Privilege Applies Even Where In-House Lawyer Lacks State-Specific Law License 1

A California-licensed in-house attorney who periodically practiced out of his company’s Pennsylvania office never obtained a “Limited In-House Corporate Counsel License” as required by licensePennsylvania’s Bar Admission Rules.  The USDC for the Middle District of Pennsylvania ruled that the absence of a Pennsylvania law license did not vitiate the attorney–client privilege, but referred the issue to Pennsylvania’s Disciplinary Board to investigate whether the lawyer engaged in the unauthorized practice of law.  Scranton Prods., Inc. v. Bobrick Washroom Equip., Inc., 2016 WL 3193482 (M.D. Pa. June 3, 2016).  You may read the decision here.

Licensure Requirements and the Unauthorized Practice of Law

Rule 302 of the Pennsylvania Bar Admission Rules requires lawyers working for non-governmental business entities to obtain a Limited In-House Corporate Counsel License before practicing law within the state.  Rule 5.5(b)(1) of the Pennsylvania Rules of Professional Conduct prohibits an in-house lawyer licensed in another state from practicing within Pennsylvania unless she has obtained a Rule 302 corporate-counsel license.

These Pennsylvania rules mirror ABA Model Rule 5.5(d), which generally permits an in-house lawyer to provide limited legal services through her company’s out-of-state office without engaging in the unauthorized practice of law, but notes that states may require corporate counsel to obtain a special license.  See ABA Model Rule 5.5 cmt. 17.

Licensure and Privilege

Scranton Products’ in-house lawyer was fully licensed to practice law in California. When first hired in 2013, the lawyer worked and maintained an office in Scranton, PA, but eight months later relocated to Illinois.  While based in Illinois, he “kind of ha[d] an office in Pennsylvania” and worked out of the Pennsylvania office “every two or three months.”

The in-house was aware of Rule 302’s corporate-counsel licensing requirements, but never obtained that license.  In a business-litigation lawsuit brought by Scranton Products, the defendant moved compel communications with this in-house lawyer, arguing that the privilege did not apply because the lawyer was not a licensed lawyer in Pennsylvania—the state where the putatively privileged communications occurred.

Ruling

The court was clearly troubled by the in-house lawyer’s failure to meet Pennsylvania’s licensure requirements, but held that the privilege applies because he  held a license from a jurisdiction (California) even if not the jurisdiction of Pennsylvania.  The court distinguished cases holding the privilege inapplicable where the in-house lawyer lacks a law license from any jurisdiction, and found that the privilege covers his communications “regardless of his compliance—or lack thereof—with Rule 302.”

While upholding the company’s privilege, the court referred this matter to the Pennsylvania Supreme Court’s Disciplinary Board to determine whether the in-house lawyer’s conduct “may constitute a violation of Rule 302.”

PoP Analysis

The Scranton Products case inserts another piece to the in-house-lawyer-privilege puzzle.  Chart 13, p. 39, of the 2015 Comprehensive Guide to Bar Admission Requirements reveals that 33 states require a foreign in-house lawyer to obtain a limited law license to practice for her employer in another state.  Scranton Products tells us that the failure to obtain a corporate counsel license may constitute the unauthorized practice of law, but will not destroy the attorney–client privilege.

The privilege may not apply, however, if the in-house lawyer is not licensed in any jurisdiction, whether in the United States or elsewhere.  Anwar v. Fairfield Greenwich, LTD, 306 F.R.D. 117 (S.D.N.Y. 2013).  The privilege may nevertheless cover an employee’s communications with an unlicensed in-house lawyer if the employee can show that she reasonably believed the lawyer was fully licensed.  Gucci America, Inc. v. Guess?, Inc., No. 09 Civ. 4373(SAS), 2011 WL 9375 (S.D.N.Y. Jan. 3, 2011).

The better course of conduct, obviously, is for in-house lawyers to diligently recognize and adhere to the licensure requirements of states where their companies have offices and from which they practice, even occasionally.   But even if the in-house lawyer fails to meet this requirement, the company may not lose its privilege if its in-house lawyer maintains an active license in some jurisdiction or even if the communicating employees reasonably believe the in-house lawyer is fully licensed.