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The Unauthorized Practice of
the Law:
What the Buyer Should Know about "Legal Drafting" and other Services
by Non-Lawyers
© 2005 Bierce & Kenerson,
P.C. All rights reserved.
UPL. The
definition of "unauthorized practice of law" ("UPL") has
bedeviled legislators, courts, lawyers and non-lawyers since the legal
profession became regulated. Outsourcing service providers and even
consultants may be practicing law, with various consequences.
ABA's
Proposed Definition. In 2002, the American Bar Association
proposed a comprehensive definition to avoid confusion:
The practice of law consists of "the application of legal principles and
judgment with regards to the circumstances or objectives of a person that
requires the knowledge and skill of a person trained in the law."
As a corollary, "a person is presumed to be practicing law when engaging in
any of the following conduct on behalf of another:
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Giving advice or counsel to persons as to their legal rights
or responsibilities
or to those of others;
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Selecting, drafting, or completing legal documents or agreements that affect the
legal rights of a person;
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Representing a person before an adjudicative body, including
but not limited to,
preparing or filing documents or conducting discovery; or
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Negotiating legal rights or responsibilities on behalf of a person." ABA Task Force on the Model Definition of the Practice of Law, Proposed Model
Definition of the Practice
of Law, Sections (b)(1) and (c) (Sept. 18, 2002).
Federal
Trade Commission's Views. In response, the Federal Trade Commission
submitted comments to the ABA's Task Force on the Model Definition of the
Practice of Law. The FTC argued that such a definition was too
broad, too anti-competitive and was a disservice to the public. It noted
that, in court decisions, non-lawyers have been allowed to perform activities
usually performed by lawyers if those activities are incidental to the
profession or business of the nonlawyer. Another judicial exception may
exist for the preparation of simple or easy forms, including a simple income tax
return. FTC letter to ABA Task Force, Dec. 20, 2002.
What the
Corporate Client Should Know about UPL in the Outsourcing Context. Assuming
that non-lawyers will be permitted to engage in some or even all of the
activities identified in the ABA's now abandoned model definition, what should
the consumer of legal services know about the difference? What if a
consultant is preparing all the documents for review by in-house legal counsel?
In general, the in-house attorney exposes himself or herself to
professional liability by being the sole lawyer on a transaction where the
in-house lawyer lacks the experience to make informed legal judgments.
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Factor
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Lawyer
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Nonlawyer
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Education.
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Regulated. Minimum
curriculum and bar examination as well as Continuing Legal Education
requirement.
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No requirement.
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Familiarity with local
laws.
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Regulated.
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No requirement
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Conflicts of interest.
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Regulated. Code of
Ethics requires avoidance of representation of current (and, in certain
instances, former) clients with conflicts of interest.
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No requirement. In
practice, some consultants avoid conflicts by never representing service
providers. However, taking advertising money or fees for training
a service provider in the consultant's methodology may create a conflict
that should be disclosed to enterprise customers and expressly waived.
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Confidentiality.
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Attorney-client
communications and attorney "work product" (reflecting the
analysis by the lawyer of the client's rights and remedies) are
protected by legal privilege. This prevents disclosure in court,
unless waived by the client.
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Confidentiality agreement
may be equivalent, but does not protect from disclosure in court.
Disgruntled employees or shareholders and regulators therefore have
access to consulting advice in a litigation context.
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Liability for mistakes in
advice on the law.
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Malpractice liability is
generally unlimited but can be applicable only to the lawyer and his
firm and not all partners personally. In some jurisdictions (e.g.,
the Netherlands), a lawyer may limit liability by posting a public
notice of limits. The attorney-client services agreement may limit
certain elements of liability, subject to an overriding prohibition
under public policy.
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No malpractice liability.
However, consultants may be liable for "errors and omissions,"
subject to the limitations on their liability that may be set forth in
the consulting agreement with the client. Consultants claiming to be
"experts" or to have "broad experience" will be held
to a high standard of care for making mistakes.
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Right of Board of
Directors to rely upon advice.
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Clear.
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Unclear. Where the
consultant claims to be an expert, the Board may rely upon the expert,
with resulting legal liability for mistakes at the level of an expert.
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Personal liability of
in-house attorney for mistakes in advice on the law.
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No personal malpractice
where in-house lawyer is relying upon expertise of outside legal
counsel, unless the in-house counsel contradicts or exercises specific
substantive controls over decisions.
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In-house lawyer is liable
for malpractice. Even if the consultant's employees are lawyers,
the consulting agreement will ordinarily warn the client that the
consultant is not giving legal advice, so the in-house lawyer is not
able to rely upon the legal expertise of the consultant's employed
lawyers.
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Impact of legal liability
issues affecting the "practice of law" upon the outsourcing
transaction.
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In-house lawyers acting
alone expose the companies to errors and omissions that could affect
regulatory compliance and liability to shareholders, employees,
supply-chain partners and others with whom the corporate enterprise has
business or legal connections.
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The consultant should
recommend hiring an experienced outsourcing lawyer and provide a warning
that it is not providing legal advice. The warning should be as
extensive as possible to mitigate the risk of the consultant's assuming
liability for "legal advice" or for achieving benefits or
mitigating risks.
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Further reading:
Consultants in Outsourcing
Lawyers in Outsourcing
Outsourced Legal Research
Outsourced Bankruptcy Petition Preparation
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