The interstate practice of law: are you crossing the line?

AuthorBarker, William T.

California's Birbrower decision has focused attention on the ability of lawyers to furnish legal services outside their state of admission

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 of the United States.(1) Yet licensure to practice law is almost exclusively the province of those individual states. Litigators can avoid the most serious limits this regulatory scheme imposes on practice involving multiple states by obtaining admission pro hac vice from 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, and even litigators frequently provide out-of-court services, either in alternate dispute resolution proceedings or in counseling clients on avoiding litigation or strengthening potential defenses.

Even without the benefit of pro hac vice admission, 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" state's 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 these 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."(2)

The attention of the practicing bar has been drawn forcefully to these problems by the California Supreme Court's 1998 decision in Birbrower, Montalbano, Condon & Frank P.C. v. Superior Court (Esquire Business Services Inc.),(3) in which the court held that a New York lawyer's California activities in connection with arbitration of a commercial dispute were the unauthorized practice of law in violation of a California statute, 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.

This subject had received scholarly attention,(4) with commentators unanimous in favoring broad freedom for lawyers to engage in practice affecting jurisdictions where they are not licensed. But much of the case law in this area has taken a much more parochial view, a view increasingly at odds with the realities of practice in a globalizing world.

The American Bar Association and Fordham University convened a Symposium on Multijurisdictional Practice in March 2000 to examine the issues presented by these tensions. That symposium reached a strong consensus that the ABA should address this issue and take a leadership rule in modernizing the law.(5) The International Association of Defense Counsel and other defense organizations have appointed special committees to develop positions on these issues.(6)

This article is intended to alert defense lawyers to these developments and to solicit their input. The present confused state of the law limits the guidance that can be provided for litigators, but this article offers an analysis of some points that do seem clear.

BIRBROWER

Birbrower denied fees to out-of-state lawyers for work in California. A New York-based firm, Birbrower rendered legal services to a California-based corporation, Esquire Business Services Inc., with respect to a dispute with another California-based corporation. The dispute was to have been arbitrated in California, but it 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 pre-existing relationship between Birbrower and ESQ on other matters.(7)

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.(8) The fee agreement originally had been for a contingent fee of one third of the recovery and was later modified to fixed fee of more than $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 former 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 lawyer's 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.(9) In the court's view, the lawyer's physical location was relevant, but not dispositive:

For example, one may practice law in the state in violation of Section 6125 [of the California Business and Professions Code] 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.(10) Applying this standard to Birbrower's 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 firm's in-state activities clearly constituted the [unauthorized] practice of law" in California.(11) 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,(12) 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.'"(13) In the absence of proper training, examination and local licensing, the Birbrower court pronounced it irrelevant whether an "attorney is duly admitted in another state and is, in fact, competent to practice" locally.(14)

Spivak denied fees to a California lawyer summoned to New York by an acquaintance to assist her in developing a strategy to resist her husband's 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 $3,500 ($250 per day) in fees and $1,600 in expenses.

The lawyer argued that this "isolated...

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