Oregon State Bar Bulletin — JUNE 2003
|Promising or Problematic?|
By Peter R. Jarvis
In August 2002, the American Bar Association House of Delegates approved Client Representation in the 21st Century, the final report of the ABA Commission on Multijurisdictional Practice (the 'MJP Report,' which can be found online at www.abanet.org/cpr.). Although earlier ABA efforts to promote multidisciplinary practices foundered, the MJP Report’s call for liberalized restrictions on multistate practice by U.S.-licensed lawyers appears likely to have at least some degree of success.
As with any significant regulatory reform, however, this liberalization will raise some new issues and reemphasize some old ones even as it resolves others. There are three sets of issues that lawyers with multistate practices are likely to confront. But first, some background.
The key provisions of the MJP Report are its proposed amendments to Rule 5.5 of the ABA Model Rules of Professional Conduct (the 'Model Rules'). Click here full text of the amendments.
For present purposes, the key provisions are the four 'safe harbors' or exclusions from what would otherwise constitute the unauthorized practice of law that are contained in Proposed RPC 5.5(c). Proposed RPC 5.5(c)(1) exempts all activities undertaken by lawyers in states in which they are not licensed, so long as they work 'in association' with a locally licensed lawyer who 'actively participates' in the matter. Proposed RPC 5.5(c)(2) allows lawyers who expect to be admitted pro hac vice once a matter begins in litigation to take preliminary steps in aid of that litigation. Proposed RPC 5.5(c)(3) allows lawyers to work in arbitration, mediation and similar proceedings without local licenses. Finally, Proposed RPC 5.5(c)(4) allows all other actions by out-of-state lawyers that are 'reasonably related' to the practice of those lawyers in states in which they are licensed.
As the MJP Report recognizes, however, the increase in the ability of lawyers to move across state lines requires a comparable increase in the ability of the states to discipline lawyers who may be temporarily practicing in a jurisdiction but are not licensed there. Driver’s licenses provide a useful analogy. The license that I receive from my state of residence allows me to drive lawfully in other states. When I do so, however, I am subject to the speed limits and other limitations that those other states impose on their own licensed drivers.
As can be seen here, (where Proposed RPC 8.5 is in redlined form), however, the choice-of-law rule contained in Proposed RPC 8.5 is necessarily more complex than the rule applicable to automobile drivers Thus Proposed RPC 8.5(b)(2) calls for a determination of the state in which 'the predominant effect' of a lawyer’s actions will be felt and provides an extended safe harbor under the law of a state 'in which the lawyer reasonably believes the predominant effect of the lawyer’s conduct will occur.'
Issues Arising from Potentially Inconsistent or Different
The ABA does not have the authority to impose its professional responsibility rules on any state. To the contrary, each state controls its own professional responsibility rules, just as each state controls its own substantive law. Nor, at least at present, is there any clear basis for arguing that state-based limitations on multistate practice are invalid as a matter of express federal preemption or under negative Commerce Clause jurisprudence. See, e.g.,Kroll v. Finnerty, 242 F.3d 1359 (Fed. Cir. 2001). As the official comment to Proposed RPC 5.5 notes in part, '(t)he definition of the practice of law is established by law and varies from one jurisdiction to another.' MJP Report at 69.
It follows, however, that the liberalized multistate-practice rules endorsed by the MJP Report will become law only if, as and to the extent that they are adopted on a state-by-state basis. This has both immediate and long-term consequences. On an immediate basis, very few states have adopted Proposed RPC 5.5 and 8.5 or equivalent rules, and it may be a matter of years before a significant number of states do so. On a long-term basis, it may well be that some states will reject the proposed changes in whole or in part.
Consider, for example, the plight of a lawyer licensed only in State A, which has adopted Proposed RPC 5.5 and 8.5 in haec verba. Suppose that that lawyer, a nationally recognized expert in the law of widgets, is asked to handle a widget law business matter for a client located in State B, and that the business matter would be permissible under State A’s version of Proposed RPC 5.5(c)(4), but that State B either has not modified its version of Model Rule 5.5 at all or has done so without including Proposed RPC 5.5(c)(4). What would be the result?
One obvious answer is that our hypothetical lawyer will be subject to injunctive relief or prosecution in State B for the unauthorized practice of law in that state. A less obvious but no less clear answer is that even if State B does not pursue this lawyer, the lawyer would also be subject to discipline in State A pursuant to State A’s version of Proposed RPC 5.5(a), which prohibits a lawyer from engaging in acts that constitute the unauthorized practice of law in other states. A final answer is that our lawyer may be unable to collect fees for this 'unlicensed' work. See, e.g., Birbrower, Montalbano, Condon & Frank, P.C. v. Superior Court, 949 P.2d 1 (Cal. 1998); Spivak v. Sachs, 211 N.E.2d 329 (N.Y. 1965).
One can argue that the risk that either state would actually take action against the lawyer is probably quite low and that if the lawyer is ill-advised enough to allow the client to run up a substantial unpaid bill, that is the lawyer’s own fault. Nevertheless, the point here is that conscientious lawyers who wish to abide by the rules will need to look into the law of other jurisdictions in which they may occasionally practice, in order to determine whether, or to what extent, any or all of the safe harbor rules contained in Proposed RPC 5.5 have been adopted. And given the presently broad array of non-uniform amendments of other ABA rules, it is probably more likely than not that at least some states will reject Proposed RPC 5.5 either in whole or in part.
ISSUES ARISING FROM Potentially Inconsistent Applications
of Same Rules
Even if State A, State B and all other states ultimately adopt identical versions of RPC 5.5, that will not be the end of the matter. As anyone who has ever worked with ostensibly uniform state laws or the law as interpreted by different federal circuit or district courts well knows, differing interpretations are likely to abound. Three examples should suffice.
First, suppose that a State A litigator is handling litigation in State A and that State A’s professional responsibility rules have been interpreted to preclude lawyers from directing or helping their clients engage in undercover 'sting' operations or from taping telephone conversations without the consent of all parties thereto. Suppose further that key nonparty and unrepresented witnesses are located in State B and that State B law has been held to allow private sting operations and the unilateral recording of telephone calls. May the State A litigator use tactics that are permissible in State B in aid of the State A litigation? Alternatively, what if the litigation is pending in State B, with the lawyer admitted pro hac vice, but the witnesses are located in the lawyer’s own State A?
There are obvious choice-of-law issues here, and it is conceivable that the law of either state could ultimately be held applicable. It is not wholly clear that the reasonable-belief standard contained in Proposed RPC 8.5(b)(2) would necessarily save the lawyer in such circumstances. It may be, for example, that the reasonable-belief standard will be held to require a careful review of both multistate ethics and general choice-of-law rules, and that a lawyer who acts on the assumption that the law in one state is the same in all others (or will be construed to be the same in all others) will ultimately be held to be out of luck.
Alternatively, consider the assertion in the official comment to Proposed RPC 5.5 that the reasonable-relationship standard in Proposed RPC 5.5(c)(4) may be met by 'draw(ing) on the lawyer’s recognized expertise developed through the regular practice of law on behalf of clients in matters involving a particular body of federal, nationally-uniform, foreign, or international law.' MJP Report at 71. How much involvement of state law will be tolerated before a matter can be said not to be sufficiently based on a particular body of federal law, and how many variations in state law will be tolerated before a body of state law can be held not to be nationally uniform? Alternatively, is the uniformity to be judged on the basis of the uniformity of a whole body of law or on the basis of the presence or absence of uniformity in fact regarding the particular provisions of that law that may be applicable to a specific matter? What if there is in fact a proposed uniform law duly adopted by the National Commission on Uniform State Laws but adopted in only 10 or 20 states?
Assume, for example, that a professional responsibility lawyer is licensed only in State A and that State A has adopted the ABA Model Rule version of RPC 1.6, which does not allow a lawyer to reveal the intention of a client to commit a crime unless there is an 'imminent risk of death or serious bodily injury.' In spite of the existence of this proposed uniform rule, the majority of states has rejected the official version of RPC 1.6 and has adopted more permissive provisions. In fact, some states have gone so far as to require the disclosure of a client’s intention to commit certain crimes. See generally 1 Geoffrey C. Hazard, Jr. & W. William Hodes, The Law of Lawyering § 9.15-.21. Under what circumstances, if any, can it be said that there is a 'nationally-uniform' body of law here if the matter on which the professional responsibility lawyer is consulted for advice is primarily or partially based on issues of future client crime? At this point, it simply is not possible to assert how all such cases will be resolved. The possibility therefore cannot be ignored that different results may be reached by different courts on facts that are difficult or impossible to distinguish.
Finally, assume that a lawyer licensed in State A wishes to handle a State B matter for a State B client pursuant to Proposed RPC 5.5(c)(1), by using an associate licensed in State B. How much work must the associate do before the associate can be said to be 'actively participat(ing)' in the matter? And must the active participation be at all stages of the matter, or only at some? To put it mildly, it is likely that reasonable minds will differ.
Civil Liability Issues
Let’s return one last time to our hypothetical State A lawyer, who is once more a nationally recognized expert in widget law and is asked by a client located in State B to handle a widget law matter. Let’s assume as well that State B has adopted Proposed RPC 5.5 in full and that it would be permissible for the lawyer to represent the client in this matter. Suppose, however, that while the lawyer handles the widget law aspects of the matter flawlessly, the lawyer overlooks a particular, and unusual, local tax issue under the law of the county in which the client is located and that the client therefore incurs substantial taxes that could have been avoided. Finally, assume that national widget law practitioners are uniformly unaware of this particular county tax but that reasonably prudent transaction lawyers who regularly handle business transactions in State B are aware of the tax and know how to avoid it. What would be the result when the client sues the lawyer for malpractice?
The answer is that the client is likely to win unless, at a minimum, the lawyer has effectively disclaimed responsibility for local tax matters as a part of the engagement with the client. Put another way, the standard of care to which the national widget law lawyer will be held is likely to be cumulative and to include not only things that a reasonably prudent national widget law lawyer should or would know, but also things that a reasonably prudent State B lawyer who might handle such matters should or would know, whether or not that reasonably prudent State B lawyer has any widget law expertise.
Arguably, this result is entirely appropriate. Pursuant to Model Rule 1.1 and applicable standards of reasonable care, the national widget law lawyer should not represent clients in matters that the lawyer is not competent to handle in full or is unwilling to become competent to handle in full. Moreover, the ability of the national widget law lawyer to avoid such responsibilities through a clear and unequivocal limitation of the lawyer’s obligation may in itself be ample reason to hold the lawyer liable for failing to inform the client that additional counsel is or may be necessary. Nevertheless, this remains a significant potential trap for unwary lawyers and also reflects a significant risk to clients who want to engage a 'one size fits all' lawyer or firm to handle all transactions in all locations.
At the risk of mixing metaphors, it is generally bad form to look a gift horse in the mouth, and the recommendations in the MJP Report are no Trojan horse. Nevertheless, it is premature for lawyers with actual or potential multistate practices simply to declare victory and return home. This area of law will require careful attention for years to come.
ABOUT THE AUTHOR
Peter R. Jarvis has a litigation practice at Stoel Rives in Portland, with emphasis on attorney disciplinary and professional responsibility matters and also on general contract and business matters. He is a frequent writer and speaker on legal ethics issues, and his practice includes advising attorneys with legal ethics questions and defending attorneys accused of legal ethics violations.
1. This article does not address other issues addressed in the MJP Report, including, but not limited to, the proposals for a uniform pro hac vice admissions rule and a uniform rule for foreign legal consultants. See, e.g., MJP Report at 49-52, 59-61.
© 2003 Peter R. Jarvis