Panel urges relaxing practice limits for out-of-state lawyers

By Kristina Horton Flaherty
Staff Writer

Faced with the expanding geographic boundaries of modern-day lawyering, a state Supreme Court committee has proposed new rules to ease and clarify the restrictions on out-of-state attorneys seeking to practice law in California.

"Today's reality is that the needs of many clients do not stop at state lines, and neither does the legal practice of the attorneys who represent them," an advisory task force concluded last year in recommending such changes.

California is one of many states that have grappled in recent years with the conflicting realities of a changing business world, the advent of the Internet and other technological advances, and rules that generally prohibit lawyers from practicing law outside the states in which they are licensed.

"Nobody is sure where the lines are," said San Francisco attorney Joanne Garvey, who served on the panels that developed California's proposed rules and on the American Bar Association commission that recently crafted national model rules relating to the multijurisdictional practice of law.

Most agree that changes are due. Just what those changes should be, however, has triggered sharp debate, with public protection and consumer benefits issues topping the list. "What you're trying to do is balance a number of interests, all of which have good reason to be balanced," Garvey said.

The rules recently proposed by the Supreme Court's Multijurisdictional Practice Implementation Committee would allow four categories of out-of-state attorneys to practice law in California in certain circumstances:

• In-house counsel for qualifying institutions;



• Public-interest lawyers;



• Lawyers practicing temporarily in California on specific litigation; and



• Lawyers handling non-litigation matters in California on a temporary basis.

"I'm pleased and excited about the work that we've done because it truly is a major movement in opening up the practice of law in California," said San Francisco attorney Raymond Marshall, who chaired the two California panels that developed the proposed rules.

Marshall

The door remains open to further changes in five years. "This is a beginning," Marshall said. "We do need some real-world experience under our belts to see whether we've hit the mark or whether we've fallen short in some way."

Under the proposal, in-house counsel and public interest lawyers living in California would be allowed, in limited circumstances, to practice law in the state without taking California's bar exam. Such attorneys would have to be in good standing with another state bar, meet certain requirements and register with the State Bar. They would be subject to California's disciplinary rules and, in the first year, would have to fulfill the same minimum continuing legal education (MCLE) requirements that California lawyers must complete every three years.

Those who crafted the new rules say public protection has always been their highest priority. "The idea is not to increase the ability of out-of-state lawyers to practice in California at the expense of consumer protection," Marshall said.

Out-of-state attorneys also would be allowed to provide certain legal services on a temporary basis without going through the registration process. California already opens the door to out-of-state attorneys in very limited circumstances: with the consent of a trial judge, as counsel pro hac vice ("for this occasion"), as an attorney arbitration counsel, as a foreign legal consultant or as military counsel.

But the rule-drafting committee concluded that such exceptions do not go far enough. The new rules would, for example, apply to out-of-state attorneys who make a quick trip or two to California to take depositions or to handle occasional transactional matters for a client.

"This is really a good first step toward the practical balance of meeting the needs of interstate practice with public protection and protection of the practices of California lawyers," said State Bar President Jim Herman.

The bar will provide input to the rule-drafting committee. "We are looking at this in terms of its financial and enforcement impacts on the State Bar," he said. He also stressed outright that any costs would be borne by the out-of-state attorneys themselves, not the bar membership.

Birbrower impact

Many say the proposed rules simply reflect what attorneys already do. Lawyers cross state lines routinely to attend to the legal matters of clients and employers, which could amount to breaking the law in some instances. But few paid much attention to this potential conflict until a 1998 California Supreme Court decision, Birbrower v. Superior Court, trained a national spotlight on the problems that an attorney could face in such situations.

In the Birbrower case, a New York law firm (Birbrower) negotiated a worldwide license, on behalf of a New York client, with a California computer company. The East Coast client then created a California company to handle the work under the new licensing agreement. A dispute over the licensing rights later arose, however, and Birbrower attorneys were brought back in to resolve the matter. The case was settled, but the clients wound up suing Birbrower for malpractice. Birbrower, in turn, filed a cross-complaint alleging breach of contract for lack of payment.

That was when the already unusual case took an even more unusual turn. The clients argued that no payment was due because the Birbrower attorneys were not licensed to practice law in California. Ultimately, the California Supreme Court agreed.

"The maxim 'bad facts make bad law' probably applies to this case," said Palo Alto attorney Scott Mosko, who represented Birbrower before the high court. "Nevertheless, it's out there suggesting circumstances that could put the non-California lawyer at risk when he or she gets involved with a California entity."

Mosko argued to the Supreme Court that such a decision could impact companies that do interstate commerce because it would potentially prevent them from selecting the lawyer of their choice.

In the wake of Birbrower, the American Bar Association and many states began examining the issue. In California, there were concerns that the state's outdated rules could be limiting client options, hindering multi-state companies who transfer in-house counsel to California and ultimately driving up consumer costs.

Last year, a California Supreme Court advisory task force, appointed in 2000, wrapped up a report recommending a series of changes. The panel decided against adopting such sweeping measures as comity or reciprocity. Comity, which would open the door to lawyers licensed in all other states, would lower California's admission requirements to the lowest standard adopted in any other state, the panel suggested.

Reciprocity, a system in which California would only admit attorneys from states offering the same to Californians, would pose problems as well, the panel concluded. Unlike other states, California does not require graduation from an ABA-accredited law school as a condition of bar admission. And, said Marshall, "not a single state was willing to accept reciprocity for those California lawyers who did not graduate from an (ABA-accredited school)."

There was, however, widespread agreement that the restrictions on in-house counsel should be relaxed. Under the rules proposed by the drafting committee, registered out-of-state attorneys who live in California and work for "qualifying institutions" could provide legal services to their employers. They would not be allowed to appear in court, however, and they would have to renew their registration annually.

Drawing lines for temporary transactional work proved to be one of the toughest sticking points for the rule-drafting committee. "Is it temporary or transitory if you come every month to visit with a client?" Garvey asked. "Should you have time limits?"

Marshall suggested there are simply "too many variables" to set specific time limits. "We didn't want to write a rule that was going to be so restrictive that it would undercut the general theme," he said.

Rules will conform with practice

In the coming weeks, the rule-drafting committee will review input received during a recent public comment period and could still make revisions. If adopted by the state Supreme Court, such rules could take effect as early as January.

"This proposal will kind of bring the rules in conformity with the practice," said Santa Clara University School of Law Professor Gerald Uelman, applauding the panel's work.

Some still see the proposed rules as too narrow. Susan Hackett, general counsel of the American Corporate Counsel Association (ACCA), suggested that the rules should extend to all otherwise qualified in-house counsel, not just those who work for a "qualifying" institution. Under the rules, a "qualifying" institution would have to have 10 full-time employees in California or one lawyer licensed in California.

"What makes that so much safer for the public?" the Washington, DC-based attorney asked. "You could work in a legal department with 20 California lawyers and still be an incompetent boob."

Hackett also would like to see an amnesty provision that would give in-house counsel currently practicing law in California without admission to its bar an opportunity to take advantage of the new rule, and she suggests broadening the rules for temporary work.

But her greatest concern is that California, like some other states, has crafted its own rules rather than adopting the model rules recently released by the ABA. She dismissed arguments that California has unique circumstances and suggested that a "patchwork" of different rules nationwide could ultimately confuse attorneys. The purpose, she said, was "to make it simple."

Different from ABA Model Rules

Hackett and others do agree that California's proposed changes are "consistent in spirit" with the ABA's model rules. California's rules for temporary practice, however, are somewhat narrower. In addition, California's panel rejected the ABA recommendation to allow admission on motion to experienced out-of-state attorneys, a recommendation that was controversial even among the ABA commissioners.

Unlike the ABA's model rules, California's rules would allow public interest attorneys with out-of-state licenses to provide supervised legal services.

Such attorneys could, if registered, serve the poor under a California lawyer's supervision for up to three years. The ABA commission rejected the idea based on client protection issues, but California's task force pointed to the "reality" that many people of limited means cannot secure legal counsel at all. "Registering public interest attorneys might to some small extent ameliorate the situation," the panel concluded.

Some still see gaps in California's proposed rules. Mosko, an intellectual property litigator at Finnegan, Henderson, Farabow, Garrett & Dunner, said the rules address many interstate commerce issues that he raised in the Birbrower case six years ago. But there are issues, he said, that remain unresolved.

Take, for example, the situation of an out-of-state attorney who decides to move to California after representing hundreds of clients in patent application. Her work largely relies on precedent set by the federal circuit and rules set by the patent and trademark office.

"Why should she be compelled to take the California bar?" Mosko asked. "I would suggest that the type of practice that that person is involved with should dictate whether that person should take the bar."

Even those who see rough spots in the proposed rules seem to agree that they do help push California into the 21st century.

Said Mosko: "It's a hell of a good start."