March 14, 2001
Mr. John Holtaway
ABA Center for Professional Responsibility
541 N. Fairbanks
Chicago IL 60611
Dear Mr. Holtaway:
As discussed, I am attaching the current draft of the report of the Connecticut Bar Association Task Force on Multijurisdictional Practice. We are currently examining the latest Ethics 2000 draft of Rule 5.5 and may make some changes to our proposed version as a result.
Barring some unforeseen circumstance, I will be at the hearing at 9:00 A.M. on March 30, 2001.
Very truly yours,
cc: Donat C. Marchand, Esq.
Mr. Tim Hazen
REPORT OF THE CBA TASK FORCE ON MULTIJURISDICTIONAL PRACTICE
In response to concerns expressed by CBA members, on October 31, 2000, Donat C. Marchand, the President of the Connecticut Bar Association, appointed a task force on Multijurisdictional Practice to "study the facts and questions surrounding the delivery of legal services by lawyers in states in which they are not admitted to practice". (1) The Task Force is to report to the CBA President and House of Delegates by the Annual Meeting on June 11, 2001.
To provide a broad perspective, the members appointed to the Task Force include members of small, medium and large firms, specialists and generalists, and house counsel. (2)
Because of the widespread recognition of the problem, the ABA had earlier established a Commission on Multijurisdictional Practice to investigate the issue and present recommendations. That Commission is conducting hearings and is now scheduled to report to the ABA House of Delegates in August 2002.
The Nature Of The Unauthorized Practice Problem
There exists a host of ethical rules, state laws and case law intended to prevent an attorney from practicing law in a state in which the attorney is not licensed. These unauthorized practice of law rules arose in the nineteenth century when most law was state law, when most business was local in nature and when most lawyers seldom had work which required them to venture beyond their states' boundaries. These practice limitations served the purpose of protecting clients from lawyers who were ill-equipped to deal with the vagaries of legal systems with which they were unfamiliar.
Today's environment is vastly different. The law today is much more complex and vast areas of the law are national in scope rather than state or local. Moreover, business and commerce are predominantly interstate and/or international in nature with the consequence that many lawyers and their clients are constantly on the move and handling transactions that cut across state and national boundaries. Added to the foregoing is the reality that vastly improved systems of communication and transportation have significantly diminished the relevance of state boundaries to the legal profession and to the public generally. The landscape is now dotted with national law firms with offices in multiple jurisdictions. Multinational corporations employ large cadres of attorneys who regularly advise their employers/clients on legal matters involving the laws of numerous jurisdictions.
As a result, most legal observers who have studied the issue have concluded that the existing patchwork of unauthorized practice of law rules is ill-suited for the world in which we now live. Today there is also a widespread perception that clients' interests are best and most efficiently served by allowing lawyers to represent their clients even when that representation takes the lawyer outside the jurisdiction in which she is licensed. A client, for example, which has facilities in ten states, should not have to retain ten different local counsel every time a legal issue is raised regarding the operation of those facilities. Nor should a corporation which does business in all fifty states be expected to employ lawyers licensed in fifty jurisdictions to review its practices and procedures.
In fact, actual practice has kept pace with these changes, but the rules have not. Many lawyers regularly provide services to their clients which would easily violate the unauthorized practice of law rules if applied literally. However, enforcement of the rules in this context had been rare although this may be changing. The profession seems to have accepted a "don't Ask -- Don't Tell" approach. Since the rules have been seldom enforced, enforcement appears to be arbitrary and the result is often perceived as being unfair or unsound. Moreover, when rules are only sporadically enforced, conscientious attorneys are provided little guidance as to what is allowed and what is not--what conduct is proper and what is sanctionable.
In short, the time is ripe for reform. Numerous alternatives have been suggested. These range from national licensure to more modest proposals. Chapter 1, Section 3 of The American Law Institute's The Restatement (3rd) of the Law Governing Lawyers, for example, would permit an attorney to provide services outside the jurisdiction in which the attorney is admitted "to the extent that the lawyer's activities arise out of or are otherwise reasonably related to the lawyer's practice in the jurisdiction in which the lawyer is admitted". The ABA Ethics 2000 Commission has proposed a more far reaching solution. Its proposed revision of Model Rule 5.5 not only captures the essence of the Restatement provision, but it also goes on to provide other safe harbors, including one allowing in-house attorneys to provide services exclusively to their employers in jurisdictions in which the attorneys are not admitted. The Connecticut Bar Association has previously addressed the in-house attorney problem and is advocating a change in the Rules.
Connecticut lawyers have also been addressing the broader issues of multijurisdictional practice. A Connecticut Bar Foundation Symposium in December 2000 probed the issues raised by recent court decisions which have rigidly applied existing unauthorized practice of law rules to conduct many lawyers view as perfectly appropriate. Concurrently, this Task Force was formed to study the issues and issue a report to the House of Delegates of the Connecticut Bar Association.
Conclusions And Recommendations
After reviewing the literature, analyzing the various proposals and discussing the alternatives, the Task Force has reached certain conclusions:
Change is needed. The multijurisdictional practice of law raises immediate issues under the State's current rules of professional conduct and unauthorized practice laws or rules. To the extent possible, an immediate solution should be pursued, even if it is only a partial solution.
Existing laws, rules and precedent lack uniformity, are only sporadically enforced, are widely ignored, and are at odds with prevalent practices. Moreover, they are ill designed to ensure attorney competency, the rationale under which they are defended.
The multijurisdictional practice of law issue is not an issue which primarily focuses on competence; Rule 1.1 of the Rules of Professional Conduct requires a lawyer to act in a competent manner. Rule 1.1 requires lawyers to represent their clients competently and the threat of civil malpractice liability together provide a more direct and effective framework for ensuring lawyer competency than do the unauthorized practice of law rules. Any resolution of the multijurisdictional practice of law issue should maintain this preeminent principle.
Courts and governmental entities should be free to maintain control over the persons who appear before them in a professional capacity. To a reasonable degree, the State's rules should not impede persons who are, or who expect to be, parties to a proceeding before such a body from engaging counsel of their choice, notwithstanding that the necessary formalities of his or her compliance with the rules of the Court or governmental entity may not take place until a later date.
The multijurisdictional practice of law is a feature of the current marketplace for legal services. Accommodating the reality of multijurisdictional practice within the ethical constraints of the legal profession should not have the effect of changing the marketplace unless it imposes rules not now commonly observed in practice.
Loosening the restraints on out-of-state practice will not have a substantial impact on most local practitioners. Local real estate, matrimonial, personal injury and trusts and estates practice will be unaffected by out-of-state lawyers who have no economic incentive to make inroads into such local matters.
Imposition of constraints on multijurisdictional practice of law which prevent a lawyer admitted in this or another state from acting for a client in an otherwise appropriate manner imposes additional costs in time and expense. These increased costs would be perceived by clients as economically unwarranted and unreasonable, would result in less utilization of legal services, and disadvantage those less able to afford legal services. Such constraints are not sufficiently justifiable.
Some accommodation also needs to be made with respect to the in-house council aspects of the multijurisdicational practice of law.
It is in the Bar's interest to facilitate the delivery of quality legal services by its members at reasonable cost.
It is in the State's interest to foster interstate commerce in legal services as in other fields.
Because of the above considerations, the Task Force rejected approaches to multijurisdictional practice issues for which implementation would require the involvement of other states or the federal government. In particular, it was felt a federal system of licensing, or a uniform state licensing or registration system, was not likely to be implemented in the immediate future. Similarly, more comprehensive approaches, such as those that might be the product of the ABA Commission, should be considered, if and when proposed, as a replacement or refinement of a more immediate resolution.
The Task Force therefore endorses a modified version of the Proposed Model Rules 5.5 and 8.5 in the report of the ABA's Ethics 2000 Commission. (3) The safe harbors contained in subsection (b) of Rule 5.5 are felt to treat appropriately a significant number of the multijurisdictional practice issues that arise in common practice. However, the included safe harbors are not considered comprehensive resolutions of the issues. In particular:
The Task Force feels a lawyer admitted in Connecticut with offices in Connecticut, contacted by an out-of-state client to render services partially or wholly outside Connecticut, should not be viewed as engaged in the unauthorized practice of law. The Task Force believes the safe harbor of subsection (b)(2)(ii), and its accompanying commentary, recognizes that this would be appropriate in many circumstances. The Task Force is aware that the ABA's Commission was urged to adopt a more extensive safe harbor in this respect. The Task Force believes the approach of adopting limited safe harbors will address many practical circumstances immediately while allowing further consideration of the appropriateness of other circumstances.
The Task Force considered whether the safe harbor in section (b)(2)(i) was overly limited by using the term "employee". The arrangements between many business entities and their work forces go beyond conventional employee/employer relationships and include temporary employees, independent contractors, leased employees and other similar arrangements. The Task Force believes developing a consensus about an appropriate expansion of the safe harbor to address such circumstances would delay adoption and therefore believes, as in the prior case, that these matters can be add
The inclusion of the in-house counsel provision (§(b)(2)(1)) in the rule proposed by the Task Force has been questioned in view of the broader proposed rule as to house counsel which has been forwarded by the CBA to the Rules Committee of the Superior Court. The proposed rule would be effective only in Connecticut unless other states were to adopt a similar rule. It is more likely that other states will adopt revised Rule 5.5 and thus reciprocity could be available as to those states.
The efficacy of Proposed Model Rule 5.5 assumes that it will be adopted nationwide, and accordingly it focuses on when an out-of-state lawyer would be engaged in the unauthorized practice of law in this state. The Task Force believes a nationwide rule would have significant advantages and should be encouraged. It therefore considers a reciprocity element to be desirable to encourage states to adopt similar rules. For that reason, the Task Force proposes the addition to Model Rule 5.5 of a reciprocity proviso to the first sentence of Section 5.5(b). It also considers that reciprocity would prevent inequitable treatment of lawyers located in border areas, who might be disadvantaged by the ability of lawyers in a neighboring state to practice in Connecticut when they could not do so in the
neighboring state. The Task Force believes it would be worthwhile for the Connecticut Bar to reach out to neighboring states to seek to develop a common, reciprocal approach in a regional compact.
The Task Force feels that as proposed, and in the absence of nationwide adoption, Proposed Model Rule 5.5 might impose on lawyers in this State greater restrictions than are placed on out-of-state lawyers. In particular, subsection (a) as proposed by the ABA Commission would penalize a lawyer admitted in this State under this State's rules for conduct in another state which would be permitted in this State by lawyers admitted in that state. This is the other side of the reciprocity issue. It should be noted that Rule 8.5 of the Rules of Professional Conduct deals with the disciplinary authority and choices of law. Therefore, the Task Force believes it is necessary to amend subsection (a) to provide a similar safe harbor for such conduct by adding a new second sentence to that effect.
As recommended by the Task Force, Proposed Model Rule 5.5 would now read as follows:
(a) A lawyer shall not practice law in a jurisdiction where doing so violates the regulation of the legal profession in that jurisdiction. Conduct described in subsection (b)(1) and (2) in another jurisdiction is not the practice of law for purposes of this subsection (a).
(b) A lawyer admitted to practice in another jurisdiction, but not in this jurisdiction, does not engage in the unauthorized practice of law in this jurisdiction when engaged in the following activities, provided such activities would not constitute the unauthorized practice of law in such other jurisdiction if conducted in such other jurisdiction by a lawyer admitted in this jurisdiction:
(1) the lawyer is authorized to appear before a tribunal in this jurisdiction by law or order of the tribunal or is preparing for a proceeding in which the lawyer reasonably expects to be so authorized; or
(2) other than making appearances before a tribunal with authority to admit the lawyer to practice pro hac vice:
(i) a lawyer who is an employee of a client acts on the client's behalf or, in connection with the client's matters, on behalf of the client's other employees or its commonly owned organizational affiliates;
(ii) the lawyer acts with respect to a matter that arises out of or is otherwise reasonably related to the lawyer's practice on behalf of the client in a jurisdiction in which the lawyer is admitted to practice; or
(iii) the lawyer is associated in the particular matter with a lawyer admitted to practice in this jurisdiction.
(c) a lawyer shall not assist another person in the unauthorized practice of law.
[Italicized portions are additions proposed by Task Force]
The changes to Rule 8.5 proposed in the report of the Ethics 2000 Commission would be compatible with our recommended Rule 5.5. A copy of the proposed revised Rule 8,.5 is appended hereto as Appendix C.
The Task Force believes it appropriate to identify what Proposed Rule 5.5 and 8.5 would not permit:
The Proposed Rules would not allow a lawyer not admitted in this State to open an office in this State, to advertise in this State, or to be held out as admitted in this State.
The Proposed Rules would not excuse compliance with the other rules of professional conduct; it would in fact cause them to be applicable and do not guarantee that a lawyer not admitted in Connecticut would be able to comply with all applicable provisions.
The Proposed Rules would not excuse incompetence.
Proposed Further Action
It should be recognized that many small firm lawyers in Connecticut may express concern that proposed Rule 5.5 would open the flood gates to lawyers from other states soliciting business in Connecticut. This is even more likely to be the case in states which do not have a large number of business law firms and corporations operating in other jurisdictions. As a result, it is quite possible that proposal Rule 5.5 may not be adopted nationally and/or by the majority of the states. If Connecticut lawyers do not fully understand the situation, they may oppose even limited solution proposed by the Task Force.
To obtain support for the proposed rule change, steps must be taken to inform the Bar of the problem, the reasons for finding a reasonable accommodation, and the constraints on the influx of attorneys from other states, all as discussed herebefore.
The realities of the situation are that most Connecticut clients will continue to look for local representation as to most matters. It is the clients of the medium and large size firms which are those more likely to avail themselves of counsel in other states. However, these firms are also most likely to be currently engaged in multijurisdictional practice because they have clients which are engaged in national and international matters.
Because clients seeking attorneys to provide multijurisdictional services are heavily clustered in a limited number of states (e.g, New York, Massachusetts, Connecticut, Pennsylvania, New Jersey, Ohio, North Carolina, California and Illinois), it is more likely that the Bar in those states will have interest in fostering multijurisdictional practice and exempting it from the present unauthorized practice of law restriction.
To secure support for, or at least reduce opposition to, the proposal by Connecticut attorneys, the Task Force should make presentations to local bar associations at which the presenters disseminate information and answer questions. Enlightened discussions should dispel much of the concerns.
Concurrently with efforts to secure endorsement and ultimate adoption of the proposed rule in Connecticut, efforts should be made to explore reciprocal compacts with at least some of the New England states and New York. Such compacts would then provide impetus for reciprocity discussions with other states.
1 The complete charge to the Task Force reads as follows: The purpose of the task Force on Multijurisdictional Practice is to study the facts and questions surrounding the delivery of legal services by lawyers in states in which they are not admitted to practice, a phenomenon caused by increasing demands for attorneys to provide legal services to clients with facilities or activities in a number of states, by clients who have relocated to other jurisdictions and wish to continue the client relationship, and by clients seeking the services of specialists in specific areas of the law. The Task Force will examine the extent of the activity, the causes, potential responses to the issue ranging from keeping the status quo to adopting a single-license national system, and the possible effect upon clients and members of the Connecticut Bar, as well as possible approaches to issues of unauthorized practice of law by the delivery of legal services by an attorney admitted in another state.>2.
2 The members of the Task Force are set forth in Appendix A.3.
3 The text of the revised rule, observations and comments of the Commission are set forth in Appendix B.