Opposition Brief — Birbrower, Montalbano, Condon & Frank, P. C. v. ESQ Business Services, Inc.
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No. 97-1798 {
t
In The
Supreme Court of the United States
ee
October Term, 1997
BIRBROWER, MONTALBANO, CONDON & FRANK, P.C.,
and KEVIN F. HOBBS,
Petitioners,
VS.
ESQ BUSINESS SERVICES, INC., a California corporation,
Respondent.
On Petition for Writ of Certiorari to the
California Supreme Court
RESPONDENT’S BRIEF IN OPPOSITION
JON MICHAELSON
Counsel of Record
PERRY S. GOLDMAN
DENISE Y. YAMAMOTO
HOPKINS & CARLEY
A Law Corporation
Attorneys for Respondent
Ten Almaden Boulevard, 8th Floor
San Jose, California 95113
(408) 286-9800
146708 (800) 274-3321 » (800) 359-6859 LA ppellate
A DIVISION OF COUNSEL PRESS
Senices, inc.
i
RESPONDENT’S RESTATEMENT OF THE
QUESTIONS PRESENTED
1. Are Petitioners precluded from raising an issue of the
constitutionality of California’s unauthorized practice of law
statute, Business & Professions Code § 6125, which they failed
to raise in previous federal and state court proceedings in this
case?
2. As framed and decided by the California Supreme Court,
do the actions and services of attorneys licensed only in New
York, performed in California for a California client relative to
a dispute arising from a contract governed by California law,
constitute unauthorized practice under section 6125 and, if so,
does that violation render the fee agreement between the New
York attorneys and their California client wholly unenforceable?
3. Does the Federal Arbitration Act preempt a determination
by the California Supreme Court that the actions and services
of attorneys licensed only in New York, performed in California
for a California client in preparation for arbitration of a
commercial dispute arising from a contract governed by
California law, constitute the unauthorized practice of law under
section 6125?
STATEMENT PURSUANT TO RULE 29.6
Respondent ESQ Business Services, Inc., a California
corporation, does not have a parent company. ESQ. Ltd. is a
nonwholly owned subsidiary of ESQ Business Services, Inc.,
a California corporation. The owners of ESQ Ltd. are ESQ
Business Services, Inc., a California corporation, and Iqbal
Sandhu.
iit
TABLE OF CONTENTS
Page
Respondent’s Restatement of the Questions Presented
Per er pee ey ee ree ee ee eee ee ee i
Statement Pursuant to Rule 29.6 ...........-.+++:: il
3 fk” ere errr ee ee ee iil
CO ee Perea ere rr Tee ere er eee iV
Statement of Jurisdiction ..............e eee eeeees l
Statement of the Case ... 22... ccc cece cee es neces l
A Prpondrel FstOry jc we ce reece rees ]
B. Factual Summary ............-ceeeeeecees ~
Reasons for Denying the Writ .........-.-.++--055 8
I. Jurisdiction Does Not Exist For Review Of Issues
Not Presented To And Decided By A State Court
ge SS See rr Terese ORT ETE TL ae 8
Il. Petitioners Lack Standing To Assert Supposed
Commerce Clause Rights Of Unidentified
oe uk iu eg spun nc eae nd ead onese se 12
Ill. The California Supreme Court Exercised
Appropriate State Power To Regulate The Practice
Of Law In A Manner Which Does Not Violate
i ee EEE, gd. ivi cece senene 14
A.
iv
Contents
No Court Has Held That A State’s Long-
recognized Interest In Licensing And
Regulating Attorneys Violates The
CE SN i kw oedeleciaee cs
Petitioners Can Supply No Evidence That
Section 6125 Impedes Interstate
fo eer re epee pea re
The California Supreme Court Has Merely
Applied A Traditional Rule, And Has Done
So In A Way Which Neither Impairs Nor
Threatens Interstate Commerce. .........
IV. It Is Not Appropriate to Consider Petitioners’
Invitation to Establish a Federal Rule Governing
Attorney Participation in Commercial
PU 6 pene kaetaeie Gane ck)
V. Petitioners Provide No Authority or Reason to
Justify Extension of the Federal Arbitration Act
to Limit Regulation by the States of the Practice
RE Oe Peer rir ea ey fare weeny er eee
Conclusion
i243 + SO 6 2 2 OA OO 622 OS ESS D6 SOD DO CO: 2:4 D2 RE OO
TABLE OF CITATIONS
Cases Cited:
Adams v. Robertson, .. U.S. __; 117 §. Ce. 1028
(1997)
oS 2:6 # 2. 2 AC O80 £12 SEES SS OSS OS OSS OS OSS ED SS
Page
18
21
25
28
30
‘eae ei
v
Contents
Page
Amato v. Wilentz, 952 F.2d 742 (3rd Cir. 1991) ...... 13
Ames v. Gilman, 51 Mass. (10 Met.) 239 (1845) ..... 19
Appell v. Reiner, 43 N.J. 313, 204 A.2d 146 (1964) .. 10, 22
Baron v. City of Los Angeles, 2 Cal. 3d 535, 86 Cal.
Ae EB a f ) ee ey eee er rer Pee Tee 16, 25
Bates v. State Bar of Arizona, 433 U.S. 350 (1977) .. 16
Board of Directors of Rotary Int'l v. Rotary Club of
Dwerts; 481 US; 557 CIS cick 9, 10
Brown-Forman Distillers Corp. v. New York State Liquor
Authority, 476 U.S. S73 (1986) «2. ccc cc ceesess 15
California Attorneys for Criminal Justice v. Butts, 922 F.
Suen. S27 CE CA. FRPP ois vue aed cha eens 13
California Federal Savings and Loan Association v.
Geena, 479 US. Zia CPOE ask os ok aces 28
Caplin v. Drysdale, 491 U.S. 617 (1989) ........... 13
Cardinale v. Louisiana, 394 U.S. 437 (1969) ....... 8,9
Consumers Lobby v. Public Utilities Comm., 25 Cal. 3d
B91, 160 Cal. Hatn 16 CEFR) 5 nox viens ci eeevek 22
Dietrich Corp. v. King Resources Co., 596 F.2d 422 (10th
Ro, , SEA perme nr amarg nono ciict ay caine Aon a 21, 22
i
{
f
:
vi
Contents
Page
El Gamayel v. Seaman, 72 N.Y. 2d 701, 536 N.Y.S. 2d
REUOE Gikg Wo he Saeki ee mes os CHL ees 21
The Florida Bar Re Advisory Opinion on Nonlawyer
Representation In Securities Arbitration, 696 So. 2d
SEP ME, STE cis check cece ews cea aww daw 25
The Florida Bar v. Savitt, 363 So. 2d 559 (Fla. 1978) 22
Fought & Company, Inc. v. Steel Engineering and
Erection, Inc., 87 Haw. 37, 951 P.2d 487 (1998) .. 24, 25
General Motors Corp. v. Tracy, _. U.S. __, 117 S. Ct.
EE CENTS OS k cab dag VAREORS CREM nab ad 14
George O. Richardson Machinery v. Scott, 276 U.S. 128
CREE Chcikwe REEDS dak Va Aw Ree eee Wk 10
Giannini v. Real, 911 F.2d 354 (9th Cir.), cert. denied,
ee Bie. BORG RINE ied baa os hoes ee ee 14, 17, 18
Ginsburg v. Fahrney, 45 Misc. 2d 777, 258 N.Y.S. 2d
ROS 6 Sitio oe deka ers Chee 24
Goldfarb v. Supreme Court of Virginia, 766 F.2d 859
Pe CA. Tee ce nee aa Deke ve ee eka eee eee Fe By
Goldfarb v. Virginia State Bar, 421 U.S. 773 (1975) . 16
Hawkins v. Moss, 503 F.2d 1171 (4th Cir. 1974), cert.
nd, Sao 5. See Cae) a ke cndnn ces eee 26
Contents
Page
Hoover v. Ronwin, 466 U.S. 558 (1984) .......... 8, 15, 26
In re Estate of Waring, 47 N.J. 367, 221 A.2d 193
CORO Aca Ves ei ccaatce Hepeka hate wen Wh eaee 10, 22, 23
In re Griffiths, 413 U.S. 717 (1973) ........ eee eens 16
In re Peterson, 163 B.R. 665 (Bkrtcy. D. Conn. 1994)
PEEK LAE REEL RARER ALERT RSE ERED 21
Kirkpatrick v. Shaw, 70 F.3d 100 (11th Cir. 1995) ... 17
Lambrix v. Singletary, __ U.S. __, 117 S. Ct. 1517
BOER erica eke kde abu ead eae eee ene wen 1]
Leis v. Flynt, 439 U.S. 438 (1979) .......... 15, 16, 18, 27
Longval v. W.C.A.B., 51 Cal. App. 4th 792, 59 Cal. Rptr.
De SE CIS OO) aia he end Ga nee beers evans’ 21
Moses H. Cone Memorial Hospital v. Mercury
Construction Corp., 460 U.S. 1 (1983) .......... 29
New York Criminal and Civil Courts Bar Association v.
Jacoby {& Meyers], 61 N.Y. 2d 130, 460 N.E. 2d 1325
CRORE ois dak whens hee vs de eer aR ones 22
Orr v. Orr, 440 U.S. 268 (1979) ncn cccccccsccaee 10
O’Shea v. Littleton, 414 U.S. 488 (1974) ........... 12
Vili
Contents
Page
Perlah v. S.E.1. Corp., 29 Conn. App. 43, 612 A.2d 806
CORED EMG ye haw eRe NOV ee eee Rik eaAee EO 21
Peterson Lozoff v. Shore Heights, Ltd., 35 Ill. App. 3d
OF 1, SRk Pea, OE Ie LIGPOD 5 veka dakvadadionn ts ay 20
Pike v. Bruce Church, Inc., 397 U.S. 142 ........... 14, 15
Powers v. Ohio, 499 U.S. 400 (1991) .............. ae
Ranta v. McCarney, 391 N.W. 2d 161 (N.D. 1986)... 21
Scariano v. Justices of Supreme Court of Indiana, 38 F.3d
ae LO es CPE ie a ee ee ko meseruaens
Servidone Construction Corp. v. St. Paul Fire & Marine
Insurance Co., 911 F. Supp. 560 (N.D. N.Y. 1995)
eb SRS EERE SE REE AA Hr ee RE CE 21
Sestric v. Clark, 765 F.2d 655 (7th Cir. 1985), cert.
SORA, SIE TD. TOO CAFO) ks Vive vacactecdves 17
Shapiro v. Cooke, 552-F. Supp. 581 (N.D. N.Y. 1982),
and, 762 P26 46 Cid. Car. 1963) oo seeeess 17
Spanos v. Skouras Theatres Corp., 364 F.2d 161 (2d Cir.)
(en banc), cert. denied, 385 U.S. 987 (1966) ...... pt Mae
Spivak v. Sachs, 16 N.Y. 2d 163, 263 N.Y.S. 2d 953
CRIED CRE Rea oa EN eo rchae Seen Ree ra eeeee 21, 23
edad —
ian.
ix
Contents
Page
Tolchin v. Supreme Court of New Jersey, 111 F.3d 1099
(3rd Cir.), cert. denied, 118 S. Ct. 435 (1997) ..... 17
Trailer Marine Transport Corp. v. Rivera Vazquez, 977
oe Ret: LS AD). > 4 eerie See 12
United States Department of Labor v. Triplett, 494 U.S.
TER CER i rch NG Kh eho HA ENED Ve edacngo CNSR 13
Volt Information Sciences, Inc. v. Board of Trustees of
the Leland Stanford Junior University, 489 U.S. 468
CEN bik ah ek sess a hha dN Ue Renee khan SSS 28, 29
Webb v. Webb, 451 U.S. 493 (1981) ...........0.5. 8, 10
Western Life Insurance Co. v. Nanney, 296 F. Supp. 432
CBD. TO TIGR) on vc icce so ede se wien beens eceve 24
Whitmore v. Arkansas, 495 U.S. 149 (1990) ........ 12
Williamson v. John D. Quinn Const. Corp., 537 F. Supp.
GES TEE TE. FRED ok aioe swine se eae ewedaenss 26
Wilson v. Cook, 327 U.S. 474 (1946) .............. * 11
Yakus v. United States, 321 U.S. 414 (1994) ........ 12
Yee v. City of Escondido, California, 503 U.S. 519
REND Si cA GS Wakes awEe Pade p ea ees Ceeeny 8
Contents
Page
Statute Cited:
ee Seas Oh GE 3 nc bnc vies benkeeeen babune kes 8
Business & Professions Code Section 6125 ......... passim
United States Constitution Cited:
Se PRINT Sco Giacchb sccceendeachetewsedaks 14
NSE ink cack ee he brie bak hehe iwi 27
en ne oles eas aia 8
Pe Ce ec ccwkebdecustean 8
Rules Cited: s
Ci Ce, ns a weedewe tates aes 22
Se en ee Shiba © ae oe 22
Other Authorities Cited:
Annot., Right of Attorney Admitted in One State to
Receive Compensation for Services Rendered in
Another State Where He Was Not Admitted to the Bar,
Tete ee § RS tgs, freee 19, 21
Brakel & Loh, Regulating the Multistate Practice of Law,
Sa Wee, G.. ow, GOP, Te CEPTS: ocinocckacuwacs 16, 18
Contents
Daly, Resolving Ethical Conflicts in Multijurisdictional
Practice — Is Model Rule 8.5 The Answer, An Answer,
or No Answer At All, 36 S. Tex. L. Rev. 715, 725
m.23., 729-731 (19S) 2. cc ccccccsvccsvcvsccvess
Needham, Splitting Bar Admission into Federal and State
Components: National Admission for Advice on
Federal Law, 45 Kan. L. Rev. 453, 473-474 ......
Rhode, Policing the Professional Monopoly: A
Constitutional and Empirical Analysis of Unauthorized
Practice Prohibitions, 34 Stan. L. Rev. 1, 13 n.47
FODED scudcodeyatebsekcenceusd ban snpeene tes
Woolfram, Sneaking Around in the Legal Profession:
Interjurisdictional Unauthorized Practice by
Transactional Lawyers, 36 S. Tex. L. Rev. 665, 685
Page
18, 21
18, 19
18
t, -) PPR Pr erore eT iri errer ers so 18, 21, 27, 30
Ill. Ethics Op. No. 94-5 (1994) 2... 0.0 e ee eee eens
N.J. Ethics Op. No. 28 (1994) .......--0-e eee eeeee
APPENDIX
Appendix A — Notice Of Removal Of Action Under 28
United States Code Section 1441(b) (Diversity) Filed
February 11, 1994 ........ 2c cece cece ee eee eee
Appendix B -— Defendants Birbrower, Montalbano,
Condon & Frank, P.C. And Kevin F. Hobbs’
Opposition To Plaintiffs’ Motion For Leave To Amend
And Motion For Remand Filed March 25, 1994...
26
26
la
4a
xil
Contents
Page
Appendix C — Petition For Writ Of Mandate And/Or
Prohibition With Supporting Memorandum Of Points
RE TE ob go wt atéssddebuesesessaweasdue l4a
Appendix D — Petition For Review ............... 25a
Appendix E — Petitioners’ Opening Brief .......... 28a
Appendix F — Excerpts From Software Marketing And
Support Agreement Dated August 31, 1993 ...... 33a
Appendix G — California Legislature Assembly Bill No.
2066, Amended Agril 22, 1996 ... 2. ccccccccccss 38a
> l
STATEMENT OF JURISDICTION
The Interstate Commerce Clause question presented by
Petitioners was not raised in any prior federal or state court
proceeding in this case. This Court should therefore decline to
consider that question for lack of jurisdiction.
STATEMENT OF THE CASE
The controversy underlying this Petition arises from a New
York law firm’s attempts to advise a California client about complex
questions of California and intellectual property law in a transaction
between the California client and another California-based
company, and the New York firm’s subsequent litigation of disputes
concerning that transaction in a California forum.
Petitioners are primarily tax, estate planning, and personal
injury lawyers. They were not members of the California Bar, and
did not have or obtain the knowledge of California law or
knowledge of the subject matter of the engagement necessary for
competent representation of their California client. Their advice,
which was rendered in substantial measure while physically present
in California, regarding supposed claims arising from the California
transaction was simply wrong and caused damages in excess of $1
million to the client.
A. Procedural History
Petitioners do not specify the stage and manner in which their
Commerce Clause issue was timely and properly raised in prior
proceedings. Nor can they do so.
In January 1994, Respondent ESQ Business Services, Inc., a
California corporation (“ESQ”), and its sole shareholder, Iqbal
Sandhu, filed a Complaint in Santa Clara County, California
2
Superior Court for negligence and related claims against Birbrower,
Montalbano, Condon & Frank, a New York corporation
(“Birbrower’”), and one of its attorneys, Kevin Hobbs. ESQ and
Sandhu included allegations that Hobbs had engaged in the
unauthorized practice of law in California and that such violations,
along with other independent reasons, rendered fee agreements
with Birbrower void and unenforceable.
Birbrower and Hobbs filed a Notice of Removal in the United
States District Court for the Northern District of California based
only on the ground of diversity of citizenship. Respondent’s
Appendix (“RA”) at 1a-3a. Both Petitioners filed an Answer to the
Complaint; the Birbrower firm also filed a Counterclaim to recover
fees for work done in both New York and California. Birbrower
averred that a separate entity, ESQ Business Services, Inc., a New
York corporation (“ESQ-NY”), had acted as an agent for ESQ and
Sandhu relative to transactions in controversy. Birbrower did not
name ESQ-NY as a party.
ESQ and Sandhu responded by motion for leave to amend
their Complaint to add ESQ-NY as a plaintiff (under a claim for
declaratory relief to establish that ESQ-NY had no liability to
Birbrower), and to remand the case to state court because joinder
of ESQ-NY would eliminate diversity. Petitioners opposed these
requests, but did not assert that jurisdiction could be maintained
because of a claim or right arising under the Constitution or a
federal statute. RA at 4a-13a. In April 1994, the District Court
entered its Order granting the motions to amend and for remand.
The matter returned to the California Superior Court.
There, in November 1995, ESQ requested summary relief
declaring void or voidable the fee agreements on which Birbrower
based some of its claims for relief. ESQ advanced three independent
bases for the motion, the first of which was that Petitioners had
violated Business & Professions Code section 6125. In their
3
opposition to ESQ’s motion, Petitioners did not contend that
application of section 6125 abridged the Commerce Clause or that
application of the California statute to an out-of-state lawyer
representing a party in connection with a commercial arbitration
was preempted. No paper submitted by either side references the
Commerce Clause or the Federal Arbitration Act (“FAA”). The
Superior Court granted ESQ’s motion. Petitioner’s Appendix (“PA”)
at 60-63.
Petitioners obtained review by the Court of Appeal for the
State of California, Sixth Appellate District. They did not mention
or suggest any constitutional question in describing the case or
framing the issues for the Court of Appeal. RA at 14a-24a.
Petitioners again did not argue that section 6125 offended the
Commerce Clause or that the state statute was preempted; no
reference to the Commerce Clause or the FAA appeared in any
brief. The Court of Appeal affirmed the Order of the Superior
Court. PA at 45-59.
In their request for review by the California Supreme Court,
Petitioners stated the issues in this manner:
1. Does an out of state attorney’s limited non-
courtroom legal work performed in California
constitute the “unauthorized practice of law,” under
Business and Professions Code section 6125?
2. Is an out of state attorney, barred from enforcing an
otherwise valid fee agreement with a client when the
legal services include limited work performed in
California? RA at 27a. Also see RA at 29a-3la
The California Supreme Court described the issues addressed in
its consideration of the case in much the same way:
4
We granted review to determine whether Birbrower’s
actions and services performed in California constituted
the unauthorized practice of law under section 6125
and, if so, whether a section 6125 violation rendered
the fee agreement wholly unenforceable. PA at 8.
Yet again, there was no reference to a possible Commerce Clause
violation in any brief submitted to the California Supreme Court
by Petitioners, by ESQ, or by any amicus curiae. Contrary to
Petitioners’ unsubstantiated assertion (Petition (“Pet.”) at 6), no
mention of the Commerce Clause was made at oral argument. Like
the lower state courts before it, the California Supreme Court said
nothing on the subject because the issue never was raised.
By contrast, Petitioners did finally reference the FAA while
the matter was before the California Supreme Court. This was
done, however, only in Petitioners’ reply to the amicus brief of the
State Bar of California. ESQ had no opportunity to respond.
Although the California Supreme Court was not obliged to address
this point, it did so in a fashion consistent with principles of FAA
preemption articulated by this Court. PA at 20.
The claims by ESQ and Sandhu against Petitioners for
malpractice remain to be tried. Similarly, the question of fee
entitlement, if any, by the Birbrower firm remains to be determined
pursuant to guidelines set by the California Supreme Court. See
PA at 28-29.
B. Factual Summary
The facts pertinent to resolution of ESQ’s section 6125 claim
were not disputed by Petitioners in proceedings before the
California courts. Now, however, they emphasize a different tale
in support of contentions never raised before. In particular, the
existence of a “non-resident client” (ESQ-NY presumably) which
5
“owned” claims is a fiction which the California Supreme Court
appropriately ignored.
In late 1989 or early 1990, Iqbal Sandhu was a young man
living in Silicon Valley who had partially developed a software
product known as PNA. He received a proposal from Tandem
Computers to finance completion and then market PNA on an
exclusive basis. Tandem was a Delaware corporation headquartered
in Santa Clara County, California.
~ Sandhu felt he needed legal advice and contacted his older
brother, Kamwaljit Sandhu (“Kamal”), who lived in New City,
New York, a town 30 miles northwest of New York City. Kamal
suggested that Iqbal contact Hobbs, who had previously represented
the Sandhu brothers’ father and also Kamal’s business, ESQ-NY,
in several matters.’ Iqbal contacted Hobbs, and Hobbs undertook
the engagement. Hobbs knew that California law would govern
the arrangement proposed by Tandem. Neither Hobbs nor any of
his colleagues at Birbrower were members of the California Bar.
Neither Hobbs nor his firm associated or consulted any California
attorney to assist at this or any later stage of the representation.
On March 16, 1990, a written contract (the “Tandem
Agreement”) was entered in California. Iqbal intended to establish
a California entity to perform the contract with Tandem, but was
unable to do so before the Tandem Agreement was ready to sign.
He therefore arranged for ESQ-NY to execute the Tandem
Agreement. Everyone involved, however, understood that Iqbal
and the business to be formed by him were responsible for the
ESQ “side” of the Tandem Agreement. Hobbs handled
incorporation of ESQ in California, but no formal assignment of
1. Despite assertions to the contrary (Pet. at 2-3), there was only a family
relationship between the brothers. As Kamal has testified, he was the sole owner
and sole officer of ESQ-NY, Iqbal had no responsibility for ESQ-NY operations,
and was never an employee of that business. Similarly, when ESQ was formed
in California, Kamal and ESQ-NY had no substantive role in that enterprise.
6
the Tandem Agreement from ESQ-NY to ESQ was ever made.
Nonetheless, after March 1990, Tandem on one hand and Iqbal
and ESQ on the other dealt only with each other under the Tandem
Agreement; neither Kamal nor ESQ-NY had further contact with
Tandem.
In early 1992, Iqbal became concerned with Tandem’s actions
and intentions and sought advice from Hobbs. Without researching
pertinent law, and without even recognizing that certain critical
legal issues were involved, Hobbs convinced Iqbal that ESQ had
“multi-million dollar claims” against Tandem. Hobbs also
represented that he and his firm were competent to litigate the
case. As a result, ESQ entered a contingency fee agreement with
the Birbrower firm. Because on its face the Tandem Agreement
had identified ESQ-NY as a contracting party, ESQ-NY was named
along with ESQ as a “client” in the engagement. However, Iqbal
(not Kamal) signed the fee centract as the “authorized agent” of
ESQ-NY.?
2. Acknowledging that inclusion of ESQ-NY in the fee contract was a
matter of form and not substance, Petitioners made statements regarding ESQ-
NY not being party under the fee contract to the United States District Court in
opposition to the motions to amend and remand:
ESQ-NY’s interests do not need protection since it does not face
claims against it that would subject it to liability. It is clear that
ESQ-NY is not even a necessary party to this action. RA at 9a.
Defendants have not served ESQ-NY with any action, filed any
action against it, nor do they seek any recovery from it. Passing
references to ESQ-NY does [sic] not pose any threat to ESQ-NY,
even if the claims against plaintiffs were proven. RA at 13a.
These judicial admissions by Petitioners further contradict their current position
that ESQ-NY was a real client in connection with the Tandem Agreement
controversy.
7
Thereafter, Hobbs and other Birbrower attorneys engaged in
what the California Supreme Court aptly described as extensive
practice of law within California. See PA at 4-5. During the year
or more covered by their California activities, Petitioners never
consulted with, advised, or reported to ESQ-NY. All attorney-
client communications involved only California entity ESQ.* When
talks to resolve the dispute between Tandem and ESQ neared
conclusion, Hobbs directed his protests and legal opinion only to
ESQ. No evidence exists that Hobbs even informed ESQ-NY that
the matter was being settled.
Settlement documentation (by way of a new agreement
between ESQ and Tandem) made no mention of ESQ-NY, did
not provide for or include any signature by or assignment from
ESQ-NY, and recited that the March 16, 1990 contract had been
entered between Tandem and ESQ Business Services, Inc., a
California corporation. RA at 33a-37a. In these same papers, which
were reviewed by Hobbs, arbitration proceedings were described
as being between only Tandem and ESQ, and waivers and releases
were provided between only Tandem and ESQ. RA at 33a-34a,
36a-37a.
The parties confirmed, in other words, that from the start there
was no New York “client” involved as a matter of substance in the
Tandem Agreement or in any dispute related to that contract.
Consistent with the reality that ESQ-NY was only a “straw man”
and “owned” no claim against Tandem, following settlement of
the Tandem dispute ESQ and Birbrower modified their fee
agreement and, among other things, eliminated ESQ-NY as a party
named in that contract.
3. ESQ-NY also was not mentioned in Petitioners’ communications with
third parties. Neither the arbitration demand which Petitioners prepared nor any
other communication from them to the American Arbitration Association
references ESQ-NY as being the claimant. All such papers prepared by Petitioners
say either “ESQ” or “ESQ Business Services, Inc.” and no more.
8
Petitioners were not in-house lawyers, outside general counsel
to a bi-coastal enterprise, or even a multi-state firm. Despite
characterizations of the Tandem Agreement as involving
“international marketing” of PNA, the underlying dispute between
ESQ and Tandem did not require attention from attorneys skilled
in the laws of several different jurisdictions. Rather, the controversy
arose under California law and could have been handled by a
member of the California Bar without leaving the San Francisco
Bay Area. Under the undisputed facts actually presented below on
which the decision of the California court was based, the Birbrower
opinion creates no cause for constitutional concern.
REASONS FOR DENYING THE WRIT
I. JURISDICTION DOES NOT EXIST FOR REVIEW OF
ISSUES NOT PRESENTED TO AND DECIDED BY A
STATE COURT OF LAST RESORT.
Petitioners’ Commerce Clause argument is raised for the first
time. This Court therefore lacks jurisdiction to determine substantive
matters raised at pages 11 to 29 of the Petition. See 28 U.S.C.
§ 1257(c); Adams v. Robertson, __ U.S. __, 117 S. Ct. 1028,
1029 (1997) (per curiam); Yee v. City of Escondido, California,
503 U.S. 519, 533 (1992). Before reviewing state decisions, the
Court must be satisfied that the state court has had “a fair
opportunity to address the federal question that is sought to be
presented.” Webb v. Webb, 451 U.S. 493, 501 (1981). “[T]he court
will not decide federal constitutional issues raised . . . for the first
time on review of state court decisions.” Cardinale v. Louisiana,
394 U.S. 437, 438 (1969); accord, e.g., Hoover v. Ronwin, 466
U.S. 558, 574 n.25 (1984) (Fifth and Fourteenth Amendment
claims regarding Arizona Bar admission practices deemed not
seasonably raised).
9
Sound policy reasons support this rule:
Questions not raised below are those on which the
record is very likely to be inadequate, since it
certainly was not compiled with those questions in
mind. And in a federal system it is important that
state courts be given the first opportunity to consider
the applicability of state statutes in light of
constitutional challenge, since the statutes may be
construed in a way which saves their
constitutionality. Or the issue may be blocked by an
adequate state ground. Even though States are not
free to avoid constitutional issues on inadequate state
grounds . . . they should be given the first
Opportunity to consider them.
Cardinale, 384 U.S. at 439 (citation Omitted).
This rationale is operable here. Petitioners never raised a
Commerce Clause argument during any previous proceeding, and
there is no indication that any lower court believed it was being
asked to render a decision under that provision. The California
Supreme Court never had opportunity to review, address, or
properly consider Commerce Clause assertions made here for the
first time.* Nor did it have the benefit of a proper record on which
resclution of the issue appropriately might be based.
4. Petitioners mistakenly assert, without citation to or submission of a
record, that “[dJuring oral argument, the parties discussed at length the impact of
the court of appeal’s ruling on interstate commerce.” Pet. at 6. This did not occur
and, in fact, there is no evidence that the issue was discussed or considered by
the California Supreme Court. Not coincidentally, the Birbrower decision makes
no mention of a Commerce Clause issue. When the highest state court is silent
on a federal question, this Court assumes that the issue was not properly
presented. Board of Directors of Rotary Int'l v. Rotary Club of Duarte, 481 U.S.
537, 550 (1987). In such circumstances,
(Cont'd)
10
Petitioners may argue that the California court mentioned the
“multistate nature of law practice” in its decision (PA at 21), and
thereby implicitly considered application of the Commerce Clause.°
However, the mere fact that a state court mentions an issue touching
upon a federal question is not sufficient to convey jurisdiction on
this Court. See George O. Richardson Machinery v. Scott, 276
U.S. 128, 132-133 (1928).°
Petitioners must establish that the federal question was actually
presented for decision or has actually been decided by the state
court, and that the state court’s judgment could not have been
(Cont'd)
the aggrieved party bears the burden of defeating this assumption
.. .by demonstrating that the state court had “‘a fair opportunity to
address the federal question that is sought to be presented here.”
Adams, 117 S. Ct. at 1029 (quoting Webb, 451 U.S. at 501).
5. In limited instances the Court will review federal questions not raised
in the lower courts. However, review is permitted only when (i) the state court
did “not decide against a petitioner . . . upon an independent state ground,” and
(ii) the state court actually “entertain[ed] and decide[d] that question adversely
to the federal right asserted.” Orr v. Orr, 440 U.S. 268, 276-77 (1979).
6. Similarly, Petitioners cannot rely upon decisions involving the “multi-
State nature of law practice” cited in their state court briefs to rescue constitutional
arguments never specifically raised before. For example, Petitioners referenced
Appell v. Reiner, 43 N.J. 313, 204.A.2d 146 (1964), and Jn re Estate of Waring,
47 N.J. 367, 221 A.2d 193 (1966), as substantiating their allegedly falling under
an exception to section 6125. See PA at 20-21. Neither case mentions or cites
the Commerce Clause. Neither decision purports to strike down undue burdens
on interstate commerce. Even if these cases could support a Commerce Clause
argument (which Respondent does not concede), discussion or casual reference
to such a case “in the midst of an unrelated argument, is insufficient to inform a
State court that is has been presented with a claim subject to [this Court’s} appellate
jurisdiction under 28 U.S.C. § 1257(2).” Board of Directors of Rotary
International, 481 U.S. at 550 n.9; accord, Adams, 117 S. Ct. at 1030.
1]
rendered without deciding the federal question. Wilson v. Cook,
327 U.S. 474, 480 (1946).
Neither California appellate opinion suggests that Petitioners’
Commerce Clause issue was actually presented, actually decided,
or formed the crux of analysis. The Commerce Clause is not
mentioned by the California Supreme Court or the Court of Appeal.
It was not addressed in Petitioners’ appellate briefs, or in any other
brief filed with those courts. Both opinions reflect that interstate
commerce was not an important factor or central focus; each court
determined, based upon facts not in dispute, that the underlying
engagement of Petitioners by ESQ was intrastate in nature. While
recognizing a need to accommodate attorneys involved in multistate
transactions,’ the California Supreme Court held that Petitioners
were ineligible for an “interstate representation” exception to section
6125 because of their “extensive activities within California.” PA
at 21. The District Court of Appeal held:
This exception is inapplicable under the facts
presented here. . . . Nothing about this dispute was
interstate in nature. Consequently, the exception
does not apply.
PA at 57 (emphasis added).
The ruling below, in other words, rested solely on state law
principles. The case hinged not on any constitutional argument,
but on a determination about what activity constitutes the “practice
of law” under California law. That alone precludes review. See
Lambrix v. Singletary, __ U.S. __, 117 S. Ct. 1517, 1522 (1997)
(“since the state-law determination is sufficient to sustain the decree,
7. Importantly, the California Supreme Court did not hold that there was
no “interstate representation” exception. The court left open possible application
of such an exception to matters that truly require accommodation of the multistate
nature of certain transactions.
12
any opinion of this court on the federal question would be purely
advisory”).
Lastly, Petitioners abandoned any right to challenge section
6125 under the Commerce Clause. In light of their consistent failure
to even cite the Commerce Clause at every prior stage of
adjudication, Petitioners waived the claim. Trailer Marine Transport
Corp. v. Rivera Vazquez, 977 F.2d 1, 6 (1st Cir. 1992) (a Commerce
Clause assertion is not jurisdictional and can be waived by failure
to advance the claim at lower court level); accord, Yakus v. United
States, 321 U.S. 414, 444 (1994).
II. PETITIONERS LACK STANDING TO ASSERT
SUPPOSED COMMERCE CLAUSE RIGHTS OF
UNIDENTIFIED CLIENTS.
Nearly all of Petitioners’ contentions revolve around the thesis
that clients are harmed by application of unauthorized practice
Statutes to out-of-state attorneys. Petitioners lack standing to make
these arguments because the interests invoked are those of
unidentified “clients” rather than their own.
Generally, “a litigant must assert his or her own legal rignts
and interests, and cannot rest a claim to relief on the legal rights or
interests of third parties.” Powers v. Ohio, 499 U.S. 400, 411 (1991)
(citations omitted). Third-party standing may be allowed if the
litigant suffered injury in fact; the litigant has a close relationship
with the third party; and some hindrance exists to the third party
ability to assert the rights themselves. /d.
Petitioners do not meet these requirements. They have not yet
suffered injury since no court has entered a final judgment in this
case. See Whitmore v. Arkansas, 495 U.S. 149, 155 (1990); O’Shea
v. Littleton, 414 U.S. 488, 494 (1974). Second, though this Court
has characterized the attorney-client relationship as “one of special
————————————Ore
13
consequence,” the relationships Petitioners reference are prospective
only and not actual client relationships. Caplin v. Drysdale, 491
U.S. 617, 623 n.3 (1989); see California Attorneys for Criminal
Justice v. Butts, 922 F. Supp. 327, 333 (C.D. Cal. 1996)
(relationship between criminal defense attorneys and prospective
clients not sufficiently definite). More importantly, Petitioners’
interests are not consistent with those of many of the “clients” for
whom they purport to speak; indeed, this litigation is a prime
example of how interests of attorneys and clients can be at odds.
See Amato v. Wilentz, 952 F.2d 742, 751-753 (3rd Cir. 1991).
The rationale for the standing requirement, to ensure effective
advocacy, would be hampered by allowing Petitioners to argue
Respondent’s interests. Powers, 499 U.S. at 413.
Finally, there are no obstacles preventing clients from
advancing such rights themselves. A client could sue to invalidate
section 6125 as violative of interstate commerce protections. No
person in the client group, however, has chosen to do so or to
challenge any similar statute in force in any other state.
Petitioners may try to rely on the narrow exception created by
United States Department of Labor v. Triplett, 494 U.S. 715
(1990), to claim that, as attorneys, they have standing to assert the
rights of clients. Triplett is distinguishable because the attorney
and client there shared consistent interests (to provide and to obtain
competent representation). By contrast, Petitioners’ interest here is
to be paid for legal work they performed in a state where they
were not authorized to practice law, while Respondent’s interest is
to assure that state regulations intended to protect clients are
enforced.
Moreover, the client group in Triplett was homogeneous (those
potentially eligible for black lung benefits). Here, however, clients
whose interests Petitioners pretend to promote range from sole
proprietorships to multinational corporations. Unauthorized practice
by out-of-state lawyers means different things and raises different
14
issues for different types of clients, and varies even further according
to the nature of the engagement. Third party standing is not viable
under such circumstances, and Petitioners’ assertion of Commerce
Clause interests of unidentified “clients” should be rejected.
Ill. THE CALIFORNIA SUPREME COURT EXERCISED
APPROPRIATE STATE POWER TO REGULATE THE
PRACTICE OF LAW IN A MANNER WHICH DOES NOT
VIOLATE THE COMMERCE CLAUSE.
Certiorari also is not proper because Petitioners’ claim lacks
merit. Although Article I, Section 8 of the Constitution implicitly
limits the power of a state to interfere with or impose burdens on
interstate commerce, it does not prohibit all forms of regulation.
The Commerce Clause only prohibits regulation that discriminates
against or burdens interstate commerce and thereby impedes private
trade in the marketplace. General Motors Corp. v. Tracy, __ U.S.
_, 117 S. Ct. 811, 818 (1997).
Section 6125 is not discriminatory on its face. It does not
inhibit or preclude any out-of-state attorney from practicing in
California. The only requirement is that the attorney satisfy
California admission standards and remain an active member of
the Bar. “There is no discrimination on the basis of non-residency
or citizenship in California because neither California citizenship
nor residency is a requirement for California bar applicants.”
Giannini v. Real, 911 F.2d 354, 357 (9th Cir.), cert. denied, 498
U.S. 1012 (1990).
Where, as here, a regulation is facially neutral and has only
indirect effect on interstate commerce, the Court employs the test
created in Pike v. Bruce Church, Inc.:
Where the statute regulates even-handedly to
effectuate a legitimate local public interest, and its
eee ee
15
effects on interstate commerce are only incidental, it
will be upheld unless the burden imposed on such
commerce is clearly excessive in relation to the
putative local benefits . . . If a legitimate purpose is
found, then the question becomes one of degree.
397 U.S. 137, 142 (1970) (citations omitted).* The balance in
this matter is in favor of California’s paramount interest in
regulating lawyer conduct.
A. No Court Has Held That A State’s Long-recognized
Interest In Licensing And Regulating Attorneys Violates The
Commerce Clause.
Since the founding of the Republic, the licensing
and regulation of lawyers has been left exclusively
to the states . . . within their respective jurisdictions.
The States prescribe the qualifications for admission
to practice and the standards of professional conduct.
vets v. Flynt, 439 U.S. 438, 442 (1979). As summarized in
Hoover v. Ronwin:
8. Petitioners incorrectly assert that it is unclear whether the Pike analysis
applies. See Pet. at 15. Citing Brown-Forman Distillers Corp. v. New York State
Liquor Authority, 476 U.S. 573 (1986), they suggest that there are two tests that
might govern the analysis of section 6125. The Brown-Forman test applies only
when statutes are clearly discriminatory. In contrast, the Pike balancing test is
applied when the statute is facially neutral and has only an incidental effect on
interstate commerce. See Scariano v. Justices of Supreme Court of Indiana, 38
F.3d 920, 928 (7th Cir. 1994) (holding Pike test proper for analysis of interstate
commerce clause challenge to Indiana rule allowing out-of-state attorneys to
avoid taking bar exam if they practice predominantly in Indiana for five years);
Goldfarb v. Supreme Court of Virginia, 766 F.2d 859, 862 (4th Cir. 1985) (applying
Pike test to Virginia rule excusing out-of-state attorneys from taking bar exam if
they intended to practice full time in Virginia).
16
“[T]he regulation of the activities of the bar is at the
core of the State’s power to protect the public.” ...
“The interest of the States in regulating lawyers is
especially great since lawyers are essential to the
primary governmental function of administering
justice, and have historically been “officers of the
courts.” Few other professions are as close to the
“core of the State’s power to protect the public.”
Nor is any trade or other profession as “essential to
the primary governmental function of administering
justice.”
466 U.S. at 568 n.18 (quoting Bates v. State Bar of Arizona,
433 U.S. 350, 361 (1977); Goldfarb v. Virginia State Bar, 421
U.S. 773 (1975), and In re Griffiths, 413 U.S. 717, 722-23
(1973)).
Petitioners concede that California has at least some legitimate
reason to regulate lawyers who interact with its domiciliaries and
courts, including but not limited to “protecting clients from
unskilled or unethical lawyers.” See Pet. at 15. The California
Supreme Court noted that section 6125 “is designated to ensure
that those performing legal services do so competently.” PA at 8.
Accord, e.g., Baron v. City of Los Angeles, 2 Cal. 3d 535, 540-41,
86 Cal. Rptr. 673, 676 (1970) (bar regulations . . . also safeguard
the general public “against the ignorances or evil dispositions of
those who may be masquerading beneath the cloak of the legal
and supposedly learned and upright profession”); Brakel & Loh,
Regulating the Multistate Practice of Law, 50 Wash. L. Rev. 699,
701 (1975) (protecting the public from incompetence or unethical
conduct on the part of out-of-state attorneys is a legitimate purpose
of the unauthorized practice laws).°
9. The importance of California’s right regulate the behavior of out-of-
state attorneys who practice in the state is highlighted in this case. Before the
(Cont'd)
17
Though bar regulations potentially affect commerce, to
Respondent’s knowledge no Court of Appeal has invalidated any
such rule on Commerce Clause grounds. See, e.g., Tolchin v.
Supreme Court of New Jersey, 111 F.3d 1099, 1107-1111 (3rd
Cir.), cert. denied, 118 S. Ct. 435 (1997) (New Jersey in-state
office and mandatory continuing education rules do not violate
Commerce Clause); Kirkpatrick v. Shaw, 70 F.3d 100, 103 (11th
Cir. 1995) (fitness review requirement not an undue burden on
interstate commerce, “especially in light of the expected benefit of
protecting Florida’s citizens from unscrupulous attorneys”);
Scariano, 38 F.3d at 928; Giannini, 911 F.2d at 357-358:
Goldfarb, 766 F.2d at 862; Sestric v. Clark, 765 F.2d 655, 663
(7th Cir. 1985), cert. denied, 474 U.S. 1086 (1986) (“states have
been held to have a legitimate interest in regulating the quality of
legal practice, and it is not an irrational method of regulation to
make nonresident lawyers take the state’s bar exam — even though
they have already taken a bar exam and practiced in another state
..-'); See also Shapiro v. Cooke, 552 F. Supp. 581, 589 (N.D.
N.Y. 1982), aff'd, 702 F.2d 46 (2d Cir. 1983) (“if a state may
constitutionally require all applicants to take [a Bar] examination,
the Commerce Clause is not offended by a rule which permits
some, but not all, out-of-state attorneys to be admitted on waiver
of the examination.”).
Petitioners do not cite let alone discuss or diStinguish any of
these cases. They do not (and cannot) argue that the California
Supreme Court created a conflict in Commerce Clause authority.
They do not compare California governance of lawyers, either
generally or with specific regard to section 6125, to any regulation
(Cont'd)
California Supreme Court, Petitioners took the position that even when they
practiced law in California they were not obliged to follow the California Rules
of Professional Responsibility and statutory provisions (other than section 6125)
which govern relationships in California between lawyers and clients.
18
or rule upheld against Commerce Clause challenge in any of these
precedents. They do not contend that section 6125 imposes any
greater burden on commerce than was found acceptable in any
such prior decision. Inability to place contentions now made in
the context of existing law is fatal to the Petition.
B. Petitioners Can Supply No Evidence That Section 6125
Impedes Interstate Commerce.
It is not an unreasonable interference with commerce “for
attorneys of other states to be required to take the California bar to
be able to practice in California.” Giannini, 911 at 358-59; accord,
Leis, 439 U.S. at 443 (“This Court, on several occasions, has
sustained state bar rules that excluded out-of-state counsel from
practice altogether or on a case-by-case basis” [citations omitted]).
Because, as noted, Petitioners failed to make a Commerce
Clause claim in any prior proceeding, the record is devoid of
evidence of any undue burden associated with section 6125.
Secondary authorities, including those on which Petitioners rely,
acknowledge that no empirical study has been conducted to assess
how application of unauthorized practice statutes to out-of-state
lawyers may impact commerce. Brakel & Loh, 50 Wash. L. Rev.
at 737-738 (1975); Daly, Resolving Ethical Conflicts in
Multijurisdictional Practice — Is Model Rule 8.5 The Answer, An
Answer, or No Answer At All, 36 S. Tex. L. Rev. 715, 725 n.23,
729-731 (1995); Woolfram, Sneaking Around in the Legal
Profession: Interjurisdictional Unauthorized Practice by
Transactional Lawyers, 36 S. Tex. L. Rev. 665, 685 (1995); see
also Rhode, Policing the Professional Monopoly: A Constitutional
and Empirical Analysis of Unauthorized Practice Prohibitions,
34 Stan. L. Rev. 1, 13 n.47 (1981) (survey excludes “decisions
involving unauthorized practice by ... attorneys not licensed in
the jurisdiction . . . [which] raise issues substantially different from
those addressed in this article.””); Needham, Splitting Bar Admission
into Federal and State Components: National Admission for Advice
ocx eisai
pik ik Siete Sern
19
on Federal Law, 45 Kan. L. Rev. 453, 473-474 (1997) (insufficient
information available regarding discipline of out-of-state lawyers).
No actual example is contained in the record below or described
in the Petition where interstate commerce was in fact excessively
hindered by section 6125 or any other effort to regulate interaction
between a California resident and an attorney licensed to practice
only by another jurisdiction.
Statutory prohibitions enacted by the states against
unauthorized practice have existed for more than 200 years, and
enforcement of those laws against out-of-state attorneys has taken
place over at least 150 years. Annot., Right of Attorney Admitted
in One State to Receive Compensation for Services Rendered in
Another State Where iie Was Not Admitted to the Bar, 11 A.L.R.3d
907, 911 (1967) (referencing Ames v. Gilman, 51 Mass. (10 Met.)
239 (1845), denying fees to an attorney licensed by New Hampshire
based upon a 1785 statute prohibiting unauthorized practice of
law in Massachusetts). During the past two centuries, interstate
commerce has grown, multi-state business operations have grown,
the legal profession has grown, in-house legal departments have
been created and have grown, multi-state law firms have emerged
and grown. There is no evidence that any such progression has
been slowed by rules which put an attorney’s fees at risk if he plies
his trade in a state where he is not authorized to practice law.
There is likewise no evidence that section 6125 impermissibly
restricts unidentified “client’s” ability to select counsel. There is
nothing on the record in this matter indicating that “clients” are or
will be deprived of access to a pool of competent attorneys due to
enforcement of California’s unlicensed practice provision. Indeed,
an equally compelling argument is that the statute works to the
benefit of “clients” by protecting them from incompetent counsel
or counsel unfamiliar with local laws, regulations, and practices."
10. Of course, that is precisely what happened here. This action involves
an instance where California clients (not the hypothetical out-of-state client
(Cont'd)
20
Burdens identified by Petitioners as supposedly flowing from
the existence of different rules in different states (Pet. at 19, 28)
also cannot be deemed excessive. Putting aside the fact that such
differences are inherent in our federal system, and putting aside as
well the fact (as described in the next section) that unauthorized
practice authorities rest upon generally agreed principles, this
contention is an embarrassment to the profession. Lawyers are
trained to identify and understand applicable law. The Commerce
Clause was not intended to relieve attorneys from their obligation
to follow the rules of professional conduct which exist in each
place they may wish to practice.
Potential burden on interstate commerce, if any, has been
minimized because the California Supreme Court crafted its opinion
carefully to avoid intrusion into the “business” of other states. The
most significant portions of the decision, those defining what it
means to practice law “in California,” are expressly limited to
relationships involving California clients. PA at 10.
The Birbrower opinion also creates a safe-harbor relating to
interstate commerce aspects of a transaction not connected to
California practice of law. According to the California Supreme
Court, section 6125 allows out-of-state attorneys to enforce fee
agreements
to the extent it is possible to sever the portions of
the consideration attributable to [the attorney’s]
services illegally rendered in California from those
attributable to [the out-of-state] services.
PA at 29. Thus, notwithstanding Petitioners’ fears, California
does not seek to regulate the practice of law in other states. PA
at 24-28.
(Cont'd)
described in Petitioners’ papers) discovered that out-of-state counsel had misled
them into an attomey-client relationship and mishandled a transaction and litigation
involving California parties and application of California substantive law.
21
The burdens on interstate commerce, if any, that the California
Statute imposes are incidental and fall far short of outweighing the
benefits that the provision promotes. It does not interfere
excessively with interstate commerce and is rationally related to
California’s strong interest in regulating the practice of law.
C. The California Supreme Court Has Merely Applied A
Traditional Rule, And Has Done So In A Way Which Neither
Impairs Nor Threatens Interstate Commerce.
The California Supreme Court followed the long established
rule that “an attorney who is not admitted to practice in the state
where he performs services is not entitled to recover compensation
for such services even though he is admitted to practice in another
state.” 11 A.L.R. 3d at 908; also see Daly, 36 S. Tex. L. Rev. at
771 (“[djenial of fees is a traditional remedy for the unauthorized
practice of law by [out-of-state] attorneys . . .”); Woolfram, 36 S.
Tex. L. Rev. at 691-692. Recent cases enforcing the “traditional
remedy” of denial of fees include Longval v. W.C.A.B., 51 Cal.
App. 4th 792, 59 Cal. Rptr. 2d 463 (1996); Servidone Construction
Corp. v. St. Paul Fire & Marine Insurance Co., 911 F. Supp. 560
(N.D. N.Y. 1995); In re Peterson, 163 B.R. 665 (Bkrtcy. D. Conn.
1994); Perlah v. S.E.I. Corp., 29 Conn. App. 43, 612 A.2d 806
(1992); Ranta v. McCarney, 391 N.W. 2d 161 (N.D. 1986);
Peterson Lozoff v. Shore Heights, Ltd., 35 Ill. App. 3d 697, 342
N.E. 2d 475 (1976); and Spivak v. Sachs, 16 N.Y. 2d 163, 263
N.Y.S. 2d 953 (1965).
The traditional remedy has not been afforded mechanical
application. Courts have crafted exceptions and on occasion stepped
away from strict adherence to avoid results which would offend
common sense. E.g., El Gamayel v. Seaman, 72 N.Y. 2d 701,
536 N.Y.S. 2d 406 (1988) (permissible for foreign attorney
residing in Washington D.C. to advise New York client by telephone
regarding status of legal proceeding in Lebanon); Dietrich Corp.
22
v. King Resources Co., 596 F.2d 422 (10th Cir. 1979) (fees allowed
for law professor employed as consultant to duly licensed litigation
counsel); Spanos v. Skouras Theatres Corp., 364 F.2d 161 (2d
Cir.) (en banc), cert. denied, 385 U.S. 987 (1966) (fees awarded
to out-of-state attorney practicing in New York at the invitation of
and in association with licensed local counsel because of his specific
skill with respect to an issue of federal law raised in a federal
lawsuit); Estate of Waring, 221 A.2d 193 (isolated instances of
physical presence in New Jersey did not preclude award of fees to
New York lawyers whose services were performed largely outside
New Jersey and did not involve matters of New Jersey law); Appell,
204 A.2d 146 (“peculiar circumstances” of “tangled and interwoven
elements” of client financial transactions in New York and New
Jersey justified recovery by New York lawyers for fees relating to
New Jersey issues).''
Two critical characteristics permeate these decisions. First, the
courts have recognized that because unauthorized practice by out-
of-state attorneys can arise in a nearly unlimited number of different
forms, the flexibility afforded through case by case adjudication is
essential. E.g., Spanos, 364 F.2d at 171(‘‘questions best left to
another day’); Peterson, 163 B.R. at 674-675 (holding strictly
11. Courts in several jurisdictions have undertaken general rule-making
pertaining to practice by out-of-state lawyers. See, e.g. New York Criminal and
Civil Courts Bar Association v. Jacoby {& Meyers], 61 N.Y. 2d 130,460 N.E.
2d 1325 (1984) (recognizing illegality of out-of-state lawyers’ local activities,
but permitting multi-state firm to practice through locally licensed lawyers); The
Florida Bar v. Savitt, 363 So. 2d 559 (Fla. 1978) (establishing rules for out-of-
state attorneys of a national law firm to practice locally in association with and
under the supervision of licensed lawyers). State courts also have created more
limited exceptions by rule and have upheld other exceptions created by statute.
See, e.g., Cal. Rules of Court, Rule 983 [pro hoc vice admission] and Rule 988
[Registered Foreign Legal Consultants]; Consumers Lobby v. Public Utilities
Comm., 25 Cal. 3d 891, 160 Cal. Rptr. 124 (1980) (upholding statute permitting
non-attorney to recover fees for representation in certain administrative agency
proceedings).
a cm a cence
fa
limited to facts where the court acknowledged that “[t]he contours
of the so-called ‘federal practice exception’... are not sharply
defined”); Estate of Waring, 221 A.2d at 198 (“questions of
unlawful practice will turn on the particular facts presented”’).
Second, the courts have also recognized that it is important to
take account of “modern realities” in commerce and in the practice
of law. As stated by New York’s highest court more than 30 years
ago,
[t]here is, of course a danger that [New York’s statute
on unlawful practice] could be stretched to outlaw
customary and innocuous practice. We ..
recognize[e] [given] the numerous multi-State
transactions and relationships of modern times, we
cannot penalize every instance in which an attorney
from another State comes into our State for
conferences or negotiations relating to a New York
client and a transaction somehow tied to New York.
We can decide those cases when we get them but
they are entirely unlike the present one.
Spivak, 16 N.Y. 2d at 168; accord, e.g., Spanos, 364 F.2d at
170-171.
Contrary to Petitioners’ cries of apocalypse, a fair reading of
the California Supreme Court opinion demonstrates that these
salutory characteristics of the decisional law have been enhanced.
Birbrower expressly endorses the case by case approach appropriate
to this subject area. PA at 11. By incorporating Ethical
Consideration EC 3-9 of the ABA Model Code of Professional
Responsibility, the Supreme Court provides a more complete
framework for analysis than appears in prior cases. Moreover, the
Court acknowledges specifically that in some instances judicial
accommodation must be made for “interjurisdictional practice.”
24
And contrary to Petitioner’s protestation that handcuffs have been
applied (Pet. at 23), the decision leaves open possibilities for
refinement of the traditional rule as future circumstances may
demand.
Birbrower also contributes two helpful features to the
jurisprudence of unauthorized practice. First, by invoking the
doctrine of severability to afford Petitioners an opportunity to
recover that portion of their fees earned in New York, potential
harshness of the traditional remedy is eased and the “burden,” if
any, on commerce is reduced." Petitioners’ criticisms ring hollow
given the fact that the California Supreme Court potentially left
them better off than older decisions might dictate.
Second, the California Supreme Court acknowledges in a
thoughtful way that there are limits to the reach of state authority
to regulate the practice of law. PA at 10. This exact formulation
already has been quoted, adopted, and applied by the highest court
of another state. In Fought & Company, Inc. v. Steel Engineering
and Erection, Inc., 87 Haw. 37, 951 P.2d 487 (1998), the Supreme
Court of Hawaii was asked whether fees could be claimed for the
work of an out-of-state attorney who assisted local counsel to handle
a Hawaii lawsuit without being physically present in that state.
ate Although Petitioners cite this decision (Pet. at 28), they neglect to
mention that it creates no conflict with Birbrower and does not
demonstrate that the law in this area is in turmoil. To the contrary,
12. Some prior cases suggest an “all or nothing” attitude, even depriving
the attorney of compensation for work conducted in his “home” state. See
Ginsburg v. Fahrney, 45 Misc. 2d 777, 258 N.Y.S. 2d 43 (1965). The few
departures rely on the doctrine of quantum meruit, which can present more
difficult problems of proof for the unpaid lawyer. E.g., Western Life Insurance
Co. v. Nanney, 296 F. Supp. 432 (E.D. Tenn. 1969) (refusing to enforce state
unauthorized practice provision because of interstate nature of underlying matter,
but then rejecting attorneys’ quantum meruit claim for fees).
Se
25
the Hawaii Supreme Court builds on the analytical process
articulated by the California Supreme Court. Expressly applying
the “factors suggested by Birbrower,” the Fought tribunal concluded
that the out-of-state attorney was not subject to regulation by Hawaii
even though he had assisted the client dealing with a litigation in
that state.
Thus, in the very first unauthorized practice case in which
Birbrower is cited, none of the dire consequences for commerce
predicted by Petitioners is evident. If anything, Fought demonstrates
that local regulation of the practice of law following Birbrower is
not likely to restrict or excessively burden interstate commerce.
IV. IT IS NOT APPROPRIATE TO CONSIDER
PETITIONERS’ INVITATION TO ESTABLISH A
FEDERAL RULE GOVERNING ATTORNEY
PARTICIPATION IN COMMERCIAL ARBITRATIONS.
Under the guise of battling a supposed obstacle to commerce,
Petitioners in effect ask this Court to instruct the states to draft or
interpret unauthorized practice laws to permit an attorney licensed
by any jurisdiction to represent clients in commercial arbitrations
anywhere else. Pet. at 28. There is no justification for such a request,
and likely no authority for issuing any such edict.
Representation of a party in commercial arbitration falls within
the definition of the “practice of law.” See, e.g., The Florida Bar
Re Advisory Opinion on Nonlawyer Representation In Securities
Arbitration, 696 So. 2d 1178 (Fla. 1997) (identification of client
rights at stake before, during, and after arbitration hearing); Baron,
2 Cal. 3d at 543, 86 Cal. Rptr. at 678 (representations before certain
administrative boards and commissions). The pertinent questions
then are whether such acts are “unauthorized,” and who should
make that determination.
26
Petitioners are correct that only two cases address the first of
these issues.'* Birbrower holds that representation by an out-of-
state lawyer in connection with a commercial arbitration is
“unauthorized” as defined by the California statute. Conversely,
the U.S. District Court in Williamson v. John D. Quinn Const.
Corp., 537 F. Supp. 613 (S.D. N.Y. 1982), held that similar
activities were not “unauthorized” under New York law. There are
reasons why these two decisions are distinguishable, including
reasons beyond those noted by the California Supreme Court (PA
at 17-18)'* and beyond the obvious observation that a district court’s
interpretation of state law is not controlling. But even assuming
arguendo that a schism in authority exists, attempted resolution
by this Court is not warranted.
Regulation of the practice of law is part of the sovereign power
reserved to the states. Hoover, 446 U.S. at 569 n.18; Hawkins v.
Moss, 503 F.2d 1171, 1175-76 (4th Cir. 1974), cert. denied, 420
U.S. 928 (1975) (“licenses to practice law, granted by the courts
of one state, have no extraterritorial effect or value and can vest no
13. A few other pronouncements also exist. See N.J. Ethics Op. No. 28
(1994) (one instance of representing a party in arbitration not unauthorized
practice); Ill. Ethics Op. No. 94-5 (1994) (several representations in arbitration
deemed unauthonzed practice).
14. For example, the two fee claimants in Williamson were New Jersey
lawyers who had been invited because of their particular skills to participate in
the arbitration in association with the regular outside counsel of a sophisticated
client. Williamson thus is a near clone to Spanos on its facts, and a far cry from
this situation (where Petitioners brought no special skill to the engagement, were
not invited into the matter by California counsel, and never associated ,/ith a
member of the California Bar in representing ESQ). Additionally, one of the two
New Jersey fee claimants (indeed the sole owner of the small firm under which
both practiced) was also a member of the New York Bar and a member of the
Bar of the District Court. By contrast, no Birbrower attorney was a member of
the California Bar. And further yet, the court in Williamson seems to have believed
that aside from a local bar association report there was no authority pertinent to
this issue. That reduces the instructive weight of its decision as well.
27
right in the holder to practice law in another state”); see Leis, 439
U.S. at 443 (no “federal” right to practice law in any state). Article
X of the Constitution specifically reserves rights of regulation to
the states absent express delegation of authority to the United States.
Federal legislation encroaching upon a state’s power to set its own
standards for bar admission, discipline, and regulation therefore
“would stand on somewhat debatable constitutional foundations.”
Woolfram, 36 S. Tex. L. Rev. at 703 n.125; accord, Needham, 45
Kan. L. Rev. at 509.
Petitioners forget that the California Supreme Court did not
reject the proposition that an exemption to section 6125 for general
commercial arbitration might be appropriate. Instead, it deemed
the issue as “best left for the Legislature.” PA at 19. The California
Legislature has accepted this invitation. As of June 1, 1998, a bill
(AB 2086, reproduced at RA 38a-40a), which would exclude out-
of-state lawyers’ engagements for arbitrations from the scope of
the statute, had been approved by the California Assembly and
was pending before the State Senate."
The principle of separation of powers is fundamental to
governance in the United States. Within California, application of
the concept has now directed the question of representation in
commercial arbitrations raised in Birbrower to the appropriate
branch of state government. For this Court to decide the same
issue on certiorari, and to do so even before the state has full
opportunity to deliberate and possibly act, would jeopardize state
sovereignty. It would also interfere with the decision of a state’s
highest court regarding how authority over questions of public
policy should be allocated pursuant to the state’s own constitution.
15. Status of legislation in California is reported on a current basis through
the California Legislative Counsel's web site (http://www. leginfo.ca.gov).
28
Regulation of attorneys in a federal system is not always
consistent, logical, or tidy. That is not, however, adequate reason
to nationalize all or any part of the practice of law. What the Petition
seeks is beyond the appropriate authority of this Court to grant.
V. PETITIONERS PROVIDE NO AUTHORITY OR
REASON TO JUSTIFY EXTENSION OF THE FEDERAL
ARBITRATION ACT TO LIMIT REGULATION BY THE
STATES OF THE PRACTICE OF LAW.
Petitioners do not and cannot identify a conflict in FAA case
authority created by the California Supreme Court in this matter.
Nor do they explain how any recognized FAA purpose is impaired
by state regulation of the practice of law.
This Court has determined that the FAA does not contain an
express preemptive provision, and that the FAA does not reflect
congressional intent to occupy the entire field of arbitration. Volr
Information Sciences, Inc. v. Board of Trustees of the Leland
Stanford Junior University, 489 U.S. 468, 479 (1989). Preemption
therefore exists only if
“compliance with both federal and state regulations
is a physical impossibility,” or because the state law
stands “as an obstacle to the accomplishment and
execution of the full purposes and objectives of
Congress.”
California Federal Savings and Loan Association v. Guerra,
479 U.S. 272, 281 (1987) (citations omitted). Neither prong of
this test applies.
No conflict of the first order exists because it is possible to
comply with both section 6125 and the FAA. The FAA does not
29
mandate general procedures for commercial arbitration’® and does
not address the question of party representation in such a
proceeding. Adherence to section 6125 does not require violation
of the FAA.
Turning to conflict arising because a state law is inconsistent
with the purposes of a federal statute, Congress’ principal aim for
the FAA was to ensure that “private arbitration agreements are
enforced according to their terms.” Volt, 489 U.S. at 479. The
FAA does not prevent “the enforcement of agreements to arbitrate
under different rules than those set forth in the Act itself.” /d.
Because “[a}rbitration under the Act is a matter of consent .. . and
parties are generaily free to structure their arbitration agreements as
they see fit,” where the parties agree to abide by state rules of
arbitration, “enforcing those rules according to the terms of the
agreement is fully consistent with the goals of the FAA... .” /d.
Here, as in Volt, the subject arbitration agreement contained a
California choice-of-law provision. PA at 4, 20. Application of
California's section 6125 thus was in accord with party intent and,
under Volt, consistent with the FAA goal of honoring such
agreements according to their terms.
California Supreme Court treatment of this issue is also
consistent with FAA goals identified in Moses H. Cone Memorial
Hospital v. Mercury Construction Corp., 460 U.S. 1 (1983), and
reaffirmed in Volt, of assuring that matters subject to arbitration are
in fact arbitrated and that arbitration awards are enforced. Moses
H. Cone, 460 U.S. at 24-25. Application of section 6125 to a
commercial arbitration does not make the underlying dispute any
more or less amenable to arbitration. Similarly, there is nothing in
the California Supreme Court opinion or in section 6125 which
Suggests that the award rendered in a commercial arbitration in
16. Section 7 of the FAA, which deals with the summoning of witnesses
before arbitrators, is the only provision in the statute remotely procedural in
nature.
30
which an out of state attorney has represented a party would not
be enforceable or enforced. Cf’ Woolfram, 36 S. Tex. L. Rev. at
692-693. Section 6125 places obligations and risks on the out-of-
state lawyer engaged in unauthorized practice, not on the arbitration
process or on any party in arbitration proceedings.
CONCLUSION
New York directs its attorneys to obey the standards for
professional conduct of each other jurisdiction in which they happen
to practice. See N.Y. DR 3-101(B). Petitioners ignored this
proscription. They never read or considered the California statutes
and rules governing lawyer behavior in the state before or during
their representation of ESQ in California. Petitioners thus risked
the usual consequence for violation of one such rule: loss of fees,
at least in part, for unauthorized practice. Not every possible
pecuniary loss, however, creates issues of constitutional merit. The
Petition should be denied accordingly.
Respectfully submitted,
JON MICHAELSON
Counsel of Record
PERRY S. GOLDMAN
DENISE Y. YAMAMOTO
HOPKINS & CARLEY
A Law Corporation
Attorneys for Respondent
Ten Almaden Boulevard, 8th Floor
San Jose, California 95113
(408) 286-9800
APPENDIX
ey AL TENS RRS NERA TA NO SANE A ee ee ig
la
APPENDIX A — NOTICE OF REMOVAL OF ACTION
UNDER 28 UNITED STATES CODE SECTION 1441(b)
(DIVERSITY) FILED FEBRUARY 11, 1994
WILLIAM J. ELFVING — BAR NO. 38334
HOGE, FENTON, JONES & APPEL, INC.
Sixty South Market Street
San Jose, California 95113-2396
(408) 287-9501
Attorneys for Defendants BIRBROWER, MONTALBANO,
CONDON & FRANK, P.D., a New York corporation, and KEVIN
E. HOBBS
UNITED STATES DISTRICT COURT
NORTHERN DISTRICT OF CALIFORNIA
[stamp] Original Filed FEB 11 1994
C-94 02105 JV EAB [stamp]
No.
ESQ. BUSINESS SERVICES, INC., a California corporation;
etal.,
Plaintiffs,
VS.
BIRBROWER, MONTALBANO, CONDON & FRANK, P.C.,
a New York corporation; et al.,
Defendants.
2a
Appendix A
NOTICE OF REMOVAL OF ACTION
UNDER 28 UNITED STATES CODE
SECTION 1441(b) (DIVERSITY)
Date:
Time:
Dept.:
TO THE CLERK OF THE ABOVE-ENTITLED COURT:
PLEASE TAKE NOTICE that defendants Birbrower,
Montalbano, Condon & Frank, P.C., and Kevin E. Hobbs hereby
remove to this court, the state court action described below.
1. On January 12, 1994, an action was commenced in the
Superior Court of the State of California in and for the County of
Santa Clara, entitled ESQ Business Services, Inc., a California
corporation and Iqbal Sandhu, plaintiffs, v. Birbrower,
Montalbano, Condon & Frank, P.C., a New York Corporation
and Kevin E. Hobbs, defendants, as Case NO. CV737595
attached hereto as Exhibit A.
2. The first date on which defendants Birbrower,
Montalbano, Condon & Frank, P.C., and Kevin E. Hobbs received
a copy of the said complaint was January 14, 1994, when
defendants were served via facsimile with a copy of the said
complaint in the said state court. A copy of the summons was
not included. Defendants Birbrower, Montalbano, Condon &
Frank, P.C., and Kevin E. Hobbs received a copy of the summons
from the said state court on or about January 21, 1994. A copy
of the summons is attached hereto as Exhibit B.
3a
Appendix A
3. This action is a civil action of which this court has original
jurisdiction under 28 United States Code section 1332, and is
one which may be removed to this court by defendants pursuant
to the provisions of 28 United States Code section 1441(b) in
that it is a civil action between citizens of different states and the
matter in controversy exceeds the sum of $50,000, exclusive of
interest in costs because, among other things, plaintiffs’ complaint
contests a fee agreement between defendants and plaintiffs
providing for the payment of $1.15 million. In the complaint,
plaintiffs maintain that the reasonable value of defendants’ legal
services to plaintiffs “was no more than a few hundred thousand
dollars, if that.” (Plaintiffs’ Complaint, § 19.)
4. Defendants are informed and believe that plaintiff ESQ
Business Services, Inc., was, and still is, a Corporation
incorporated under the laws of the State of California, having its
principal place of business in the State of California. Defendants
are informed and believe that plaintiff Iqbal Sandhu was, and still
is, a citizen of the State of California. Defendant Birbrower,
Montalbano, Condon & Frank, P.C., was, at the time of the filing
of this action, and still is, a corporation incorporated under the
Laws of the State of New York, having its principal place of
business in the State of New York. Defendant Kevin E. Hobbs
was, at the time of the filling of this action, and still 1S, a citizen
of the State of New York. Birbrower, Montalbano, Condon &
Frank, P.C., and Kevin E. Hobbs are the only defendants that
have been served summons and complaint in this action.
Dated: February 11, 1994
HOGE, FENTON, JONES & APPEL, INC.
Bys/ William J. Elfving
WILLIAM J. ELFVING
. Attorneys for Defendants
4a
APPENDIX B — DEFENDANTS BIRBROWER,
MONTALBANO, CONDON & FRANK, P.C. AND KEVIN
F. HOBBS’ OPPOSITION TO PLAINTIFFS’ MOTION
FOR LEAVE TO AMEND AND MOTION FOR REMAND
FILED MARCH 25, 1994
WILLIAM J. ELFVING — BAR NO. 38334
HOGE, FENTON, JONES & APPEL, INC.
Sixty South Market Street
San Jose, California 95113-2396
(408) 287-9501 -
ROGER C. PETERS — BAR NO. 39321
HALLEY, CORNELL & LYNCH, P.C.
525 Market Street, Suite 3700
San Francisco, California 94105-2745
(415) 495-8800
Attorneys for Defendants BIRBROWER, MONTALBANO,
CONDON & FRANK, P.C., a New York corporation, and KEVIN
F. HOBBS
UNITED STATES DISTRICT COURT
NORTHERN DISTRICT OF CALIFORNIA
No. C-94 20105 JW (ARB)
ESQ BUSINESS SERVICES, INC., a California corporation;
et al.,
Plaintiffs,
VS.
ime Ss neiN
Sa
Appendix B
BIRBROWER, MONTALBANO, CONDON & FRANK, P.C.,
a New York corporation; et al.,
Defendants.
AND RELATED COUNTERCLAIM.
DEFENDANTS BIRBROWER, MONTALBANO, CONDON &
FRANK, P.C. AND KEVIN F. HOBBS’ OPPOSITION TO
PLAINTIFFS’ MOTION FOR LEAVE TO AMEND AND
MOTION FOR REMAND
Date: April 15, 1994
Time: 9 a.m.
Dept.: 8
INTRODUCTION
ESQ Business Services, Inc., and Iqbal Sandhu (“Plaintiffs”)
originally filed a complaint in this action in Santa Clara County
Superior Court. Defendants properly removed the action to this
court, on diversity of citizenship grounds. Plaintiffs now seek to
amend their complaint to add another plaintiff, a New York
corporation also called ESQ Business Services, Inc. (“ESQ-NY”),
for the sole purpose of destroying diversity jurisdiction. For the
reasons set forth below, defendants respectfully request that this
court deny plaintiffs’ motion for leave to amend and motion for
remand.
FACTUAL BACKGROUND
As stated in plaintiffs’ complaint, this dispute arises out of
defendants’ legal representation regarding a Software
6a
Appendix B
Development and Marketing Agreement with Tandem Computers
Incorporated. Plaintiffs initially engaged defendants to give legal
advice regarding a proposed agreement with Tandem. Plaintiffs
later retained defendants to represent them when a dispute arose
out of this Tandem software agreement. Plaintiffs entered into
two separate fee agreements with defendants for defendants’ legal
services. The first was a contingent agreement. The second, was
a revised agreement intended to supersede the first. This new
agreement was drafted at plaintiffs’ request to provide a flat fee,
rather than a contingent fee.
Under the terms of the revised attorneys’ fee agreement,
plaintiffs were required to make installment payments to
defendants commencing in December 1993. Instead of making
said payment, plaintiffs filed the instant action in Santa Clara
County Superior Court. Defendant Birbrower, Montalbano,
Condon & Frank, P.C., properly removed the action to this court
and filed a counterclaim against plaintiffs for breach of contract
and other related claims. Although the counterclaim alleges some
involvement of ESQ-NY, defendants did not name ESQ-NY as a
counter-defendant, nor seek any recovery against ESQ-NY.
ESQ-NY was a party to the original fee agreement, of which
plaintiffs seek declaratory relief. However, plaintiffs intentionally
chose not to include ESQ-NY as a plaintiff in this action. Plaintiffs
made this decision even though they were fully aware of ESQ-
NY’s participation when it first filed this lawsuit. Instead, now
that this action has been removed to federal court, plaintiffs seek
to amend their complaint to include ESQ-NY. Because of plaintiffs’
bad faith and improper motive in only now seeking to amend the
complaint, this court should exercise its discretion and deny
plaintiffs’ motion for leave to amend and motion for remand.
—ee
7a
Appendix B
LEGAL ARGUMENT
Plaintiffs contend that the rule 15 of the Federal Rules of
Civil Procedure permits the requested amendment in this action.
In addition, plaintiffs rely on 28 United States Code section
1447(e) to support their position that the motion for leave to
amend and the motion to remand should be granted. Plaintiffs’
argument fails because (1) section 1447(e) does not apply to this
action, and (2) even if the court were to hold section 1447(e)
applicable, plaintiffs improperly apply this provision to the
circumstances of this action.
28 UNITED STATES CODE SECTION 1447(e)
DOES NOT APPLY TO THIS ACTION.
Plaintiffs’ reliance on 28 United States Code section 1447(e)
to support their argument that amendment of the complaint to
add ESQ-NY as an additional plaintiff is flawed. Section 1447(e)
provides: “If after removal the plaintiff seeks to join additional
defendants whose joinder would destroy subject matter
jurisdiction, the court may deny joinder, or permit joinder and
remand, the action to the state court.” (Emphasis added.) (28
U.S.C. § 1447(e).) In the instant action, plaintiffs seek to join an
additional non-diverse plaintiff, not a defendant. Had Congress
intended for this provision to apply to joining plaintiffs, it would
have used the word “parties” instead of “defendants.” Section
1447(e) does not apply to the circumstances of this case. F urther,
plaintiffs misrepresent Righetti v. Shell Oil Co., 711 F.Supp.
531 (N.D. Cal. 1989). This issue in Righetti was whether plaintiff
should be granted leave to amend its complaint to substitute a
defendant for a fictitiously named defendant. The issue was not
whether a non-diverse plaintiff could be joined.
8a
Appendix B
Instead, the proper analysis requires compliance with rule
19 of the Federal Rules of Civil Procedure. The Ninth Circuit has
used this approach in Takeda v. Northwestern Nat. Life Ins. Co.
(1985) 765 F.2d 815.' In its discussion of the propriety of remand
the court stated: “Ordinarily, when removal is proper at the outset,
federal jurisdiction is not defeated by later changes or
developments in the suit.” (/d. at p. 819.) The exception to this
rule, according to Takeda, is when an indispensable party would
destroy diversity. Accordingly, this court must find that ESQ-
NY is indispensable in order to allow its joinder.
Rule 19 of the Federal Rules of Civil Procedure prescribes a
bifurcated analysis to determine whether parties should or must
be joined. The court must first consider whether the party is
necessary under Rule 19(a) of the Federal Rules of Civil
Procedure by looking at whether:
“(1) in his absence complete relief cannot be accorded
among those already parties, or (2) he claims an
interest relating to the subject of the action and is so
situated that the disposition of the action in his
absence may (i) as a practical matter impair or impede
his ability to protect that interest or (ii) leave any of
the persons already parties subject to a substantial
risk of incurring double, multiple, or otherwise
inconsistent obligations by reason of his claimed
interest.” (Fed. Rules Civ.Pro., rule 19(a).)
1. Takeda was decided prior to the 1988 amendment of 28 United States
Code section 1447 that added subdivision (e). Since the section | 447(e) analysis
applies only when a plaintiff seeks to add a non-diverse defendant, this court
should follow the Takeda analysis in this action.
9a
Appendix B
Under this analysis, ESQ-NY is not evena necessary party
to this action. Complete relief can be accorded among all parties.
Defendants have asserted no claims against ESQ-NY, so its joinder
is not necessary. ESQ-NY’s interests do not need protection since
it does not face claims against it that would subject it to liability.
It is clear that ESQ-NY is not even a necessary party to this
action.
Even if the court decides ESQ-NY is necessary, “(i)f the
party is necessary but his joinder will destroy jurisdiction, as is
the case here . . . then we must consider whether ‘in equity and
good conscience’ the action should proceed without his joinder,
i.¢., whether he is indispensable.” (Takeda v. Northwestern Nat
Life Ins. Co., supra.) Four factors are relevant to this inquiry:
(1) to what extent a judgment rendered in the person’s absence
might be prejudicial to him or those already parties; (2) the extent
to which, by protective provisions in the judgment, by the shaping
of relief, or other measures, the prejudice can be lessened or
avoided; (3) whether a judgment rendered in the person’s absence
will be adequate, (4) whether the plaintiff will have an adequate
remedy if the action is dismissed for nonjoinder. (Fed. Rules
Civ.Proc., rule 19(b).) Since adding ESQ-NY asa plaintiff would
destroy diversity in this action, the court must consider whether
“in equity and good conscience” the case should proceed without
joinder, or if the case more properly should be remanded to state
court.
“The Rule 19 analysis is easily stated, but not so easily
applied. The rule emphasizes practical consequences and its
application depends on the circumstances of each case.” (/d.) In
the instant action, a judgment rendered without the inclusion of
ESQ-NY will not prejudice any parties. Defendants do not seek
relief against ESQ-NY and plaintiffs’ fear of ESQ-NY’s joint and
See ot ea
10a
Appendix B
several liability is unfounded. Any judgment rendered will be
adequate even if ESQ-NY is not joined as a party to this case.
Finally, the threat of litigation against or by ESQ-NY in a
concurrent state court action is de minimis. If ESQ-NY was
concerned about that it would have been a named plaintiff in the
action from the beginning. It is also relevant that although Iqbal
Sandhu, the owner of ESQ Business Services, Inc., of California,
chose to be a plaintiff, Kanwaljit (“Kamal”) Sandhu, the owner
of ESQ-NY, is not named as a plaintiff in the proposed amended
complaint. ESQ-NY is not an indispensable party that must be
joined to this action. This court may, and should, proceed without
joinder of ESQ-NY. Plaintiffs’ motions should be denied.
ll
EVEN IF THIS COURT RULES THAT 28 UNITED
STATES CODE SECTION 1447(e) APPLIES
TO THIS ACTION, THE COURT SHOULD
DENY PLAINTIFFS’ MOTIONS.
Even if the court concludes that section 1447(e) applies to
the joinder of non-diverse plaintiffs, balancing of the equities
requires that plaintiffs’ motions be denied. The court should
exercise its wide discretion to deny plaintiffs’ motions.
Under the 28 United States Code section 1447(e) analysis,
“(t)he determination of whether a joinder of a non-diverse party
is appropriate requires a balancing of the equities involved.”
(Heininger v. Wecare Distributors, Inc. (S.D. Fla. 1989) 706
F.Supp. 860, 862.) To assist the trial court in its determination of
whether a joinder of a non-diverse party is appropriate, the federal
courts have outlined several factors to consider. The trial court
must consider (1) the extent to which the purpose of the
lla
Appendix B
amendment is to defeat federal jurisdiction, (2) whether plaintiff
has been dilatory in asking for amendment, (3) whether plaintiff
will be significantly injured if amendment is not allowed, and (4)
any other factors bearing on the equities. (See Heininger v. Wecare
Distributors, Inc., supra; Hensgens v. Deere & Company (Sth
Cir. 1987) 833 F.2d 1179.)
A. Plaintiffs’ Proposed Amendment Seeks Only to
Destroy Diversity Jurisdiction.
Plaintiffs’ motivation in filing this motion to amend and
remand is relevant to the court’s analysis.
“(T)he motive of a plaintiff in seeking the joinder of
an additional defendant is relevant to a trial court’s
decision to grant the plaintiff leave to amend his
original complaint. Further, . . . a trial court should
look with particular care at such motive in removal
cases, when the presence of a new defendant will
defeat the court’s diversity jurisdiction and will require
a remand to state court.” (Desert Empire Bank v.
Insurance Company of North America (9th Cir. 1980)
623 F.2d 1371.)
Plaintiffs initiated this lawsuit. They intentionally chose not
to name ESQ-NY as a co-plaintiff even though they were fully
aware of ESQ-NY’s existence and involvement with defendants.
Not to be overlooked are the facts that ESQ-NY, not the plaintiffs,
entered into the agreement with Tandem. ESQ-NY is owned by
2. Although the instant action involves Plaintiffs’ seeking to add a non-
diverse plaintiff to the complaint, not a defendant, the same inquiry into plaintiffs’
motive is applicable.
12a
Appendix B
Kanwaljit Sandhu, Iqbal Sandhu’s brother, yet the plaintiffs have
not sought to add Kanwaljit Sandhu as a plaintiff. Plaintiffs’
coming forward to name ESQ-NY as a co-plaintiff, after the action
has been properly removed from state court, reeks of bad faith
and ulterior motive. Plaintiffs seek only to undermine the integrity
of the federal court and this court should not permit such activity.
B. Plaintiffs Have Unreasonably Delayed in Naming
ESQ-NY as Co-Plaintiff.
As indicated above, plaintiffs should have named ESQ-NY
as a party to this action when they first filed the lawsuit. Had
plaintiffs included ESQ-NY in the state court complaint, diversity
of citizenship would not have existed, and defendants would have
been precluded from removing the action to this court. Plaintiffs’
late decision to include a previously known co-plaintiff has already
resulted in increased litigation costs. In the interests of judicial
economy and fairness, this court should not now sanction
plaintiffs’ belated amendment. Instead, this court should preclude
plaintiffs from amending the complaint at this dilatory stage.
C. Denial of Amendment Will Not Significantly Injure
Plaintiffs.
Plaintiff asserts that unless the court allows the proposed
amendment, “ESQ-NY will face the ongoing threat that defendants
will attempt to assert these claims against it in a separate
proceeding.” (Plaintiffs’ Memorandum of Points and Authorities
in Support of Motion for Leave to Amend and Motion for Remand,
p. 6, Ins. 2-4.) Plaintiffs further assert that since the Birbrower
Law firm makes allegations involving ESQ-NY in its counterclaim,
if proven, these allegations would make ESQ-NY jointly and
severally liable for all claims against plaintiffs. This argument
hardly deserves a response.
- 13a
Appendix B
Defendants have not served ESQ-NY with any action, filed
any action against it, nor do they seek any recovery from it. Passing
references to ESQ-NY does not pose any threat to ESQ-NY,
even if the claims against plaintiffs were proven. The counterclaim
does not change the significance of plaintiffs’ failure to included
ESQ-NY as a co-plaintiff from the outset of this action. This
court’s denial of plaintiffs’ motion to amend and for remand will
not significantly harm plaintiffs. In fact, it will not harm plaintiffs
at all.
CONCLUSION
Plaintiffs seeks to amend their complaint to add ESQ-NY
solely to defeat diversity jurisdiction and te have this court remand
the action to state court. Under rule 19 of the Federal Rules of
oe Civil Procedure, ESQ-NY is not an indispensable party, and this
action should continue without plaintiffs’ proposed amendment.
Even if the court decides that section 1447(e) applies to this joinder
issue, because of plaintiffs’ obvious motive and the lack of harm
that will result if the amendment is denied, the court should use
its discretion to deny plaintiffs motions. Therefore, defendants
respectfully request that this court deny plaintiffs’ motion for
leave to amend and motion for remand.
Dated: March 25, 1994
HOGE, FENDON, JONES & APPEL, INC.
Bys/ William J. Elfving
By s/ David P. Eby
WILLIAM J. ELFVING
Attorneys for Defendants
l4a
APPENDIX C— PETITION FOR WRIT OF MANDATE AND/
OR PROHIBITION WITH SUPPORTING MEMORANDUM
OF POINTS AND AUTHORITIES
REQUEST FOR STAY
IN THE COURT OF APPEAL
OF THE STATE OF CALIFORNIA,
SIXTH APPELLATE DISTRICT
No.
Santa Clara County Superior
Court No. CV737595
BIRBROWER, MONTALBANO, CONDON & FRANK, P.C.,
a New York corporation, and KEVIN F. HOBBS,
Petitioners,
VS.
SUPERIOR COURT OF THE STATE OF CALIFORNIA IN
AND FOR THE COUNTY OF SANTA CLARA,
Respondent,
ESQ BUSINESS SERVICES, INC.,
Real Party in Interest.
15a
Appendix C
PETITION FOR WRIT OF MANDATE
AND/OR PROHIBITION WITH SUPPORTING
MEMORANDUM OF POINTS AND AUTHORITIES
EXHIBITS FILED UNDER SEPARATE COVER
IN THE MANDAMUS PROCEEDING TO VACATE AN ORDER
OF THE SANTA CLARA COUNTY SUPERIOR COURT
HONORABLE JOHN F. HERLIHY, JUDGE
HOGE, FENTON, JONES & APPEL, INC.
BY: WILLIAM J. ELFVING — BAR NO. 38334
DAVID P. EBY — BAR NO. 168093
60 South Market Street
San Jose, California 95113
Attorneys for Petitioners
16a
Appendix C
TABLE OF CONTENTS
Page
PETITION FOR WRIT OF MANDATE AND/OR
PROHIBITION WITH SUPPORTING MEMORANDUM
OF POINTS AND AUTHORITIES
NEED FOR IMMEDIATE APPELLATE REVIEW .... l
Pe SEE PREIS os ve onde Kowemee er bheekaean 6
PETES ks ii edie ne eee ees er4e heehee Mel ad ees 9
WP MAEUEIOT 6a:c:0b ys bnctiaeie ean ee eins beneeea ned 1]
MEMORANDUM OF POINTS AND AUTHORITIES
IN SUPPORT OF PETITION FOR WRIT OF
- MANDATE AND/OR PROHIBITION
BACKGROUND AND STATEMENT OF MATERIAL
PIPES Nice os bVies iv cudb pees ce Cel eeibg shades 13
Boo eb | nn: Pere er eee 15
I. THIS COURT MAY REVIEW AN IMPROPER
ORDER GRANTING MOTION’ FOR
SUMMARY ADJUDICATION ............. 15
II. RESPONDENT COURT ERRED BY
APPLYING THE RULE OF BUSINESS &
PROFESSIONS CODE SECTION 6125 TO
DEERE SAE 6 650 Oe ete Ne deeb Whe eae 16
17a
Appendix C
Page
Ill. EVEN IF BUSINESS AND PROFESSIONS
CODE SECTION 6125 APPLIES HERE,
RESPONDENT COURT ERRED IN DENYING
PETITIONERS’ ATTORNEYS’ FEES FOR
SERVICES RENDERED OUTSIDE OF
CALIFORNIA, AS WELL AS IN CALIFORNIA,
BY HOLDING THAT THE FEE AGREEMENTS
AT ISSUE ARE UNENFORCEABLE
Pt nthee ene + ohE eee ea asad teed da cael f., 20
IV. THE “GENERAL RULE” CITED BY RPI IS
NOT SUPPORTED BY ANY CALIFORNIA
CASE OR STATUTORY LAW ................. 22
SAM RR AMET cd veb Susu Lie a 25
TABLE OF AUTHORITIES
CASES:
Agran v. Shapiro (1954) 127 Cal.App.2d 807 ........ 16, 17
Appell v. Reiner (1964) 43.N.J.313 ................ 25
Bank of America v. Superior Court (1942) 20 Cal.2d 697,
Wee Sup aeet eng Ned Caue erator sy Saeed cus 15
Conway v. The Bughouse, Inc. (1980) 105 Cal.App.3d
WR Kes eaNeuse ner bene is Mee Like Dae 15
Cowen v. Calabrese (1964) 230 Cal. App. 2d 870 .. 18, 19,21
18a
Appendix C
Page
Hardy v. San Fernando Valley Chamber of Commerce
C1950} SP Cal. ADO. 26 S72, S7O so os ee vies is 20, 21, 22
In re Anderson (S.D. Cal. 1987) 79 Bank.Rptr. 482 .... 17
in 0 BECCA CIS SG) SUE GL BF BG ois eis ocak 19
Spanos v. Skouras Theaters Corp. (1966) 364 F.2d 161
Sais chad aks ew Geer Meare hie We COe Aor ek ah Se 8 23, 24
Trani v. R.G. Hohman Enterprises, Inc. (1975) 52
CF ke as ee US wa es cee 15
Vasquez v. Superior Court (1971) 4 Cal.3d 800, 806-807
Pee LARA RA CE RS eA ew EN AWE One eee ek 15
CODES
Business and Professions Code section 6000 ......... 18
Business and Professions Code section 6100 ......... 16
Business and Professions Code section 6125
GeO ay ge Bar Ee PEO Ra Nah eee MA Ea 16, 17, 18, 19, 20
Business and Professions Code section 6126 ......... 16
Code of Civil Procedure section 437c, subdivisions (f)
REE i che ohne a eek bea Cre ee’ UGE 15
19a
Appendix C
Page
TEXTS:
11 American Law Reports, Third Series, sections 907, 908
eS PUN Ee Oe Te Panay bor pipe eae eke ate ook 22, 23
7 California Jurisprudence Third, sections 64, 66, & 67,
“eins at eg Te OPE Pe eLetters 18
20a
Appendix C
TO: THE HONORABLE JUSTICES OF THE COURT OF
APPEAL OF THE STATE OF CALIFORNIA IN AND
FOR THE SIXTH APPELLATE DISTRICT:
NEED FOR IMMEDIATE APPELLATE REVIEW
I
Petitioners Birbrower, Montalbano, Condon & Frank, P.C.,
a New York corporation, Kevin F. Hobbs, and Thomas A.
Condon are defendants and cross-complaintants in the action
entitled ESQ BUSINESS SERVICES, INC., v. BIRBROWER,
MONTALBANO, CONDON & FRANK, P.C., et al., Civil Action
No. CV737595, now pending before the Santa Clara County
Superior Court. Petitioners hereby petition this court for a writ
of mandate directing Respondent Superior Court of the State of
California in and for the County of Santa Clara to: (a) Vacate its
order granting the underlying motion for summary judgment and/
or adjudication brought by the Real Parties in Interest ESQ
Business Services, Inc., and Iqbal Sandhu, and (b) enter a new
order denying that motion.
I]
In 1992 and 1993, Petitioners, New York attorneys, provided
legal services in New York for Real Parties in Interest ESQ
Business Services, Inc., and its president Iqbal Sandhu (“RPI”)
pursuant to a written contingent fee agreement. The underlying
litigation involved a dispute between ESQ Business Services and
Tandem Computers, Inc. over the marketing rights to certain ESQ
computer software. The dispute was to be litigated before the
American Arbitration Association, a private tribunal. After
Petitioners had invested substantial time on the case, the underlying
2la
Appendix C
dispute settled. Under the contingent fee agreement, Petitioners
believe they would be entitled to as much as $10,000,000 for
their legal services. However, Petitioners allege that, after the
underlying case settled, RPI misrepresented to them the true value
of that ESQ-Tandem settlement and coerced Petitioners to accept
a substantially lesser “fixed” sum. In reliance on these
misrepresentations, Petitioners executed a “fixed” fee agreement
with RPI (in lieu of the contingent fee agreement) for the payment
of $1,150,000. To date, RPI has failed to pay anything for the
legal services rendered. Instead, RPI filed a legal malpractice
lawsuit against Petitioners. Petitioners filed a counterclaim for
attorneys’ fees and related claims of fraud and negligent
misrepresentation regarding the fixed fee agreement.
II]
On November 16, 1995, RPI filed a motion for summary
judgment and/or adjudication as to Petitioners’ claim for
attorneys’ fees. The motion argued that, because Petitioners
travelled to California during the ESQ-Tandem litigation on several
occasions to assist RPI, Petitioners engaged in the “unauthorized”
practice of law in California, thus rendering the fee agreements
unenforceable. Respondent Court granted RPI’s motion for
summary adjudication, ruling that the fee agreements at issue were
unenforceable. Respondent Court concluded that, because
Petitioners were not members of the California State Bar,
Petitioners’ limited litigation activity in California constituted the
“unauthorized” practice of law. Respondent Court’s ruling
disposes Petitioners’ claims for fees under the two written
agreements. It also effectively disposes Petitioners’ negligence
and fraud claims, as they were based on the “fixed” fee agreement.
RPI’s malpractice claims remain. Petitioners only real claim
remaining against RPI is its quantum meruit claim.
22a
Appendix C
IV
Respondent court had a clear, present, and mandatory duty
to apply controlling law and, more specifically, to deny RPI’s
motion for summary judgment and/or adjudication. Respondent
Court’s order granting RPI’s motion for summary adjudication
constituted an act in excess of its jurisdiction, an abuse of its
discretion, and a violation of its duty, because: (a) Petitioners did
not engage in the unauthorized practice of law in California; and
(b) even if Petitioners’ conduct constitutes the unauthorized
practice of law, Petitioners are still entitled to fees for services
rendered outside of California under the written fee agreements.
Respondent Court’s order fails to abide by the law as interpreted
by the California Court of Appeal.
Vv
Respondent Court’s order bars a substantial portion of
Petitioner’s case from being heard on the merits, which will cause
severe prejudice to Petitioners when the legal malpractice claims
proceed to trial. As is, the case will proceed to trial on the legal
malpractice claims alone (and Petitioners’ quantum meruit claim).
Respondent Court’s order effectively disposes Petitioners’ claims
of fraud and negligence. These claims allege that RPI
misrepresented the true facts to persuade Petitioners to accept
$1,150,000 in lieu of an amount under the contingent fee
agreement. Respondent Court’s ruling that both fee agreements
are unenforceable renders Petitioners’ negligence and fraud claims
effectively moot. It will be impossible for Petitioners to
demonstrate to the trier of fact that RPI coerced Petitioners into
signing the “fixed” fee agreement, when, by Respondent Court’s
order, that very agreement is unenforceable.
23a
Appendix C
VI
There exists a need for immediate appellate review of
Respondent Court’s order.' Absent review through this Petition,
all parties may suffer harm that cannot be corrected on appeal, in
that they may be required to try this case twice. The close
relationship between Petitioners’ attorneys’ fees claims and RPI’s
legal malpractice claims dictates that all claims be tried together.
Petitioners’ claims for fees under the fee agreements are
inextricably related to RPI’s claims of legal malpractice. RPI has
asserted numerous breaches of fiduciary duty and other acts of
legal malpractice. For example, RPI alleges that Petitioners forced
RPI into unconscionable fee agreements. Petitioners, on the other
hand, allege that RPI voluntarily entered both fee agreements,
and further assert that RPI misrepresented the true value of the
ESQ-Tandem settlement to persuade Petitioners to accept only
$1,150,000. If the legal malpractice claims proceed without
Petitioners breach of fee agreement claims, and Petitioners later
successfully appeal Respondent Court’s order, the entire case
will, in essence, need to be retried to determine the validity of the
fee agreements. Most of the same witnesses will need to be called.
Experts that testified to the attorney standard of care would need
to testify again to determine the propriety of the fee agreements.
Experts testifying to ESQ’s alleged damages would need to be
1. RPI agree that there exists and need for immediate appellate review of
the issues presented by this petition. RPI agree that if the case were to proceed
to tnal only on the remaining malpractice causes of action, and Petitioners later
successfully challenged Respondent Court’s order, all parties herein would be
required to retry portions, if not all, of the case. On January 9, 1996, Petitioners
and RPI jointly requested that Respondent Court vacate the January 16, 1996,
trial date pending resolution of the instant Petition. (Exhibit 9 to Petitioners’
Appendix (“PA”) [PA 281-284].) On January 9, 1996, Respondent Court
ordered the January 16, 1996, trial date be vacated. (Exhibit 10 [PA 285-286].)
24a
Appendix C
re-called to evaluate the value of the ESQ-Tandem settlement,
and thus the fee under the contingent fee agreement. The parties
and percipient witnesses involved, including ESQ and Tandem
accountants and personnel, would also need to be re-called to
determine the circumstances and value of the fee agreements.
Given the potential waste of time, money, and judicial resources
that could be avoided by a writ of mandate, such a writ is an
appropriate remedy.
Vil
By this Petition, Petitioners ask this Court to speak to an
important issue never before directly decided by the California
Court of Appeal: May an out-of-state attorney, not a member of
the California State Bar, collect money pursuant to a valid fee
agreement executed out-of-state, for legal services rendered to a
California client (and to what extent) when (1) the majority of
legal services performed were performed in the attorney’s home
state, (2) the litigation services performed in California did not
involve appearing before a state or federal court, but rather
involved advice given to, and negotiation on behalf of, the client,
and (3) the legal proceeding was before a private arbitration
tribunal.
25a
APPENDIX D — PETITION FOR REVIEW
IN THE SUPREME COURT
OF THE STATE OF CALIFORNIA
ESQ BUSINESS SERVICES, INC., a California corporation;
etal.,
Plaintiffs and Respondents,
vs.
BIRBROWER, MONTALBANO, CONDON & FRANK, P.C.,
a New York corporation; et al.,
Defendants and Appellants.
AND RELATED CROSS-COMPLAINT.
After a Decision by the Court of Appeal
Sixth Appellate District Case No. H014880
Santa Clara County Superior Court,
Case No. CV737595
PETITION FOR REVIEW
WILLIAM J. ELFVING — BAR NO. 38334
DAVID B. EBY — BAR NO. 168093
HOGE, FENTON, JONES & APPEL, INC.
Sixty South Market Street
San Jose, California 95113-2396
(408) 287-9501
26a
Appendix D
ROGER C. PETERS, ESQ. — BAR NO. 39321
HALLEY, CORNEL & LYNCH
101 California Street, Suite 2300
San Francisco, California 94111
(415) 954-1540
Attorneys for Defendant/Appellant
BIRBROWER, MONTALBANO, CONDON &
FRANK, P.C., a New York Corporation
TABLE OF CONTENTS
Page
PETITION FOR REVIEW .........20eceeeeeeeces l
ISSUES FOR REVIEW .... 2... eee eee cc cc cece enes 1
EINTRODUCTIORSG go akc 5 5 eRe ae Rees es 2
FACTUAL AND PROCEDURAL BACKGROUND ... 4
REVIEW SHOULD BE GRANTED UNDER RULE 29
BECAUSE THIS PETITION RAISES IMPORTANT
QUESTIONS OF LAW WHICH THIS COURT HAS
YET TO ADRESS i ovo caw sence ais cence es 6
CONCLUSION | <ccc 06 5 00ers hg Fe tes bse 10
TABLE OF AUTHORITIES
CODES:
Business and Professions Code section6100......... 6
27a
Appendix D
Business and Professions Code section 6125
California Rules of Court, Rule 29
California Rules of Court, Rule 29(a)
TEXTS:
11 American Law Reports, Third Series, 907
11 American Law Reports, Third Series, section 3[a], page
PETITION FOR REVIEW
TO: THE CHIEF JUSTICE AND THE ASSOCIATE JUSTICES
OF THE SUPREME COURT OF CALIFORNIA.
ISSUES FOR REVIEW
1. DOES AN OUT OF STATE ATTORNEY’S LIMITED NON-
COURTROOM LEGAL WORK PERFORMED IN
CALIFORNIA CONSTITUTE THE “UNAUTHORIZED
PRACTICE OF LAW,” UNDER BUSINESS AND
PROFESSIONS CODE SECTION 6125?
2. IS AN OUT OF STATE ATTORNEY BARRED FROM
ENFORCING AN OTHERWISE VALID FEE AGREMENT
WITH A CLIENT WHEN THE LEGAL SERVICES INCLUDE
LIMITED WORK PERFORMED IN CALIFORNIA?
28a
APPENDIX E — PETITIONERS’ OPENING BRIEF
IN THE SUPREME COURT
OF THE STATE OF CALIFORNIA
NO. S057125
Santa County Superior Court
Action No. CV737595
Sixth Appellate District Case
No. H014880
BIRBROWER, MONTALBANO, CONDON & FRANK, P.C.,
a New York corporation, and KEVIN F. HOBBS,
Petitioners,
VS.
SANTA CLARA COUNTY SUPERIOR COURT,
Respondent.
ESQ BUSINESS SERVICES, INCORPORATED, et al.,
Real Parties in Interest.
PETITIONERS’ OPENING BRIEF
HOGE, FENTON, JONES & APPEL, INC.
BY: WILLIAM J. ELFVING — BAR NO. 38334
DAVID P. EBY — BAR NO. 168093
60 South Market Street, #1400
San Jose, California 95113
(408) 287-9501
IT.
III.
29a
Appendix E
Attorneys for Petitioners
BIRBROWER, MONTALBANO, CONDON &
FRANK, and KEVIN F. HOBBS
ISSUES FOR REVIEW
PETITIONERS’ ISSUES ON APPEAL
DOES AN OUT-OF STATE ATTORNEY’S LIMITED
NON-COURTROOM LEGAL WORK PERFORMED IN
CALIFORNIA CONSTITUTE THE “UNAUTHORIZED
PRACTICE OF LAW” UNDER BUSINESS AND
PROFESSIONS CODE SECTION 6125?
IS AN OUT-OF-STATE ATTORNEY BARRED FROM
ENFORCING AN OTHERWISE VALID FEE
AGREEMENT WITH A CLIENT WHEN THE LEGAL
SERVICES INCLUDE LIMITED WORK PERFORMED
IN CALIFORNIA?
ADDITIONAL ISSUES ON APPEAL
WHERE AN OUT-OF-STATE ATTORNEY SEEKS TO
REPRESENT A CALIFORNIA CLIENT IN AN
ADVERSARY PROCEEDING AGAINST ANOTHER
CALIFORNIA PARTY IN A CALIFORNIA FORUM,
MUST THE ATTORNEY COMPLY WITH CALIFORNIA
RULES OF PROFESSIONAL CONDUCT, RULE 3-300,
RELATING TO OBTAINING AN INTEREST IN THE
CLIENT’S PROPERTY?
WHERE AN OUT-OF-STATE ATTORNEY SEEKS TO
REPRESENT A CALIFORNIA CLIENT IN AN
ADVERSARY PROCEEDING AGAINST ANOTHER
30a
Appendix E
CALIFORNIA PARTY IN A CALIFORNIA FORUM,
FOR A CONTINGENCY FEE, MUST THE ATTORNEY’S
FEE AGREEMENT COMPLY WITH CALIFORNIA
BUSINESS & PROFESSIONS CODE SECTION 6147,
WHICH GOVERNS CONTINGENCY FEES?
TABLE OF CONTENTS
Page
ENTREE IRIN ccc cian gis vay sNews eekeneeel l
BACKGROUND AND STATEMENT OF MATERIAL
PACTS on 553d bas Oye k hake ee Lar eae 3
PETITIONERS’ ISSUES ON APPEAL ............. 6
I. DOES AN OUT-OF-STATE ATTORNEY’S
LIMITED NON-COURTROOM LEGAL WORK
PERFORMED IN CALIFORNIA CONSTITUTE
THE “UNAUTHORIZED PRACTICE OF LAW”
UNDER BUSINESS AND PROFESSIONS
CODE SECT GLZe! 5.0 dows Gees eeankn 6
A. California Courts Have Never Applied Business
And Professions Code Section 6125
To Out-of -State Attommeys .......csececeecs 6
B. The Purpose Of Business And Professions Code
Section 6125 Is Not Furthered By Its
Application To Out-of-State Attorneys ......... 8
Cc.
II.
III.
31a
Appendix E
Even If Business And Professions Code Section
6125 Applies To The Conduct Of Out-Of-State
Attorneys, This Court Must Recognize An
Exception To The Unauthorized Practice Of Law
Under the Circumstances Of This Case
RR Sa re ee SC a eae a ee eae de ah ab ek ls ede
1. Numerous Exceptions Have Been
Recognized By Courts Throughout The
Country, Including California ........
2. California Should Recognize An
Arbitration Exception To The
Unauthorized Practice Of Law .......
IS AN OUT-OF-STATE ATTORNEY BARRED
FROM ENFORCING AN OTHERWISE VALID
FEE AGREEMENT WITH A CLIENT WHEN
THE LEGAL SERVICES INCLUDE LIMITED
WORK PERFORMED IN CALIFORNIA? ....
ADDITIONAL ISSUESON APPEAL ..............
WHERE AN OUT-OF-STATE ATTORNEY
SEEKS TO REPRESENT A CALIFORNIA
CLIENT IN AN ADVERSARY PROCEEDING
AGAINST ANOTHER CALIFORNIA PARTY
IN A CALIFORNIA FORUM, MUST THE
ATTORNEY COMPLY WITH CALIFORNIA
RULES OF PROFESSIONAL CONDUCT,
RULE 3-300, RELATING TO OBTAINING AN
INTEREST IN THE CLIENT’S PROPERTY?
Pe Se Pe ee See oS SOS OCS BO 2 4 2S 6 ob ee eee oe
14
14
18
24
27
32a
Appendix E
IV. WHERE AN OUT-OF-STATE ATTORNEY
SEEKS TO REPRESENT A CALIFORNIA
CLIENT IN AN ADVERSARY PROCEEDING
AGAINST ANOTHER CALIFORNIA PARTY
IN A CALIFORNIA FORUM, FOR A
CONTINGENCY FEE, MUST THE
ATTORNEY’S FEE AGREEMENT COMPLY
WITH CALIFORNIA BUSINESS &
PROFESSIONS CODE SECTION 6147,
WHICH GOVERNS CONTINGENCY FEES?
7 we 62H. SS O'S 2S So 22'S 6.6 2D Fo S88. 2-559 6.4 2.8 Ss 2 ee oS
COMPILATION OF HARD-TO-FIND AUTHORITIES
IN SUPPORT OF PETITIONERS’ OPENING BRIEF
So O99 286 2 £28. © 9.6 RD-6 2:6 FF 0. 0S FSO. SEU BO 2:8 2S Ee we S
31
33a
APPENDIX F — EXCERPTS FROM SOFT WARE
MARKETING AND SUPPORT AGREEMEN T
DATED AUGUST 31, 1993
SOFTWARE MARKETING AND
SUPPORT AGREEMENT
DATED AUGUST 31, 1993
By and Between
TANDEM COMPUTERS INCORPORATED
and
ESQ BUSINESS SERVICES
SOFTWARE MARKETING AND
SUPPORT AGREEMENT
THIS SOFTWARE MARKETING AND SUPPORT
AGREEMENT (the “Agreement”) is made and entered into this
31st day of August, 1993 by and between Tandem Computers
Incorporated, a Delaware corporation (“Tandem”) with its
principal place of business at 19333 Vallco Parkway, Cupertino,
California U.SA. 95014 and ESQ Business Services Incorporated,
a California corporation (“ESQ”) with its principal place of
business at 5300 Stevens Creek B1, San Jose, California 95129.
RECITALS
WHEREAS, Tandem and ESQ entered into that “Software
Development and Marketing Agreement” dated March 16, 1990
with respect to the development, enhancement, marketing and
support of certain ESQ computer software, generally known as
Programmatic Network Administrator and generally described on
Exhibit A hereto (the “Original PNA Agreement”);
34a
Appendix F
WHEREAS, Tandem and ESQ have certain disputes
regarding their respective rights and obligations under the Original
PNA Agreement and have commenced an arbitration action with
respect thereto;
WHEREAS, Tandem and ESQ desire to settle and resolve
their disputes under the Original PNA Agreement and cause said
arbitration to be withdrawn and dismissed, and as part of that
settlement to terminate the Original PNA Agreement and supersede
the same by this Agreement, all on the terms and conditions set
forth herein.
Now, Therefore, the parties hereto agree as follows:
l Definitions.
1.1 “Derivative Work” means a work which is based upon
one or more pre-existing works, such as a revision, modification,
collection, compilation or any other form in which such pre-
existing works may be recast, transformed or adapted, and which,
in the absence of this Agreement or other authorization by the
owner of the pre-existing work, would constitute a copyright
infringement or other infringement of proprietary rights of the
owner therein.
from that transaction shall be the lesser of (i) the portion of the
revenues from the Bundled Product transaction equitably
attributable to the Software included therein (which shall be
determined on a pro rata basis, based on the then current
“unbundled” stand-alone list price for the items sold or licensed
together as the Bundled Product) and (ii) the then “unbundled”
stand-alone list price for said Software.
35a
Appendix F
1.17 “Transferred Customers means Tandem Customers
transferred from Tandem to ESQ pursuant to Section 3.3.
1.18 “Execution Date” means the date first set forth above
(being the date both parties executed this Agreement).
1.19 “Effective Date” means April 1, 1993 (being the date
of this Agreement takes retroactive effect).
2 ORIGINAL PNA AGREEMENT.
2.1 Termination. Subject to Section 4.1.1, the parties
hereby novate, terminate and supersede the Original PNA
Agreement, with retroactive effect as of the Effective Date. This
Agreement shall be effective as of the Effective Date; from and
after the Effective Date, the license agreements under which
Existing Tandem PNA licensees are licensed to use the Software
shall be treated and deemed as if granted under and pursuant to
this Agreement.
2.2 Dismissal of Pending Arbitration. All arbitration
proceedings between Tandem and ESQ pending or contemplated
as of the Execution Date and/or relating to the Original PNA
Agreement are and shall be terminated and dismissed with
prejudice (but without prejudice to ESQ’s right to bring an
arbitration proceeding relating to royalties payable hereunder or
under the Original PNA Agreement if such royalties are not paid
in accordance therewith. Each party shall, within five business
days after the Execution Date, execute and file as required any
and all papers and instruments necessary to implement and to
give full effect to this Section 2.2. Each party acknowledges and
agrees that this provision is a material part of the consideration
for the other party to execute this Agreement and that the other
36a
Appendix F
party would suffer material and irreparable injury (for which money
damages would be insufficient) if this provision were breached.
Accordingly, each party acknowledges and agrees that the other
party shall be entitled to injunctive and other equitable relief to
enforce this Section 2.2.
2.3 Waiver and General Release. Subject to Section 4.1.1:
2.3.1 Each party hereby acknowledges and agrees,
subject to the provisions of Sections 4.1 and 4.3 of this
Agreement, that the other party has either fully performed all of
its agreements and obligations under the Original PNA Agreement
and is not in breach or default thereunder and that to the extent
any such breach or default exists or may exist, the same is hereby
waived.
y oe Each party intends that Section 2.3 be a full and
general release, subject to the provisions of Sections 4.1 and 4.3
of this Agreement, -of any and all losses, claims, demands,
liabilities, actions, causes of action (including all rights to
arbitration), counterclaims and damages, whether at law, equity,
or in administrative or arbitration proceedings, whether at common
law (regardless of theory) or pursuant to any statute, rule,
ordinance or regulation, whether vested or contingent, whether
known or unknown, whether liquidated or unliquidated, whether
matured or unmatured, whether disputed or undisputed
(collectively, “Claims”) which such party ever had, now has or
which may have or with respect to, resulting from, relating to or
under the Original PNA Agreement.
2.3.3 Each party expressly understands and
acknowledges that it is possible that unknown Claims may exist,
or that known Claims may be understated, and explicitly took
37a
Appendix F
that into account in determining to give this release. Consequently,
each party expressly waives, and waives all rights under, California
Civil Code section 1542, which provides:
“A general release does not extend to claims which
the creditor does not know or suspect to exist in his
favor at the time of executing the release, which if
known by him must have materially affected his
settlement with the debtor.”
s/ [illegible] s/ [illegible] (Initials)
3 LICENSE GRANTS.
3.1 By ESQ. ESQ shall deliver copies (in object code
form) of the Software and their updates to Tandem, in order to
implement the licenses granted by this Section, from time to time
as requested by the Tandem Relationship Manager. ESQ grants
Tandem the following licenses:
- * x
38a
APPENDIX G — CALIFORNIA LEGISLATURE
ASSEMBLY BILL NO. 2086, AMENDED APRIL 22, 1998
AMENDED IN ASSEMBLY APRIL 22, 1998
CALIFORNIA LEGISLATURE —
1997-98 REGULAR SESSION
ASSEMBLY BILL No. 2086
Introduced by Assembly Member Keeley
February 18, 1998
An act to add-Section 4284-5 to amend Section 1282.4 of
the Code of Civil Procedure, relating to arbitration.
LEGISLATIVE COUNSEL’S DIGEST
AB 2086, as amended, Keeley. Arbitration:-awards-attorneys.
Existing law requires any person rendering legal services
in this state to be admitted to the State Bar of California.
Existing law provides that a party to an arbitration has the
right to be represented by an attorney.
This bill would permit persons admitted to the bar of any
state to represent a party in an arbitration proceeding in this
state, or to render legal services in this state in connection with
an arbitration proceeding in another state.
39a
Appendix G
Vote: majority. Appropriation: no. Fiscal committee: no. State-
mandated local program: no.
The people of the State of California do enact as follows:
SECTION 1. Section 1282.4 of the Code of Civil Procedure
is amended to read:
1282.4 (a) A party to the arbitration has the right to be
represented by an attorney at any proceeding or hearing in
arbitration under this title. A waiver of this right may be revoked;
but if a party revokes such waiver, the other party is entitled to a
reasonable continuance for the purpose of procuring an attorney.
(b) Notwithstanding any other provisions of law, including
Section 6125 of the Business and Professions Code, an attorney
admitted to the bar of any state may represent the parties in the
course of, or in connection with, an arbitration proceeding in
this state, or in connection with rendering legal services in this
state in connection with an arbitration proceeding in another
State.
40a
Appendix G
This is a copy of a public record, reproduced as it was published. It is not legal advice, and it may not be the version a court would rely on. Check the official source before you cite it.