New Licensing Rules Present Higher Hurdles for GCs

by
Amanda Bronstad
The National Law Journal

General counsel are facing more risks and frustrations with new rules requiring them to obtain a limited license to practice law in states where they work but haven't taken the bar exam.

The rules came about after the American Bar Association sought to modernize licensing requirements as more lawyers move from state to state when changing jobs.

Since 2002, 26 states have passed new rules, most recently in Utah, which became effective on Nov. 1, and Washington state, on Sept. 1. The vast majority of the rules have been passed in the last two years.

General counsel originally heralded the rules, which clarified for the first time that they were not engaged in the unauthorized practice of law if they did not take the local bar exam. The new rules also exempted them from taking local bar exams in order to become licensed.

But the new rules have put an uncomfortable spotlight on general counsel who don't obtain a limited license. Last year, Judge Thomas Griffith of the D.C. Circuit Court of Appeals faced criticism during his confirmation for not being licensed in Utah while serving as general counsel of Brigham Young University.

In August, the general counsel of a Virginia-based pork-processing company lost his legal title after a feuding labor union noted he wasn't licensed in that state to practice law. And last month, an online blog highlighted unlicensed general counsel at four Wisconsin-based companies.

Beyond the risks, general counsel are getting increasingly frustrated in some states with the limited license requirements, which include mounds of paperwork, high registration fees and, in some cases, fingerprinting for background checks. Some are ignoring the rules altogether.

"There are probably quite a few people in the in-house profession who are flying below radar, engaged in the practice where everyone is assuming 'no harm, no foul,'" said Susan Hackett, senior vice president and general counsel of the Association of Corporate Counsel in Washington, who is advising general counsel of the risks of being unlicensed.

NEW RISKS

In 2002, the American Bar Association proposed an amended model rule that clarified the licensure requirements of lawyers practicing in multiple states. Part of that rule, called Model Rule 5.5, permitted general counsel to practice law without a license in the state where they worked as long as they were admitted somewhere.

More than half of the states have either adopted Model 5.5 in its plain language or adopted their own special licensing rules for in-house counsel. Several states, including New York and Connecticut, have not passed rules at all, leaving the status of general counsel in question.

The rules raise new risks for general counsel. A Wisconsin blog, called Milwaukeeworld.com, raised attention among the in-house bar last month after revealing that general counsel at four Wisconsin-based companies were not registered to practice law in that state, where they worked.

Three of them, including Bryan Blankfield, executive vice president and general counsel of Oshkosh Truck Corp., and John "Jack" Hammond, general counsel, vice president and secretary of Sensient Technologies Corp., told The National Law Journal that Wisconsin does not require them to be licensed.

"I'm not offering a public service to consumers," said the third, Robert Heath, vice president and general counsel and secretary of Briggs & Stratton Corp. "I'm working for a group of businesspeople as part of a team trying to solve problems that involve legal issues. I don't see the value there of getting licensed in every jurisdiction that your particular employer may move you to."

The fourth lawyer, W. David Romoser, vice president, general counsel and secretary of A.O. Smith Corp., did not return calls seeking comment.

Even though Wisconsin case law says that general counsel don't need to be licensed in the state, the microscope is damaging, said Lee Braem, president-elect of the New Jersey Corporate Counsel Association and counsel at Tyco International Ltd.

"Because of the compliance issues, there is a likelihood that an unauthorized practice of law issue could get raised," he said. "It can be embarrassing. They're supposed to be setting an example of leadership and compliance and governance and ethics."

In August, an investor group associated with the United Food and Commercial Workers International Union wrote a letter to the board of directors of Smithfield Foods Inc. asking why its then-general counsel, Richard J.M. Poulson, was not licensed to practice law in Virginia, where the company is based.

In 2004, Virginia passed a new rule requiring local general counsel who hadn't passed the state's bar exam to obtain limited licenses.

Following a rare investigation, the Virginia Bar Association concluded last month that Poulson had not violated state rules because he works primarily in New York, said James McCauley, ethics counsel for the Virginia bar.

"If we had some evidence that Mr. Poulson was advising persons in Virginia, and was physically here in Virginia when doing so, then the outcome might be different," McCauley said.

Meanwhile, Poulson, who did not return calls seeking comment, had his title changed to vice president of external affairs, where "he will not be rendering legal advice, or otherwise acting as a lawyer," said Scott Hynes, a Smithfield spokesman.

UTAH'S ALTERNATIVE

In Utah, where Griffith's license status came into question, new rules became effective on Nov. 1.

Joni Dickson Seko, deputy general counsel for admissions for the Utah State Bar, said there was a difference of opinion as to whether Griffith was providing advice about Utah law while at Brigham Young.

But with the new rules, the challenge is convincing general counsel that they are violating the law if they're not licensed. "In the past, there was sympathy to say you have to take the bar exam," Dickson said. "Now, we have this legitimate alternative for people, and I would hope they would take advantage of it."

Despite the risks, many general counsel aren't getting the limited licenses -- often because they find the process frustrating.

In most cases, states have set up extensive registration programs for general counsel to obtain limited licenses. The processes usually require filling out a lengthy form ensuring good standing, plus registration and annual fees.

"The big thing that in-house lawyers got from these rules is certainty," said Michael Lampert, a partner in the Princeton, N.J., office of Philadelphia-based Saul Ewing, who represents lawyers as clients. "But they've traded convenience."

California's new rule, passed in 2004, requires general counsel to complete continuing legal education courses, pass a professional responsibility exam and provide fingerprinting for background checks. Phyllis Culp, director of the office of special admissions and specialization for the State Bar of California, said that about 600 in-house counsel have applied for the limited license.

But that's not everyone.

Jonathan Block, vice president and general counsel of Camarillo, Calif.-based Salem Communications Corp., said that many lawyers in the state are frustrated about the new rules. "It's unnecessarily bureaucratic," Block said.

In New Jersey, more than 1,000 general counsel have begun receiving state licenses in recent months after completing an extensive application process passed by the state two years ago. The rule requires them to fill out a 26-page form, pay a $750 registration fee, get fingerprinted, provide driver's license records and take an hours-long ethics course.

"It's a lot of paperwork for people who, in many cases, have been in practice for 15 or more years," said Philip Crowley, assistant general counsel at Johnson & Johnson, which has 120 in-house lawyers in the company's home base in New Jersey. He said that although his lawyers have complied, "it seems to me to be overkill. I don't believe that all of this is absolutely necessary."

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