by Michael S. LeBoff

As more and more attorneys shift to remote working environments and law firms continue to add offices around the world, it is becoming far more common for out-of-state lawyers to be heavily involved in representing California clients in matters substantially connected to California. And, as is often the case, laws have been slow to catch up with the evolving realities of an increasingly borderless profession.

California Business and Professions Code section 6125 states, “No person shall practice law in California unless the person is an active licensee of the State Bar.” So, what constitutes the unlicensed practice of law in California?

The seminal case defining what it means to “practice law in California” is Birbrower, Montalbano, Condon & Frank, P.C. v. Superior Court (ESQ Bus. Servs., Inc.), 17 Cal. 4th 119 (1998). In this case, a law firm located in New York agreed to represent a California client in a contract dispute against a Delaware corporation headquartered in California. The contract in dispute specified “[t]he internal laws of the State of California (irrespective of its choice of law principles) shall govern the validity of this Agreement, the construction of its terms, and the interpretation and enforcement of the rights and duties of the parties hereto.” Id. at 125. None of the New York attorneys were licensed in California or admitted pro hac vice. Nevertheless, the out-of-state lawyers made trips to California, where they provided legal advice to their California-based clients. The out-of-state lawyers, however, never made any formal court appearances. Eventually a dispute arose between the California client and the New York firm, and the client sued. The superior court found the fee agreement unenforceable because the New York law firm provided legal services without being licensed in California.

On appeal, the California Supreme Court adopted a “we-know-it-when-we-see-it” test to define the meaning of “practice law in California” under California Business and Professions Code section 6125, holding:

In our view, 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. In addition to the quantitative analysis, we must consider the nature of the unlicensed lawyer’s activities in the state. Mere fortuitous or attenuated contacts will not sustain a finding that the unlicensed lawyer practiced law “in California.” 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.

Birbrower, 17 Cal. 4th at 128. The court went on to state that to “practice law” in California “does not necessarily depend on or require the unlicensed lawyer’s physical presence in the state.” Id. Physical presence is just one of many factors the court may consider in deciding whether an unlicensed lawyer practiced law in California.

In an effort to provide clarity as to what unadmitted attorneys can do without engaging in the unauthorized practice of law in California, the Judicial Council of California adopted California Rules of Court, rules 9.47 and 9.48. Rule 9.47 addresses when unadmitted attorneys may temporarily provide representation in California on litigation matters. According to the rule, an unadmitted attorney may temporarily practice law in California if the attorney: (1) maintains an office in a United States jurisdiction other than California in which the attorney is licensed to practice law; (2) has already been retained by a client in the matter for which the attorney is providing legal services in California, except that the attorney may provide legal advice to a potential client, at the potential client’s request, to assist the client in deciding whether to retain the attorney; (3) indicates on any website or other advertisement that is accessible in California either that the attorney is not a licensee of the State Bar of California or that the attorney is admitted to practice law only in the states listed; and (4) is an active attorney in good standing of the bar of a United States state, jurisdiction, possession, territory, or dependency.

This rule is not intended to be an alternative to a pro hac vice admission. Unadmitted attorneys that meet these four requirements are not deemed to be engaging in the unauthorized practice of law in California only where the services provided are part of: (1) a formal legal proceeding that is pending in another jurisdiction and in which the attorney is authorized to appear; (2) a formal legal proceeding that is anticipated but is not yet pending in California and in which the attorney reasonably expects to be authorized to appear; (3) a formal legal proceeding that is anticipated but is not yet pending in another jurisdiction and in which the attorney reasonably expects to be authorized to appear; or (4) a formal legal proceeding that is anticipated or pending and in which the attorney’s supervisor is authorized to appear or reasonably expects to be authorized to appear.

The United States District Court addressed these restrictions in Taylor v. Chaing, No. CIV S-01-2407 JAM GGH, 2009 WL 453050 (E.D. Cal. Feb. 23, 2009). In that case, the plaintiff’s counsel sought an interim fee award of nearly $5.5 million. The court declined to award more than $1 million in fees for services provided by a Colorado attorney, rejecting the argument that the out-of-state attorney did not engage in the unauthorized practice of law in California because he merely assisted the lead lawyer who was admitted to practice in California and made all court appearances. The court held if the “practice of law” were limited under California rules to affirmative appearance in court, the out-of-state lawyers’ actions of advising California clients and ghost writing for a California lawyer would be of no import. But, the practice of law in California includes legal research, brief writing, and advising clients. Further, rejecting the application of California Rules of Court, rule 9.47, the court held that working for a California law firm is a systematic and continuous presence in California. Moreover, the out-of-state attorney’s fees exceeded $1 million, and, according to the court, “no reasonable argument can be made that such activities are not a ‘substantial’ and ‘regular’ business activity in California.” Id. at *5. Finally, addressing the issue of whether the out-of-state attorney was “supervised” by California counsel, the court held “[s]upervision is not a tool by which non-admitted attorneys may avoid admission requirements for an omnibus practice in California.” Id.

California Rules of Court, rule 9.48 deals with non-litigation matters. The requirements for qualifying under rule 9.48 are the same as rule 9.47. Like rule 9.47, the circumstances in which unadmitted lawyers can provide legal services in non-litigation matters is limited. In non-litigation matters, qualified unadmitted attorneys may: (1) provide legal assistance or legal advice in California to a client concerning a transaction or other nonlitigation matter, a material aspect of which is taking place in a jurisdiction other than California and in which the attorney is licensed to provide legal services; (2) provide legal assistance or legal advice in California on an issue of federal law or of the law of a jurisdiction other than California to attorneys licensed to practice law in California; or (3) is an employee of a client and provides legal assistance or legal advice in California to the client or to the client’s subsidiaries or organizational affiliates. Even with these limitations, unadmitted attorneys relying on rules 9.47 or 9.48 must not: (1) hold out to the public or otherwise represent that he or she is admitted to practice law in California; (2) establish or maintain a resident office or other systematic or continuous presence in California for the practice of law; (3) be a resident of California; (4) be regularly employed in California; (5) regularly engage in substantial business or professional activities in California; or (6) have been disbarred, have resigned with charges pending, or be suspended from practicing law in any other jurisdiction.

What constitutes the unlicensed practice of law in California is not clearly delineated and is likely to continue evolving over time. While the boundary lines for the unauthorized practice of law in California remain unclear, the consequences of violating these rules, even innocent violations, can be severe. The unauthorized practice of law in California is a misdemeanor. Cal. Bus. & Prof. Code § 6126. In addition, unadmitted attorneys may not recover compensation for services in California. See Birbrower, 17 Cal. 4th at 127. Further, California lawyers who assist or aid and abet unadmitted lawyers in the unauthorized practice of law in California may be subject to criminal or civil liability, or State Bar discipline. As a result, out-of-state lawyers playing substantial roles in California-related matters or advising California clients run a significant risk of running afoul of California law, as do the California attorneys that partner with these out-of-state lawyers.

Michael S. LeBoff is a partner at Klein & Wilson LLP and a member of the Professionalism and Ethics Committee. His practice focuses on business litigation and attorney malpractice. He can be reached at leboff@kleinandwilson.com.