X

Thank you for sharing!

Your article was successfully shared with the contacts you provided.
Albert Rapoport spent most of his legal career as a solo practitioner in Washington, D.C., handling everything from federal criminal cases to immigration and personal injury claims. But in 1980, he moved to Boca Raton, Fla., and started representing investors in securities disputes with their brokers. A licensed attorney in good standing in the District of Columbia and with the U.S. Supreme Court since the 1950s, Rapoport didn’t foresee a problem. But in January 2001, the Florida Bar filed a complaint against Rapoport, charging him with practicing law without a license. Although he had been living permanently in Boca Raton for more than 20 years, Rapoport had never sought Florida licensure. This came to the Bar’s attention through advertisements that he had placed in the South Florida Sun Sentinel and other local newspapers offering his services. Last month, in a 5-2 decision, the Florida Supreme Court upheld the Bar’s finding against the 75-year-old attorney. The high court based its opinion on its 1997 ruling in an advisory opinion in which it held that “nonlawyers” could not represent clients in securities arbitration. The high court’s Feb. 20 opinion in The Florida Bar v. Albert Rapoport has caused mass confusion in the securities law community, both among local attorneys and out-of-state lawyers who handle Florida arbitration cases. Dozens of arbitration hearings have been postponed. Out-of-state attorneys are scrambling to hire local counsel for fear of being charged with unlicensed practice of law. And the Florida Bar reports being inundated with calls from attorneys seeking direction on what the supreme court ruling means. “It’s thrown a lot of doubt in the air as to who can practice here,” said Jeffrey Sonn, a partner at Sonn & Erez in Fort Lauderdale, which primarily handles securities cases. The ruling also adds fuel to the national debate about the current system of state-by-state attorney licensing, and whether attorneys should have greater flexibility to engage in multijurisdictional practice. Last August, the American Bar Association approved a package of new model rules giving attorneys more freedom to represent clients in out-of-state proceedings under certain conditions. The Florida Bar is currently considering whether to approve those rules. NEW CAREERS After moving to Florida, Rapoport worked as a stockbroker for five years and received certification as an arbitrator with the National Association of Securities Dealers and the New York Stock Exchange, which regulate brokers and brokerage firms nationwide. He was also authorized to serve as a mediator in family court and civil cases. Given his experience in the securities industry and extensive legal background, Rapoport didn’t think his lack of a Florida Bar license would be a problem when he started representing investors there. In addition, attorneys who handle federal matters such as patent, immigration and social security law are permitted to practice in any state. In 1963, the U.S. Supreme Court ruled in Sperry v. Florida ex rel. Florida Bar that the Bar could not prevent out-of-state lawyers registered with the U.S. Patent Office from handling patent matters. In Sperry, the Court held that a federal statute and Patent Office regulations authorized licensed attorneys to prepare and prosecute patent applications in any state. In the Rapoport case, his attorney, Ainslee Ferdie argued that Rapoport was allowed to provide representation in securities arbitration without a Florida license because the Federal Arbitration Act preempts state law. Florida has no authority to forbid an attorney from participating in federal securities matters conducted within the state, said Ferdie, a Coral Gables, Fla., solo practitioner. “Rapoport is an attorney in good standing in federal court. Nobody claims anywhere that he wasn’t competent.” But unlike U.S. patent law, securities law includes both federal and state statutes, legal experts note. And the supreme court held that Rapoport fit the definition of a “nonlawyer” under Florida Bar Rule 10-2.1, which includes lawyers admitted in other jurisdictions, law students, law school graduates and disbarred attorneys. “As a nonlawyer, Rapoport is not authorized to practice law in Florida,” the court wrote in its per curium opinion. The supreme court based its ruling on a prior 1997 opinion, The Florida Bar re: Advisory Opinion on Nonlawyer Representation in Securities Arbitration. In the 1997 opinion, the court held that the tasks involved in handling securities arbitration cases amounted to the practice of law. Therefore, the court ruled, clients in these matters cannot be represented by “nonlawyers.” The 1997 decision was issued in response to an increase in the number of paralegals and other non-licensed advisers who had opened centers offering securities arbitration services. Ferdie had claimed the 1997 opinion could not be the basis for excluding Rapoport because it included an important footnote. That footnote stated that the opinion did not specifically address the legality of lawyers practicing in Florida with licenses from other states. Ferdie contended that the opinion was not meant to ban qualified out-of-state attorneys from providing these services in Florida. But the high court majority rejected Ferdie’s claim of federal pre-emption, saying there is no provision in the Federal Arbitration Act that gives attorneys uniform authority to handle securities arbitration in every state. Without specific language in that federal statute that would trump state regulation, the Florida Bar has the right to oversee the attorneys working within its jurisdiction, the high court ruled. Justices Leander Shaw Jr. and Peggy Quince dissented, saying that Rapoport’s due process rights were violated because the bar referee assigned to hear the case granted the bar’s motion for summary judgment against Rapoport without a full hearing. The majority held it wasn’t necessary to conduct a full hearing because there were no material issues in dispute. Rapoport had already admitted in his written pleadings that he was handling arbitration cases without a Florida license, the majority said. Ferdie has already filed for rehearing with the supreme court. If the justices decline to take the case, Ferdie said he plans to petition the U.S. Supreme Court for certification. Rapoport, an attorney for 50 years, claims the state supreme court made a glaring mistake. “This totally disregards the fact that securities arbitration cases are national and international,” he said. “It cuts down the rights of consumers to have an attorney of their own choosing. The Florida Bar deserves a kick in the pants.” ARBITRATION CLAIMS UP When an individual investor has a complaint against a broker, he or she is required to settle the dispute through arbitration by filing a claim with either the National Association of Securities Dealers or the New York Stock Exchange. Most of the cases involve claim that a broker invested money in securities that were unsuitable for a particular client or misrepresented the stability and potential of a particular stock. Brokers can also be accused of churning, which involves making a series of unnecessary trades to earn more commission fees. In the past three years, with the crash of technology stocks and a lingering recession and general market downturn, the number of arbitration claims has spiked. Last year, 7,700 claims were filed with the NASD, compared with 5,608 in 1999. In Florida, the NASD regional office is in Boca Raton, where arbitration is conducted daily in four conference rooms. The NYSE, which does not have a regional office in Florida, conducts its arbitrations in rented hotel conference rooms on an as-needed basis. The cases are decided by a three-person arbitration panel comprised of two public members, often attorneys, and a member of the securities industry, such as a brokerage firm branch manager. The proceedings operate independent of state and federal courts, although they are conducted much like trials with opening and closing statements, presentation of evidence and questioning of witnesses. The arbitration panel’s decisions are binding and rarely are subject to appellate review. Occasionally, a panel’s ruling is appealed to the local circuit court. Those lawsuits can be filed on only four limited grounds: that the arbitrators perpetuated a fraud, excluded crucial evidence, intentionally disregarded the law or refused to grant postponements with sufficient cause. Securities arbitration, which encompasses both federal and state statutes, is a highly specialized area of law. In South Florida, roughly 15 attorneys, mostly solo practitioners, represent the bulk of individual investors in their claims against securities firms, local experts estimate. On the defense side, the major players include Morgan Lewis & Bockius, Fowler White Boggs Banker, Homer Bonner & Delgado and Greenberg Traurig. Since the Rapoport decision, attorneys at these firms report receiving a flood of calls from out-of-state counsel for brokerage firms seeking help defending their cases. “My phone has been ringing off the hook,” said Keith Olin, a partner at Morgan Lewis in Miami, who defends brokerage firms such as Prudential, Merrill Lynch and Paine Weber in securities arbitration. “It’s more business for us, but we had plenty of business already. This has definitely rattled the cages.” While the problem is more widespread for brokerage firm counsel, some out-of-state attorneys on the plaintiff side have also turned their cases over to local practitioners. Since the Rapoport ruling was issued last month, the Florida Bar has issued no directive about what out-of-state attorneys need to do to continue handling securities arbitrations in Florida. But Lori Holcomb, the Florida Bar’s unlicensed practice of law director, said new ABA model rules, if approved by the Florida Bar and the Florida Supreme Court, would clear up much of the confusion. The ABA model rules include a provision that would allow out-of-state lawyers to provide services in arbitrations, mediations and other alternative dispute resolution proceedings on a temporary basis. The rules would also allow veteran attorneys to apply for permanent admission in any state without taking that state’s bar exam, and authorize states to discipline any lawyer who practices in that state, regardless of whether the lawyer had been admitted to the state’s bar. The model rules were drafted in response to evolutions in the practice of law, as the economy has become increasingly global and communication technology has made it easier for lawyers to handle cases remotely. In Florida, a special 11-member Bar commission is reviewing the ABA proposals and is expected to submit its own recommendations to the Bar’s board of governors in early April. If passed by the board, the supreme court then would have to approve the new rules. “If the rule goes through, an attorney from Chicago would be able to come here and handle an arbitration,” Holcomb said. STILL REPRESENTING CLIENTS The Bar is treating Rapoport’s case as an isolated incident and is not using it to prosecute all out-of-state attorneys who handle securities arbitration, Holcomb said. Bar officials will continue investigating any complaints they receive from judges, opposing counsel and clients regarding anyone suspected of practicing law without a Florida license. But it will make its determinations on a case-by-case basis, Holcomb said. She said that there is an important distinction between Rapoport’s case and the more typical scenario of out-of-state brokerage firms sending their in-house counsel to Florida to handle an arbitration proceeding. The difference, she said, is that Rapoport had moved to Florida permanently years ago and had set up a practice here without a Florida license. The new ABA model rule, therefore, would not pertain to Rapoport’s situation, Holcomb said. Rapoport is now working four days a week in the Elder Justice Program of the Palm Beach Circuit Court, where he provides legal assistance to senior citizens charged with traffic offenses, domestic violence and petty crimes. Although he has cut back his securities practice since the bar initiated its investigation, Rapoport said he’s still representing a handful of arbitration clients while the motion for rehearing before the Florida Supreme Court is pending. Florida Bar officials have filed their response to the motion for rehearing and expect the high court to respond shortly. Until a decision is rendered, bar officials agree that the Rapoport decision is technically not binding. “I’m still doing it until I get a definite answer,” Rapoport said. “I’m going to take this as far as I can.”

This content has been archived. It is available exclusively through our partner LexisNexis®.

To view this content, please continue to Lexis Advance®.

Not a Lexis Advance® Subscriber? Subscribe Now

Why am I seeing this?

LexisNexis® is now the exclusive third party online distributor of the broad collection of current and archived versions of ALM's legal news publications. LexisNexis® customers will be able to access and use ALM's content by subscribing to the LexisNexis® services via Lexis Advance®. This includes content from the National Law Journal®, The American Lawyer®, Law Technology News®, The New York Law Journal® and Corporate Counsel®, as well as ALM's other newspapers, directories, legal treatises, published and unpublished court opinions, and other sources of legal information.

ALM's content plays a significant role in your work and research, and now through this alliance LexisNexis® will bring you access to an even more comprehensive collection of legal content.

For questions call 1-877-256-2472 or contact us at [email protected]

 
 

ALM Legal Publication Newsletters

Sign Up Today and Never Miss Another Story.

As part of your digital membership, you can sign up for an unlimited number of a wide range of complimentary newsletters. Visit your My Account page to make your selections. Get the timely legal news and critical analysis you cannot afford to miss. Tailored just for you. In your inbox. Every day.

Copyright © 2020 ALM Media Properties, LLC. All Rights Reserved.