by Paul A. Stewart, Christopher M. DiLeo, and Wendy K. Peterson

Many California attorneys represent clients located in other states. We represent these out-of-state clients by phone or email from our offices in California, or in California courts, and normally limit our advice to matters of California or federal law. Occasionally, however, our representation requires us to visit the client’s state to meet with our clients, review documents, negotiate a contract, or appear in court. Although these activities may seem routine for some of us, they pose the risk that the attorney may be violating California ethics rules and the laws of other states commonly referred to as “unauthorized practice of law” (“UPL”) statutes.

The unauthorized practice of law became a hot topic for lawyers across the nation following the 1998 California Supreme Court decision in Birbrower, Montalbano, Condon & Frank, PC v. Superior Court, 17 Cal.4th 119 (Cal. 1998). There, two New York attorneys represented a California-based client in connection with a dispute with a third party. The attorneys routinely visited California to meet with their client and to engage in negotiations with the third party. They also provided advice in California regarding a potential arbitration that was averted by a settlement agreement. Later, a fee dispute developed between the attorney and  client. Ultimately, the California Supreme Court held that the attorney could not collect his fee because he was practicing law in California without being a member of the California Bar. The Birbrower decision greatly concerned lawyers, particularly transactional lawyers, who regularly represented clients outside of their home states.

Since 1998, California and other states have pursued unlicensed lawyers for violations of their UPL statutes or refused to allow unlicensed lawyers to collect fees in their states. See, e.g., In re Wells, 2005 WL 3293313 (Cal.BarCt. Dec. 5, 2005) (No. 01-O-00379) (finding UPL where a California attorney moved to South Carolina and continued to practice law); Cleveland Bar Association v. Moore, 722 N.E.2d 514 (2000) (finding UPL where an out-of-state lawyer at an Ohio firm performed non-litigation tasks); In re Jackman, 761 A.2d 1103 (N.J. 2000) (finding UPL where a licensed Massachusetts lawyer advised clients in New Jersey on transactional matters); Linder v. Insurance Claims Consultants, Inc., 560 S.E.2d 612 (S.C. 2002) (denying a public insurance adjuster compensation for services found to be UPL); Florida Bar v. Rapoport, 845 So.2d 874 (Fla. 2003) (finding UPL where a District of Columbia lawyer represented parties in securities arbitrations in Florida). Some states have even permitted plaintiffs to use the states’ UPL statutes as a basis to sue the lawyers for malpractice, or as grounds to find personal jurisdiction over an out-of-state lawyer defendant. See Sample v. Morgan, 935 A.2d 1046 (Del. Ch. November 27, 2007). Worse yet, lawyers can be exposed to criminal prosecution for violating UPL statutes—in many states, violations are misdemeanors. One of the most notorious UPL cases was a 2004 case in which two Georgia lawyers and their law firm were indicted for violating a North Carolina UPL statute. In that case, the lawyers assisted a North Carolina university in investigating alleged improprieties in its basketball program.

Since then, the American Bar Association adopted amendments to Model Rule 5.5 that govern in states that have adopted them, and somewhat ease the restrictions on, lawyers with a multijurisdictional practice. While the rule continues to prohibit establishing an office or having systematic and continuous presence in a state in which the lawyer is not licensed, Model Rule 5.5(c) provides that a lawyer may provide services on a “temporary basis” in another state if (1) undertaken in association with a lawyer admitted in that state who actively participates in the matter, (2) the services are in or reasonably related to a court proceeding in which the lawyer is authorized by law to appear (such as by pro hac vice admission), (3) the services are in or reasonably related to an ADR proceeding relating to the lawyer’s practice in his home state and the forum does not require pro hac vice admission, or (4) the matter is a non-litigation or ADR matter that otherwise arises from or relates to the lawyer’s practice in his home state. In addition, Model Rule 5.5(d) provides that a lawyer admitted in another U.S. jurisdiction may provide services in the foreign state if (1) they are provided to the lawyer’s employer or affiliates and are not services for which the forum requires pro hac vice admission or (2) the lawyer is authorized by federal law to provide such legal services. Currently, over 36 states and the District of Columbia have adopted some form of Model Rule 5.5, and others, including California, are considering it. Interestingly, the Board of Governors of the State Bar of California’s proposed Model Rule 5.5 does not include Model Rule 5.5(c). In addition, Model Rule 8.5 makes a lawyer subject to discipline in any state where the lawyer renders or offers to render legal services, even if the lawyer is not admitted there. The Board of Governors of the State Bar of California has proposed adoption of a variation of Model Rule 8.5.

For California lawyers, the starting point for analysis is the California Rules of Professional Conduct. Rule 1-300 provides that a member of the California Bar shall not practice law in another jurisdiction where to do so would be in violation of the laws or regulations of that jurisdiction. Therefore, in order to determine whether you are engaging in the unauthorized practice of law in another state, you must review the UPL statute and ethics rules of that state. You should also determine and comply with any applicable state registration requirements, and also may wish to investigate with local counsel as to whether the host state is welcoming or hostile to out of state lawyers. While a survey of the UPL statutes of each state is beyond the scope of this article, there are practical steps a California lawyer can take to reduce the possibility of a charge of UPL. The following are guidelines that may be used to minimize risk:

1. Do Not Maintain an Office or Use Space for an Extended Period. Work done in another state in reliance on Model Rule 5.5 must be on a temporary basis. Therefore, do not open an office in another state where you are not licensed, or even rent space for a few months. In In re Kingsley, 950 A.2d 659 (Del. 2008), an unlicensed lawyer was disciplined in Delaware for borrowing office space from a certified public accountant in Delaware for four months. Similarly, in In re Wells, 2005 WL 3293313, a California attorney who moved to South Carolina and set up an “administrative office” near her new home was found by the California State Bar to have engaged in the unauthorized practice of law in South Carolina.
2. Engage Local Counsel for Transactional Matters. If a transactional matter will require “systematic and continuous” visits to another state, consider whether to affiliate with local counsel who will “actively participate” in the matter.
3. Engage Local Counsel for Litigation Matters and Seek Pro Hac Vice Admission. For litigation matters, engage competent local counsel and seek pro hac vice admission (and take care to follow the formalities of admission, including complying with local court and ethics rules). Use local counsel to handle all court filings.
4. Limit Work in Other States to Matters of Federal Law and Become Admitted to Practice Such Law. If your work is limited to matters of federal law, such as patent or trademark, immigration or bankruptcy law, you should be permitted to work in any state provided that you are admitted by the relevant federal court or agency. The supremacy clause of the U.S. Constitution restricts states from attempting to limit a lawyer’s practice before a federal agency, even in a state in which the lawyer is not licensed. Sperry v. Florida, 373 U.S. 379 (1963). For example, the Virginia bar issued an opinion that allowed a lawyer not licensed in Virginia, but authorized to practice before the U.S. Patent Office, to have an office and give legal advice in Virginia, but only on matters that relate exclusively to patent law. Virginia State Bar Standing Committee on Unauthorized Practice UPL Opinion 210 (Aug. 8, 2006). See also, District of Columbia Committee on Unauthorized Practice of Law Opinion 17-06 (July 21, 2006). ABA Model Rule 5.5(d) is consistent with that opinion. However, if the federal agency does not have admissions procedures, the practice may be unauthorized. See, e.g., Maryland Opinion 05-07 (Feb. 1, 2005) (opining that a New York law firm could not open an office in Maryland to practice federal tax law).
5. Provide Services as In-House Counsel. Under ABA Model Rule 5.5(d), lawyers may provide legal services in a foreign state to their employers or their employer’s organizational affiliates, as long as the local forum does not require pro hac vice admission. Thus, in states that have adopted Model Rule 5.5(d), in-house counsel may provide advice to their companies without being licensed in a foreign state, but they may not appear in the local court without pro hac vice admission. (But see Rule 965 under the California Rules of Professional Conduct that requires in-house counsel to register with the California State Bar.)

There is, unfortunately, no bright line test for determining when an attorney crosses the line from providing appropriate services to an out-of-state client to engaging in the unauthorized practice of law in another jurisdiction. However, following the above guidelines should assist attorneys in complying with both the California Rules of Professional Conduct and the UPL statutes of other states, and avoiding situations that would prevent the collection of fees from out-of-state clients. 

Paul A. Stewart is a partner and Christopher M. DiLeo is an associate at the law firm of Knobbe, Martens, Olson & Bear LLP. Wendy K. Peterson is general counsel of Knobbe, Martens, Olson & Bear. Mr. Stewart and Mr. DiLeo focus their practices on intellectual property matters. In addition, Mr. Stewart is Chairman of the Ethics Committee at Knobbe, Martens, Olson & Bear.