Discipline and Fee Consequences

Discipline and Fee Consequences

A lawyer who crosses the line Rule 5.5(a) draws meets two distinct sets of consequences. The rule forbids practicing law in a jurisdiction in violation of that jurisdiction's regulation of the legal profession, and it forbids assisting another to do so.¹ The earlier sections of this chapter located the line: what counts as practice, when practice occurs in a state, and which safe harbors and exceptions make an out-of-state lawyer's work lawful. This section asks what follows when a lawyer steps over it.

The first consequence is discipline. A state must be able to reach a lawyer it never admitted, and Rule 8.5(a) supplies that reach by subjecting a lawyer who provides or offers to provide legal services in the state to its disciplinary authority. The second consequence is financial and civil. The lawyer may be unable to collect a fee for the work, and the lawyer may face the state's unauthorized practice statute. Different decision-makers control each track. A disciplinary agency decides whether to charge misconduct, a court hearing a fee dispute decides whether the fee is owed, and a prosecutor decides whether to enforce the statute. A lawyer can therefore suffer one consequence without the other.

Disciplinary Authority

Rule 5.5(a) defines the misconduct but does not say who may charge a lawyer who works in a state that never licensed that lawyer. The silence matters, because a disciplinary agency ordinarily acts on a license it has issued. Rule 8.5(a) closes the gap by tying authority to conduct. A lawyer admitted in the state answers to its disciplinary system wherever the conduct occurs, and a lawyer not admitted there comes under the same system by providing or offering to provide legal services in the state.² The lack of a local license therefore shields no one who works there.

Five kinds of lawyer fall within that reach, and the list shows how little the lawfulness of the practice matters:

• A lawyer admitted in the state, over whom the state holds full power, including the power to continue or terminate the license.³
• A lawyer admitted pro hac vice by a court in the state, or authorized to practice there as house counsel for an employer.⁴
• A lawyer practicing temporarily under a Rule 5.5 safe harbor, who may be disciplined for violating the state's rules of professional conduct.⁵
• A lawyer who only offers services, for example by directing advertising toward potential clients in the state.⁶
• A lawyer practicing with no authorization at all.⁷

The last category shows why authority cannot depend on lawful practice. If it did, a lawyer who practiced without any authorization would be harder to discipline than one who stayed within the rules, and the violation of Rule 5.5 would shelter the violator. Because the state's authority attaches to the act of providing or offering services, the state in whose territory the line was crossed can police it, whether the practice was authorized or not, temporary or regular.⁸

The safe-harbor category shows the same logic from the other side. A safe harbor lifts the ban on the practice and leaves the lawyer subject to the state's conduct rules. As Professor Stephen Gillers observes, “[t]he expanded authority that Rule 5.5 confers comes at a price”: a lawyer who wishes, even temporarily, to provide legal services in the jurisdiction “must recognize the jurisdiction's interest in disciplining him or her for misconduct in connection with those services.”⁹ Without that price, the forum would have to choose between excluding visiting lawyers and admitting visitors it cannot reach. Two conclusions are tempting and wrong: that a lawyer inside a safe harbor escapes the forum's discipline because the practice was lawful, and that a lawyer with no local license leaves the forum nothing to act on.

What the state can do depends on what it gave the lawyer. Against a lawyer it admitted, the state holds the full range of sanctions, including ending the license. Against a lawyer it never admitted, the state cannot technically disbar, because it has no license of its own to revoke. The court may instead revoke the lawyer's admission pro hac vice or registration as house counsel, preclude that admission or registration in the future, or refer the lawyer for reciprocal discipline in the home jurisdiction.¹⁰ The first two remedies withdraw permissions the state controls, since it decides who may appear before its courts and who may register as house counsel. For the sanction that depends on a license the forum did not issue, it relies on a state that did.

Reciprocal discipline makes that reliance workable. A lawyer admitted in one jurisdiction who is disciplined in another state or territory, or in federal court, presumptively will be disciplined in the same manner in the home jurisdiction.¹¹ A finding made in the forum thus reaches the home state with a presumption behind it.

Advertising poses the sharpest test of when authority attaches, because no client need have been served.

Which state's ethics rules govern a particular act is a separate question from whether a state has authority over the lawyer at all. This section takes up only authority.

Step three does most of the work on exam stems, which usually describe a lawyer who believes that lawful practice, or the lack of a local license, puts the forum out of reach. Neither belief is correct. Only one fact decides whether the forum's authority attaches: whether services were provided or offered in the state.

Fees and Civil Exposure

A lawyer who practices without authorization cannot count on being paid, and the lawyer may also answer under the state's unauthorized practice statute, which treats a lawyer admitted only elsewhere to the same extent as a nonlawyer who does the same work.¹³ These consequences run outside the disciplinary system. They arise from the same Rule 5.5(a) violation, but they are enforced by courts, clients, and prosecutors.¹⁴

The leading illustration is Birbrower, Montalbano, Condon & Frank, P.C. v. Superior Court, 949 P.2d 1 (Cal. 1998). New York lawyers advised a California client and negotiated for it in a California dispute. They provided competent representation, but they violated California's statutory prohibition on the unauthorized practice of law.¹⁵ The fee agreement between the firm and its client was therefore illegal and against public policy, and it was unenforceable.¹⁶ The court asked whether the unlicensed lawyers engaged in sufficient activities in the state, or created a continuing relationship with the California client that included legal duties and obligations. Physical presence is one factor, but it is not required, and fortuitous or attenuated contacts do not suffice.¹⁷

Competent work did not save the fee, because the violation lies in the lack of authorization and not in the quality of the work. The rule can look harsh to a client who got a good result. But the statute exists to protect the public from unauthorized legal advice and counsel, and the court rejected a narrower definition of practice because it would undermine that purpose.¹⁸

The fee fails here for the same reason the Birbrower fee failed. The contract calls for services the law forbids the lawyer to render in the state, so a court will not help collect payment for them. No prosecutor or disciplinary agency is needed, because the client raises the point as a defense. The result reverses when the same work is authorized. Had the lawyer provided the services temporarily, in association with a Connecticut lawyer who actively participated, the work would fall within a safe harbor. It would then violate no regulation of the profession, and the client would have no unauthorized-practice defense to the bill.¹⁹

Loss of the fee is the private side of the exposure. The public side comes from the state's own enforcement tools. Because the unauthorized practice statute reaches a lawyer admitted only elsewhere to the same extent as a nonlawyer, the penalties and injunction suits described in the discussion of public enforcement are available against the out-of-state lawyer too.²⁰ Whether a given state makes the violation a crime depends on its statute, so an exam answer should attribute any penalty to the jurisdiction. Discipline runs on a separate track and may accompany either consequence or arrive without them.

The university scene shows why exposure persists where the practice has gone unchallenged. Each state applies its own statute, but Birbrower shows the shape of the analysis. A continuing relationship with a client in the state that includes legal duties and obligations can count as practice there without physical presence, while fortuitous or attenuated contacts cannot. A years-long advisory relationship with an Alabama university looks far more like the first than the second, although the Birbrower court said each case turns on its own facts.²¹ Nothing in the facts supplies an authorization. Enforcement is sporadic because many lawyers serve out-of-state clients this way and prosecutors have limited resources. A decision not to prosecute is an exercise of discretion that a different prosecutor can revisit, and it grants no permission.

Both consequences return to the theme of this chapter. The unauthorized practice rules bind lawyers and nonlawyers alike, and a license from another state gives no immunity from the fee bar or the statute. The safe harbors are what let an out-of-state lawyer avoid these consequences. Work that fits association with local counsel, a pro hac vice proceeding, an ADR proceeding, a connection to home practice, or a standing-office category is authorized, so it is not unauthorized practice at all.