In 1998 the California Supreme Court was faced with the issue as to whether representation by a New York law firm of a California corporation at an AAA Arbitration proceeding in California constituted unauthorized practice of law in California under circumstances where the California corporation was a subsidiary of a New York parent company that was a client of the law firm.
The Court ruled that out-of-state lawyers without California licenses are engaging in the unauthorized practice of law if they participate in “sufficient activities in the state” or create a “continuing relationship with a California client that includes legal duties and obligations.” In dicta, the court stated a lawyer could be engaged in the unauthorized practice of law even without being physically present in California, simply by advising a California client on California law in connection with a California legal dispute by telephone, fax, computer or other modern technological means. Birbrower, Montalbano, Condo & Frank v. Superior Court of Santa Clara County, 17 Cal. 4th 119 (1998).
The case was the subject of extensive criticism (including even a similar case in Illinois in which the Court ridiculed the California decision) and the Legislature moved to amend the impact of the decision by passage of an amendment to the California Code of Civil Procedure (“CCP”) which provides that an attorney admitted to the bar of any other state may represent the parties in the course of, or in connection with, an arbitration proceeding in this state, provided that the attorney, if not admitted to the State Bar of California, satisfies all of the following: (i) he or she timely pays a fee and serves a certificate on the arbitrator(s), the other parties and the State Bar stating that he or she is a member in good standing of an out of state Bar, is not a resident of California, and details regarding the case; (ii) The attorney’s appearance is approved in writing on that certificate by the arbitrator(s) or the arbitral forum; (iii) the certificate bearing approval of the attorney’s appearance is filed with the State Bar of California and served on the parties .
Unfortunately, although the. International commercial disputes provisions of the California Arbitration Act (see Section 1297.351 of the CCP) allow foreign attorneys to appear for parties in conciliations, the courts and the State Bar had taken the position that “admitted to the bar of another state” barred from appearance any attorneys of a foreign national unless formal pro hac vice procedures are allowed and followed and California counsel is associated. Some Arbitrators and attorneys have taken the position that this reasoning applies (or should apply) to international arbitrations as well as conciliations but in doing so there is a certain risk. For a number of years there have been attempts to get the California Legislature to act on this problem. At one point the s committee that I chaired for the Arbitration Committee of the Business Law Section of the State Bar presented proposed legislation which was approved by the State Bar but apparently blocked by the Judicial Counsel (for reasons unknown); several law review and trade magazine articles have been written criticizing the limits of the legislation that had been enacted.
Now, the problem has been solved, at least as to commercial disputes. In July 2018 the Governor signed Senate Bill 766 which will be incorporated into the California Arbitration Act as Section 1297.186(a). The Legislative Counsel’s Digest of the Bill first states recognition of the issue and then goes on to provide as follows: “This bill would permit an individual who is not admitted to practice law in California but who is a member in good standing of a recognized legal profession in the United States or a foreign jurisdiction and is subject to effective regulation and discipline by a duly constituted professional body or public authority to provide legal services in an international commercial arbitration or related proceeding, as specified. Additionally, the bill would subject an individual rendering legal services pursuant to this provision to the disciplinary jurisdiction of the State Bar, and it would direct the State Bar to annually report to the Supreme Court regarding the number and nature of any complaints that it has received against these attorneys and any actions it has taken in response to these complaints.”
Attorneys of other states must still follow the procedure outline above (which has worked) and this Bill will now solve the problem facing many involved in international commercial disputes. Thus the finale of Birbrower—better late than never!