Related Attorney: Teresa R. Tracy
A recent California Attorney General (“AG”) opinion finding that only a licensed attorney can lawfully represent another in a California administrative hearing under the Administrative Procedure Act is a good reminder to in-house counsel to be aware of California licensing requirements. These requirements apply to any person “practicing law” in California, whether because an out-of-state business entity has a facility in California, or because the attorney has relocated from another state to California and has not yet become licensed to practice law in California. Not only can it limit the ability of that attorney to represent the entity in judicial and administrative proceedings, but it can also impact the availability of valuable protections under the attorney-client privilege. Furthermore, the unauthorized practice of law is a misdemeanor under Bus. & Prof. Code § 6126.5.
In Opinion 14-101, the California Attorney General was asked:
- Does the Administrative Procedure Act authorize a party to a proceeding conducted by the Office of Administrative Hearings to be represented by a person who is not an active member of the California State Bar?
- Does 20 U.S.C. 1415(h)(1), or its implementing regulations, or California Education Code § 5605(e)(1) authorize a party to a special education “due process hearing” to be represented by a person who is not an active member of the California State Bar?
The AG answered both of these questions in the negative.
As part of the discussion leading to this conclusion, the AG noted that the representation of another before a governmental entity has historically been regarded as the “practice of law.” See, e.g., Baron v. City of Los Angeles (1970) 2 Cal.3d 535, 543 (character of act, not forum, is decisive); Hustedt v. Workers’ Comp. Appeals Bd. (1981) 30 Cal.3d 329, 335-336; see also Benninghoff v. Superior Court (2006) 136 Cal.App.4th 61 (disbarred lawyer may not represent another person in administrative proceedings). Under the State Bar Act, it is unlawful to practice law in this state unless one is a member of the California State Bar or is otherwise authorized by statute or court rule to engage in the practice of law. Bus. & Prof. Code, §§ 6125, 6126(a). For purposes of this opinion, the term “nonlawyer” or “unlicensed” includes lawyers who are licensed to practice law in other states or jurisdictions but are not active members of the California State Bar. The prohibition against the practice of law without membership in the California State Bar or authorization by statute applies equally to lay persons and to out-of-state attorneys. Birbrower, Montalbano, Cordon & Frank v. Superior Court (1998) 17 Cal.4th 119, 130-132.
In Birbrower, attorneys from a New York-based firm with no California-licensed attorneys, was retained to represent a business in a San Francisco-based arbitration. Birbrower attorneys advised their client on California substantive law, interviewed witnesses and arbitrators, hired experts, conducted settlement negotiations and otherwise moved ESQ closer to the arbitration hearing. Although some of its work was done in New York, most Birbrower attorney services were performed in California. After the arbitration settled, the client refused to pay the firm’s bill, claiming that the firm had violated the California Business & Professions Code by engaging in the unauthorized practice of law.
Although the Legislature did not closely define what constitutes the “practice of law,” the court construed the term to include “the doing and performing services in a court of justice in any matter depending therein throughout its various stages and in conformity with the adopted rules of procedure,” and, even more broadly, “legal advice and legal instrument and contract preparation, whether or not these subjects were rendered in the course of litigation.” Birbrower, supra, at 128. The California Supreme Court went on to say:
The practice of law ‘in California’ entails sufficient contact with the California client to render the nature of the legal service a clear legal representation… The primary inquiry is whether the unlicensed lawyer engaged in sufficient activities in the state, or created a continuing relationship with the California client that included legal duties and obligations.
Our definition does not necessarily depend on or require the unlicensed lawyer’s physical presence in the state… For example, one may practice law in the state in violation of section 6125 although not physically present here by advising a California client on California law in connection with a California legal dispute by telephone, fax, computer or other modern technological means… We must decide each case on its individual facts.
Id. at 129.
California Rule of Court 9.46 allows a registered in-house counsel to provide legal services in California only to the qualifying institution that employs him or her without taking or passing the California Bar Exam and without becoming a member of the State Bar of California. One of the requirements of registration is that the attorney is licensed and a member in good standing, eligible to practice in a state, territory or insular possession of the United States. However, such counsel cannot (1) make court appearances in California state courts, (2) engage in any other activities for which pro hac vice admission is required if they are performed in California by an attorney who is not a member of the California State Bar, or (3) provide personal or individual representation to any customers, shareholders, owners, partners, officers, employees, servants, or agents of the qualifying institution. This rule contains a number of important definitions and provides the requirements for eligibility, the application process, and other important restrictions and requirements. Application forms, instructions and fee information is available on the State Bar’s website at www.calbar.ca.gov (Click on “Attorneys” and then select “Admissions,” “Special Admissions,” followed by “Multijurisdictional Practice Program”). There are also specialized rules for limited work done in California. See, e.g., California State Bar Rule 9.47 and 9.48.
ABA Model Rule 5.5(d) generally permits an in-house counsel to provide limited legal services through the company’s out-of-state office without engaging in the unauthorized practice of law, but notes that states may require corporate counsel to obtain a special license. See ABA Model Rule 5.5 cmt. 17.
Properly licensed status also extends to the important issues of attorney-client privilege.
In Gucci America, Inc. v. Guess?, Inc. (S.D.N.Y. 2010) 271 F.R.D. 58, during the discovery process in some trademark litigation, opposing counsel from Guess? challenged Gucci’s assertion of attorney-client privilege regarding communications to and from its in-house counsel who was law school graduate and a member of the California Bar but with “inactive” status. The federal magistrate judge sided with Guess, concluding that Gucci’s communications with that in-house counsel weren’t privileged and were thus subject to disclosure. After Gucci’s investigation confirmed its counsel’s inactive bar status, it fired him. Luckily for Gucci, the federal district court in the case did not follow the magistrate’s order. The court reasoned that because it found that Gucci demonstrated its reasonable belief that its counsel was an attorney at the time of the communications. The evidence included the fact that Gucci knew when it hired him that he had a law degree, he was hired to perform legal work and did so competently throughout his employment with Gucci, Gucci paid his California bar membership fees throughout his employment, and six current and former executives and Gucci’s outside counsel submitted declarations stating that they all considered him to be an attorney. Gucci America, Inc. v. Guess?, Inc. (S.D.N.Y. Jan. 3, 2011) No. 09 Civ. 4373(SAS), 2011 WL 9375.
In Scranton Prods., Inc. v. Bobrick Washroom Equip., Inc. (M.D. Pa. June 3, 2016) 2016 WL 3193482, the company’s in-house counsel was fully licensed to practice law in California but failed to become properly licensed under Pennsylvania’s Limited In-House Corporate Counsel License and was not a member of the Pennsylvania Bar. However, he periodically worked out of an office in Pennsylvania during part of his employment. The court decided that his communications with the company were nevertheless protected by the attorney-client privilege since was a member of the bar and licensed to practice in a jurisdiction. It distinguished cases finding that communications with lawyers who were not admitted to the bar of any jurisdiction were not privileged.
Since most states have special licenses for in-house counsel, counsel are well-advised to become familiar with and comply with those licensing requirements in every state in which the company has an office or employees in order to avoid issues about whether the person engaged in the unlicensed practice of law and whether the attorney-client privilege applies.
There are some notable exceptions that expressly allow persons who are not members of the California State Bar to perform activities commonly performed by licensed attorneys within California. See, e.g., Bus. & Prof. Code, §§ 6450 (paralegals), 22440 et seq. (immigration consultants); Code Civ. Proc., § 1297.351 (international commercial disputes); Lab. Code, §§ 1151.3 (Agricultural Labor Relations Board), 5700 (Workers Compensation Appeals Board); Unemp. Ins. Code, § 1957 (Unemployment Insurance Appeals Board); Welf. & Inst., Code, § 4701(f)(3) (Dept. of Development Services); Welf. & Inst. Code, § 10950(a) (Dept. of Social Welfare); see also Ed. Code, § 48918(b)(5) (school expulsion); Rev. & Tax Code, § 19084(a)(4) (Franchise Tax Board). Likewise, several administrative agencies have chosen to give parties the option of lay representation. See, e.g., 2 Cal. Code Regs. §§ 52.9 (State Personnel Board), 617.3(a) (Victim Compensation and Government Claims Board), 1187.8 (Commission on State Mandates); tit. 4, § 12060(j) (Gambling Control Commission); tit. 8, §§ 232.09(a) (California Apprenticeship Council), 378 (Occupational Safety & Health Appeals Board), 424.3(a) (Occupational Safety and Health Standards Board), 17209 (Dept. of Industrial Relations prevailing wage cases); tit. 10, § 2661.1(a) (Insurance Commissioner rate proceedings); tit. 17, §§ 60055.3(a), 60060.3, 60065.3 (Air Resources Board); tit. 22, §§ 2051-8(c)(3)(A) (Employment Development Department), 120222(a) (Dept. of Child Support Services); tit. 25, § 7637 (Office of Migrant Services) There are also a limited number of judicially-recognized exceptions. See, e.g., Eagle Indem. Co. v. Industrial Acc. Commission of Cal. (1933) 217 Cal. 244, 247 (workers’ compensation administrative proceedings); Consumers Lobby Against Monopolies v. Public Utilities Commission (1979) 25 Cal.3d 891, 913-914 (parties can be given a choice of being represented by a nonlawyer in adjudicatory proceedings before the Public Utilities Commission).
Again, in-house counsel who are not actively licensed in California either under the normal attorney licensing requirements or under the special in-house counsel procedure, should limit their activities to proceedings with these administrative agencies, keeping in mind that internal communications may not be protected by the attorney-client privilege.
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This Bulletin is made available for educational purposes and to provide general information on current legal topics, not to provide specific legal advice. The publication of this Bulletin does not create any attorney client relationship and should not be used as a substitute for competent legal advice from a licensed professional attorney.