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I wrote earlier this year about the increasing activism of committees on unauthorized practice � and the trend for these agencies to cross jurisdictional boundaries and to work in tandem with bar counsel and state admissions committees, creating the nightmarish specter of multijurisdictional prosecutions before multiple agencies arising out of relatively simple ethics infractions [" Ethics Violators and More," Feb. 10, 2003, Page 20]. Currently pending before the Board of Commissioners on Unauthorized Practice of the Ohio Supreme Court is an instance of a different sort of activism by a committee on unauthorized practice. This is a highly unusual complaint, filed by the Unauthorized Practice of Law Committee of the Cincinnati Bar against the Allstate Insurance Co., alleging that the carrier’s use of staff attorneys to defend insureds constitutes the unauthorized practice of law. The action has drawn a stinging amicus brief in support of the insurance carrier from the National Association of Independent Insurers, the American Insurance Association, the National Association of Mutual Insurance Companies, the Ohio Insurance Institute, and the American Corporate Counsel Association. The committee concedes that the practice it complains about has long been regarded as not constituting unauthorized practice in Ohio, by virtue of a 1939 decision of the Ohio Supreme Court, Strother v. Ohio Cas. Ins. Co. �among the earliest of similar decisions in 23 states. There is no issue here about whether the individual attorneys are licensed to practice law in the jurisdiction; they are all licensed members of the Ohio State Bar in good standing. The idea behind the complaint is that by using “in-house” salaried employee-attorneys, Allstate is, as a corporation, engaged in the “vicarious” practice of law. Allstate’s attorney-employees are practicing “under Respondent’s (Allstate’s) direction and supervision . . . and under Respondent’s control,” the complaint reads. Corporations may not engage in the practice of law in Ohio, as in most states; only individual persons can be licensed to practice. Attorneys may, however, associate themselves together in a corporation or professional association “through which” to practice law. Ohio law defines “corporate UPL” as forming a corporation for the purpose of charging fees for provision of legal services, unless the corporation has a “direct and primary interest” in the litigation for which the services are retained. When an insurer defends a claim against one of its own insureds, it clearly has such a “direct and primary interest.” But the committee contends that because Allstate “is not a ‘legal professional association, corporation, legal clinic, limited liability company or registered partnership,’” within the meaning of the Ohio Bar’s rules, it is not authorized to practice law. Remarkably, the committee does not dispute the applicability of the “direct and primary” test of Strother,which distinguishes insurance staff counsel from lawyers in other types of corporations. Rather, citing a 1937 case, Judd v. City Trust & Savings Bank,the committee takes the position that it makes a difference whether the attorney provided to an insured is employed directly by the carrier or by a law firm representing the carrier. Strother,the committee says, is wrongly decided to the extent that it fails “to consider, even in passing, any of the considerations that the Juddcourt found to be of paramount importance,” i.e. that “the allegiance of the attorney-employee is to his employer;” that his “master would not be the client but the corporation, conducted as it may be wholly by laymen, organized simply to make money and not to aid in the administration of justice,” that the company officers, directors or stockholders may not include a single lawyer and “may be . . . without stimulus to good conduct from the traditions of an ancient and honorable profession, and no guide except the sordid purpose to earn money for stockholders.” In short, according to this view, in-house counsel cannot be independent. In-house counsel by definition cannot represent with appropriate vigor an insured whose legal needs may at some point diverge from or prove antithetical to the economic interests of the insurance company, because the company harbors only “the sordid purpose to earn money.” But all attorneys � whether in-house or in outside law firms � have the professional responsibility to comply with the ethical rules dealing with conflicts of interest and independence of professional judgment. As Grace M. Giesel puts it in Corporations Practicing Law Through Lawyers,65 Mo. L. Rev. 151 (2000), the suggestion that the way an attorney is paid � by salary or by the hour � determines whether she is capable of compliance with ethical guidelines is based on four questionable assumptions: that attorney-employees are “not independent or capable of independence”; that outside attorneys are independent; that outside attorneys are not profit-motivated; and that profit motive “by definition subverts ethical behavior.” This debate has been going on for decades. It arises out of the tripartite nature of the insurer-attorney-insured relationship. Despite American Bar Association Formal Opinion 282 (1950), approving the use of salaried attorneys to defend insureds, many refuse to concede that an attorney can ever retain independence of judgment on behalf of a client-insured when the interests of that client are at odds with those of the insurance company that pays her salary. But if that is so, then may it not also be argued � as it has in fact been argued � that outside counsel may feel equally beholden to the carrier that pays his fee? And if the carrier is a major client, is that argument not all the more persuasive? Can it not be persuasively argued that an outside lawyer for an insurance company might prove susceptible to the blandishments of a client that produces a major portion of his legal work? These arguments do a disservice to lawyers, who are almost invariably sensitive to their ethical obligations, even though they are practicing law to earn a living and not altogether for altruistic reasons. That is certainly as true of the salaried employee lawyer as it is of the independent contractor, if not more so. Insurance companies have served their policyholders well by providing capable, experienced, and efficient representation through staff counsel. As one court put it: “These are not second-class lawyers; they are first-class lawyers. . . . If this form of practice results in lower legal costs, the public has an interest in seeing that able attorneys continue to be attracted to it.” In Re Weiss, Healey & Re(N.J. 1988). Committees on unauthorized practice perform a valuable, often unrecognized service for the profession. They are the “guardians at the gates,” assuring that the practice of law continues as an honorable calling and not just another marketplace business. But they can become overzealous. When such a committee decides to challenge a long-standing rule of law in the service of a view that is at least somewhat muddled, it is time to step back and reflect upon its mandate. When disciplinary bodies become vigilantes, neither the public nor the profession is well-served. James P. Schaller, a partner at D.C.’s Jackson & Campbell, is a former chair of the D.C. Court of Appeals’ Committee on Unauthorized Practice. His practice includes representation of lawyers and law firms in matters of legal ethics and professional responsibility. His e-mail address is [email protected].

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