The world today is a place with instantaneous global communication and (delays at the departure gate notwithstanding), rapid world-wide travel. Nevertheless, as the New York law firm of Birbrower, Montalbano, Condon & Frank once learned, some quaint, eighteenth-century concepts like “state lines” still mean something in the Age of the Internet.
In 1992, the Birbrower firm was hired by ESQ Business Services, Inc., a software company located in (Surprise! Surprise! Surprise!) Santa Clara County, California. During 1992 and 1993, the firm spent considerable time representing ESQ in a dispute with another computer company, which included its attorneys making multiple trips to California to advise ESQ’s personnel and to negotiate with the rival company. During all of this time, however, the Birbrower firm had no one working for it who was licensed to practice law in California.
ESQ eventually settled its dispute with the other company, but was not happy with the result. So, apparently believing that it had been talked into a bad deal, it turned around and sued Birbrower in a California court for malpractice (this time hiring a California law firm to represent it). Birbrower, believing that it was owed about $1 million in attorney’s fees, countersued for those unpaid fees.
ESQ’s response (ably assisted, no doubt, by its new law firm) was to argue that Birbrower was not entitled to be paid anything because none of its lawyers were licensed in California. What chutzpah! What cheek! (Of course, if someone claims that you owe them $1 million, and you spend $900,000 to defend yourself, you’ve got a clear profit of $100,000 . . . right?)
After various maneuvers, the case ended up before the California Supreme Court. Surprisingly enough, the Supreme Court agreed with ESQ that, except for a small amount of work done while its attorneys were physically present in New York State, Birbrower indeed could not get paid for legal work its attorneys had done for ESQ.
The first question this raises is: Just what is meant by “legal services” or “practicing law”? The statutes don’t give much help, so one is forced to fall back on court decisions. Even though it decided this case in 1998, the California Supreme Court reached into a 1922 decision for a definition that, essentially, “practicing law” means doing those things that one would normally have to hire a lawyer to do.
That’s why one goes to the California Supreme Court — to answer those questions that can’t be answered anywhere else.
Well, okay — the court was actually a little more specific than that. It focused on things like drafting legal documents, giving legal advice, and appearing in court. But by crossing the state line into California to do these things — and perhaps more importantly, by rendering these services to a company located in California — Birbrower gave up its entitlement to be compensated for its work. It didn’t matter that the Birbrower lawyers were licensed in New York. In effect, the firm was practicing law in California without a license every bit as much as folks who had never set foot inside a law school.
This raises some other interesting questions. For instance, if the Birbrower lawyers weren’t entitled to get paid, could they still be sued for malpractice? After all, if ESQ wanted to treat the Birbrower folks as non-attorneys to get out of paying them, how could it (at the same time) hold them to the standard for legal competence? Unfortunately, the Supreme Court’s decision doesn’t help much on this issue, because the court only addressed whether Birbrower was entitled to be paid.
The Birbrower case has been heavily-criticized by some legal commentators, who argue that it’s unfair in the modern world where communication no longer respects state or even national boundaries — where one can chat daily via the Internet with someone in South Africa, Taiwan, or Chile — to make such a big deal about state borders. Companies don’t want to be constrained by such “artificial barriers” in deciding what talent they hire — and ESQ was a software company, for crying out loud!
The California Legislature responded (somewhat) by enacting rules for out-of-state counsel that followed a more traditional rule: a non-California attorney or firm can practice in California (and get paid) if it associates with California counsel for that one case.
But as long as the Birbrower case is around, it does ensure that, in general, all those computer and software firms in Silicon Valley (and anywhere else in California) will have to stay away from carpetbaggers and riff-raff from places like New York.
Unless they bring in a California attorney to sit next to them in court.
Frank Zotter, Jr. is a Ukiah attorney.
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