Unauthorized Practice of Law: Pitfalls for NC Attorneys and Out-of-State Law Firms
February 20, 2020
The more things change, the more they remain the same.
Recently, the ABA Section of Litigation published an article
discussing a 2018
ethics opinion of the Indiana Supreme Court Disciplinary Commission warning
its lawyers about the potential pitfalls in a trend of Indiana attorneys being
approached by nonlawyer companies or out-of-state law firms to establish an
ongoing affiliation for providing legal services in Indiana without registering
with the state bar. The Indiana
commission cautioned that such an affiliation can put the Indiana attorney at
risk of violating multiple ethics rules.
article noted similar warnings issued in other states.
In North Carolina, we have also seen an increase of this
activity and the accompanying allegations of unauthorized practice of law
[“UPL”]. Often, a national or
out-of-state law firm approaches a young or solo NC lawyer to be “of counsel”
to their firm so the firm can then provide legal services in NC.
The details vary, but the fundamentals are consistent. From a UPL standpoint, situations like this can
be a potential pitfall for both sides of the equation.
Under North Carolina law, even if it hires an NC lawyer to
handle NC cases, an out-of-state law firm looking to set up shop in NC must
register as an interstate law firm with the NC State Bar. As part of that registration, the NC lawyer
must certify to the State Bar that all professional services rendered to NC
citizens by the firm are only provided by a duly licensed active member of the
NC State Bar, and that other lawyers in the firm not licensed in NC will abide
by the NC Rules of Professional Conduct.
In addition to registering with the NC State Bar, the law firm will also
likely need a Certificate of Authority to transact business as a foreign
professional corporation from the NC Secretary of State’s office.
For the NC attorney, failure to follow the appropriate
procedure may result in a bar grievance for assisting in the unauthorized
practice of law in violation of the NC Rules of Professional Conduct, Rule 5.5(f). The attorney may also face potential civil
liability for assisting another person to commit the unauthorized practice of
The out-of-state law firm may also be exposed to potential
civil liability and action by the NC State Bar for engaging in the unauthorized
practice of law. The NC State Bar
Council and any of its committees appointed for that purpose (such as the
Authorized Practice Committee) have the authority to investigate UPL
allegations. Following such an
investigation, the State Bar may issue a warning letter, issue a cease and
desist letter, or seek an injunction to prohibit a person or business from
engaging in the unauthorized practice of law depending on the
There are also criminal law implications. District attorneys may investigate and
prosecute unauthorized practice of law as a misdemeanor criminal offense. Other more serious felony offenses, such as
false pretenses, could be involved where an unlicensed person accepts fees
while in engaging in the unauthorized practice of law.
The facts may change, but these laws have remained the
same. Know the potential pitfalls for both
the NC attorney and the out-of-state firm looking to practice in NC. Review and follow NC law and the procedures
outlined by the Administrative Rules of the State Bar, 27 N.C.A.C. Chapter 1E,
Section .0200. Under the right
circumstances, an arrangement like this can be ethical and beneficial to the NC
lawyer, to the interstate law firm, and to clients.
I am a NC licensed attorney and practice in The Brocker Law Firm, P.A. I represent represent professionals before various licensing boards and administrative agencies. I counsel clients on ethics, disciplinary, and licensing matters, and provide general employment law advice and compliance counseling.