June 2007 #1. The Pitfalls of Mediating and Arbitrating on the Mainland: Are You Inadvertently Committing the Unauthorized Practice of Law?.

• Author: by Lane Hornfeck

Hawaii Bar Journal

2007.

June 2007 #1.

The Pitfalls of Mediating and Arbitrating on the Mainland: Are You Inadvertently Committing the Unauthorized Practice of Law?

Hawaii State Bar JournalJune 2007The Pitfalls of Mediating and Arbitrating on the Mainland: Are You Inadvertently Committing the Unauthorized Practice of Law?by Lane HornfeckAs our global economy grows ever closer, many Hawaii attorneys and third-party neutrals, who may or may not be attorneys, have a growing amount of work generated from, or arising on, the mainland. Many Hawaii-based professionals have mainland clients who have business in Hawaii but, for purposes of saving on travel and conference facility costs, often prefer to meet, or engage in alternative dispute resolution ("ADR") proceedings, on the mainland. This is particularly true where there are a number of clients, parties or insurance carriers from across the country involved in a matter.

You may have traveled to the mainland for work or ADR and never thought about whether you are engaging in the unauthorized practice of law ("UPL") in the particular state in which you are visiting or working. There are a number of rules, resolutions, guidelines and statutes that have been adopted or enacted by the American Bar Association (the "ABA"), various states' bar associations, and various state legislatures that one may want to consider or review before your next trip.

Some Guidelines for the Mediator or Arbitrator

In 2002, the ABA Section of Dispute Resolution adopted a Resolution on Mediation and the Unauthorized Practice of Law (the "ABA Resolution")1 answering the question of whether mediation constitutes the practice of law. In short, the ABA Resolution recognized the "growing consensus in the ethical opinions addressing the issue that mediation is not the practice of law"2 and provided the following clarifying principles:

· Assisting non-client parties reach a volun tary settlement does not constitute UPL;

· Discussing legal issues generally in mediation with non-client parties does not constitute providing legal advice and does not create an attor ney-client relationship;3

· Drafting settlement agreements that merely incorporate the terms already reached by the non-client parties does not constitute UPL;

· Drafting settle ment agree ments that incorporate additional terms not reached by the parties will also not constitute UPL if the par ties are repre sented by counsel and the mediator dis closes that any such proposal has legal implications, the proposed terms are informational only, and the parties should seek independent legal counsel in con sidering any such additional pro posed terms; and

· Engaging in conduct considered in his or her jurisdiction to be the prac tice of law is, obviously, engaging in the UPL.

In this vein, the ABA has adopted a recent amendment to the ABA Model Rules of Professional Conduct recognizing the "Lawyer Serving as Third Party Neutral" and providing guidance on what the lawyer-neutral should do. In short, lawyer-neutrals should advise their non-client parties that they are not representing them and explain their role in the proceedings as mediators or arbitrators. This, of course, is enhanced if the contractual provision authorizing ADR provides for such flexibility. It appears that Hawaii has yet to adopt this rule, and the only similar counterpart is Rule 2.2 of the Hawaii Rules of Professional Conduct ("HRPC") regarding an attorney acting as an intermediary between or among existing clients.4

The ABA Resolution also cautions that lawyer-neutrals working in a multi-jurisdictional practice need to exercise extra caution and be aware of how each state defines UPL. For example, some states consider mediation by lawyers licensed in other states to constitute the practice of law and do not follow the recommended principles of the ABA Resolution.5 So, if one intend to act as a mediator in a jurisdiction in which you are not licensed as an attorney, or if you are a non-attorney third-party neutral, you may want to consider researching the UPL laws and guidelines of the particular state(s) to which you will be traveling. Otherwise, you may find yourself responding to an investigation or complaint as to whether you have been committing UPL.6

So What Exactly Is UPL?

Many people talk about UPL but do not know exactly what it is. Although one should be aware of the definition of UPL in the jurisdiction in which one mediates, a good baseline from which to start is Hawaii law - as all Hawaii attorneys will be governed at least in part by Hawaii law regardless of where one is practicing law. Hawaii Revised Statutes ("HRS") 605-147 does not provide an express definition of UPL and simply states:

It shall be unlawful for any person, firm, association, or corporation to engage in or attempt to engage in or to offer to engage in the practice of law, or to do or attempt to do or offer to do any act constituting the practice of law, except and to the extent that the person, firm, or association is licensed or authorized so to do by an appropriate court, agency, or office or by a statute of the State or of the United States.

Nothing in sections 605-14 to 605-

17 contained shall be construed to prohibit the preparation or use by any party to a transaction of any legal or business form or document used in the transaction.8

Enacted to protect the public "against incompetence or improper activity[,]" the Hawaii State Legislature declined to adopt a specific or limiting definition, noting that "[a]ttempts to define the practice of law in terms of enumerating the specific types of services that come within the phrase are fruitless because new developments in society, whether legislative, social, or scientific in nature, continually create new concepts and new legal problems."9

However, in the statute's legislative history, which can be used as an extrinsic aid to glean legislative intent, the Hawaii State Legislature explained "that the practice of law is not limited to appearing in court. It consists, among other things[,] of the giving of advice, the preparation of any document or the rendition of any service to a third party affecting the legal rights . . . of such party, where such advice, drafting or rendition of service requires the use of any degree of legal knowledge, skill or advocacy."10

In considering and rejecting a claim that an out-of-state counsel's fee application should automatically be denied because it automatically constituted UPL, the Fought Court took the opportunity, for the first time, to outline events that may constitute UPL. Some of these are more obvious than others and include, but are clearly not limited to:

· Filing and signing numerous court papers including but not limited to, various petitions, requests for serv ice, complaints, claims, joinders in pleadings, and cross-claims, as well as motions and memoranda in sup port and opposition to motions;

· Appearing in court...