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By Joan C. Rogers
March 4 — It's been a dozen years since the ABA revised Model Rule of Professional Conduct 5.5 to authorize lawyers' limited cross-border practice, but uncertainties and risks remain for those who don't confine their practice to the states where they're licensed, according to panelists who spoke Feb. 27 at the 14th Annual Legal Malpractice & Risk Management Conference.
The conference, held Feb. 25-27 in Chicago, is sponsored primarily by Hinshaw & Culbertson LLP. Bloomberg BNA is a co-sponsor.
“One of the biggest traps for lawyers is multijurisdictional practice,” moderator Katie M. Lachter said in introducing the speakers. With the multistate and increasingly technological nature of law practice, it's difficult to confine law practice solely to the jurisdiction(s) in which the lawyer is licensed, she said. Lachter is a partner in Hinshaw & Culbertson's New York office.
Attendees got this snapshot of current rules around the country:
• 46 jurisdictions have adopted a version of Model Rule 5.5;
• 10 states, including Delaware, allow temporary practice by non-U.S. lawyers;
• 40 states allow admission on motion, but 23 of those require reciprocity;
• five states have adopted the Model Rule on Practice Pending Admission, while 10 have rejected the ABA recommendation and eight are studying it; and
• three states require registration for occasional practice.
Plenty of variations have evolved among the states, the speakers made clear. For example, Montana sets a total limit of two pro hac vice admissions for out-of-state lawyers, panelist Alison B. Buchanan noted. She is a shareholder in Hoge Fenton Jones & Appel, San Jose, Cal.
Panelist Wayne B. Positan warned lawyers to be wary of temporary practice in Hawaii, Mississippi, Montana, New York and Texas, which have no MJP rule akin to Model Rule 5.5. Positan is managing director of Lum, Drasco & Positan LLC in Roseland, N.J., and chaired the ABA commission that drafted the MJP amendments to Model Rule 5.5.
Buchanan noted that in New York, temporary practice is allowed only for law students and societies for the prevention of cruelty to animals, while in Mississippi an MJP proposal is pending before the state supreme court.
Positan pointed out that although Texas does not have an MJP rule, a state bar ethics opinion found latitude for cross-border practice in the existing rules. See Texas Ethics Op. 597, 26 Law. Man. Prof. Conduct 342 (2010).
Describing how this patchwork of rules evolved, Positan noted that before 2002 only a few jurisdictions allowed temporary practice by lawyers licensed in other states.
Now, he said, “we have this morass of different rules in different states” because each one wants to make its own changes to Rule 5.5.
Positan said many lawyers complain about the lack of uniformity and variations among states. “We don't want to have overly technical rules that prevent us from representing our clients,” he said.
While some lawyers favor getting uniformity through a national law license, Positan said the ABA's MJP commission opted not to recommend that approach because it would mean regulation by Congress. “The cure might be worse than the disease if we let Congress tinker with it,” he said.
Attendees at the panel on MJP heard about developments in Arizona that could dramatically broaden what's allowed in that state for lawyers licensed elsewhere.
Panelist Allison Buchanan said that as one part of a package of proposed amendments pending before the supreme court, lawyers licensed in other states could live in Arizona and practice the law of another jurisdiction. Non-Arizona lawyers could engage in the regular practice of law for up to a year, but only if they apply for admission on motion before beginning to practice, she said.
The proposals seem to say, “Sure, come to Arizona and set up shop,” Buchanan said. There's some skepticism about whether the recommendations will be adopted, she stated. Those interested may submit comments on the proposed changes by May 20.
Moderator Katie Lachter contrasted the Arizona proposals with Gould v. Harkness, 2006 BL 58, 470 F. Supp. 2d 1357, 22 Law. Man. Prof. Conduct 398 (S.D. Fla. 2006), which held that a New York-licensed lawyer residing in Florida did not have the right to advertise for clients in Florida who might need help with New York legal matters or federal administrative practice. Florida's MJP rule only allows out-of-state lawyers to enter the state for a short period to represent existing clients, the court said.
Lawyers who welcome MJP shouldn't expect states' efforts to police the unauthorized practice of law to go away, according to the panel.
“Adversaries in litigation are starting to catch on to the fact that this is a big issue,” moderator Lachter said. If a lawyer shows up at a deposition and isn't familiar with local rules, opposing counsel may have someone check the lawyer's licensing status. Lawyers are routinely checking to see if attorneys are on the other side are properly licensed, she said.
The panel highlighted a number of unpleasant consequences that may flow from cross-border practice beyond what is authorized by state laws and rules:
▸Violation of laws criminalizing UPL—Buchanan pointed out that unauthorized practice is a felony in some states, including California, Florida and New York. In most states UPL is a misdemeanor, she said.
▸Discipline—A California lawyer was disbarred for engaging in UPL by doing “credit repair” for consumers in other states without being licensed there, Buchanan noted. In re Lenard, No. 09-O-11175, 29 Law. Man. Prof. Conduct 275 (Cal. State Bar Ct. Review Dep't April 14, 2013).
▸Loss of fees—An out-of-state firm's inability to recover fees for services provided in California brought the issue of MJP to the forefront in Birbrower, Montalbano, Condon & Frank P.C. v. Superior Court, 949 P.2d 1 (Cal. 1998).
▸Impact on client's case—The Mississippi Supreme Court reversed a defendant's criminal conviction because he was represented only by an out-of-state lawyer at trial, Positan noted. Newberry v. State, 2014 BL 232635, 145 So. 3d 652, 30 Law. Man. Prof. Conduct 590 (Miss. 2014).
▸Sanctions—In one case, Buchanan said, a law firm got a “brutal wake-up call” when it was hit with a $10,000 sanction for aiding UPL by allowing a nonlawyer assistant to negotiate reaffirmation agreements in a bankruptcy proceeding. In re Carlos, 227 B.R. 535 (Bankr. C.D. Cal. 1998).
▸Barrier to admission in other states—Positan cited In re Jackman, 761 A.2d 1103, 16 Law. Man. Prof. Conduct 686 (N.J. 2000), where a lawyer's application for admission in New Jersey was delayed for 18 months because he had practiced in New Jersey and New York for years without a New Jersey license. Firms need to be mindful of this issue when they move associates around, he said.
See also Lance J. Rogers, Failure to Heed MJP Limitations Can Cost Lawyers—and Their Clients, 25 Law. Man. Prof. Conduct 539.
Positan described several concepts in Rule 5.5 that are particularly important in analyzing what's permitted and what's not:
• Lawyers not admitted in a state may not establish an office or other “systematic and continuous” presence there, or hold themselves out as being admitted there. Exceptions apply for in-house counsel and activities authorized by federal law.
• “Temporary” practice is allowed when it is “reasonably related” to or arises out of lawyers' practice in their home jurisdiction. Temporary practice is also permitted in association with a licensed lawyer or if reasonably related to a pending or potential proceeding before a tribunal or alternative dispute resolution forum.
These concepts are especially important in the context of virtual law practice, but there is little uniformity so far in ethics opinions on virtual law offices, Buchanan said.
She gave as an example Illinois Ethics Op. 12-09, 28 Law. Man. Prof. Conduct 222 (2012), which concluded that a lawyer not admitted in Illinois may not practice primarily in Illinois, either physically or via electronic means, even if an Illinois partner supervises the lawyer's work for Illinois clients. The opinion focused on the location of the clients rather than that of the lawyer, Buchanan said.
Buchanan contrasted that opinion with California Formal Ethics Op. 2012-184, 28 Law. Man. Prof. Conduct 471, which advised that lawyers practicing in an Internet-only structure have the same professional obligations as other lawyers but must take additional steps to assure themselves that these duties are met. The California opinion doesn't analyze MJP, she noted.
Positan related that a New Jersey client asked him for advice on a noncompete agreement in Tennessee. He said he looked up Tennessee law in a handbook that compiles state noncompete laws, and gave the client an answer, along with a disclaimer that if the client gets sued, Tennessee counsel will be necessary. This involved advising on Tennessee law, but I was competent under the rules of professional conduct, he said.
The practical reality is that clients want the lawyer they're comfortable with, Positan said. “My clients are annoyed to hear we have to hire counsel elsewhere.” They don't want to sign another engagement letter and deal with another lawyer who's not familiar with them and their operations, he said.
At the panel on multijurisdictional practice, Wayne Positan said that for lawyers and firms engaged in MJP, the analysis of general jurisdiction in malpractice suits against out-of-state law firms was changed dramatically by a Supreme Court decision last year. That decision, Daimler AG v. Bauman, 2014 BL 9151, 82 U.S.L.W. 4043 (U.S. Jan. 14, 2014), held that a multistate corporation generally will be subject to suit only in the state where it is incorporated or where its headquarters are located.
Positan said that under the Daimler test, a law firm will not be subject to jurisdiction in other states merely because partners reside there, or the firm has clients there in unrelated matter or the firm engages in other temporary practice in that state.
In an article discussing the impact of Daimler for law firms, Positan and his partner Arthur M. Owens said that “to limit the number of jurisdictions in which a multistate law firm is properly considered ‘at home,' multistate law firms would be well guided to have a clearly defined headquarters, and to perhaps ensure that the headquarters is located within the state of registration or incorporation.”
“Daimler does not alter the standard for establishing specific jurisdiction over a law firm defendant,” Positan and Owens said in their paper, General Jurisdiction and Multijurisdictional Practice Following Daimler AG v. Bauman.
From the audience, New York lawyer Anthony Davis asked Positan whether a New York lawyer who practices with a New York firm is permitted to work out of his home in New Jersey three days a week. “This question comes up everywhere,” Davis said.
Positan said that to the extent the lawyer is a partner in New York and isn't maintaining a New Jersey office per se, it's hard to see how the lawyer can be said to be practicing law in New Jersey. But if he starts putting out business cards saying he's in New Jersey, that's different, he said.
We all know that thousands of lawyers are doing the same thing, Positan said. “Is anyone going to do anything about it? No. Can you issue the lawyer an opinion letter saying he can do it? No.”
Positan pointed out that New Jersey UPL Op. 49, 28 Law. Man. Prof. Conduct 770 (2012), took a restrictive view of what out-of-state lawyers can do under New Jersey's unique rule on MJP. The opinion is “an exercise in tortured logic” that prohibits most cross-border practice, he said. The “magic answer” for MJP in New Jersey, he said, is to associate with a New Jersey lawyer.
States will face increasing pressure to allow MJP, Positan predicted. He mentioned a recent finding that 47 percent of people in the United Kingdom expect to deal with legal services over the Internet. In addition, he said, a huge amount of venture capital has been invested in efforts to deliver legal services online. These trends will ultimately force every state to open up, he told the audience.
One development to watch, Positan said, is the ABA Commission on the Future of Legal Services, which is studying how to increase access to legal services and a broad range of other issues bearing on the regulation of law practice. The Conference of Chief Justices is also exploring the role of nonlawyers in increasing access to legal services, he said.
Positan noted that in Washington state, nonlawyer “legal technicians” will soon be allowed to draft forms and perform certain services for their own clients in family law and immigration law matters without insurance or supervision by lawyers. The state supreme court adopted the new regime over the objection of the state bar, he said.
The bar recently asked the court to amend the state's professional conduct rules to provide guidance on how attorneys may interact and practice with nonlawyer legal technicians. See 31 Law. Man. Prof. Conduct 63.
Positan predicted that lawyers in other states also will see nonlawyers being granted a bigger role in delivering legal services. “Rest assured, it's coming to your home state,” he said.
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The proposed MJP changes before the Arizona Supreme Court can be viewed along with the request for comments at http://azdnn.dnnmax.com/AZSupremeCourtMain/AZCourtRulesMain/CourtRulesForumMain/CourtRulesForum/tabid/91/forumid/7/postid/2986/view/topic/Default.aspx.
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