduct, Rule 5.5. Over the years the courts have not found it easy to determine whether a layperson is guilty of UPL, and the question is even more complex when the subject is a lawyer licensed in another jurisdiction. True, lawyers are rarely if ever disciplined for giving occasional, transitory advice in another jurisdiction, but a lawyer who does so may nevertheless want to be assured that the contemplated work is proper even if the conduct carries little professional risk as a practical matter. Birbrower makes clear that risk cannot always be anticipated.
And risk of discipline aside, the conduct could have adverse consequences. Clients have sometimes successfully cited the lawyers alleged UPL as a defense to a fee claim, as in Birbrower. In Ranta v. McCarney, 391 N.W.2d 161 (N.D. 1986), for example, the state supreme court denied a fee to a Minnesota lawyer who had been giving federal tax advice to a small business in North Dakota. The Court said the lawyer could get paid for work he did in his home state, but not for work while physically in North Dakota.
Further, lawyers who are employed by corporations or other entities, including government, have a special concern. They may be relocated to offices in states in which they are not admitted. This may happen several times in a career, each assignment lasting a few years. Their work in the new states will often fall within the definition of law practice. While they need not worry about getting paid, they still have a legitimate interest in knowing that they are not violating the new states UPL laws. For one thing, they may someday seek permanent admission in another state and will want to be able to say, in the character inquiry, that they have never practiced law in a state in which they were not admitted. Some states have met this concern, at least in part, through statutes that license these lawyers to practice law solely for their employers. See, e.g., Florida Supreme Court Rule 3-6.1; Missouri Supreme Court Rule 8.105.
This uncertainty can confront trial lawyers, too. The lawyers in Birbrower intended to represent their client in an arbitration proceeding. In most jurisdictions, if not all, there is no pro hac vice process for arbitration or mediation (except where conducted under supervision of a court). Even when pro hac vice admission exists, as it does in conventional litigation, it is not available until a case is filed. So work done in a jurisdiction prior the time a case is filed (if it ever is) can constitute UPL. There also are issues for trial lawyers participating in discovery activities out of their licensing state or advising a client in an office that is outside the lawyers licensing state.
The current vague state of the rules governing UPL by lawyers admitted in other jurisdictions creates obvious uncertainty for the counseling and transactional practices of lawyers (such as business, environmental, and government lawyers) whose clients matters may take them into other jurisdictions to advise or negotiate. And even if those lawyers do not travel to other jurisdictions, they may advise clients or negotiate for them in those jurisdictions, via fax, e-mail, and other technology, to such an extent that a court could later characterize their activity as the virtual practice of law "in" those jurisdictions and therefore unauthorized.
That this is an important issue is reflected by the treatment of the topic in the American Law Institutes recently published Restatement (3 rd) of the Law Governing Lawyers (§ 3, Comments e, f, and g, and Reporters Note). And during the recent national debate on multidisciplinary practice, commentators observed that if law firms are to compete with, and not as parts of, accounting firms, then the rules applicable to multijurisdictional practice must be reassessed from the point of view of enabling lawyers to compete on a level playing field with other professionals. Additionally, the work of the Commission on Evaluation of the Model Rules of Professional Conduct ("Ethics 2000") emphasizes the need to address multijurisdictional practice issues as related to the unauthorized practice of law provisions and disciplinary conflicts of law rules.
We should be clear what the multijurisdictional practice debate is not about. Work done in a lawyers home state for a client who is physically in that state will not be UPL even if the lawyer must construe the law of another state or foreign country. A lawyer in Illinois whose in-state client asks about a legal problem in Indiana or in France, and who is competent to advise on Indiana or French law, is licensed to do so from his Illinois office. That is why the Birbrower and Ranta lawyers could get paid for work performed in their home states. See also, Estate of Condon, 65 Cal. App. 4 th 1138, 76 Cal. Rptr. 2d 922 (1998); Fought & Co., Inc. v. Steel Engineering & Erection, Inc., 87 Haw. 37, 951 P.2d 487 (1998).
At the other end of the spectrum, a lawyer who creates a permanent physical presence (i.e., hangs out a shingle) in a state in which he or she is not admitted, or who holds himself or herself out as admitted in a state in which he or she is not admitted, almost certainly violates that states UPL law. And an in-state lawyer who helps the other lawyer do so, risks a disciplinary violation for aiding UPL. See, e.g., Office of Disciplinary Counsel v. Pavlik, 89 Ohio St. 3d 458, 732 N.E.2d 985 (2000), which reprimanded an Ohio lawyer who, through neglect or omission, aided an Illinois lawyer in the unauthorized practice of law in Ohio. Earlier, the Court had enjoined the Illinois lawyer from law practice in Ohio. Cleveland Bar Assoc. v. Misch, 82 Ohio St. 3d 256, 695 N.E.2d 244 (1998).
How should the profession resolve the issues surrounding multijurisdictional practice? Following are some proposals that previously have been discussed. These are not meant to foreclose or discourage anyone from suggesting other proposals, nor do we endorse these specific proposals. The proposals, not all of which are mutually exclusive, are listed here simply because they have been part of the national discussion. A recommendation from the Commission will come only after careful review and study and hopefully, receipt of a great amount of advice from organizations like yours and people like you.
In thinking about the proposals, it might be helpful to have a few simple hypothetical situations in mind. These are but pared down versions of recurrent situations.
Hypothetical #1: Lawyer Smith, admitted only in State A, is working on a business deal for a client. The work requires her to travel to the clients satellite site in State B to speak with and counsel officers there. Also in State B, she spends two days negotiating portions of the transaction with lawyers for the other party. Due diligence requires Smith to investigate the laws of several jurisdictions, including federal law and the laws of State A and State B.
Hypothetical #2: Same as before except Smiths communications with her clients officers and the opposing lawyer are all done via e-mail, fax, and telephone into State B.
Hypothetical #3: Brown is a nationally recognized expert on federal copyright law admitted only in State A. A company in State B invites her to come to State B and work with its staff in developing some protocols that will afford maximum protection for the companys intellectual property. She plans to spend a week in State B.
Hypothetical #4: Same as #3, except Browns expertise is in commercial law. The states laws in this area are nearly uniform and all are easily available nationwide through computer research. She plans to spend a week in State B advising her State B client on procedures to protect their interests under that States commercial laws.
Hypothetical #5: Lawyer Jones, admitted only in State A, is an expert in trade regulation. A company in State B asks him to come to its headquarters, speak to its officers and employees, and review its files in order to advise it on whether (or not) to bring an action against a competitor under federal law or the laws of State B (or both). Any such action would be brought in federal or state court in State B. Jones would be lead counsel and would seek pro hac vice admission once an action is brought, if it is.
Now, here are some ways in which some have suggested that the UPL questions these lawyers face might be clarified, if at all. We offer these to help your own analysis. As stated above, the Commission has taken no positions on any of these.
- First, the organized bar may decide to remain with the status quo. We might conclude that vagueness is inevitable in the state-based admission system we have and that any solutions we might propose are only likely to create new problems. Lawyers will have to recognize that if they practice law in any jurisdiction, physically or virtually, more than some de minimis amount or allow or aid someone else in doing so, they may be technically guilty of UPL and face challenges to their fees, prosecution, or discipline.
- Second, the organized bar could encourage states to adopt rules that authorize employed lawyers in good standing in their home state, who move into another state to serve their corporate, governmental, or other organizational employer, to practice law for that employer so long as they remain employed by it. ("safe harbor" provision) Where laws already exist, they have generally excluded permission to make court appearances, where pro hac vice admission is possible. Note that this deals only with the employed lawyers practice in the state of his or her domicile, and does not address the employed lawyers practice in multiple other jurisdictions on behalf of the employer.
- Third, the organized bar could encourage states to adopt laws or court rules that explicitly authorize out-of-state lawyers in good standing (and perhaps admitted for some minimum number of years), while temporarily in the state, to engage in activities for which a law license is required. This proposal (and the next one) require us to define "temporary." For example, it might exclude a permanent physical presence and also systematic solicitation of clients in the other state.
- Fourth, a more limited version of the same policy would allow lawyers admitted in any state to practice temporarily in a state if that lawyers home state affords reciprocity to lawyers elsewhere.
- Fifth, the organized bar could encourage states to adopt rules that bring within pro hac vice authorization work done in contemplation of filing an action in which the lawyer plans to seek pro hac vice admission and reasonably believes it will be granted. Obviously, the pre-filing work would then have to be protected even if the action is not filed.
- Sixth, the organized bar could encourage states to adopt rules that make some sort of pro hac vice admission process applicable to activities in anticipation of or in connection with state or local administrative proceedings, arbitration, mediation, or other non-court-administered alternative dispute resolution process or with respect to discovery processes outside a lawyers licensing state or the state where the lawsuit pends.
- Seventh, the organized bar might encourage states to adopt rules that permit an out-of-state lawyer in good standing to do work in the state for which a law license is required, so long as he or she collaborates with an in-state lawyer (who may but need not be in the same firm).
- Eighth, the organized bar could encourage the states to adopt rules that would entitle a lawyer admitted in any state to advise on federal or non-U.S. law (and perhaps incidental state law) anywhere.
- Ninth, the organized bar could encourage the states to adopt rules that would entitle a lawyer admitted in any state to advise on highly specific or specialized areas of the law requiring a high degree of specialization or expertise (and perhaps incidental state law) anywhere.
- Tenth, the organized bar could encourage the states to adopt rules that would entitle a lawyer admitted in any state to conduct any activities in a jurisdiction (short of permanent establishment or wrongfully holding himself or herself out as admitted in that jurisdiction) that a non-lawyer in that jurisdiction could undertake without violating the UPL laws of that state. This would level the playing field as between out-of-state lawyers and in-state non-lawyer professionals, such as accountants or environmental consultants.
- Eleventh, and far reaching, the organized bar could urge a rule that would entitle a lawyer admitted and in good standing anywhere (perhaps after some specified number of years) to open an office anywhere, perhaps following a character investigation. Essentially, this would be a form of national motion admission.
- Twelfth, and even more far reaching, the organized bar could urge a national licensing process to solve all multijurisdictional practice issues and as well, to serve as a prelude to seeking reciprocity in the global community.
It should be noted that many suggest that the "solution" of national motion admission to license permanent presence in a state or a general federalization of the licensing of lawyers goes further than the dilemma addressed by most lawyers at present requires. Others suggest that any attempt at nationalization would have constitutional infirmities.