You asked whether Connecticut has a law, rule, or regulation that requires in-house counsel working in a company's Connecticut home office to be licensed to practice law in this state. You wanted information about efforts to change the practice rules for in-house counsel and a discussion of the policy reasons for and against the change.

The Office of Legislative Research is not authorized to give legal opinions and this report should not be treated as such.

SUMMARY

There is no express requirement that a Connecticut organization's in-house counsel be licensed to practice law in this state, but this topic has generated much recent controversy. Barbara Collins, president of the Connecticut Bar Association (CBA), reports that the CBA plans to release an informal opinion this June stating that in-house counsel who are not members of the state bar are engaging in the unauthorized practice of law (UPL) when they give legal advice to their employers on matters involving Connecticut law.

Collins reports that the CBA's In-House Counsel Study Committee has proposed a change in existing practice rules for in-house lawyers. The change would create a category of "Authorized House Counsel," exempting them from bar examination requirements and UPL sanctions for limited types of legal work they perform for their employers. The proposed rule is modeled after one that has been used in Florida since 1997 (Fla. Sup. Ct. Rules Regulating the Florida Bar, Ch. 17). Although Collins' term as CBA president ends June 30, she will continue to lead the association's efforts to secure court approval of the rule. If approved at a special meeting of the Superior Court Rules Committee this September, the full Judges Assembly may give it final approval before the end of the year.

The CBA proposal reflects a compromise between groups who advocate that the same bar admission rules should apply to Connecticut in-house counsel as apply to other Connecticut attorneys, on one hand, and those who argue that such rules should not apply because in-house legal work routinely involves multi-state transactions or expertise in areas (such as patent or securities law) that cut across state lines.

Those who favor imposing full state licensing requirements argue that this protects the public against incompetent or unethical practitioners. Others are concerned that permitting in-house counsel to practice in states where they are not licensed reduces the business opportunities of local practitioners and lessens the vitality of the local bar.

Opponents of in-house counsel licensing argue that subjecting these lawyers to state UPL sanctions does not reflect the reality of current corporate law practice. Corporate lawyers perform a myriad of legal and non-legal functions, and have traditionally done so wherever their companies do business. The corporation's day-to-day supervision of in-house counsel and its ability to terminate them is an adequate substitute for state regulation and disciplinary sanctions.

UNAUTHORIZED PRACTICE OF LAW

UPL laws typically date from the early 20^th Century and prohibit people from engaging in the practice of law except in states where they are licensed or otherwise authorized. The changing nature of clients' legal needs, particularly the increase in interstate transactions and the development of highly specialized legal practice areas in the intervening years have led some to question whether jurisdictional limitations on law practice have become an impediment to effective legal representation.

Legal ethics experts suggest that attorneys who provide services in these areas, including in-house counsel, are violating state UPL laws when they handle matters involving the laws of states where they are not admitted to practice (Needham, The Multijurisdictional Practice of Law and the Corporate Lawyer, 36 S. Tex. L. Rev. 1075 (1995)). Connecticut Superior Court judges can hold in-house counsel in contempt for engaging in UPL, although it does not appear that this has ever occurred (CGS § 51-88(b)). But they have refused to award attorneys fees or enforce fee agreements for legal services provided by attorneys not admitted to practice in Connecticut.

Other violators of Connecticut's UPL law face fines of up to $ 250, imprisonment for up to two months, or both, in addition to contempt citations.

ARGUMENTS AGAINST ELIMINATING STATE-BY-STATE LAWYER LICENSING

In general, local control of attorneys promotes a variety of state interests. It permits states to set professional competency and ethical standards that reflect community values. Lawyers licensed by the state are thought to be more familiar than out-of-state lawyers with state practice rules, disciplinary provisions, and unwritten expectations about how members of the local bar should behave. Some suggest that state disciplinary bodies can more easily and effectively deal with misconduct by lawyers holding state licenses than they can with out-of-state lawyers. Others maintain that local licensing strengthens lawyers' ties to the community, benefiting those communities by their voluntary service on court committees and non-profit organization boards and participation in other public service activities (American Bar Ass'n, Interim Report of the Commission on Multijurisdictional Practice (Nov. 2001)).

ARGUMENTS FOR ELIMINATING LOCAL PRACTICE CONTROLS

Those favoring elimination of jurisdictional practice restrictions argue that the patchwork of local rules and standards discourages lawyers from providing services that they are able to render skillfully and ethically. One consequence of this is to deprive corporate clients of a preferred lawyer including, at times, the lawyer who can serve the client most efficiently and economically because of knowledge gained in the course of prior work for the client or expertise in the particular subject area. Alternatively, lawyers concerned with UPL sanctions may insist that clients hire local counsel or co-counsel in situations where doing so unnecessarily increases legal costs (Id. ).

CBA'S PROPOSED RULE CHANGE

The CBA's proposal authorizes attorneys licensed to practice in jurisdictions other than Connecticut to act as house counsel in Connecticut without taking the Connecticut bar examination so long as

they are exclusively employed by an organization that neither engages in the practice of law itself nor charges others for the activities of authorized house counsel.

Limitation on Legal Activities

Under the proposal, authorized house counsel cannot hold themselves out as members of the Connecticut bar. They can provide legal advice and services in Connecticut, but their activities are limited to: (1) advising their employer's directors, officers, employees, and agents about its business and affairs; (2) negotiating and documenting matters for their employer; and (3) representing the organization in its dealings with administrative agencies, tribunals, and commissions, so long as they do not enter an appearance as counsel for the organization unless specially admitted for that purpose.

Authorized house counsel cannot prepare legal documents for anyone other than their employer. They are barred from giving legal opinions to be relied on by any other person or entity, except in connection with commercial, financial, or other transactions to which their employer is a party and (1) another party has asked for their opinion or (2) their opinion is normally expected given the nature of the transaction. In matters involving consumer transactions, they cannot give legal opinions or advice to their employer's customers. Similarly, they cannot represent or give advice to individual shareholders, owners, partners, officers, employees, servants, or agents in any matter or transaction other than those described above.

Eligibility Requirements

Under the rule, authorized house counsel must:

1. be members in good standing of the bar of another state or U. S. territory or the District of Columbia,

2. be certified on recommendation of the Connecticut Bar Examining Committee, and

3. agree to abide by Connecticut's rules regulating members of its bar and submit to the jurisdiction of the Statewide Grievance Committee and the Superior Court.

Application Requirements

Applicants for authorized house counsel designations must submit to

the Connecticut Bar Examining Committee:

1. certifications from all applicable licensing bodies that they are members in good standing;

2. sworn statements that (a) they have read and will abide by the Connecticut rules regulating attorneys and submit to the jurisdiction of the Statewide Grievance Committee and the Superior Court for disciplinary purposes, (b) authorize notification to or from other licensing jurisdictions of any disciplinary action taken against them, (c) list every jurisdiction where they have been licensed, and (d) disclose every disciplinary sanction or pending proceeding relating to their law license;

3. certifications from their prospective or current Connecticut employer that it is aware that they are not licensed to practice law in Connecticut;

4. completed applications in the form the Bar Examining Committee requires and filing fees; and

5. affidavits from two members of the Connecticut bar who have been licensed in Connecticut for at least five years stating that the applicant is of good moral character and is or will be employed by an organization covered by the rule.

Certification as Authorized House Counsel

The Superior Court certifies authorized house counsel upon recommendation of the Bar Examining Committee. Prior to making its recommendation, that committee must investigate the applicant's credentials and suitability for certification.

Authorized house counsel must register with the Statewide Grievance Committee every year and pay the same fees, including Client Security Fund fees, as other members of the Connecticut Bar.

Termination or Withdrawal of Registration

Authorization to perform services ceases upon the earliest of the house counsel:

1. terminating employment, unless he begins working for another covered employer within 30 days and the new employer files a certificate with the Bar Examining Committee;

2. withdrawing his registration;

3. relocating outside of Connecticut for more than 180 consecutive days; or

4. failing to comply with any applicable provisions of the rule.

Discipline

In addition to any discipline that the Statewide Grievance Committee can impose, the Superior Court may at any time, with cause, terminate house counsel's registration, temporarily or permanently. The Statewide Bar Counsel may notify other jurisdictions where the house counsel is licensed when discipline is imposed in Connecticut.

Transition

The proposed rule immunizes current Connecticut in-house counsel from UPL sanctions for activities performed before the rule's effective date, so long as they apply for authorized house counsel status within six months thereafter. It also provides that such past conduct will not disqualify them from becoming authorized under the new rule.

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