Samuel C. Stretton. Samuel C. Stretton.

In-House counsel not licensed in Pennsylvania are required to get a limited in-house corporate counsel license.

What has been an issue of concern in Pennsylvania for in-house corporate counsel recently?

One of the biggest problems facing in-house corporate counsel, whether general counsel or assistant counsel to corporations, are lawyers who are not licensed in Pennsylvania when they are located in the corporation’s Pennsylvania office. It is not unusual that a general counsel for a corporation will be admitted to practice in one state, but will not actually be located in the state for which they are admitted. Usually, in-house corporate counsel is located at corporate headquarters, which could be in a state different from where they are licensed.

The in-house corporate counsel not licensed in Pennsylvania has really two choices. One, to seek full admission in Pennsylvania, either by waiving in if they have practiced for five continuous years in another jurisdiction, or by sitting and taking the Pennsylvania Bar Exam. The second option is to get a limited in-house corporate counsel license reserved for corporate counsel who are not licensed in Pennsylvania, but who are working for a corporation where the general counsel’s office is located in Pennsylvania. Pennsylvania Bar Admission Rules allow for a limited in-house corporate counsel license under Rule 302. This rule is very clear that every lawyer not a member of the bar in Pennsylvania, but who is employed and performs legal services in Pennsylvania for a corporation or a company or a partnership or other nongovernmental business, must obtain a limited in-house corporate counsel license to provide such services if the services performed in Pennsylvania are on more than a temporary basis by the attorney, and if the attorney maintains an office or other systematic or continuous presence in Pennsylvania. In other words, if corporate counsel is assigned to a Pennsylvania office but they are not licensed in Pennsylvania, they must seek a limited in-house corporate counsel license or become fully licensed either by waiving in under the five-year rule or taking the bar exam.

This is a mandatory rule, but at times ignored by corporate counsel or their staff. The problem is if it’s ignored, it could cause serious problems for the corporate counsel and their law license. In Pennsylvania, a lawyer who is admitted in another state has no right to practice in Pennsylvania. Once in Pennsylvania, they take the same position almost as a paralegal. Pennsylvania prohibits the unauthorized practice of law and also prohibits law-related activities, see Rule 5.4 and Rule 5.5 of the Rules of Professional Conduct and Pennsylvania Rules of Disciplinary Enforcement, Rule 217(j). Practicing law without a license can oftentimes result in a serious suspension of at least one year and a day, which would require then a petition for reinstatement, which would add another year or two to the suspension time period. Therefore, corporate counsel who handle matters in Pennsylvania without getting a limited in-house corporate counsel license or becoming fully admitted run the risk of being found in violation of the unauthorized practice of law/practicing law without a license, or law related activity which could have severe disciplinary consequences. The problem for that corporate counsel if they are disciplined in Pennsylvania by a suspension or disbarment would be reciprocal discipline in the state for which they are licensed, or any other courts in which they are licensed. One can fight reciprocal discipline if proper due process is not given, but Pennsylvania’s disciplinary system does provide adequate due process. Normally, it is very difficult to defeat reciprocal discipline.

The fact that the out-of-state lawyer is not licensed in Pennsylvania does not preclude discipline. Also, someone practicing law who is licensed in another jurisdiction, but not Pennsylvania and practices law improperly, can be suspended or disciplined in Pennsylvania with the resulting reciprocal discipline in their home jurisdiction. Therefore, it is a major mistake for a lawyer who is representing a corporation as general counsel or assistant general counsel to come into Pennsylvania and practice law without getting the limited in-house corporate counsel license, or getting a full Pennsylvania license.

The corporate in-house license is of limited scope. Legal services have to be limited to legal advice given to directors, employees, or officers and agents of the business, negotiating and documenting all matters for the business organization, and representing the business organization in their dealings with any administrative agency or commission if authorized by the rules of the agency or commission.

The limited license precludes a lawyer from representing the corporation in any pending matter before the courts of Pennsylvania unless the lawyer then obtains a pro hac vice admission. It also precludes the lawyer from giving legal advice to any shareholders, partners, officers, or other agents in reference to the personal legal matters or transactions. In other words, if the Corporate President’s son was arrested for DUI, the limited licensed corporate counsel cannot give advice if they only have a limited corporate license. Finally, the limited license precludes offering legal services or advice to the public, and precludes the counsel from holding themselves out to offer legal services in Pennsylvania.

There is an exception allowing for pro-bono services if performed through a legal aid society or a bar association program. The process of getting a limited in-house corporate counsel license is pretty straight forward. An application is filed using the form application on the website for the law board examiners. To get this limited license, one must have a law degree, and admission to practice in another state. That person has to have good character. Prior attorney discipline could preclude this admission. The person has to present a certificate of good standing. There has to be a statement from the person and the corporation concerning the legal services. The limited corporate license only is withdrawn if the lawyer is suspended or disbarred, or fails to maintain active status in the other state. In other words, if a lawyer is licensed in California, but gets a limited license in Pennsylvania, they must keep their California license active, and cannot place it on an inactive status. Also, the limited license no longer works if they are discharged from their in-house corporate position unless one gets a new corporate employer.

The key thing is to take the appropriate steps. If a lawyer is licensed in Pennsylvania, but let their license lapse, or go inactive for more than three years, they cannot get a limited in-house corporate counsel license. They must reinstate their inactive status license.

For too long, there was a myth that if one was GC for a corporation and licensed somewhere, they didn’t have to be licensed in the state where they were headquartered and could provide advice, etc., in that state. In most states, and at least, in Pennsylvania, that is not the case. Failure to get that limited license or get a full license if the corporate counsel’s headquarters is in Pennsylvania can result in unauthorized practice of law charges resulting in serious discipline. Therefore, all corporate counsel should take notice and ensure that all proper steps are taken to be validly able to practice in the commonwealth of Pennsylvania, if they are not already licensed in Pennsylvania.

Under the Rules of Professional Conduct, there is no right to restrict a lawyer’s ability to practice.

An associate had been hired by a firm and just signed their employment contract. I noted there was a restrictive covenant that prohibits practice within 10 miles if the associate should leave the firm. Is there a problem with me signing this employment contract?

The answer is yes and the agreement is prohibited under the Rules of Professional Conduct.

Law is a profession, not a business. As a profession, clients have the right to choose who they want to represent them. The fact a lawyer worked for a firm and then left the firm should not preclude a client from hiring that lawyer. If the client wants a particular lawyer, that lawyer should not be barred from representing the client because of a restrictive covenant in the employment contract.

Rule 5.6 of the Rules of Professional Conduct is very clear that there cannot be any agreement that restricts allowing a lawyer to practice after termination of the representation. The one exception, of course, would be the sale of the legal practice under Rule 1.17 of the Rules of Professional Conduct. If one sells all of their practice, or a portion of their practice, the lawyer cannot practice in that particular area.

Under the Rules of Professional Conduct, there is no right to restrict a lawyer’s ability to practice. Obviously the associate who signs this kind of restrictive covenant is in violation of the rules, but the law firm which includes this unethical provision is also going to be in violation of the rules. The associate could argue that they needed a job, or they were under duress, or it was a take it or leave it situation. That is certainly understandable from a human standpoint, but not acceptable from an ethical standpoint. The lawyer cannot enter into an agreement that restricts their right to practice, and an employer cannot require a lawyer to sign such an agreement. This is a rock-bottom rule and it is absolutely and totally necessary to protect the professionalism of the legal practice. Therefore, signing such a contract should not be done. If the employer refuses to change the contract, perhaps an associate should show them Rule 5.6. Failure to comply with that rule might go to the lawyer’s honesty, fitness and trustworthiness, which requires a mandatory reporting of the misconduct under Rule 8.3 of the Rules of Professional Conduct to the Office of Disciplinary Counsel.

Chester County lawyer Samuel C. Stretton has practiced in the area of legal and judicial ethics for more than 35 years. He welcomes questions and comments from readers. If you have a question, call Stretton directly at 610-696-4243 or write to him at 301 S. High St. P.O. Box 3231, West Chester, Pa. 19381.