John H. McGuckin Re: The In-House Case for Multijurisdictional Practice of Law - Center for Professional Responsibility

February 16, 2001

American Bar Association
Commission on Multijurisdictional Practice
c/o The Center for Professional Responsibility
541 North Fairbanks Court, 14th Floor
Chicago, Illinois 60611-3314

Re: The In-House Case for Multijurisdictional Practice of Law

Ladies and Gentlemen:

Attached is an executive summary of the position of the American Corporate Counsel Association ("ACCA") on the need for multijurisdictional practice (MJP) reform, presented to this Commission in support of my testimony scheduled for 9:00 a.m. on February 16, 2001, in San Diego, California.

The American Corporate Counsel Association is the leading national bar association for in-house counsel. ACCA's membership includes over 12,500 in-house attorneys working in over 5,000 companies and associations throughout the United States and around the world. Since 1986, ACCA’s board and members have actively supported reform of the states' rules relating to the multijurisdictional practice of law ("MJP").

The attached paper sets forth in outline form what we believe is a workable proposal for MJP – a practice we believe is already wide-spread, wholly appropriate to the professional needs of clients, and completely consistent (if the system is reformed) to appropriate state-based regulation of the profession to protect the public. ACCA believes that attorneys admitted and in good standing in any US jurisdiction should be able – under a national compact which allows states to protect local public interests – to provide the legal services their client requires, no matter where the client's matter takes them in the US.

ACCA's position is based on the reality of modern legal practice, but in particular, I would like to underscore the following three points as most pertinent to our position's arguments.

1. Most U.S. companies, both large and small, do business nationwide (if not globally), even if simply to buy supplies or to sell products and services. An in-house attorney located in one state may be called upon to advise on an HR matter in a factory or office in another state, negotiate a contract with a customer or vendor in another state, or advise on a whole range of litigation or transactional matters which occur company-wide.

Many of these companies have a centralized legal department (large or small) located at the company's headquarters. The company's in-house attorneys – by telephone, email, and fax – advise clients and work with other lawyers nationwide. While sitting at their desks, rendering this advice – even if national or interstate in nature – is not likely to raise any MJP concerns. But lawyers from headquarters often need to visit sites in other states to negotiate an acquisition, do due diligence for a public securities offering, develop an environmental compliance program, participate in litigation (or pre-litigation preparation/dispute resolution), or provide other legal assistance. For ongoing matters or major projects, in-house lawyers may spend many days or weeks in another state. If the company has a decentralized law department located in several states, lawyers with a particular expertise may provide legal services company-wide in that area of specialty, travelling from office to office to provide their guidance or to join interdisciplinary teams working on corporate projects. In addition, it is common practice for a corporate employer to reassign an in-house attorney permanently from one office to another. In all of these situations, the same advice given comfortably in compliance with the rules from the lawyer's "home" office in his or her state of admission is now considered suspect; and yet, the only change is the physical location of the lawyer providing the advice.

2. To be competitive and to best manage their legal risks, U.S. companies must be able to retain outside counsel who have the necessary expertise, no matter where the lawyer is physically located. The most effective and professional advice often comes from outside counsel who not only have the needed expertise, but also through past engagements already know the company's officers, policies, procedures, history, and culture. Clients do not want to pay the time or money needed for local counsel to "reinvent the wheel" each time a similar matter arises in an additional jurisdiction.

3. When examining the question of MJP in the inhouse context, it is worth noting that in-house counsel do not hold themselves out for retention to the public. The attorney's sole client is his or her employer. That client has a broad range of actions it can take if an attorney's work is not satisfactory without needing to invoke the protections afforded individual legal consumers by the institutional bar. Thus, many of the objections regarding public interest protection usually advanced against MJP practice do not apply to in-house counsel.

In short, today's practice and clients have evolved significantly beyond the capacities and presumptions of the current system of admission and licensure. Advances in technology, the growth of "business" counseling (as opposed to litigation-based practice), interstate commerce, increasing federal regulation, the globalization of client interests and interconnectivity all impact the nature of our profession's services and changed our clients' expectations and needs for our counsel. Over time, as the legal profession has progressed, so have its rules to meet new challenges. The regulation of lawyer admission and licensure must evolve, too.

Since few would argue that states have a strong interest in (or the financial means and resources) to enforce their current rules against such "victimless" MJP practices, the question before this Commission is what is the best way to create a system that will ensure that the increasing number of lawyers who have a multijurisdictional practice today (and will have one in the future) are doing so professionally, and in conformance with states' interests in protecting the public.

Our proposal provides as follows:

• States would continue to regulate lawyer admission (both first time and subsequent admission). In addition, the states would regulate the multijurisdictional practice of lawyers who occasionally and temporarily cross state lines. This multijurisdictional practice regulation would be guided by the terms of a "national compact" adopted and enacted by each state. (Professor Stephen Gillers of New York University's law school also suggests a "compact" solution; his thoughts were formative in ACCA's policy development. While our prescription is drawn from his use of this term and some of his wonderful ideas, please do not attribute our position to him without his consent.)

• Under the terms of the compact, any lawyer in good standing who has been previously admitted by a state bar (we are not proposing a change in the first-time admission process) could move to a new state of residence and be admitted to the practice of law without retaking the bar examination.

• Further, pursuant to the compact, those attorneys who are admitted in at least one state, with a practice that occasionally or temporarily takes them into other states, would carry with them an "inferred license" that authorizes their practice and subjects them to local regulatory control, without need of additional bar exams or other formal requirements.

Attached is an executive summary of ACCA's proposal, entitled, "The In-House Case for Multijurisdictional Practice of Law in the United States." This statement contains an attachment providing examples of real-life MJP issues that corporate lawyers (both in-house and outside) encounter in their daily practices. Under separate cover, we will be pleased submit a more detailed treatise on MJP for further reading by those who are interested or wish to further explore ACCA's position and underlying arguments.

Since 1986, ACCA has sought to reform the rules of admission and unauthorized practice to reflect the changing realities of modern legal practice. While ACCA's MJP proposal appropriately focuses on the issues as they affect lawyers representing corporate clients, we believe this approach to be equally workable for attorneys in other practice settings. If for any reason our proposal is not found appropriate for other practice settings, we believe it would still provide the best solution for in-house counsel and their corporate clients.

ACCA appreciates the opportunity to participate in this important debate. We look forward to future discussions and to supporting your deliberations.

Respectfully submitted,

John H. McGuckin, Jr.
Chair, Advocacy Committee, Board of Directors
American Corporate Counsel Association
Executive Vice President, General Counsel, and Secretary
Union Bank of California, N.A.

THE IN-HOUSE CASE

FOR THE MULTIJURISDICTIONAL PRACTICE OF LAW

IN THE UNITED STATES

This paper summarizes the proposal of the American Corporate Counsel Association ("ACCA") to recognize the multijurisdictional practice of law ("MJP") in the United States within a regulatory framework that provides both public and legal professionalism protection.

ACCA's membership includes over 12,500 attorneys who work in over 5,000 different companies across the United States and around the world. Since 1986, ACCA’s board of directors, along with the leadership and members of our chapters nationwide, have actively participated in the MJP debate, providing the in-house perspective on this important issue.

ACCA believes that the current system should be reformed to reflect the realities of modern legal practices and clients' needs. ACCA believes that attorneys admitted and in good standing in any US jurisdiction should be able – with due consideration to States' need to protect the public interest – to provide the legal services their clients require, no matter where the clients' matters take them in the US. Our position is based on the following principles.

Today’s Corporate In-house Practice

An increasing number of U.S. companies do business on a national and global scale. As a result, large and small U.S. businesses need legal services that transcend state and national boundaries. When seeking legal advice, these sophisticated consumers of legal services make highly informed choices about the lawyers they employ and seek the most efficient and effective legal services available. These clients generally obtain legal advice through services provided by some combination of in-house and outside counsel. Basing their selection on a lawyer’s experience, expertise, and past track record, today’s corporate clients rarely need the protection afforded individual consumers by existing licensing and disciplinary mechanisms.

The national nature of corporate clients’ legal needs is also reflected in their expectations and use of lawyers. In a world of instant communication, today’s corporate clients rarely think about the location of the lawyer on the other end of the phone call, fax, or email. Companies need competent and quick legal advice on a daily basis. Many in-house counsel are called upon to provide legal services to their corporate employers system-wide, not just in the state in which they are located. In-house counsel advise on labor and personnel matters in any of the company’s locations, negotiate customer or vendor contracts in many states, and advise on regulatory compliance, changes in the law, litigation, pre-litigation, and a variety of transactional matters, all of which may arise at any location in which the company does business.

When a company’s lawyers are all in one location, they provide these services company-wide (without regard to state or national borders, even as they employ their understanding of state, federal and international law). Often they provide these services by phone, fax, or email from the headquarters offices. But sometimes, prudent legal representation requires in-house counsel to visit company locations in other states in order to provide training, conduct investigations, negotiate contracts, interview witnesses, or offer any number of other legal services . The content of their counsel does not change as they travel to multiple locations; they provide the same counseling they would have offered if they had forced the client to come to their offices instead.

Further, it is not unusual for the client to decide to reassign in-house attorneys on a temporary or permanent basis to other locations. Significant transactions or litigation may require temporary relocation or repeated trips to another state. Increasingly, lawyers with similar skills or practice areas are grouped together, or one attorney with particular expertise is given company-wide responsibility for an area of legal compliance, management, or employee training. In each case, the best use of these lawyers’ talents crosses state lines.

Most corporate clients also continue to spend a majority of their legal budgets on the retention of outside counsel. To the client, the outside lawyer’s location is also irrelevant, as long as that lawyer provides what the client needs. On behalf of his client, today's general counsel hires the best, most experienced outside counsel, regardless of the state of his admission (except perhaps for litigation appearances). Telephones, faxes, emails, intranets, extranets, video conferencing, and increasing mobility have all combined to expand corporate clients' options. In-house counsel and their clients can now easily retain outside counsel with both local and national reputations and practices. As a result, in-house counsel develop intricate and longstanding "partnering" arrangements with outside counsel to provide coordinated legal services quickly and efficiently, wherever they are needed. These are success stories in legal practice and are highly professional activities in the manner they are handled.

The Current Debate

The MJP debate forces us to face the reality that today's practice of law is now national (and increasingly global), conducted via the internet, telephone, fax, and by face-to-face meetings facilitated by modern transportation. While we must protect the public from incompetent practitioners and unprofessional behavior, what is needed is a national framework that can overlay our state-based regulatory system to facilitate, not hinder, multijurisdictional practice across state lines.

States should continue to regulate lawyer admission (both first-time and subsequent admissions) and be able to regulate the multijurisdictional practice of lawyers who occasionally cross state lines. The common framework that would create coordinated reciprocity would be a "compact" developed under the leadership of a group such as the Conference of Chief Justices. The compact would then be adopted and enacted by each state's licensing authority.

Under the terms of the compact, any lawyer in good standing who has been previously admitted by a state bar (we are not proposing a change in the first-time admission process) could move to a new state of residence and be admitted to the practice of law without retaking the bar examination.

Those attorneys who are admitted in at least one state, with a practice that occasionally or temporarily takes them into other states, would carry with them an "inferred license" that authorizes their multijurisdictional practice and subjects them to local regulatory control, without need of additional bar exams or other formal requirements.

We are all well-served by a regulatory environment in which clients are served by competent, professional, and ethical lawyers who conform to the authority and discipline of the licensing agencies in all of the state(s) in which they practice. ACCA's proposed system retains a regulatory environment in which incompetent, unprofessional, and unethical lawyers can be disciplined by one or more states and barred from practice.

ACCA does not purport to represent every segment of the legal profession. Our proposal is based on our specific understanding of the needs of corporate clients. We believe, however, that our proposed plan offers an appropriate structure for the larger bar as a whole, and certainly for in-house counsel.

Following is a short outline summary of ACCA's proposed reform. While we recognize that the devil can be in the details, we have provided a concept which we believe is clear and provides a workable foundation for reform of the system.

ACCA's MJP Proposal (outline form)

HOME STATE ADMISSION

A. If a new lawyer took the bar in State A, passed the bar, and was sworn in, State A would be his or her Home State of admission. (No change to the current practice.)

B. If a lawyer moved from his or her Home State of original licensure (State A), to another state (State B), where he or she would establish residency and operate his or her practice:

    1. State B would admit the lawyer to practice in State B if he or she:

a. registered his or her presence and applied for admission with State B's bar within XX days (we would suggest 30), including evidence that he or she is admitted in good standing in State A;
b. paid any relevant fee and processed the necessary paperwork;
c. agreed to be subject to State B's rules and discipline; and
d. passed a character check or investigation, if desired by State B.

    2. Under this proposal, the lawyer:

a. would not have to take State B's bar exam; and
b. would not need proof of practice for the prior X number of years in his or her Home State (thus "grandfathering" those who have been working in states outside of their admission).

    3. Under this proposal, State B would:

a. offer reciprocity to every other state's lawyers in good standing; and
b. license and regulate the lawyer as his or her new Home State for purposes of CLE, pro bono requirements, IOLTA, discipline, proof of licensure, insurance, etc.

OCCASIONAL/TEMPORARY PRESENCE

A. The "drivers' license" model: an inferred license would be recognized by all states for all US lawyers whose practices take them occasionally or temporarily into a non-Home-State jurisdiction under the following terms:

THE STATES' COMPACT TO ENACT THIS SYSTEM

In order for the two pronged system proposed above to work, states would need to agree to join in the creation of a "model" admissions and MJP licensing compact. The compact should be written with the input of every state and under the leadership of a group such as the Conference of Chief Justices. Upon completion of the compact, each state would individually endorse and enact the compact locally as the vehicle for regulating MJP licensure within their jurisdiction.

    • States would not have to adopt a singular or uniform code for first time admissions standards or general ethical conduct, but for purposes of MJP practitioners, they would need to recognize and respect the original admission standards of other states or propose alternatives that would still allow for a multijurisdictional compact in which all states can participate.

    • States may wish to cooperate in the development of a national database of admitted counsel to facilitate reference checks and provide information about each lawyer's admission and standing in the bar(s) of their home states and states in which they engage in MJP.

    • States would agree to assist each other in enforcing discipline as prescribed by the Host State in which an infraction occurred. The Host State would have the option of locally prosecuting infractions or referring them back to the Home State of admission.

CORPORATE COUNSEL SAFE HARBORS

If our proposal for a larger, profession-wide reform is rejected, then we would urge that the states nonetheless enact a compact providing for an in-house counsel safe harbor provision to state UPL/licensure rules which would mirror the terms of the larger proposal outlined above, except that we would substitute the term "in-house counsel" for the term "lawyers." If the principal interest of our state regulatory agencies is the protection of the public, then an in-house counsel safe harbor should pose no concern, yet could help resolve the current MJP problem for in-house counsel. Additionally, in the event that larger reform is seen as unrealistic or too drastic for a first step, the establishment of a safe harbor for in-house counsel would at least offer states a test group to gauge the practical effect of establishing a broader reciprocity system at some future time.

Conclusion

MJP reform is logical, practical, necessary and feasible. It is in the public's best interest to adapt our regulatory machinery to the evolving nature of practice so as to ensure proper regulatory control by the profession of its members. All that is required is for us to put our minds to finding solutions that address our clients', our profession's, and our society's needs, and to do so now.

This is a revised paper, originally submitted to the ABA MJP Commission on February 16, 2001. If you would like additional information about the American Corporate Counsel Association and MJP reform, please contact Susan Hackett, ACCA's senior vice president and general counsel: 202/293-4103, ext. 318 or hackett@acca.com; or visit our MJP section of our website.

A Few Real Life Examples of Multijurisdictional Practice (MJP)

Common to Corporate Lawyers (Both Inside and Outside Counsel)

• An in-house counsel for a tech start-up company in State C is transferred temporarily to help open the company's plant and fulfillment center in State D. He works there for three months without seeking or gaining admission to State D's bar.

• A Fortune 500 client wishes to retain a firm to provide employment-related counseling and dispute resolution for the company's HR functions across the country and around the world.

• The in-house counsel for a bank that has recently merged with another, larger bank is offered a position in the new entity's headquarters in another state.

• A small, local business hires a commercial litigator to take action against an out-of-state supplier who has delivered defective goods and is now claiming bankruptcy.

• An outside lawyer admitted to practice in State A visits his aging parents who reside in State B every month for a few days each month. While in State B, he returns client calls.

• A counsel admitted in State A and working in offices in State A lives in State B and regularly telecommutes from home.

• An in-house counsel in State E moves permanently to State F (by taking a new job, following a spouse who is transferred, or by being reassigned or promoted to leadership at another corporate facility for her current employer) and does not gain separate admission to the bar in State F.

• A lawyer affiliated with a law firm is transferred temporarily (for a few months' rotation in one of the firm's branch offices) and moves to State G without gaining admittance in State G.

• A lawyer involved in a litigation in State H (where he is admitted) travels to States I, J, and K to interview witnesses, conduct discovery, and take depositions.

• A transactions specialist, famous for working on high profile mergers and acquisitions, is flown in by a Fortune 500 company to meet with executive management to discuss an upcoming merger that will affect operations in 50 states and 27 countries.

• A law firm specializing in e-commerce compliance strategies advertises their practice in national newspapers and airport billboards to solicit new clients from across the country.

• The in-house counsel for a drug company is asked to create a crisis management plan and FDA compliance manuals for company employees, and to make presentations at the company's centers and offices in eight different states.