You just successfully represented your biggest client in an arbitration hearing out of state. Still reveling from the closing argument you gave, you receive an unexpected phone call. It’s opposing counsel and he has called to inform you that he will be filing a motion to vacate the arbitration award on the ground that you engaged in the unauthorized practice of law. Instantly, you wonder, can he do this? More importantly, you wonder about the possible effects. As you know, a finding by the court that you engaged in the unauthorized practice of law may not only lead to the award being vacated, but it also implicates the ethical rules.
Whether the motion will succeed may depend on, of all things, where the arbitration was held. For example, effective Jan. 1, 2007, the Massachusetts Supreme Judicial Court adopted the American Bar Association’s Model Rule 5.5, entitled Unauthorized Practice of Law; Multijurisdictional Practice of Law. The new Rule 5.5 of the Massachusetts Rules of Professional Conduct, which allows an attorney unlicensed in Massachusetts to represent a client here in an arbitration, states in relevant part:
A lawyer admitted in another United States jurisdiction, and not disbarred or suspended from practice in any jurisdiction, may provide legal services on a temporary basis in this jurisdiction that are in or reasonably related to a pending or potential arbitration, mediation, or other alternative dispute resolution proceeding in this or another jurisdiction, if the services arise out of or are reasonably related to the lawyer’s practice in a jurisdiction in which the lawyer is admitted to practice and are not services for which the forum requires pro hac vice admission.
Mass R. Prof. C. 5.5(c)(3) (2007)
Under the new Rule 5.5, and in the absence of another forum rule or an express, enforceable contract provision, pro hac vice admission in Massachusetts will only be required for “court‑annexed arbitration or mediation.” Comment 12 to Rule 5.5, which further elaborates on the provision of temporary legal services by out-of-state attorneys, specifically requires pro hac vice admission in those particular circumstances.
Paragraph (c)(3) permits a lawyer admitted to practice law in another jurisdiction to perform services on a temporary basis in this jurisdiction if those services are in or reasonably related to a pending or potential arbitration, mediation, or other alternative dispute resolution proceedings in this or another jurisdiction, if the services arise out of or are reasonably related to the lawyer's practice in a jurisdiction in which the lawyer is admitted to practice. The lawyer, however, must obtain admission pro hac vice in the case of a court‑annexed arbitration or mediation or otherwise if court rules or law so require.
The American Arbitration Association rules do not include a requirement of pro hac vice admission in the state where an arbitration is being conducted. Accordingly, out-of-state attorneys may represent their Massachusetts clients in AAA arbitrations here without fear of disqualification or the threat of a bar disciplinary complaint in their home state for engaging in the unauthorized practice of law.
Arbitration proceedings in Massachusetts prior to the enactment of the new Rule 5.5 on Jan. 1, 2007
In 2006, the SJC decided two cases under the prior Rule 5.5 that involved lawyers who participated in arbitrations in Massachusetts but who were not licensed to practice here. In the first of these cases, Superadio Limited Partnership v. Winstar Productions, 446 Mass. 330 (2006), the losing party at arbitration petitioned the Court to have the arbitral award vacated. The appellant’s key argument before the Court was that the lawyer representing the appellee was not licensed in Massachusetts, and therefore, he engaged in the unauthorized practice of law by representing the appellee in a Massachusetts arbitration.
The SJC did not resolve the issue of whether an attorney licensed out of state was authorized to participate in arbitration proceedings in state because the Court was awaiting the results of an advisory committee report which, as we now know, was the impetus for the adoption of the ABA version of Rule 5.5. However, the SJC found that there was no evidence of fraud or corruption at play in the Superadio case, and ultimately the SJC concluded that the arbitrator’s decision would not be vacated based on the fact that the prevailing party was represented by an out-of-state attorney in the Massachusetts proceeding. As the SJC noted, “even assuming that the representation might constitute the unauthorized practice of law, the conduct would not provide a basis to vacate the award.” Superadio, 446 Mass. at 252.
In the second SJC case, Mscisz v. Kashner Davidson Securities, 446 Mass. 1008 (2006), the plaintiffs, who were residents of Massachusetts, sued their securities brokers. The attorneys for the broker defendants filed a statement of claim with the New York office of the National Association of Securities Dealers Inc., demanding arbitration. Per NASD rules, cases are arbitrated in the location closest to the customer’s residence. Accordingly, the arbitration hearing was held in Massachusetts. At the hearing, the broker defendants were represented by attorneys from a New York law firm. The New York law firm had a history of representing the defendants; however, the individual attorneys who appeared for these defendants at the Massachusetts arbitration were not admitted to the Massachusetts bar. The plaintiffs’ attorney filed a motion before the arbitration panel to disqualify the New York attorneys, which the hearing panel denied. On appeal, the SJC reiterated its holding in the Superadio case and declined to vacate the arbitrators’ award based on the representation by the out-of-state attorneys.
Representing your clients in out-of-state arbitrations
Not every state has been as receptive as Massachusetts to out-of-state attorneys representing clients in arbitration matters. For example, in Birbrower, Montalbano, Condon & Frank, P.C. v. Superior Court, 17 Cal.4th 119, cert denied, 525 U.S. 920 (1998), the Supreme Court of California held that out-of-state attorneys, who had prepared to arbitrate a case before an AAA panel, engaged in the unauthorized practice of law. The case itself never got as far as an arbitration hearing. Still, the court found that the two attorneys, neither of whom were licensed to practice in California, but who met with their clients in California, met with the opposition in California, and discussed a proposed settlement and made recommendations relating to it (also while in California), had engaged in the unauthorized practice of law. The Birbrower court declined in that case “to craft an arbitration exception” to California’s prohibition on the unauthorized practice of law.” Birbrower, 17 Cal.4th at 133‑34 (1998). Perhaps even worse for these attorneys, the Birbrower court barred them from recovering the legal fees they had incurred in providing legal services in California and allowed recovery of only those limited legal fees for the services that they provided in New York. Subsequent to the Birbrower case, the California Legislature adopted a law specifically authorizing out-of-state attorneys to represent clients at arbitrations after filing a certificate, which must be approved by the arbitrator; a requirement similar to pro hac vice admission. See California Code of Civil Procedure §1282.4 (1998).
States such as New York and Illinois have allowed out-of-state attorneys to represent clients in arbitration proceedings. In Williamson v. John D. Quinn Construction Corp., 537 F. Supp. 613 (1982), the U.S. District Court for the Southern District of New York was presented with the issue in the context of a fee dispute. The defendant, John D. Quinn Construction Corp., was represented by plaintiff Donald J. Williamson PA, a New Jersey law firm, in an arbitration hearing held in New York.
Williamson comprised only two attorneys, both of whom worked on the Quinn Construction arbitration but only one of whom was licensed to practice law in New York. Following the arbitration, which Quinn Construction lost, Williamson filed suit against Quinn Construction to collect more than $40,000 in unpaid fees. As part of its defense, Quinn Construction argued that Williamson was not entitled to collect the fees earned by the Williamson attorney who was not licensed to practice in New York, on the basis that the attorney had engaged in the unauthorized practice of law.
The U.S. District Court for the Southern District of New York disagreed. In holding that the Williamson attorney was within his right to participate in the New York arbitration, the court explained that an “arbitration tribunal is not a court of record; its rules of evidence and procedures differ from those of courts of record; its fact-finding process is not equivalent to judicial fact-finding; [and] it has no provision for the admission pro hac vice of local or out-of-state attorneys.” Williamson, 537 F. Supp. 613, 616 (1982). The court in Williamson also noted that the Association of the Bar of the City of New York had addressed the issue of legal representation before arbitration tribunals and concluded that “the Committee is of the opinion that representation of a party in an arbitration proceeding by a non-lawyer or a lawyer from another jurisdiction is not the unauthorized practice of law.” Williamson, 537 F. Supp. 613, 616 (1982).
Likewise, when an Illinois appellate court was presented with this question, it declined to vacate the arbitral award based upon the appearance of out-of-state counsel for one of the parties. In Colmar, Ltd. v. Fremantlemedia North America, Inc., 344 Ill. App. 3d 977 (Ill. App.1 Dist. 2003), appeal denied, 208 Ill.2d 535 (Ill. 2004), the plaintiff filed an action to have an arbitral award vacated based, in part, on the fact that Fremantlemedia’s ("FMNA") attorney was not admitted to practice in Illinois. The trial court affirmed the arbitrator’s award. The Illinois appellate court, in affirming the trial court’s order, concluded that the issue of whether FMNA’s attorney was admitted in Illinois was not determinative. The appellate court noted the general rule in Illinois that judgments are void if they are the result of a claim brought by an attorney who is unlicensed in Illinois. But, it determined that the rule should not be extended to arbitration proceedings for several reasons. First, the parties are both bound, by contract, to the rules of the AAA and the AAA does not require either party to be represented by an attorney. Next, the “modern trend of multijurisdictional practice” supports this holding. Finally, the Illinois appellate court agreed with plaintiff Colmar in stating that arbitration is not a judicial proceeding and the differences between the two proceedings were significant.
Similar to the Association of the Bar of the City of New York, the New Jersey Supreme Court Committee on Unauthorized Practice opined in 1994, in response to an inquiry, that “an out-of-state attorney may represent a party in an arbitration proceeding conducted under the auspices of the AAA in New Jersey.” 1994 WL 719208, N.J. Unauth. Prac. Op. No. 28 (1994). As the New Jersey Supreme Court Committee explained, this would include presenting evidence and arguing substantive legal issues. Relying on the reasoning of the U.S. District Court in the Williamson case, the committee found that arbitration’s “informal nature” could not be reconciled with a requirement that attorneys must be admitted to practice in-state before participating in an arbitration.
If confronted with such a challenge to an arbitral award, there are many useful policy arguments advanced by the ABA’s Commission on Multijurisdictional Practice in its comprehensive 2002 Report of the Commission on Multijurisdictional Practice. As the commission explained, there are circumstances where the client benefits if the client’s attorney is permitted to render these services.
Perhaps the most obvious benefit to the client is the freedom to be represented by someone with whom the client has built a relationship and in whom the client has vested his or her trust and confidence. The commission also found that, in the arbitration arena, admission to a particular jurisdiction may be relatively unimportant because the law in the jurisdiction where the proceeding takes place may be unrelated to the law governing the proceeding. This statement is particularly applicable to labor and employment arbitration where the language of the collective bargaining agreement effectively governs the dispute. Further, the parties to arbitration proceedings may simply choose to arbitrate at a particular location because that location is most convenient. If the arbitration site is selected as a matter of convenience, then the location is unlikely to bear any relationship whatsoever to the underlying dispute. Thus, familiarity with the laws and procedure of that jurisdiction is unnecessary as a practical matter.
Although many states allow attorneys who are not licensed in state to represent clients in arbitration proceedings, without pro hac vice admission, the rules from state to state are not uniform. Before entering a state to represent a client at an arbitration, prudent practitioners will review the state’s ethical rules and any relevant statutes relating to the unauthorized practice of law in that jurisdiction. The ABA maintains a chart that identifies what form of Rule 5.5 each state has adopted. See www.abanet.org/cpr/jclr/.
Alternative dispute resolution is an area of the law that will continue to provide limitless opportunities for solo and small firms to expand their law practices. A few hours of research will ensure that you take advantage of those opportunities without forfeiting hard-earned legal fees or facing bar disciplinary action.
1. The activities that constitute the practice of law in California were discussed in the Birbrower case in the context of the California Business and Professions Code §6125, which prohibits the unauthorized practice of law.