William L. Reynolds
William M. Richman
Modern legal practice in today’s increasingly mobile and shrinking world often requires attorneys to represent clients in several jurisdictions with or without formal licensure. This development naturally raises questions concerning both (1) the authority of a state to regulate multi-state practice, and (2) the law that should be applied in those situations. The first question requires a review of the constitutional limitations on a state's legislative and adjudicatory jurisdiction to regulate multi-jurisdictional transactions. The second question involves at least a cursory review of traditional and modern choice-of-law systems, with respect both to substantive law standards and remedies. This Paper provides an introduction to these questions and also examines briefly the approach of the European Union ("EU") to the problem of multi-jurisdictional practice. The purpose of considering EU practice is not to suggest that the Europeans necessarily have come up with a correct solution, but rather to provide a vantage point on the solution adopted by another advanced federal system.
Regulatory and Adjudicatory Jurisdiction
The first problem involves jurisdiction, or the power of the state to regulate both the matter and the person. In conflicts parlance, this involves both regulatory and adjudicatory, or territorial, jurisdiction.
A state of the United States has wide authority to regulate conduct that either occurs within its borders or affects activity there. The Supreme Court has held that a state can apply its own law to regulate multi-state activity so long as it has a significant contact or aggregation of contacts with the regulated activity, creating state interests, so that the application of the state's law is neither arbitrary nor fundamentally unfair. Allstate Ins. Co v. Hague, 449 U.S. 302 (1981), Phillips Petroleum Co. v. Shutts, 47 2 U.S. 797 (1985), Sun Oil Co. v. Wortman, 486 U.S. 717 (1988). In practice, this has been a relatively easy standard to satisfy, so that a state that has any meaningful connection with a multi-state representation should have legislative jurisdiction to apply its own law to regulate the conduct of an attorney involved in that representation. Thus, a state would have legislative jurisdiction to regulate an attorney’s conduct if the state is the domicile, principal place of business, or location of significant activity of either the attorney or the client.
Before a state can apply its law to a dispute, it must be able to bring a natural or legal person before its judicial or administrative tribunals; that is, it must be able to exercise personal jurisdiction. The law on this question is relatively straightforward. The Supreme Court has held that a state can exercise personal jurisdiction over a defendant if the defendant has certain minimum contacts with it so that the maintenance of the action does not offend traditional notions of fair play and substantial justice . International Shoe Co. v. Washington, 326 U.S. 310 (1945). The Court has indicated that this formula requires a separate assessment of contacts and fairness. World-Wide Volkswagen Corp. v. Woodson, 444 U.S. 286 (1980). The contacts test does not require that the defendant enter the state physically, although physical presence by itself is usually sufficient . Burnham v. Superior Court, 495 U.S. 604 (1990). Also sufficient is directing activities toward the forum state so that the defendant could reasonably anticipate being haled into court there . Burger King Corp. v. Rudzewicz, 471 U.S. 462 (1985). It is not enough, however, that some third party has caused the contact between the defendant and the state; the defendant's purposeful action is required. Hanson v. Denckla, 357 U.S. 235 (1958).
The fairness test requires an assessment of the interests of the defendant, the plaintiff, the forum state, and the interstate judicial system. Only rarely will a defendant who has purposefully established minimum contacts with the forum be able to show sufficient unfairness to defeat the exercise of personal jurisdiction. Burger King v. Rudzewicz.
There is very little case law involving personal jurisdiction in the attorney discipline context, but the general rules sketched above and the analogous cases involving professional malpractice, Robert Casad and William Richman, Jurisdiction in Civil Actions § 8-11 (3d ed. 1998), yield some fairly clear predictions. It is clear that a court has jurisdiction to discipline an attorney who lives or practices within its borders or whose professional activities have a foreseeable effect within the state. In other words, a state may take disciplinary action against those attorneys who are licensed to practice within the state (that is, those who are "domiciled" there), those who represent clients in the proceedings in the states tribunals, and those who give advice within the state (using so-called "long-arm" jurisdiction). If the connection is more tenuous, as in the case of advice, given outside the state to a nonresident client by a nonresident attorney, that nevertheless has an effect within the state, jurisdiction is much less clear.
In short, a state has extensive authority to regulate conduct by attorneys that either occurs within its borders or has an impact there. The next question is whether a state should or will regulate such conduct. Our law, after all, is full of examples where states abstain from exercising their acknowledged regulatory power out of respect for principles of comity (a law professor’s term meaning that the court will not exercise its proper authority out of respect for the interests of other states) or simple fairness (the use of forum non conveniens is perhaps the best known example). The next Section addresses that question in the context of choice of law and remedies.
Choice of Law
Merely because a state has constitutional authority to apply its own law to a dispute does not necessarily mean that it will or should do so. Courts routinely choose to apply the law of other states out of deference to the superior interest of the other state or because of the parties’ reliance on foreign law. But how should a court decide whether the case before it is one where the application of foreign rather than forum law is more appropriate? Fortunately, the problem comes up rarely in the area of attorney discipline because the disciplinary rules of most states coincide rather nicely. (Another, perhaps more realistic, way of saying the same thing is that the vast majority of conduct that leads to sanctions is so egregious that it would be sanctioned anywhere.)
There are, however, issues on which the states differ. One is the problem of unequal sanctions. Conduct that will lead to disbarment in one state merely gets a reprimand in another. Society obviously views disparate sentencing as a major social issue as the popularity of sentencing guidelines well establishes. Even more troublesome, is the problem of competing substantive rules. Model Rule 1.6 provides the most obvious example. Depending on the jurisdiction, disclosure of confidential information from a client is either (a) forbidden, (b) permitted under certain circumstances, or (c) required under certain circumstances. Pity the poor attorney whose case falls between jurisdictions with rules (a) and (c).
How should a court decide which set of disciplinary rules should govern in case of such a conflict? The courts and the scholars have proffered a wide variety of choice-of-law approaches that may shed light on that question. See William Richman and William Reynolds, Understanding Conflict of Laws 167-248 (2d ed. 1992). The traditional approach of the Restatement (First) of Conflict of Laws (followed in about ten or twelve states) consists of a few, broad, hard and fast rules, each governing a particular area of law. Thus the law of the place of injury governs in tort cases, the law of the place of making in contract cases, and so on. By analogy to professional malpractice, First Restatement courts might well treat matters of attorney discipline as tort issues and choose the law of the place where the misconduct occurred. Thus, if the attorney/client relationship is centered in State X, but the misconduct occurs in State Y, the law of Y would govern.
Unfortunately, although clear and certain in theory, the First Restatement proved anything but clear in practice. Thus, a court, dissatisfied with the choice of the law of Y might conclude that the injury suffered by the client occurred not where the misconduct occurred (Y) but rather where the client suffered economically (in X). Or it might choose to characterize the problem as a contract rather than a tort and look to the law of X where the contract for representation was made. Another problem with the First Restatement was that it could produce irrational results by frustrating the interests of the state most concerned with the problem. Thus in the previous example, the First Restatement would direct a court in state X to apply the law of Y even though state X's standard of care was higher and was designed to protect clients domiciled in state X.
Modern choice-of-law systems rely less on rules and more on an assessment of the contacts the case has with each state and the policies behind each state’s substantive law rule. A "false" conflict occurs when the policies and contacts of the states are so arranged that only one state's policy will be advanced by the application of its law. In a "true" conflict, by contrast, the policies and contacts are so arranged that each state's policy would be advanced by the application of its law. Thus, in the example posed above, if the law of Y called for discipline of the attorney out of a desire to protect clients, and the law of X did not, application of the law of Y would be irrational because no Y client was involved. Unfortunately, this form of policy analysis is every bit as easy to manipulate as are the rules of the First Restatement. The rules of attorney discipline, for example, often have multiple policies, and the outcome of the analysis depends upon which policy is used.
As these examples show, no choice-of-law system is guaranteed against irrational results or manipulation by result-oriented courts. Nevertheless, most modern American courts (about thirty states) have settled on the Restatement (Second) of Conflict of Laws, an eclectic mix of choice-of-law strategies, as the optimal approach. The major choice-of-law section of the Second Restatement instructs the court to apply the law of the state that has the most significant relationship to the parties and the dispute in light of the particular issue at stake. In the remedies dilemma, for example, a court might apply (or defer to) the law of the state where the attorney has been admitted on questions that go to the attorney’s character or fitness to practice law ( e.g ., the commission of a felony unrelated to the practice of law). On the other hand, if the problem involved an attorney’s participation in a particular case ( e.g., misleading represented parties concerning a specific piece of litigation), then the state where that litigation is centered might provide the appropriate degree of sanction. Finally, a state might decline to exercise jurisdiction where its relationship to the ethical question is incidental to the underlying legal problem; e.g., an attorney breaching a client's confidence on an airplane flying over the state.
The same form of analysis would apply to a conflict involving substantive issues. If disclosure by the attorney of client fraud under Rule 1.6 is the issue, for example, then the proper law might be that jurisdiction which has the most interest in the subject matter of the fraud. Two caveats came to mind with this resolution. First, it may well be difficult to determine which among several interested jurisdictions is the most interested jurisdiction. That query does not spoil the analysis, of course, although it does make it more difficult (much to the delight of law professors). Second, it is possible that the Rules might require an attorney to serve two inconsistent masters, neither of whom will brook interference from the other. Here, the need for protection of reasonable expectations comes into play. Thus, in the example of the poor lawyer caught between a version of Rule 1.6 that requires disclosure and another that forbids disclosure, the answer might simply be to validate any good-faith choice. That is, if the attorney, acting in good faith, decided that he could not disclose the client’s purported fraud, and that decision was permissible under the law of a jurisdiction with a substantial interest in the transaction, then the attorney’s decision should be validated. If it is not, then attorneys practicing in multiple jurisdictions have come face-to-face with a very specialized kind of hell.
The European Union
In thinking of solutions to problems posed by multi-jurisdictional practice in this country, it is instructive to consider the approach taken by another large federal system. The European Union consists of fifteen countries bound together by a series of treaties. (It styles itself a "union" and avoids use of the word "federal".) The EU nations, of course, are highly developed economically with much cross-border activity, and the problems of multi-jurisdictional practice by attorneys are quite familiar there. Each country, of course, regulates practice within its borders and some of them in the past did much to hinder the cross-border practice of law; this hindrance closely resembled the practice of states in this country. Because those cross-border restrictions were inconsistent with the EU’s strong commitments to open markets and the free movement of workers, the EU authorities, backed by the European Court of Justice, whittled away at them. Finally, in 1998, the EU adopted Directive 98/5 (OJ 1998 L77/36) to deal with the situation directly.
Under that Directive, an attorney licensed to practice in one member state is entitled to practice law in any other member state. He may do this on a permanent basis, although he must practice under his home-state title ( e.g., "solicitor") and register with the host-state authorities. The attorney may give advice on both host and home state law, international law, and on EU law. Attorneys so practicing are subject to the disciplinary rules of both the home and host authorities. An EU attorney who practices continuously in a host state for at least three years can gain admission to its bar without further examination and use the proper host-state title for his practice.
The benefits of the new EU process are quite apparent to clients and attorneys alike. What is interesting to an American observer is the belief by the EU lawmakers that, when it comes to regulating the practice of law, the fifteen member states have much more in common than their sometimes quite different legal systems would suggest. Thus, the benefits to clients in terms of better service and the benefits to attorneys that come with increased mobility significantly outweigh the possible costs of not being sufficiently grounded in a particular legal culture. It may be time for Americans to consider emulating the lawyers of Europe.
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.