By William T. Barker
Sonnenschein Nath & Rosenthal
It is a commonplace that business and the economy are increasingly becoming global in structure, with little respect for national boundaries, let alone those of individual states. Yet licensure to practice law is almost exclusively the province of individual states. Litigators can avoid the most serious limits this regulatory scheme imposes on practice involving multiple states by obtaining admission pro hac vice by the various courts in which clients wish to have their representation. Transactional lawyers have no similar mechanism to obtain authorization to practice in states where they are not admitted generally. Nonetheless, transactional lawyers frequently represent clients in ways that include providing some portion of their legal services with contacts in states where the lawyers are not admitted. The "foreign" states law may apply, some or all of the subject matter may be in that state, one or more parties (possibly including the client) may be domiciled there, and some of the work (e.g. interviews or negotiating sessions) may occur there.
While such representations are common, there is no explicit authorization for most of them in the governing rules or statutes and the relevant case law is both extremely fragmentary and often hostile (mildly or severely) to the practices addressed by the particular court. To some extent, lawyers who engage in multistate practice have relied on a combination of custom and the infrequency of challenges to permit continuation of their practices. The leading commentator on the subject has aptly characterized this approach as "sneaking around."
Attention of the practicing bar was drawn forcefully by the case of Birbrower, Montalbano, Condon & Frank, P.C. v. Superior Court, in which the California Supreme Court held that a New York lawyers California activities in connection with arbitration of a commercial dispute were unauthorized practice for which the lawyer was thereby precluded from recovering compensation. This was followed by several other significant cases in various jurisdictions, reaching various results on the respective facts at issue.
While the subject has received significant scholarly attention, the focus has been largely normative: what should the law be and, to the extent reform is called for, how should it best be accomplished? The commentary seems unanimous in support of allowing lawyers fairly extensive freedom to engage in practice affecting jurisdictions other than the ones in which they are admitted. (I refer to this type of practice as "extrajurisdictional" to focus on the effects and contacts in the state(s) in which the lawyer is not admitted.) While I support this conclusion, my focus here is different.
Practicing lawyers must make decisions about what they can and cannot do under existing law, as opposed to the reformed law advocated by the commentators. This article focuses on that question, evaluating various lines of analysis applicable to particular types of activities. It concludes that some of them appear fairly clearly permissible, discusses and evaluates the arguments that to varying degrees support permissibility of other activities, and notes some that seem clearly restricted by current law, at least in some jurisdictions. Because both the activities and the lines of analysis are quite diverse, the pattern that emerges is quite complex. An understanding of this analysis should be useful to lawyers trying to shape their practices in ways that will best serve their clients, while avoiding improper activities. It may also be useful to reformers looking for ways to take modest steps in directions where larger steps do not seem feasible.
This article begins by summarizing some of the major results of the analysis. It then begins developing the analysis by a detailed review of the recent cases and the authority on which they relied. It next reviews the one case that, in an injunctive context entered a (consent) decree providing a detailed set of rules on what out-of-state lawyers from the same firm could and could not do in conjunction with their local office. It will then address various common practice contexts and the analysis applicable to each.
Determining an adequately safe course that permits maximum client service is difficult. Literally read, the law in most jurisdictions is highly restrictive, with no real allowance for multi-state matters except the possibility of admission pro hac vice in litigation matters. On the other hand, a significant majority of the (relatively few) cases do make some allowances for multi-state matters and relationships. Moreover, it would be impracticable for a multistate practitioner to operate in full compliance with the most rigid interpretations of laws which were never designed to deal realistically with practice of this sort.
Because any course consistent with current standards of client service has some possibility of running afoul of the most rigid interpretations of the most restrictive laws, no such course can be completely free of risk. One can identify methods of proceeding which appear to be acceptable risks. This is so in part because the usual consequence of an unauthorized practice finding is simply forfeiture of fees for that work. In theory, there could be disciplinary or even criminal consequences, but these almost never occur in reality (and then only in blatant cases). Prosecutors and disciplinary authorities have many concerns more urgent than practice by lawyers from outside the jurisdiction (or practice by their own lawyers in places they are not admitted). Except as noted, all of the activities discussed herein are ones which ought to be regarded as permissible to the extent stated, and the risk being assessed is the possibility that a relevant court might disagree.
The only really detailed guidelines available are those laid down in Florida Bar v. Savitt. But those guidelines are the product of a consent decree and may be more permissive in some respects than other states would accept, were the issue litigated. On the other hand, they also require some formalities (e.g. written confirmation to clients that a particular lawyer is not locally admitted) that might not be required in the absence of such a decree.
Litigation representations, in which pro hac vice admission is available, present only modest problems. While these normally call for pre-filing (and, so, pre-admission) work, I am aware of no case or other authority questioning the propriety of such work. The Restatement offers cogent analysis supporting the propriety of pre-filing work. While client consent does not validate unauthorized practice, a client who has made an informed decision to save costs by acting without local counsel or with only a limited role for such counsel is less likely to use that as a basis to challenge our fees. If a lawyer is or expects to be admitted pro hac vice, there should be little risk, especially with informed client consent.
Working behind the scenes in support of litigation actively conducted by local counsel has been permitted in two recent cases, though one of them relies on the belief that local counsel had been "in charge." If a lawyer is functioning behind the scenes without local admission, local counsel should review and adopt the out-of-state lawyers work. On that basis, this, too, appears to present only minimal risk.
Federal agencies are authorized to regulate practice before themselves and to admit even non-lawyers to do so. The IRS and the Patent Office, among other agencies, do admit non-lawyers. An SEC rule permits practice by lawyers admitted in any state, and other agencies may have similar rules. Federal supremacy requires states to permit those authorized to practice before federal agencies to engage in activities reasonably related to such practice, even if they are not admitted to the local bar and their activities would constitute the practice of law under the states definition. But the precise scope of permissible activities other than directly addressing the agency is very ill defined.
In theory, it is possible to avoid unauthorized practice by having the out-of-state lawyer act only as a consultant to a local lawyer or by having the local lawyer closely supervise the work. In practice, this may not be feasible, because the out-of-state lawyer is the real expert or, at least, the lawyer to whom the client primarily looks. But consultation with a locally licensed lawyer is clearly permissible, so delivery of transactional advice to a clients inside or other locally licensed counsel for that lawyers use in advising the client should be quite safe. (This would be the transactional equivalent of behind the scenes work in litigation actively conducted by local counsel.)
Involvement of a local lawyer in a lesser capacity has considerable utility in fending off charges of unauthorized practice, though it is not a sure-fire preventative. In particular, such involvement may forestall inquiry into the precise division of responsibility among the lawyers. Assumption by the local lawyer of responsibility for the out-of-state lawyers conduct (e.g. because they are members of the same firm) would also seem helpful.
As a constitutional matter, it is doubtful that a state properly could restrict practice by a lawyer who remains physically within a state in which the lawyer is authorized to practice, even if the client and matter are located elsewhere and the lawyer gathers information and dispenses advice electronically or by mail. While some dicta suggest the possibility of such restrictions by a state which is the location of both the client and the matter, there is no authority for actually doing so. At least two courts have held such activity permissible.
Because the declared purpose of the prohibition on extrajurisdictional practice is protection of local clients against possibly incompetent representation, the prohibition may not apply at all (or may be subject to more lenient application) where the client is non-local, especially if the client and the lawyer are from the same jurisdiction or, perhaps, have a pre-existing relationship. Leniency is also likely to be promoted by existence of out-of-state aspects of the matter, especially if some or all such aspects relate to a jurisdiction in which the non-local lawyer is admitted.
Birbrower denied fees to out-of-state lawyers for work in California. A New York law firm, Birbrower, rendered legal services to a California-based corporation, ESQ, with respect to a dispute with another California-based corporation. The dispute was to have been arbitrated in California, but settled first. So far as one can tell from the opinion, the matter had no contact with any state but California, and Birbrower had no contact with California other than its retention for this matter. In particular, there is no indication of any preexisting relationship between Birbrower and ESQ on other matters.
The lawyers met in California with client personnel and accountants, held a negotiating session in California with counsel for the opponent, and interviewed potential arbitrators in California. The office work in preparing the matter was done in New York. No California lawyers were involved in the representation. The California Supreme Court held that the law firm could not recover fees for the work performed while the lawyers were physically in California, but that fees might be recoverable for the office work in New York.
The fee agreement had originally been a contingent fee of one-third of the recovery and was later modified to fixed fee of over $1 million. The validity of the modification was disputed. The court did not decide whether the agreement was severable to allow contractual recovery for the services rendered in New York and also left open the possibility of recovery in quantum meruit.
By quoting Ethical Consideration 3-9 of the ABA Model Code of Professional Responsibility, the court recognized that "the demands of business and the mobility of our society" counsel against "regulation that unreasonably imposes territorial limitations upon the right of a lawyer to handle the legal affairs of his client or upon the opportunity of a client to obtain the services of a lawyer of his choice." It also noted the lack of precedent on what activities by an out-of-state lawyer would constitute practice "in California." On the latter issue, it opined:
In our view, the practice of law "in California" entails sufficient contact with the California client to render the nature of the legal service a clear legal representation. In addition to a quantitative analysis, we must consider the nature of the unlicensed lawyers activities in the state. Mere fortuitous or attenuated contacts will not sustain a finding that the unlicensed lawyer practiced law "in California." The primary inquiry is whether the unlicensed lawyer engaged in sufficient activities in the state, or created a continuing relationship with the California client that included legal duties and obligations.
In the courts view, the lawyers physical location is relevant, but not dispositive:
For example, 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 modern technological means. Conversely, although we decline to provide a comprehensive list of what activities constitute sufficient contact with the state, 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."
Applying this standard to Birbrowers activities, the court found unauthorized practice:
[B]irbrower engaged in unauthorized law practice in California on more than a limited basis, and no firm attorney engaged in that practice was an active member of the California State Bar. . . . [I]n 1992 and 1993, Birbrower attorneys traveled to California to discuss with ESQ and others various matters pertaining to the dispute between ESQ and Tandem. Hobbs and Condon discussed strategy for resolving the dispute and advised ESQ on this strategy. Furthermore, during California meetings with Tandem representatives in August 1992, Hobbs demanded Tandem pay $15 million, and Condon told Tandem he believed damages in the matter would exceed that amount if the parties proceeded to litigation. Also, in California, Hobbs met with ESQ for the stated purpose of helping to reach a settlement agreement and to discuss the agreement that was eventually proposed. Birbrower attorneys also traveled to California to initiate arbitration proceedings before the matter was settled. As the Court of Appeal concluded, ". . . the Birbrower firms in-state activities clearly constituted the [unauthorized] practice of law" in California.
Birbrower argued that the purposes of the unauthorized practice prohibition would not be served by its application to out-of-state attorneys, at least when retained by clients fully informed of their lack of local licensure. The court disagreed. Quoting Spivak v. Sachs, it reasoned that the prohibition protects "local citizens against the dangers of legal representation and advice given by persons not trained, examined and licensed for such work, whether they be layman or lawyers from other jurisdictions." In the absence of proper training, examination and local licensing, the Birbrower court pronounced it "irrelevant . . . "[w]hether an attorney is duly admitted in another state and is, in fact, competent to practice" locally.
Spivak denied fees to a California lawyer summoned to New York by an acquaintance to assist her in developing a strategy to resist her husbands attempts to gain custody of their children in a Connecticut preceding. The lawyer spent 14 days in New York working with the client and her local lawyers. He drafted proposed settlement agreements, advised on whether Connecticut or New York was the preferable jurisdiction, advised on issues concerning property settlement and custody, and (unsuccessfully) urged a change of counsel. When requested to come to New York, the lawyer had stated that he would charge his expenses and a reasonable fee. The trial court had awarded $3500 ($250 per day) in fees and $1600 in expenses.
The lawyer argued that this "isolated incident" did not constitute "practice" in New York. The New York Court of Appeals refused to so characterize activity of this duration and extent. More usefully for interstate practitioner, it recognized a "danger" that the statute "could under other circumstances be stretched to outlaw customary and innocuous practices." It expressed agreement with the New Jersey Supreme Court that "recognizing the numerous multi-State transactions and relationships of modern times, we cannot penalize every instance in which an attorney from another State comes into our State for conferences or negotiations relating to a New York client and a transaction somehow tied to New York."
The case to which the Spivak court looked was Appell v. Reiner. That case involved services rendered by a New York lawyer to a New Jersey corporation and its New Jersey sole shareholder and alter ego. The lawyer had first represented the shareholder in a contest of his fathers will, in New York. to the corporations creditors, some of whom were in New York and some in New Jersey. The various obligations "were so intertwined as to constitute an inseparable unit." The Chancery Division had held that the lawyer could only recover for working out the New York debts, reasoning that "legal services to [be] furnished to New Jersey residents relating to New Jersey matters may be furnished only by New Jersey counsel." The New Jersey Supreme Court allowed recovery for the entire representation.
While acknowledging that the principle enunciated by the Chancery Division was "generally controlling," the court thought that "there are unusual situations in which a strict adherence to such a thesis is not in the public interest." Of particular concern were "the numerous multi-state transactions arising in modern times." This being such a situation, the court concluded that the lawyers "agreement to furnish services in New Jersey was not illegal. . . . Under the peculiar circumstances here present, independent negotiations by members of different bars, even though cooperating to the greatest extent, would be grossly impractical and inefficient." Retention of two lawyers would also have inflated the total legal fees, a burden to be avoided, if possible.
Other Recent Cases
In determining the full impact of Birbrower, it is useful to consider two subsequent cases: Fought & Co. v. Steel Engineering & Erection, Inc. and Condon v. McHenry.
Fought involved a claim for statutory fees. Fought, an Oregon firm, was a subcontractor on a Hawaii state construction project. It had supplied steel that the state said failed to conform to contractual specifications. After obtaining summary judgment on the merits, Fought sought fees. While the in-court work had been handled by Hawaii counsel, extensive work was also performed in Oregon by Foughts outside general counsel, Kobin & Kobin. The state argued that this work constituted unauthorized practice, prohibited by Hawaii law. The Hawaii Supreme Court disagreed.
The court extensively cited and quoted Birbrower in reaching its result. In particular, it noted the language opposing "unreasonable territorial limitations" on the right of clients to obtain (and lawyers to render) legal services. Interpretation of statutes prohibiting unauthorized practice "must be expansive enough to afford the public needed protection from incompetent legal advice," but not so broad as to unnecessarily impair other public interests.
[T]he transformation of our economy from a local to a global one has generated compelling policy reasons for refraining from adopting an application so broad that a law firm, which is located outside the state of Hawaii, may automatically be deemed to have practiced law "within the jurisdiction" merely by advising a client regarding the effect of Hawaii law or by "virtually entering" the jurisdiction on behalf of a client via "telephone, fax, computer, or other modern technological means."
Fought involved parties domiciled in five different jurisdictions. In this context, the court found it obvious that
a commercial entity that serves interstate and/or international markets is likely to receive more effective and efficient representation when its general counsel, who is based close to its home office or headquarters and is familiar with the details of its operations, supervises the work of local counsel in each of the various jurisdictions in which it does business.
Prohibiting or discouraging use of extrajurisdictional counsel to assist with a multi-state dispute would imprudently "increase the total cost of legal representation and . . . magnify the difficulty of controlling multi-jurisdictional litigation." Moreover, far from protecting clients from incompetent representation, such a rule might subject them to it. "In many instances involving complex litigation among parties domiciled in different jurisdictions, competent representation undoubtedly requires consultation with legal counsel licensed to practice in another jurisdiction."
Applying the Birbrower standard to the Kobin firm, the court held that it had not practiced "in Hawaii":
Fought and Kobin are both located in Oregon. Hence, Kobin did not represent a "Hawaii client." Furthermore, all of the services rendered by Kobin were performed in Oregon, where the firms attorneys are licensed. Kobin did not draft or sign any of the papers filed during the appeal, did not appear in court, and did not communicate with counsel for other parties on Foughts behalf. Finally, Kobins role was strictly one of consultant to Fought and Foughts Hawaii counsel. We are convinced that Foughts Hawaii counsel were at all times "in charge" of Foughts representation within the jurisdiction so as to insure that Hawaii law was correctly interpreted and applied. While Kobin undoubtedly contributed to the successful completion of the litigation in this case by its collaborative effort with Foughts Hawaii counsel, we cannot say, on the record before us, that Kobin rendered any legal services "within the jurisdiction." Because Kobins law practice in Oregon is not regulated by Hawaii law, it is apparent that Kobin did not violate HRS §§ 605-14 and 605-17 or the public policy embodied by those statutes in rendering legal services to Fought.
Condon was a prolonged and acrimonious California probate proceeding. The Colorado co-executor, Michael, had retained Colorado counsel, the Elrod firm, plus local counsel for court appearances and the like. His California co-executor, Caroline, had California counsel, and she objected to the application for fees for the Elrod firm, challenging the necessity of some of its work and the reasonableness of its charges. The trial court did not rule on her objections, but instead denied fees on the ground that the Elrod firms involvement, without admission pro hac vice, constituted unauthorized practice. Almost all the firms work was performed in Colorado, using telephone and other media to communicate with California. The court of appeal reversed and directed that the Elrod firm be awarded a reasonable fee. The California Supreme Court ordered this decision reconsidered in light of Birbrower. But only the opinion was revised; the result was unchanged on reconsideration.
The court of appeal pointed out that Michael had a statutory right to select his own counsel and that it was reasonable for him to use counsel convenient to his residence, especially as the firm had prepared the will under which he served. It read Birbrower to hold that the object of the statute prohibiting unauthorized practice was solely to protect California clients (individual residents and companies with their principal places of business in California). Because Michael was not a Californian, there was no violation of the statute when the Elrod firm entered California, "either physically or virtually," to practice law on Michaels behalf.
Fought also tends to support this limitation on unauthorized practice restrictions, and that limitation seems both consistent with Birbrower and justified precisely because it limits the effect of the dubious "virtual presence" dicta.
Florida Bar v. Savitt
The only reported case which has ever addressed the operations of an interstate firm in any detail is Florida Bar v. Savitt. Strook & Strook & Lavan opened a Miami office, allegedly assigning Savitt, a partner not admitted in Florida, to manage the office. An original proceeding for an injunction was concluded by the courts adoption of a consent decree forbidding some activities as unauthorized practice and permitting others.
The Florida office was required to be managed by a partner admitted in Florida. Any non-Florida lawyer functioning in the office on a permanent basis could do so only as a law clerk under direct supervision of members of the Florida bar. No non-Florida lawyer could be permitted "to exercise supervisory control" over admitted Florida associates "with respect to matters essentially involving Florida law for persons residing in Florida or business enterprises having their principal places of business in Florida." Lawyers not admitted in Florida would engage in professional activities in Florida only (1) as permitted by temporary admissions, (2) as "transitory professional activities incidental to essentially out-of-state transactions," and (3) as "coordinating supervisory activities in essentially multi-state transactions in which matters of Florida law are being handled by members of the Florida Bar."
In addition to the considerable scope allowed by the last provision, non-Florida lawyers could provide advice on matters of federal law and with respect to federal agency practice so long as any activities in Florida were on a transitory basis and it was both made clear to the client and confirmed in writing that the lawyer was not admitted in Florida. With similar conditions, non-Florida lawyers could advise non-Florida clients on matters of non-Florida law in transactions with Floridians, so long as any matters of Florida law were handled by admitted lawyers.
Alternatively, non-Florida lawyers could deal with the firms Florida lawyers in any way, including those involving the practice of law, "so long as such activities merely constitute assistance to [Florida lawyers]" and "if the result of such activities is utilized, it is the product of, or is merged into the product of [a Florida lawyer who] takes professional responsibility." Any communication with clients would be permitted so long as it was made clear that the lawyer so communicating was not admitted in Florida and such communication "is made either in the presence of, or with the written approval of, [a Florida lawyer] who assumes professional responsibility for any such communication and retains the direct relationship with the client."
Admission Pro Hac Vice: Prefiling Work
Admission for a particular case removes most questions about the propriety of the lawyers involvement in that case. But the lawyer cannot be admitted until the case is filed. If pre-filing work includes activity constituting practice or law in that jurisdiction, is that activity unauthorized?
There is little direct judicial authority on the point, but the Restatement says such activity is permissible. It relies on the fact that admission is normally granted as a matter of course. At least one state has formally established a sort of presumption in favor of admission:
The right to have counsel of ones choice, although not absolute, is important enough to require a legitimate state interest before a person can be deprived of that right. . . . In this period of greater mobility among members of the bar and the public, . . . [a] litigants request to be represented by counsel of his choice, when freely made, should be respected by the court, unless some legitimate state interest is thwarted by admission of the out-of-state attorney.
In the context of normally routine admission pro hac vice, the Restatement takes the position that "[a]ctivities in contemplation of such admission are . . . authorized, such as investigating facts or consulting with the client within the jurisdiction prior to drafting a complaint and filing the action." Alternatively, the admission, once granted, might be said to relate back to authorize the pre-filing activities. Because pre-filing activities are extremely common, I think either the Restatements view or the relation-back alternative gains considerable support from the absence of any challenge to the propriety of such activities.
If the contemplated litigation is to be conducted in federal court, California law, at least, clearly permits prefiling work. For example, where an attorney moved to California and established an office for practice in the federal district court (where he was admitted), that did not involve any violation of the prohibition on unauthorized practice. "[S]tatutes enacted for the purpose of regulating the practice of law in this state are applicable to our state courts only. The federal courts are governed entirely by federal enactments and . . . rules." On the same rationale, an Illinois bankruptcy attorney who came to California to work with the clients California attorneys on a pending bankruptcy matter did not violate the statute. And this limitation on the reach of the prohibition was reaffirmed in Birbrower. As will be seen, state law is probably powerless to forbid such activity.
A helpful, though not very articulate, case on prefiling activity is Soumah v. Flachs. Flachs was a Virginia attorney, also admitted by the Maryland federal court. Soumah, then a Virginia resident, was injured in a Maryland accident on March 8, 1992. At the request of Soumahs brother, Flachs met on April 3 with Soumah at the Maryland hospital where she was confined, and she retained him on a contingent fee. He did not tell her that he would not be able to handle the case alone in a Maryland state court.
Flachs began investigating and expending considerable effort and money in Maryland to collect and preserve evidence. On June 5, soon after her release from the hospital, Soumah moved to Maryland, eliminating any possibility that diversity of citizenship could permit suit in federal court. In July, Flachs approached a Maryland attorney about participation in the case. The two met with Soumah, at which time Flachs explained the limitations on his ability to represent her in Maryland. The Maryland lawyer did not agree to represent Soumah. The next month, Soumah discharged Flachs.
Flachs sued for his services and expenses in preparing the case while retained. One issue was whether the discharge was for cause. If not, he would be entitled to immediate, noncontingent payment in quantum meruit. If so, any right to compensation would remain contingent on success of Soumahs claims. The court ruled that failure to tell Soumah at the outset of the jurisdictional limits of Flachs ability to represent her provided sufficient cause to prevent removal of the contingency.
But Soumah argued that Flachs was entitled to no compensation at all, because Flachs was not licensed in Maryland. The court disagreed, noting that Flachs did not maintain a Maryland office, had not held himself out to the Maryland public as an attorney, and had engaged in no Maryland advertising or solicitation leading to his retention, and further noting the need to accommodate "multi-state transactions." Merely taking a case that may need to be filed in Maryland and collecting and preserving evidence for that case did not forfeit all right to compensation.
While the court does not explicitly rely on them, two factors seem especially important in Soumah. First, Soumah was a Virginia resident at the time she retained Flachs and during the time when most or all of the work was done. Several courts have held that unauthorized practice laws protect only local residents. Second, during that same period, Flachs could legitimately have been preparing the case for filing in the Maryland federal court, to which he was admitted and as to which Maryland was powerless to limit his practice. So Soumah offers only modest help on prefiling activity absent at least one of these facts. Yet, Soumah did not limit compensation to services rendered before the move to Maryland, so it does offer a little support for prefiling activity generally.
If the matter involves a federal claim or defense, and regardless of the court in which it has been or might be brought, the propriety of prefiling activity is supported by the leading case of Spanos v. Skouras Theatres Corp. Skouras had retained Spanos to assist with an antitrust case against the major movie producers in the Southern District of New York. Spanos was a successful California lawyer expert in motion picture antitrust matters. At Skouras instance, he came to New York to work (apparently full time) for three years to assist other law firms, which had already begun preparation of the case. Spanos insisted on a co-lead role and a fee (annual plus a contingency) equal to that of the other lead counsel. Although he could have been admitted to the New York bar on motion after six months residence and could have been admitted pro hac vice in the federal court at any time after filing, neither step was taken. When he sued for the contingent amount (apparently based on a settlement), Skouras defended (and counterclaimed for prior payments) on the ground that Spanos was not authorized to practice in New York.
The district court gave judgment for Spanos. While a panel of the Second Circuit reversed, an en banc rehearing resulted in affirmance. Writing for the en banc court, Judge Friendly first agreed with the district court that the award could be sustained on the ground that Spanos would have been admitted pro hac vice had the request been made; Skouros should not benefit from its failure to have its other counsel make the request and from firing Spanos before this was done. Admission would have permitted all of the work performed by Spanos in New York, not merely court appearances. Because the contract could have been performed in a lawful manner, it was not contrary to public policy.
As the suit had not yet been filed when Spanos was retained, this part of the opinion arguably validates pre-filing work, even apart from the more expansive discussion that followed. But the opinion does not exclude the possibility that Spanos began his work in California and came to New York after the suit was filed. Moreover, all hourly charges for Spanos work were already paid and even the panel declined to order refund of those payments. So the validation implied by the reasoning would only be dictum: the pre-filing work alone would hardly support a contingent bonus.
Even though the foregoing reasoning would have disposed of the case, Judge Friendly also developed an alternate rationale. Spanos acted solely in association with duly admitted New York lawyers, though concededly not under their supervision. The en banc court expressly held that
under the privileges and immunities clause of the Constitution no state can prohibit a citizen with a federal claim or defense from engaging an out-of-state lawyer to collaborate with an in-state lawyer and give legal advice concerning it within the state.
This holding was premised on the view that "where a right has been conferred on citizens by federal law, the constitutional guarantee against its abridgement must be read to include what is necessary and appropriate for this assertion." "In an age of increased specialization and high mobility of the bar," this included the right to assistance of out-of-state counsel "subject only to the valid rules of courts as to practice before them." While the dissent had suggested broadening the rules for admission pro hac vice, the court found this insufficient:
The federal matter on which the help of a non-resident specialist is sought may be pending in a different state or may not be a suit at all, and specialized legal advice may be needed without the delay or expense incident to admission by a federal court before which the attorney may not have any intention of practicing . . . . Having exercised their constitutional right to obtain expert legal assistance on their antitrust claim which they desired, defendants cannot be heard to object to paying the bill.
The court also pointed to Spanos special expertise in "antitrust problems in the motion picture industry -- a subject requiring detailed knowledge both of the decisions and of complex business practices." The court did not believe that the Constitution permitted New York to obstruct access to such assistance by criminalizing in-state performance of "interviewing witnesses and other time consuming tasks essential to the rendition of proper legal advice and the effective pursuit of antitrust claims". To permit this would preclude use of out-of-state lawyers unless their work were
performed at great inconvenience where New Yorks writ does not run. . . . If a corporation operating across state lines wishes a particular lawyer or firm of lawyers to supervise the handling of all its problems in one of such fields, we do not see how a state can constitutionally insist that a local manager come to the expert bearing bales of papers with him, rather than vice versa.
Finally, the court commented on the argument (advanced by the New York City bar) that it should be unnecessary even to associate a member of the local bar:
A good deal can be said for such a position; for example, in the case just put of the corporation having nationwide operations, it would seem absurd that when the out-of-state trademark specialist goes to a local branch, he should be required to obtain the assistance of a resident general practitioner for whose views he would have little regard. Yet there is also a case for the other side. The disparity in requirements for admission to the bar gives a state maintaining high qualification standards some interest in seeing that its residents do not take action even on a federal right solely on the advice of a lawyer from another state; moreover, what is basically a federal claim or defense may depend in part on an "issue or claim which has its source in state law." We thus limit our holding to the situation here presented, where a citizen has invited a duly licensed out-of-state lawyer to work in association with a local lawyer on a federal claim or defense.
The court expressly refrained from addressing the use of out-of-state lawyers in diversity cases, and explicitly refused to sanction establishment of a local office to advise all comers on federal law.
Unfortunately, the Supreme Court has cast doubt on the constitutional holding of Spanos. There are good arguments that what is important to this analysis survives. But that is far from certain.
In Leis v. Flynt, the Supreme Court held that an out-of-state attorney has no entitlement to admission pro hac vice or even to any form of due process before admission is denied. This case arose from a state obscenity prosecution. Flynt sought to have out-of-state counsel admitted pro hac vice, and the state court summarily refused this. The state supreme court declined to intervene. Flynt and his counsel then obtained a federal injunction against further state proceedings unless and until counsel was given a hearing on the motion for admission. The Supreme Court reversed.
Due process analysis is not implicated unless the complaining party has been deprived of some interest in "life, liberty or property." Such an interest must rest on a "claim of entitlement . . . derived from statute or legal rule or through a mutually explicit understanding." Because state law granted the trial court unfettered discretion, the attorney could not establish such a "claim of entitlement."
Justice Stevens dissent (joined by Justices Brennan and Marshall) placed considerable reliance on the constitutional reasoning of Spanos. The Court responded by noting the narrower alternate ground in Spanos and stating that the constitutional holding "must be considered to have been limited, if not rejected entirely, by Norfolk & Western R. Co. v. Beatty."
Beatty was an attempt to compel an Illinois court to admit Missouri lawyers pro hac vice as trial counsel to defend a railroad in an FELA action. In denying their admission as principal trial counsel, the state court had permitted them to be associated, "but only in a supporting, consulting or advisory role at trial." The federal court found no defect in the Illinois rule which vested the state court with discretion to grant or deny admission to try the case:
That the cases are of federal origin, that the Plaintiffs attorneys have been permitted to appear without limitation numerous times in the past, that the cases are presently being prepared for trial, that the Plaintiffs attorneys are specialists regularly representing Plaintiffs in Madison County and elsewhere, that Plaintiffs in the state cases have freedom to select the forum of their choice, that the accidents involved occurred elsewhere, that Plaintiffs attorneys have caused no disciplinary problems--these are not factors singly or cumulatively which require that the Illinois statute be found constitutionally deficient. To view it otherwise would be for this Court to create a limited federal or national bar and to impose it on the states. To do so would be in total disregard of the states great interests in the control and supervision of the practice of law in its own courts through reasonable requirements for licensing and admission.
The railroad invoked the constitutional analysis in Spanos, to which the district court responded that "some of the language . . . relied upon . . . was not necessary to the decision of that issue." The court also cited the Spanos dissent decrying the supposed infringement of courts "power to regulate who practices before them".
But even if the district court in Beatty meant to reject the constitutional holding in Spanos, a summary affirmance approves only the judgment, not the opinion. Beatty clearly supports Leis, but both are consistent with Spanos.
The Spanos court did not assert any right to have a non-admitted lawyer conduct a case in court. Rather, it found a right to obtain out-of-court services in aid of those provided by locally admitted counsel. There was no need for any claimed right to admission pro hac vice, because the district court had said such admission would have been granted. The right described by Spanos was expressly declared to be "subject . . . to the valid rules of courts as to practice before them." Moreover, Beatty relied on the permission for the Missouri lawyers to assist in defense of the case, even though they could not take the principal role at trial. In Beatty and Leis, the Supreme Court rejected only attempts to extend the constitutional holding of Spanos, not the holding itself.
Admission Pro Hac Vice:
Ancillary Activities Outside Forum
The Restatement treats temporary admission as permitting "the lawyer to engage within the jurisdiction in all customary and appropriate activities in conducting the litigation, including appropriate office practice." Additionally, it sees authorization to conduct a particular pending case as permitting ancillary activities in other jurisdictions:
A lawyer who is properly admitted to practice in a state with respect to litigation pending there, either generally or pro hac vice, may need to conduct proceedings and activities ancillary to the litigation in other states, such as counseling clients, dealing with co-counsel or opposing counsel, conducting depositions, examining documents, interviewing witnesses, negotiating settlements, and the like. Such activities incidental to permissible practice are appropriate and permissible.
Here, too, the activity described is very common and its propriety unchallenged. This provides some comfort.
To be sure, Birbrower described the "exceptions" to the requirement of local licensure as "narrowly drawn and strictly interpreted." But this statement rejects a request to permit, by analogy, activity clearly not within the exceptions, on the theory that such activities are arguably similar to those the exceptions authorize. It does not seem to call for narrowly construing the authority granted where the exceptions do apply.
On this basis, I find activity relating to litigation in which admission has been or is expected to be granted to be low risk. The risk can be further lowered by early identification and involvement of local counsel (within the lawyers firm, if the firm is multijurisdictional, or outside).
Behind the Scenes Litigation Work
Lawyers are commonly involved in litigation in which they do not appear, either being shown as "of counsel" or acting entirely behind the scenes. Duly admitted local counsel handles all in-court work, discovery, dealings with opposing counsel, etc. Such lawyers may strategize, advise on legal theory, draft papers, investigate facts, prepare witness and do any other behind-the-scenes work. Because they do not appear, they do not obtain the benefit of pro hac vice admission.
Even so, Fought and Condon support the propriety of this sort of involvement. So does Brooks v. Volunteer Harbor No. 4, in which a Maine attorney was permitted to collect fees for coming to Massachusetts at the behest of a Massachusetts client and then selecting and assisting Massachusetts counsel in defending a suit. There is no indication of admission pro hac vice.
Moreover, because local counsel must implement any action the out-of-state lawyer advises, local counsel has the opportunity to review all such actions and protect the client against any advice which falls below the level of competence. In this sense, Fought is correct in describing local counsel as "in charge," even if the outside general counsel likely had a greater role in developing strategy and advising the client on it. An analogy could also be drawn to cases holding that an unlicensed lawyer may advise and consult with licensed lawyers so long as only the latter deal with clients or courts.
Yet again, one can draw comfort from the absence or any challenge to the propriety of this very common type of conduct. As with pro hac vice litigation practice, I see this as low risk.
Federally Authorized Practice
While practice of law is primarily regulated by the states, federal law authorizes some forms of practice. As one would expect, federal supremacy precludes state restriction of such practice, leaving only the question of defining the scope of the practice authorized.
The leading case is Sperry v. Florida. Sperry was a nonlawyer, registered by the United States Patent Office as a patent agent. The Florida courts found that he was engaged in the unauthorized practice of law and enjoined him from doing so in the future. He was specifically enjoined to refrain, within the state, from (1) preparing or prosecuting (or holding himself out as qualified to prepare and prosecute) applications for letters patent, and amendments thereto; (2) rendering legal opinions, including opinions as to patentability or infringement on patent rights, and (3) preparing drafting or construing legal documents. The Supreme Court of Florida concluded that these activities constituted the practice of law and that neither the Constitution nor any federal statute empowered the Patent Office to authorize such conduct within the territory of a state. The United States Supreme Court ordered the injunction vacated.
The Court accepted "the determination that under Florida law the preparation and prosecution of patent applications for others constitutes the practice of law." Indeed, the Court itself emphasized the breadth of the functions involved in Patent Office practice, which
inevitably requires the practitioner to consider and advise his clients as to the patentability of their inventions under the statutory criteria, as well as to consider the advisability of relying upon alternative forms of protection which may be available under state law. It also involves his participation in drafting of the specifications and claims of the patent application, which . . . "constitutes one of the most difficult legal instruments to draw with accuracy." And upon rejection of the application the practitioner may also assist in the preparation of amendments, which frequently requires written argument to establish the patentability of the claimed invention under the applicable rules of law and in light of the prior art.
Given the breadth of the knowledge and judgment required for preparation and prosecution of patent applications, the Court recognized that "Florida . . . could validly prohibit nonlawyers from engaging in this circumscribed form of patent practice." In doing so, the Court rejected any effort to reconcile the federal authorization with the supposed exclusivity of state regulation by limiting nonlawyer patent agents to ministerial functions not rising to the level of practicing law.
The Court found that the statute expressly authorized the Commissioner of Patents to permit practice by nonlawyers and that the Commissioner had explicitly granted that right. Florida could not "deny to those failing to meet its own qualifications the right to perform the functions within the scope of federal authority":
A State may not enforce licensing requirements which, though valid in the absence of federal regulation, give "the States licensing board a virtual power of review over the federal determination" that a person or agency is qualified and entitled to perform certain functions, or which impose upon the performance of activity sanctioned by federal license additional conditions not contemplated by Congress. "No state law can hinder or obstruct the free use of a license granted under an act of Congress."
To be sure, nonlawyer "patent practitioners are authorized to practice only before the Patent Office, [so] the State maintains control over the practice of law within its borders except to the limited extent necessary for the accomplishment of the federal objectives." Indeed, the Commissioner only seeks to authorize "performance of those services which are reasonably necessary and incident to the preparation and prosecution of patent applications."
The question remaining after Sperry is the scope of the authority conferred by admission to practice before an agency. At a minimum, it includes representing clients before the agency in any type of proceeding the agency can entertain (unless the authorization to practice is limited to certain types of proceedings), together with any services "reasonably necessary and incident to" such representation. It includes advising clients on whether they should institute proceedings before the agency, just as a patent agent can advise on whether to rely on state law protections as an alternative to seeking a patent. As a result, and by analogy to the jurisdiction of a federal court to determine its own jurisdiction, it must include the authority to review a clients problems and advise whether those problems can be addressed by any of the proceedings the practitioner is authorized to pursue. (In the patent context, such advice would pertain to whether the client has made a patentable invention.)
Though there is scant authority on the point, I would think the authority to practice before an agency includes planning advice: advising a client, based on the federal law administered by the agency admitting the practitioner, on what steps a client might take, under state law, to pursue agency proceedings with maximum benefit or prospect of success. The agency practitioner presumably could not, without involving a state-licensed lawyer, advise on actual implementation of such advice by drafting the necessary documents or reviewing their efficacy under state law. Nor, if state law proceedings of some sort would be more useful than federal proceedings, could an agency practitioner rely on federal authority to permit the giving of advice on the relative merit of different state-law approaches
A broad view of federal agency practice is supported by In re Florida Bar Advisory Opinion - Nonlawyer Preparation of Pension Plans. The Bar sought judicial approval of an opinion finding that certain types of nonlawyer involvement in preparation of pension plans would constitute unauthorized practice. It proposed to prohibit
(a) analyzing . . . client information . . . and making a determination concerning what particular plan would be best for the client; (b) drafting of plan documents; (c) qualifying the plan before the [IRS], and (d) terminating a pension plan, including preparing corporate resolutions and applying to the [IRS] for a termination letter.
The Bar would also have forbidden nonlawyer professionals from selecting attorneys for their clients and forbid lawyers employed by businesses from drafting or selecting plans for customers of their employer. The court declined to approve the opinion, noting that accountants are authorized to practice before the IRS, and that the courts own authority was, accordingly, "restricted." "Clearly, we cannot prohibit authorized professionals from preparing and presenting the necessary documents to federal agencies before which they are authorized to practice." The court also was not convinced that there was a public need for the protection sought by the opinion. Of course, the court might have been willing to approve narrower prohibitions, had they been presented to it, but not to try to craft them itself.
The scope of the federally-conferred authority of an administrative practitioner was also considered in State ex rel. State Bar v. Keller. Prior to Sperry, the Wisconsin courts had enjoined activities of Keller, an ICC practitioner, which they deemed the practice of law. On remand for reconsideration in light of Sperry, the court agreed that, in addition to actual conduct of proceedings, Keller could consult with clients "about matters which they would like to have him submit to the [ICC] [and] give them opinions as to the impact on their matters of federal law and regulations which would govern the [ICC] in hearing and deciding such matters." But the federally-conferred authority did not extend to prosecution of parallel or related proceedings before the state public service commission or the drafting of leases and contracts, even if those documents might require ICC approval. Keller could only advise on the documents compliance with and significance under federal law, not their validity and effect under state law.
Keller confirms the conclusion that an administrative practitioner may give planning advice in contemplation of possible future proceedings. It also confirms the lack of authority to advise on related state-law matters.
The North Dakota Supreme Court adopted a far more hostile attitude toward federally licensed practitioners in Ranta v. McCarney. Ranta was an attorney admitted in Minnesota but not in North Dakota. He traveled from time to time into North Dakota to provide federal tax advice to McCarney and others whom McCarney referred to him; at one point he went so far as to open a "branch office" in Bismarck to serve these clients. At issue in this case were Rantas fees for services in connection with the sale of McCarneys auto dealership, including negotiations and an all-day closing in Bismarck. The court held Rantas practice in North Dakota unauthorized, so he could collect no fees.
The court reasoned that an out-of-state lawyer not admitted in North Dakota should be treated as if he were a North Dakota lawyer whose license had been suspended. But Ranta asserted that his activities were authorized by his right to practice before the IRS. Because the issue of unauthorized practice was first raised at the end of trial on the fee claim, the facts are poorly developed. According to one of the dissents, Ranta testified that he handled only tax aspects of the transaction, and the "commercial aspects" were handled by another (presumably locally admitted) lawyer. No contrary evidence was cited in any of the opinions. While the court discusses (and finds inapplicable) an "exception" for "federal court practice," it either rejected or did not understand the argument that a federally-licensed administrative practitioner would be entitled to provide planning advice regarding potential agency proceedings. Even the dissenters did not analyze this point, though it appears to be the primary basis for one dissent.
Ranta does not appear to take full account of the implications of Sperry (which none of the opinions cite). The court also appears particularly provoked by the opening of a local "branch office." That feature might be used to distinguish the case from situations where any such office was maintained by locally admitted lawyers, even if used by visiting lawyers not so admitted. But the local office point has also been addressed in cases involving lawyers admitted by a local federal court but not by state authorities. These cases must also be considered in assessing propriety of such an office.
The cases involving opening of local offices by practitioners admitted only in federal court are complicated by the fact that many of the lawyers involved in those cases were attempting to use their federal admission to engage in activities going beyond representation with respect to actual or contemplated litigation in federal court. Nonetheless, it is clear that federal courts have inherent authority to admit lawyers to practice before them and that disbarment, suspension or discipline of lawyers so admitted is governed exclusively by federal law. Under the same logic as in Sperry, a state may not condition or obstruct the exercise of a federally conferred right to practice, though it may require one with only limited authority to practice locally to make that limitation clear in any advertisements.
Applying this principle to the maintenance of an office in a jurisdiction where the lawyer is not admitted, one must start by defining the scope of the practice authorized for the lawyer. At a minimum, the lawyer may actually conduct pending cases for which the lawyer is admitted. By analogy to a patent agents authority to evaluate the comparative merits of patent protection and state law protections (e.g. trade secrets), a federally admitted lawyer should have the right to evaluate a prospective clients problem to determine whether federal jurisdiction can be invoked in a court where the lawyer is admitted and, if so, whether other courses (e.g. arbitration, state-court litigation) are preferable. In essence, the federally admitted lawyer has jurisdiction to determine jurisdiction. So long as there is a potential for jurisdiction in a court where the lawyer is admitted, such a lawyer ought to be able to advise on steps designed to maximize the prospects of successful invocation of that jurisdiction. In essence, one can sometimes plan with a view to litigation, and a federally admitted lawyer should be able to advise on such planning if the litigation at least might be in a court where the lawyer can act.
But admission by a federal court is not a general license to advise on matters of federal law, absent a real bearing on actual or potential litigation in federal court. Even if a problem has a litigation aspect on which the lawyer may properly advise, federal admission confers no right to advise on purely transactional aspects of the same problem or on the relative merit of different state court litigation options.
Just as Sperry holds that patent agents may maintain offices anywhere in the country, those admitted to practice in a federal court should have a similar right. But attempted exercises of such a right must scrupulously observe the limits on the scope of the practitioners federally authorized practice.
Not surprisingly, courts have reacted negatively when federally-admitted lawyers have opened offices without limiting their practices strictly to actual or potential federal litigation. In Kennedy v. Bar Association, Kennedy was a member of the District of Columbia Bar who was also admitted to the Maryland federal bar. He formed a "partnership" with Jansen, a semi-retired Maryland lawyer, to conduct a collection practice with its sole offices in Maryland.
Kennedy produced 90% of the business and did 80-90% of the work. The firm primarily represented Maryland doctors suing Maryland residents. When proceedings in Maryland courts were required, both Jansen and Kennedy would appear, usually with no attempt to have Kennedy admitted pro hac vice. In enjoining Kennedys unauthorized practice, the trial court found that Kennedy "has deliberately attempted to circumvent the provisions of the [Maryland] Code and Maryland Rules, so as to engage in an extensive and systematic practice of law, both in Court and out of court, while not being licensed to practice in the State of Maryland."
Without challenging this finding, Kennedy appealed the injunction, asserting that it improperly denied him the right to maintain an office in Maryland for the practice of "federal" and "non-Maryland" law. In light of Sperry, the court of appeals construed the decree not to prohibit actual preparation and prosecution of cases in the federal court or performance of tasks incident to such preparation or prosecution. Subject to this, it rejected Kennedys claimed right to engage in general practice of law, so long as the law applicable or potentially applicable to the prospective client derived from a sovereign other than Maryland. This would defeat the states effort to protect the Maryland public against incompetent or unethical legal practitioners, and legal problems can rarely be resolved without examining all relevant bodies of law. Kennedys federal license only authorized the conduct of litigation in federal court. Yet he asserted a right to practice without regard to whether a matter had been filed or might be filed there. Kennedy had no federal right "to carry on an office practice purportedly limited to cogitating on and applying the principles of federal and foreign law."
All of this is clearly sound. More troublesome is the courts discussion of a hypothetical litigation-only practice:
Kennedy may not utilize his admission to the bar of the federal court in Maryland, or his admission in Washington, D.C. as a shield against injunctive relief by asserting that he will operate a triage. He is not permitted to sort through clients who may present themselves at his Maryland office and represent only those whose legal matters would require suit or defense in a Washington, D.C. court or in the federal court in Maryland because the very acts of interview, analysis and explanation of legal rights constitute practicing law in Maryland. For an unadmitted person to do so on a regular basis from a Maryland principal office is the unauthorized practice of law in Maryland.
This conclusion overlooks the analogous right of a federal patent practitioner to "triage" clients by deciding whether they could qualify for patent protection and, even if they could, whether state-law protections might be more advantageous. On the other hand, Kennedy had deliberately attempted to evade the Maryland licensing requirements, and a purported "triage" procedure would both permit further evasion and make it hard to detect. In the circumstances, prohibiting such a procedure may have been justified by considerations of enforceability, even if that impinged on otherwise authorized activity.
The court offered Kennedy an opportunity to propose a permissible method (other than "triage") to continue a federal litigation practice:
We will not go so far as to say that it is theoretically impossible for Kennedy to maintain a principal office in Maryland exclusively for engaging in a practice before the federal court in Maryland and the courts in the District of Columbia. It seems, however, that it would be practically impossible to do so. Nevertheless, we shall not foreclose the possibility of Kennedys presenting to the Circuit Court for Montgomery County, in the exercise of its continuing jurisdiction over the injunction, any proposal for modification whereby Kennedy, without holding himself out as practicing law in Maryland, could first pinpoint clients whose specific matters actually required counsel before those courts where Kennedy is currently admitted to practice, and thereby could limit his legal representation in Maryland to those specific matters. For example, Kennedy might limit his practice from the Silver Spring office to Maryland federal and D.C. cases referred by other attorneys.
The court modified the injunction to permit Kennedy to use his Maryland office to consider and accept "any matters before, or to be filed in, those courts [in which he is licensed] which may come to him . . . in a manner which does not violate the injunction." So the court recognizes that a federally-admitted lawyer may maintain and utilize a local office, so long as the office is not used for activities outside the scope of the federal admission.
More troublesome, but very questionable in light of Sperry, is In Re Page. Page was a disbarred Missouri lawyer whose admission in federal court remained in effect. He assisted an injured railroad worker, Hill, in presenting a claim against his employer. In particular, Page wrote letters to the railroad, describing himself as an attorney and demanding a settlement for Hill, and participated in a meeting with Hill at which a settlement was negotiated. The Missouri Supreme Court held Page in contempt for holding himself out as a lawyer after being disbarred.
But, by virtue of his federal admission, Page was still a lawyer, albeit with a limited scope of practice. Because any claim by the injured workman would arise under the Federal Employers Liability Act, it could be brought in the court to whose bar Page was admitted. So Page could have represented Hill in bringing suit and should have been able to negotiate before doing so. The Page court asserted that state power to protect the public against incompetent or unethical practitioners permitted it to forbid out-of-court activity not strictly necessary to actual filing and conduct of cases in the federal court. That assertion cannot survive Sperry. Because Kennedy relied in part on Page, the error of the latter further undermines the former.
Another dubious case on maintenance of a local office is Ginsburg v. Kovrak. The most troubling aspect is the United States Supreme Courts dismissal of the appeal for want of a substantial federal question. But examination of the papers filed with that court indicates that the most troubling questions about the injunction in that case had not been properly presented to the state courts. So the substantive effect of the Supreme Courts action can be limited to the questions that had been properly presented, which were insubstantial.
Kovrak was admitted by the federal District Courts for the District of Columbia and the Eastern District of Pennsylvania, as well as the United States Supreme Court and the D.C. Circuit. He was not admitted in Pennsylvania. He maintained a law office in his Philadelphia home and a listing as an attorney in the Philadelphia Yellow Pages. He claimed that he limited his practice to federal tax and immigration matters, but the Unauthorized Practice Committee maintains that the record showed a general practice. He was enjoined from (1) practicing law in Philadelphia County, (2) holding himself out to the public as entitled to practice law in that county, and (3) from advertising that he practices law or is authorized to practice law in any state, nation, country or land.
The Supreme Court of Pennsylvania affirmed on the trial court opinion, though relying on a narrowing construction of the injunction:
It is readily apparent that the injunction is intended to, and does, prohibit only the maintenance of an office and the practice of law in Philadelphia County (and, of course, anywhere else in the Commonwealth of Pennsylvania). It in no way affects the appellants right to engage in the practice of law in Washington, D.C. or to try cases in the United States District Court for the Eastern District of Pennsylvania or in any other federal court or jurisdiction where he may be entitled to practice.
The dissenters in the Pennsylvania Supreme Court attacked the injunction on the ground that it prohibited Kovrak from accurately advertising his right to practice in the federal court and from maintaining a Philadelphia office in which to conduct activities incidental to federal litigation. The problem with these arguments is that Kovrak had never made them before (though his Jurisdictional Statement in the Supreme Court sought reversal on those grounds).
In the court of common pleas, Kovrak had maintained a right to practice law in any matter involving any federal question, however remote. In his brief to the Supreme Court of Pennsylvania, he argued that the injunction precluded him from practicing in the Eastern District of Pennsylvania, but did not address the advertising or office provisions. So the narrowing construction arguably sufficed to respond to the argument briefed. Moreover, not even that argument was the one made to the trial court, though the latter argument may have been broad enough to preserve the point argued to the Pennsylvania Supreme Court.
Summary adjudications by the Supreme Court are precedential only as to the narrowest ground necessary to reach the result. The motion to dismiss relied on the failure to present below the issues of concern to us. So dismissal of the appeal should not be regarded as a substantive adjudication of those questions.
That brings us to the three post- Sperry federal cases on practice in federal courts by lawyers not admitted locally. Most surprisingly, two of these hold maintenance of a local office forbidden, even if limited to representations involving pending or prospective proceedings in federal court.
In re Peterson required an attorney, Betsos, to disgorge fees charged to a debtor for services in Connection with Petersons bankruptcy. Betsos was admitted in New York and by the United States District Court for the District of Connecticut, but not by the State of Connecticut. He maintained his sole office in Connecticut and had represented debtors in five other Connecticut bankruptcy cases. He performed six hours of prepetition services for Peterson and 50 hours of postpetition services. The latter were not compensable because he never obtained an order approving his retention as counsel for the debtor. What is of interest to us is the holding that the six hours of prepetition services were noncompensable because they constituted unauthorized practice.
On this point, the bankruptcy court soundly rejected the contention that advice on federal bankruptcy law was not within the scope of the state statute prohibiting unauthorized practice. The problematic aspect is the holding that prepetition work on the bankruptcy was not within "the scope of the authorization [to practice] granted by the district court and this court." In the courts view,
an attorney who is not licensed by the State of Connecticut but who is authorized to practice before the bankruptcy court may, notwithstanding [state law], practice law in this state and even maintain an office here so long as the services rendered are limited to those reasonably necessary and incident to the specific matter pending in this court. There is a difference, however, between maintaining an office in this state for the convenience of litigating a matter in this court and maintaining such an office for the purpose of giving legal advice on bankruptcy matters to all clients who seek it and accepting all cases which can be filed here. In the instant case, the evidence disclosed that Betsos held himself out to give advice to "all comers" on bankruptcy matters. . . . He was not associated with any attorney licensed in this state, and he did not maintain an office in any other state.
This gives too much weight to the tradition of state regulation of the practice of law. On this theory, an attorney admitted to practice in the bankruptcy court cannot exercise that right until after a proceeding has been filed. Preparation of the petition must be done by some state-admitted lawyer, whether the bankruptcy practitioner or someone else. But prefiling work is surely part of the practice before the bankruptcy court. Moreover, because all bankruptcy matters at least might be the subject of proceedings in that court, Sperry seems clearly to permit advice to those contemplating such proceedings, just as patent agents may advise on whether to file a patent application.
Even more troubling than Peterson is Servidone Construction Corp. v. St. Paul Fire & Marine Ins. Co., denying compensation to a federally admitted lawyer for work done in conducting actual proceedings in the federal courts by which he was admitted, because that lawyer maintained his sole office in New York, where he was not locally admitted, and had not associated New York counsel. Goddard had successfully prosecuted an action in the United States Court of Federal Claims and the United States Court of Appeals for the Federal Circuit. His clients surety was entitled to some or all of that recovery and challenged Goddards claim for a contingent fee interest.
The court did this by following Peterson and by turning Spanos on its head. Noting that Spanos had upheld the clients right to rely on out-of-state counsel to supplement locally admitted counsel, the Servidone court found the absence of any locally admitted counsel precluded Goddard from conducting the proceedings in New York. But the Spanos court had resorted to the clients right to use the lawyer precisely because the lawyer had never obtained admission pro hac vice. Had the lawyer done so, the lawyer could have asserted his own right, based on his federal admission. Goddard had a federally conferred right to conduct proceedings in the federal courts in question and New York was powerless to limit or condition that right by requiring local admission or association of locally admitted counsel.
A sounder conclusion was reached in Mendez v. Smith. Smith maintained offices in both Illinois, where he was licensed generally, and Arizona, where he was admitted only in federal court. He represented Mendez as a debtor in bankruptcy proceedings and the plan provided for payment of a $500 fee in addition to the $750 Mendez had already paid. The trustee objected to any fees because Smith was not admitted in Arizona, but the bankruptcy court overruled that objection and the Bankruptcy Appellate Panel affirmed. Admission to the bar of the district court included authority to practice in the bankruptcy court. Peterson was distinguished on the ground that the lawyer there, unlike Smith, had no office in any jurisdiction where he was admitted and, unlike Smith, actively solicited local clients. But the distinction itself was then put aside, on the ground that the issue before the court was not whether Smith had engaged in unauthorized practice in some other matter, but whether he was entitled to fees in this one. That reasoning is inconsistent with Peterson, and renders the distinction unnecessary. Still, the court did not say that, so the conflict with Peterson is only inferential.
In light of Sperry, and notwithstanding Peterson and Servidone, it appears that a lawyer admitted by a federal court is entitled to maintain a local office to conduct that practice, so long as the lawyer refrains from activities outside the scope of the federal license.
Remote Transactional Practice
The most troublesome aspect of Birbrower is the suggestion that "one may practice law in [California] 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 modern technological means." Seemingly, this would apply even if the lawyer is physically present in a jurisdiction where the lawyer is admitted.
The troubling implications of this are somewhat ameliorated by the apparent inapplicability of Section 6125 to representation of non-California clients or to services in connection with pending or contemplated federal court litigation. It must also be limited by the fact that no state may prohibit its citizens from traveling to other states to obtain services lawful there, even if unlawful in their home state. Nor can the clients home state regulate the qualifications of those rendering services to its citizens entirely outside its boundaries.
Not surprisingly, courts have repeatedly affirmed the propriety of services performed in the lawyers home state after meetings there, even if the product was delivered in the clients home state. Even Birbrower recognized that the lawyers might be able to recover for office work performed in New York, though not for the related work performed physically in California (or, perhaps, while in communication with California). And two courts in other states have rejected unauthorized practice attacks on interstate communications between lawyers and clients.
Prior to Birbrower, the court of appeal in Condon questioned both the power of California to regulate practice outside its own borders and the wisdom of attempting to do so. It doubted "that the legislature is authorized to prevent an unlicensed person in New York or Zurich from plying California law or transmitting legal communications to anyone within the state, so long as the unlicensed person remains outside the state." Even if permissible, this would prove "frustrating and expensive for consumers," rather than protecting them:
A client outside the state, faced with a California legal problem, would be forced to choose counsel, not from the best qualified, most familiar, least expensive or most accessible attorneys, but from those who belong to the California State Bar. Counsel licensed out-of-state could not contact their clients in California, even to discuss out-of-state law. In an era when business and personal relationships commonly cross geopolitical boundaries, we see no sense in making it more aggravating and more expensive to conduct legal discussions and resolve legal disputes across those same boundaries without good reason.
I share the Condon courts doubt that California could apply its law in the way suggested by the Birbrower dictum. To do so would infringe on the sovereignty of the state in which the lawyer is authorized to practice by demanding a California license before the lawyer may perform acts authorized by the state in which the lawyer performs them. Section 6125 is a penal statute and forfeiture of fees is a sanction for violation, rather than a compensatory remedy for harm suffered by the client. While California could apply its law to redress actual harm, a penal forfeiture would raise serious due process questions. There is also a question of infringing on the right of its residents to use the instrumentalities of interstate commerce to obtain services from providers in other states.
On this basis, I would agree with the Restatement conclusion that it is "clearly permissible" for
a lawyer conducting activities in the lawyers home state [to] advise a client about the law of another state, a proceeding in another state, or a transaction there, including conducting research in the law or the other state, advising the client about the application of that law, and drafting legal documents intended to have legal effect there. . . . It is also clearly permissible for a lawyer from a home state office to direct communications to persons and organizations in other states (in which the lawyer is not separately admitted) by letter, telephone, telecopier, or other forms of electronic communication.
To this extent, the Birbrower dicta on virtual presence seem unsound in most applications. But it could take a lot of litigation to establish that.
The constitutional argument is weakened for a multi-state firm, because any state in which the firm has an office has power over the firm which it would not have over an individual out-of-state lawyer. Such a firm would have to rely on arguments from comity and the unfairness of more stringent restrictions on firms with a California presence than on those with no such presence.
Of course, some states might be persuaded, as a matter of policy rather than of limited power, to take a less restrictive view than Birbrower does of whether a particular form of out-of-court practice is forbidden. The New Jersey Supreme Court has recently done this in In re Opinion 33 of Comm. on Unauthorized Practice of Law.
Until relatively recently, New Jersey public entities desiring to issue public bonds necessarily sought the assistance of out-of-state law firms as bond counsel, because New Jersey lawyers lacked the expertise and national recognition to provide such services. In the last two decades, the requisite local expertise has been developed both by New Jersey firms and by New Jersey offices of firms based elsewhere. In light of this development, the New Jersey Bar Association urged a gubernatorial advisory panel to take steps to end the use of out-of-state lawyers as bond counsel. While the advisory panel recommended that "particular consideration" be given to New Jersey lawyers, it did not recommend that they be excluded. The Attorney General then promulgated guidelines establishing criteria, including price and relevant experience, for selection of counsel, and permitting use of firms without a bona fide New Jersey office only in "extraordinary circumstances." The Governors Executive Order only demanded "particular consideration" of New Jersey firms.
The bar association was dissatisfied with this result and sought an opinion from the Committee on Unauthorized Practice established by the supreme court. In Opinion 33, that Committee opined that "attorneys who are not admitted to practice law in New Jersey are engaged in the unauthorized practice of law when they advise New Jersey governmental bodies in connection with the issuance of state and municipal bonds." The Committee reasoned there was no need to use out-of-state lawyers:
These are not "multi-state transactions." There are no "inseparable" elements located in different states. There are no tangled and interwoven elements" fom different jurisdictions." On the contrary, the New Jersey bond issues are home-grown, Garden State-only matters. These matters involve only New JerseyNew Jersey facts, New Jersey governments, New Jersey bonds, New Jersey law. The only non-New Jersey element involved in bond practice is federal tax law. Because New Jersey lawyers are equally as skilled in federal tax law as foreign bond counseland federal law by definition does not vary from state to statethere is no need for New Jersey to permit the unauthorized practice of law by foreign attorneys whose practice is outside the state.
The Committee found this rule applicable even where the law firm had a New Jersey office, if the bond counsel services were provided by lawyers not admitted in New Jersey:
Even where an out-of-state firm has opened a New Jersey office, it is still the unauthorized practice of law if the lawyers in that office performing the legal services are not licensed in the State of New Jersey. Opening an office in New Jersey does not grant a license to practice law in this State to the entire legal staff of the out-of-state law firmeach attorney must be individually licensed to practice law in New Jersey.
The Attorney General sought review of Opinion 33. In support of the petition for review, the State Treasurer filed a certification describing two state bond issues of unusual complexity which the state had felt required use of both a New Jersey bond firm and Philadelphia firm. The director of the Economic Development Authority described complex bond issues on which the EDA had used multi-state firms with New Jersey offices and some of the lawyers assigned to those transactions were not licensed in New Jersey.
The court granted review and "modified" Opinion 33 to eliminate any absolute prohibition on services by out-of-state lawyers. It emphasized that the governing standard was whether permitting practice of the sort at issue would be in the public interest:
[T]he cases in this area . . . consistently reflect the conclusion that the determination of whether someone should be permitted to engage in conduct that is arguably the practice of law is governed not by attempting to apply some definition of what constitutes that practice, but rather by asking whether the public interest is disserved by permitting that conduct. The resolution of that question is determined by practical, not theoretical, considerations; the public interest is weighed by analyzing the competing policies and interests that may be involved in the case; the conduct, if permitted, is often conditioned by requirements designed to assure that the public interest is indeed not disserved.
The court agreed fully with Opinion 33s conclusion that the services of bond counsel constitute the practice of law. Nonetheless, the court was "persuaded that in certain contexts the public interest will not be disserved by permitting out-of-state lawyers to perform such services."
"One such context is the retention by New Jersey counsel, on its own initiative or at the request of the issuer, of an out-of-state law firm to provide special assistance and expertise." More generally, "out-of state-law firms or lawyers unlicensed in New Jersey affiliated with multi-state firms that have bona fide offices in New Jersey may perform legal services related to New Jersey bond issues if engaged to do so by New Jersey bond counsel who retains overall responsibility for representation of the issuer." This does not require that all services provided by the out-of-state lawyer be channeled through a New Jersey lawyer, for the court pointed out that even the Committee had "acknowledged at oral argument . . . that lawyers from such firms [providing specialized legal advice] should be allowed to participate directly in discussions with the issuer in conjunction with New Jersey counsel."
This is a generous application of the principle that unlicensed persons may participate in rendering legal services so long as supervised by a licensed lawyer. The implicit analysis is that supervision is adequate so long as the licensed lawyer is contemporaneously aware of any advice being provided to the client and able to question such advice or demand further review before such advice is acted upon. That is somewhat similar to the rule applied in behind-the-scenes litigation representation. The primary limitation on its application in transactional representation is the requirement that the licensed lawyer have "overall responsibility" for the matter.
The Attorney General also argued that issuers should be able to directly retain out-of-state law firms with special expertise and experience, where similar expertise and experience is not available in New Jersey. Where this is true, he argued that "obligatory retention of New Jersey counsel as an intermediary to engage out-of-state counsel would be duplicative and would interpose an unnecessary barrier between the issuer and out-of-state bond counsel." The court agreed, though anticipating "that such retentions will be infrequent, and that when they occur the issuer will be prepared to justify the decision to directly retain out-of-state bond counsel."
Explaining its conclusion that permitting out-of-state counsel to provide services in the circumstances just described, the court emphasized that "licensing of attorneys is not designed to give rise to a professional monopoly, but rather to serve the public right to protections against unlearned and unskilled advice and service." "[T]he protection of the public ordinarily afforded by licensure is of diminished significance [in the context at hand] because public entity issuers generally are sophisticated and well-represented by local counsel." The court concluded that, "[o]n balance, the interests ordinarily protected by licensure may in these instances yield to the supervening public interest furthered by our decision."
The latter analysis is arguably applicable to transactional representations of sophisticated business clients, especially those represented by their own in-house or regular outside counsel.
To avoid having to make constitutional arguments in transactional matters, it would be desirable to involve one or more local lawyers in any matter where any out-of-state lawyer will be advising a local client from an out-of-state office, especially if the matter is otherwise local. But such involvement, not amounting to supervision, probably would not defeat an unauthorized practice accusation if the court were otherwise disposed to take a restrictive view.
Extrajurisdictional Information Gathering and Negotiation
Prof. Wolfram posits the following hypothetical as a focus for much of his discussion:
Consider, then, the situation of a transactional lawyer practicing in Silicon Valley, California. The client is considering purchasing a medical practice software company in Texas. Given the manner in which such transaction often unfold, the client must plan to spend a large amount of time in Texas, holding in-depth discussions with the selling corporations personnel. The client, of course, wants Lawyer along. As matters progress toward a deal, Lawyer must conduct extensive due-diligence work, interview the selling corporations senior executives, investigate its operations, review masses of financial and other documentary information, and hold extensive conferences with its financial people. Throughout this entire process, Lawyer will need to be negotiating drafts of multiple and vital documents with counterparts from the selling corporations legal team. Much of this, of course, will go on in Texas and could hardly go on anywhere else.
But can it? Lawyer passed the California bar examination many years ago and did the other things necessary to be fully admitted to practice in California (along with a tenth of the nations lawyers). However, Lawyer is not admitted in Texas and what the attorney proposes to do in Texas can only be described as the "practice of law." Does that mean that Lawyer may not set foot in Texas to do anything that can be considered the practice of law? This symposium is a testament, among other things, to the proposition that lawyers in many states have some level of concern regarding the potential problems of practicing law in other jurisdictions. In brief, neither the official pronouncements of lawyers professional organizations, nor those of courts, offer any assurance that Lawyer would not be engaging in unauthorized practice by taking the contemplated trip to Texas. Lawyer will, of course, accompany her client, but, if fully informed on the issue, will do so with justifiable anger and anxiety that the law only uncertainly authorizes the attorney to do what every transactional lawyer considers to be useful, even essential, client service.
I would argue that gathering the information on which the lawyer will base advice, even outside the jurisdiction in which the lawyer is admitted, is not the forbidden practice of law. If the advice is rendered back in the lawyers California office, there should be no violation. The mere gathering of information (by otherwise lawful means) poses no danger to the public in the state where the information is gathered. What creates that danger is the advice or other services rendered on the basis of the information so gathered. In the hypothetical, it seems to be implied that the client is California based, though that is unclear. If true, that would reinforce the conclusion that the activity is permissible.
Even negotiation in Texas of the terms of the deal and of the documentation might be permissible, on the theory that these are business functions that the client could lawfully delegate to a nonlawyer, based on instructions given by the client after receiving legal advice in California. This could be more problematic, if (as would often happen) the lawyer and client jointly conduct the negotiations, with the lawyer rendering legal advice on the spot. For that, one would definitely need to rely on the special treatment of multistate transactions.
Transactional Representation Generally
The Restatement (which is admittedly more permissive than Birbrower) takes the view that extra jurisdictional activities are permissible "so long as they arise out of or otherwise reasonably relate to the lawyers practice in a state of admission." It continues by providing a list of factors to be considered in deciding whether that relationship is present:
whether the lawyers client is a regular client of the lawyer or, if a new client, is from the lawyers home state, has extensive contacts with that state, or contacted the lawyer there; whether a multistate transaction has other significant connections with the lawyers home state; whether significant aspects of the lawyers activities are conducted in the lawyers home state; whether a significant aspect of the matter involves the law of the lawyers home state; and whether either the activities of the client involve multiple jurisdictions or the legal issues involved are primarily either multistate or federal in nature. Because lawyers in a firm often practice collectively, the activities of all lawyers in the representation of a client are relevant.
The list of factors seems correct, even if a court would strike a different balance than the Restatement after considering those factors. The Restatement then states its permissive view of the way the factors should be analyzed:
The customary practices of lawyers who engage in interstate law practice is one appropriate measure of the reasonableness of a lawyers activities out state. Association with local counsel may permit a lawyer to conduct in-state activities not otherwise permissible, but such association is not required in most instances of in-state practice. Among other things, the additional expense for the lawyers client of retaining additional counsel and educating that lawyer about the clients affairs would make such required retention unduly burdensome.
The Restatement then discusses some specifics, including a paragraph of particular value to real estate practitioners.
Particularly in the situation of a lawyer representing a multistate or multinational organization, the question of geographical connection may be difficult to assess or establish. Thus, a multinational corporation wishing to select a location in the United States to build a new facility may engage a lawyer to accompany officers of the corporation to survey possible sites in several states, perhaps holding discussions with local governmental officers about such topics as zoning, taxation, environmental requirements, and the like. Such occasional, temporary in-state services, when reasonable and appropriate in performing the lawyers functions for the client, are a proper aspect of practice and do not constitute impermissible practice in the other state.
It is unclear whether the less permissive courts would go this far.
The Restatement would permit extension into an adjacent state of representation of a home state facility on environmental matters. This seems plausible even for the more restrictive courts.
The Restatement would permit out-of-state regulatory work where prior in-state regulatory work had provided the lawyer with "extensive knowledge" of complex information relevant to both assignments. This is still plausible but the Restatement probably goes further than the more restrictive courts in suggesting that local counsel would be unnecessary.
The Restatement would permit out-of-state regulatory and M&A practice for a new client on a multi-state assignment based solely on the lawyers special expertise. I think this goes beyond what Birbrower and similar cases would allow.
The Restatement would permit a lawyer to confer by phone with an existing estate planning client who has recently moved out of state, to draft new documents in the lawyers home state, and to deliver them to the client and supervise execution in the clients new state of residence. This is borderline under Birbrower.
Ideally, it would be desirable for state rules and statutes to be amended or interpreted to provide fairly broad freedom for clients, especially sophisticated clients, to use out-of-state lawyers in both transactional and litigation matters. Short of that, problems in this area could be ameliorated by clear acceptance of arguments such as those advanced here or extension of those arguments in related contexts.
To accomplish that, lawyers faced with these issues in actual proceedings should urge these or similar arguments. Courts should adopt them. Pending clarification of the law, each lawyer or firm requested to engage in extrajurisdictional practice must consider whether the proposed activities are permissible and, to the extent that is in doubt, should consider whether feasible alterations of the proposed activities can render them less risky.
Copyright 2000 by the American Bar Association, Stein Center for Law and Ethics at Fordham University School of Law, Attorneys Liability Assurance Society and the American Corporate Counsel Association. All rights reserved.