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Avoid Stretching Your License Beyond Its Legal and Ethical Limits

June 03, 2016 (8 min read)

By: Devika Kewalramani, Esq., Moses & Singer LLP.

The practice of law has no universally accepted definition, but the unauthorized practice of law is well-defined in jurisdictions around the country. Most states have an assortment of rules of professional conduct, statutes, and/or court rules that establish the territorial boundaries around unauthorized practice: who can practice, where, when, and how.

THE PURPOSE UNDERLYING THE PROHIBITION AGAINST unauthorized practice is to protect the general public from the unlicensed practice of law by non-lawyer individuals and entities who are untrained and inexperienced to render legal advice or services.

Lawyers who are engaged in private practice or as in-house counsel advising their corporate employers, regardless of organizational size, structure, and practice area, need to be equally aware of the jurisdictional limits and practice restrictions that may apply to them or their organizations. Even corporate entities are not necessarily shielded from the laws on unauthorized practice. For example, New York Judiciary Law section 495(1) proscribes a corporation or voluntary association from, among other things, practicing or appearing as an attorney-at-law for any person in any court; holding itself out to the public as being entitled to practice law or to render legal services or advice; furnishing attorneys or counsel; rendering legal services of any kind in actions or proceedings of any nature or in any other way or manner; or advertising that it maintains a law office for the practice of law or for furnishing legal advice or services. See N.Y. CLS Jud. § 495.

Despite the strict ban on unauthorized practice, over the years, many states have liberalized their practice requirements to allow for multijurisdictional practice, including permitting in-house counsel who are admitted in another U.S. jurisdiction to provide legal services through an office or other systematic and continuous presence to their corporate employer or its organizational affiliates. However, such legal services are generally limited to non-litigation matters unless in-house counsel seeks admission pro hac vice. See American Bar Association (ABA) Model Rules of Professional Conduct, Rule 5.5(d), which many states have adopted either wholesale or in a modified form.

In-house counsel’s ability to engage in multijurisdictional practice is recognized under a safe harbor provision of ABA Model Rule 5.5(d), which provides the following:

  • A lawyer admitted in another United States jurisdiction or in a foreign jurisdiction, and not disbarred or suspended from practice in any jurisdiction or the equivalent thereof, may provide legal services through an office or other systematic or continuous presence in this jurisdiction that:
  • (1) are provided to the lawyer’s employer or its organizational affiliates; are not services for which the forum requires pro hac vice admission; and, when performed by a foreign lawyer and requires advice on the law of this or another jurisdiction or of the United States, such advice shall be based upon the advice of a lawyer who is duly licensed and authorized by the jurisdiction to provide such advice.

In addition, Comment [16] to Model Rule 5.5 explains that Model Rule 5.5(d)(1) specifically applies, among other things, to U.S. or foreign in-house corporate lawyers who are employed by a company to provide legal services to it or its organizational affiliates, i.e., entities that control, are controlled by, or are under common control with the employer. Comment [16] provides that the lawyer’s ability to represent the corporate employer outside the jurisdiction where the lawyer is licensed generally serves the interests of the corporate employer and does not create an unreasonable risk to it and others because the corporate employer is well situated to assess the lawyer’s qualifications and the quality of the lawyer’s work. Moreover, Comment [16] notes that to further minimize any risk to the corporate employer, when advising on the domestic law of a U.S. jurisdiction or on the law of the United States, the foreign lawyer authorized to practice under Model Rule 5.5(d)(1) needs to base that advice on the advice of a lawyer licensed and authorized by the jurisdiction to provide it.

However, in-house counsel are not shielded from potential liability involving unauthorized practice simply because they provide legal advice to their corporate employers or their organizational affiliates. Their role as corporate employees, providing both legal and business advice and wearing multiple hats within their organization, can often create complex situations that can possibly lead to unauthorized practice issues. Take for example, in-house counsel’s corporate employer or its affiliate, which may have multi-state (and/ or overseas) operations, businesses, or offices that give rise to the need for legal services or advice by in-house counsel in jurisdictions where they are not licensed. In-house counsel may be asked to handle transactional matters such as contracts or leases for its corporate employer (or its affiliate) in states where it conducts business with its clients or customers but where in-house counsel may not be admitted. Similarly, inhouse counsel might be asked to coordinate or oversee the prosecution or defense of litigation proceedings on behalf of its corporate employer, its affiliate, a related entity, or even a third-party customer, that may be pending in one or more courts around the country (or abroad) where in-house counsel may not be licensed (or admitted pro hac vice), and to manage or direct the legal work of outside counsel who may be hired to appear in court proceedings and to handle the caseload.

It is in the context of litigation that in-house counsel and their corporate employers need to tread very cautiously to avoid the risk of unauthorized practice of law. A recent Florida Supreme Court case, The Florida Bar re Advisory Opinion-Scharrer v. Fundamental Administrative Services, 176 So. 3d 1273, 1275 (Fla. 2015), illustrates how the degree of involvement or control exercised by in-house counsel and their corporate employer over pending litigation in a state where in-house counsel is not licensed can be a critical factor in determining whether their conduct constitutes unauthorized practice of law. The Florida case involved in-house counsel and counsel’s corporate employer, who provided administrative support services to their client and served as a “litigation liaison” between the client and the Florida-admitted lawyers hired to represent the client in various wrongful death cases brought against the client in Florida. The client alleged that in-house counsel and counsel’s corporate employer were substantially involved in the wrongful death cases by engaging in the following conduct constituting the unauthorized practice of law:

  • Providing legal advice, strategy, and services to the thirdparty client in pending litigation where the corporate employer was not a party
  • Hiring, directing, managing, controlling, and supervising Florida lawyers defending the third-party client where the corporate employer was not a party to the litigation
  • Preparing pleadings, discovery responses, and other legal documents, making strategic defense strategy decisions on behalf of a third-party client, and construing and interpreting the legal effect of Florida law on behalf of the third-party client

The Florida Supreme Court dealt with the applicability of a proposed Florida Bar Advisory Opinion that analyzed whether a non-lawyer company or its in-house counsel (who is not licensed in Florida) engages in the unauthorized practice of law in Florida when the non-lawyer company and its in-house counsel control, direct, and manage litigation in Florida on behalf of the non-lawyer company’s third-party customers, where such control, direction, and management is directed to a member of the Florida Bar who is representing the customer in the litigation. The Florida opinion concluded that while generally such conduct is not the unlicensed practice of law, there are circumstances where the opposite may be true, and the activity of the non-lawyer company or its in-house counsel could constitute unlicensed practice. The opinion cautioned, “the answer would be dependent on the level of involvement of the Florida lawyer versus the level of involvement of the nonlawyer.” Id. at 1276. Ultimately, however, the Supreme Court of Florida disapproved of the Florida Bar Advisory Opinion for failure to properly address the specific conduct at issue in the case.

Practically speaking, when in-house counsel and their corporate employer become involved in litigation proceedings for the corporation, its affiliate, or on behalf of a client or customer in a jurisdiction where in-house counsel is not licensed but where outside counsel (who is admitted there) is retained, it is vitally important to consider a variety of factors: the actual roles, specific activities, and level of participation, involvement, and control that outside counsel, in-house counsel, and their corporate employer, its affiliate, or other third-parties will have in the matter in order to avoid any risk of violating the laws and rules regarding unauthorized practice of law.

Beyond that, if they venture across jurisdictional lines, they should be aware that each state may have different rules and requirements when it comes to protecting its borders from unauthorized practice by unlicensed and/or out-ofstate lawyers. Moreover, most jurisdictions have a complex matrix of ethics rules, statutes, and court rules that would bar crossing state lines without a license to practice. At the same time, it should be noted that many states have adopted some combination of multijurisdictional practice rules allowing temporary practice by out-of-state lawyers, safe harbor provisions for in-house counsel to advise their organizations, and/or in-house counsel registration requirements.

Non-compliance with unauthorized practice laws and rules could potentially lead to dire consequences, not only for in-house counsel but also for the lawyer’s corporate employer, its affiliates, or any third-party client or customer involved. Penalties for in-house counsel could range from professional discipline, sanctions by a court, disqualification from representation, fines, and reputational injury. For the corporate employer, ramifications could include criminal or civil penalties, court sanctions, fines, and loss of attorneyclient privilege.

Aside from the dangers posed by unauthorized practice in crossing state lines in transactional and other matters, inhouse counsel involved in cross-border litigation for their corporate employer or its affiliates need to be vigilant in drawing a very careful line between permitted and prohibited litigation activities in order to avoid endangering their license to practice and exposing their corporate employer to liability.

Devika Kewalramani is a partner at Moses & Singer LLP and co-chair of its Legal Ethics & Law Firm Practice. Ms. Kewalramani focuses her practice on legal ethics, professional discipline, risk management, and compliance. She serves as the chair of the Committee on Professional Discipline of the New York City Bar Association.

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