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Esports Law: Multi-Jurisdictional and Online Transactional Practice, and the Unauthorized Practice of Law

April 23, 2018

This article will be my first on this website that is directed specifically at legal practitioners.  I welcome all my readers to take a look if they're interested in some of the issues that lawyers need to take under consideration when practicing in the esports industry, but the language will be significantly more dense than my usual prose.

 Photo originally found here. 

 

Every American lawyer received the same advice while in law school--don't attempt to help anyone, even a close friend or a family member, with any legal problem while in law school, even if you're positive you know the right answer, even if the problem can be solved without filing anything with a court or even talking to any adverse parties.  Why?  Because to give this advice is de facto unauthorized practice of law ("UPL").  This is not rocket science; if an individual is not a lawyer, they can't practice law.

 

What every lawyer also knows is that lawyers can only practice law in a state in which they are an active member of that state's bar, meaning, licensed by the respective state.  This generally involves taking that state's bar exam, or gaining admission through a reciprocity (comity) agreement with a state in which they are already licensed.   Every lawyer knows that this means even if they are licensed in North Carolina, they cannot file a document with a court in New York, unless they are also a member of the New York Bar.  This would be UPL, and that lawyer would be subject to sanctions.

 

The there are a few basic rationales for not allowing attorneys to practice across state lines (not every state/person agrees with every rationale): 

 

  • Lawyers that passed a state's bar exam are more likely to have a firm understanding of the laws of that state

  • Licensure gives the state bar the ability to discipline misbehaving attorneys

  • Protection of its citizens through a pre-licensure background and review process

  • Protection of the business interests of lawyers already a member of that state's bar by limiting the number of lawyers allowed to practice in the state (this is by far the most controversial rationale, and state's will never outright admit that this is part of their justification against UPL of outside counsel)

 

Where things begin to enter the gray area is in the transactional field of law practice.  Sometimes there's no issue--a North Carolina corporation contacts a North Carolina attorney to draft a contract to be performed in North Carolina and governed by North Law.  There's no question that this permissible under the Rules.  

 

However, what is permissible when the variables are tweaked?  What if a N.C. corporation hires an N.C. lawyer to draft a contract that will be entirely performed in Florida?  Or the contract will be preformed in N.C., but the parties desire the contract to be governed by the laws of New York?  

 

Or even more problematic, what about when an individual living in California wants to hire a North Carolina lawyer to review and negotiation a contract being offered by a Nevada corporation, with a choice of law provision for New York?  The different permutations are endless.

 

This last example is a common scenario in the esports industry, and a problem that will need to be considered and addressed by the esports legal community as a whole.  Esports is a global phenomenon.  People from all over the world are associated with various organizations and teams--in fact, I'd hazard a guess that the majority of endemic esports teams have international and multi-state contractual and employment responsibilities.  The problem is that, even though esports as a whole is a global industry, it is still so niche that it would be impossible to expect there to be qualified and interested attorneys in every jurisdiction to handle legal matters involving those teams.  This is still a major issue in traditional sports law--one that they are still dealing with to this day (along with issues with lawyer-agents vs. nonlawyer-agents, but that is a discussion for another day).  

 

It would be crazy to think that just because another attorney is licensed in New Jersey, that this attorney would be more qualified to handle an esports contractual negotiation than someone who is located in New York or California who specialize in handling esports matters.  There is also a large public incentive to allow the public free-choice in selecting their legal representation.  This creates a situation where an attorney who practices primarily in esports law needs to practice in multiple jurisdictions, those he/she is licensed in and also where he/she is not) in order to be effective (I will define this type of practice as "multi-jurisdictional practice," per the title of this article).  

 

The various rationales and rules for and against allowing multi-jurisdictional practice for transactional work create an inherent tension in a lawyer's ability to represent esports clients without running afoul of UPL statutes.  The penalty for UPL can range from a private slap on the wrist to the suspension of the attorney's bar license, depending on both the jurisdiction and the perceived severity of the UPL violation.  

 

Many jurisdictions in the United States have differing rules on what constitutes the unauthorized practice of law (this is no surprise, given the vast variation in statutes and common law throughout the country).  I will be using the American Bar Association's (ABA) model rules for the purpose of this article, since it is the most common scheme, but keep in mind the necessity of checking your jurisdiction's rules for UPL before engaging in any conduct that might potentially be multi-jurisdictional practice.

 

 

ABA Model Rules of Professional Conduct 5.5

 

ABA RPC Rule 5.5 Unauthorized Practice of Law; Multijurisdictional Practice of Law states:

 

(a) A lawyer shall not practice law in a jurisdiction in violation of the regulation of the legal profession in that jurisdiction, or assist another in doing so.

 

(b) A lawyer who is not admitted to practice in this jurisdiction shall not:

 

(1) except as authorized by these Rules or other law, establish an office or other systematic and continuous presence in this jurisdiction for the practice of law; or

(2) hold out to the public or otherwise represent that the lawyer is admitted to practice law in this jurisdiction.

 

(c) A lawyer admitted in another United States jurisdiction, and not disbarred or suspended from practice in any jurisdiction, may provide legal services on a temporary basis in this jurisdiction that:

 

(1) are undertaken in association with a lawyer who is admitted to practice in this jurisdiction and who actively participates in the matter;

(2) are in or reasonably related to a pending or potential proceeding before a tribunal in this or another jurisdiction, if the lawyer, or a person the lawyer is assisting, is authorized by law or order to appear in such proceeding or reasonably expects to be so authorized;

(3) are in or reasonably related to a pending or potential arbitration, mediation, or other alternative resolution proceeding in this or another jurisdiction, if the services arise out of or are reasonably related to the lawyer's practice in a jurisdiction in which the lawyer is admitted to practice and are not services for which the forum requires pro hac vice admission; or

(4) are not within paragraphs (c) (2) or (c)(3) and arise out of or are reasonably related to the lawyer's practice in a jurisdiction in which the lawyer is admitted to practice.

 

(d) A lawyer admitted in another United States jurisdiction or in a foreign jurisdiction, and not disbarred or suspended from practice in any jurisdiction or the equivalent thereof, or a person otherwise lawfully practicing as an in-house counsel under the laws of a foreign jurisdiction, may provide legal services through an office or other systematic and continuous presence in this jurisdiction that:

 

(1) are provided to the lawyer's employer or its organizational affiliates, are not services for which the forum requires pro hac vice admission; and when performed by a foreign lawyer and requires advice on the law of this or another U.S. jurisdiction or of the United States, such advice shall be based upon the advice of a lawyer who is duly licensed and authorized by the jurisdiction to provide such advice; or

(2) are services that the lawyer is authorized by federal or other law or rule to provide in this jurisdiction.

 

(e) For purposes of paragraph (d):

 

(1) the foreign lawyer must be a member in good standing of a recognized legal profession in a foreign jurisdiction, the members of which are admitted to practice as lawyers or counselors at law or the equivalent, and subject to effective regulation and discipline by a duly constituted professional body or a public authority; or,

(2) the person otherwise lawfully practicing as an in-house counsel under the laws of a foreign jurisdiction must be authorized to practice under this rule by, in the exercise of its discretion, [the highest court of this jurisdiction].

 

Again, the ABA model rule's are not copied verbatim by every jurisdiction.  You can find which states follow this rule, as of 2016, here.  UPL rules are generally enforced by the "offended" jurisdiction, (that being the jurisdiction in which the lawyer is "practicing" without a license)  which necessitates an esports lawyer wishing to help an out-of-state client with legal service to look at the visiting jurisdiction's UPL rule, not the home-state's UPL rule. See ABA RPC 5.5(a).  Of course, if the outside jurisdiction rules that the visiting lawyer violated the UPL rule, it will report this result to the jurisdictions in which the lawyer is licensed, which could result in discipline in jurisdictions in which the lawyer is properly licensed to practice law. 

 

With all that in mind, let's break down the ABA rule and see what guidance it gives to a promising esports multi-jurisdictional transactional lawyers looking to make their mark on the industry.

No Physical or Systematic Presence  

 

ABA RPC 5.5(b) establishes the baseline for conduct that constitutes UPL for a lawyer who is licensed in another jurisdiction:

 

(b) A lawyer who is not admitted to practice in this jurisdiction shall not:

 

(1) except as authorized by these Rules or other law, establish an office or other systematic and continuous presence in this jurisdiction for the practice of law; or

(2) hold out to the public or otherwise represent that the lawyer is admitted to practice law in this jurisdiction.

 

The first half of (b)(1) is pretty self-explanatory--if you don't have a bar license in Florida, you're not allowed to have a brick and mortar physical location in Florida.  Even states that do not follow the ABA model rule appear to maintain this "no physical location" requirement.  See California Rules of the Court 9.48(d)(2)("an attorney must not . . .establish or maintain a resident office or other systematic or continuous presence in California for the practice of law.") 

 

It's the second part that is ambiguous beyond the point of frustrating.  What exactly is a "systematic and continuous presence?"  Anyone who remembers personal jurisdiction case law from Civil Procedure class in law school can compare this standard to the "Minimum Contacts Test" from International Shoe.  

 

As with the minimum contacts test, it appears the only way to find the outer outline of what constitutes "systematic and continuous" is to engage in legal practice activities in the jurisdiction and see if you get disciplined, possibly disciplined badly enough to lose your law license in your home jurisdiction.  This is not a workable approach for most lawyers.  Worse yet, each state is free to reach a different outer limit on what constitutes "systematic and continuous," and is not bound by the same language in another jurisdiction (since each state's bar is the ultimate authority on its licensing and professional conduct standards).  

 

The ABA's "guidance" on what could constitute systematic and continuous can be found in Comment [4] to Rule 5.5:

 

Presence may be systematic and continuous even if the lawyer is not physically present here. Such a lawyer must not hold out to the public or otherwise represent that the lawyer is admitted to practice law in this jurisdiction. 

 

The ABA does appear to be aware that this lack of guidance is a problem.  ABA's 2012 Ethics Report states that "[g]lobalization continues to transform the legal marketplace, with more clients confronting legal problems that cross jurisdictional lines, more lawyers needing to respond to those client needs by crossing borders (including virtually) and relocation to new jurisdictions."

 

The ABA sadly passes the buck on the issue by concluding: "[c]ourts, lawyers, clients and the public need enhanced guidance to address these issues."  

 

The ABA's last statement on the issue in 2013 was "the Commission, after consideration deliberations, concluded that all these issues may be best addressed in the future as the nature of virtual law practice becomes clearer and as relevant technology continues to evolve."  

 

Thanks, ABA.  

 

Examples of Application of the "Systematic and Continuous Test"

 

The following is a list of some courts that substantially address this standard (even if the exact systematic and continuous language isn't used).  This list is not conclusive--I recommend that any esports lawyer does his own research on the issue for a new jurisdiction before accepting any work that touches in that jurisdiction.  

 

A lawyer was found to have committed UPL in Ohio when she provided legal advice, drafted a motion for a party to sign pro se, sent communications demanding discovery, and made legal arguments in two ongoing domestic-relation cases.  Disciplinary Counsel v. Bukstein, 139 Ohio St.3d 230 (2014).  The board alleged that engaging in these two cases was evidence of "systematic and continuing occurrences," but the court was not convinced, and reduced the civil penalty from $20,000 to $10,000. Id.

 

The Supreme Court of Indiana reversed a finding from the its Disciplinary Commission that an Ohio attorney committed UPL when the attorney provided post-conviction legal services to an Indiana inmate without having a license to practice law in Indiana.  State ex rel. Indiana Supreme Court Disciplinary Com'n v. Farmer, 978 N.E.2d 409 (2012).  The Disciplinary Commission contended that the three year period of advice was evidence of "systematic and continuing occurrences."  Id. at 414.  The Supreme Court disagreed, and even noted that the Indiana legislature "stated that application of [Rule 5.5's] standards 'leaves room for individual opinion and judicial interpretation'." Id.  The Court held that evidence of occasional visits over three years for a single client was not enough to be systematic and continuing.  Id.

 

The Supreme Court of Delaware upheld a one year suspension of a New Jersey attorney for UPL in Delaware.  In re Nadel, 82 A.3d 716 (2013).  The evidence showed that the attorney "met with more than seventy-five Delaware residents who were involved in auto accidents.  These accidents occurred in Delaware and involved Delaware insurance policies governed by Delaware law."  Id. at 718-19.  The New Jersey attorney attempted to settle the cases pre-suit, and if he was unsuccessful he would turn the case over to attorneys licensed in Delaware.  Id.  The lawyer met with some of his clients in Delaware, and his Delaware case load accounted for ten to fifteen percent of his overall legal practice.  Id.  The court agreed that this evidence was enough to prove by the clear and convincing evidentiary standard that the attorney had a systematic and continuing practice in Delaware, and therefore sanctions were appropriate.  Id. 

The above cases are just a taste of the precedent available on the subject, and underscores the variation in disciplinary standards in various jurisdictions.  Offering legal advice on any legal matter where the parties and choice of law are jurisdictions were the attorney does not hold a law license is a risky proposition. 

 

 

Obviously, the corollary is that conduct that is not systematic and continuous is instead "legal services on a temporary basis," bringing the lawyer into the Rule 5.5(c) exceptions to the general prohibition against practicing in a foreign jurisdiction established in 5.5(b).  Most, if not all, esports lawyers would fall under the Rule 5.5(c)(4) exception for a specialized practice area, so long as their volume of practice remains low enough to avoid being classified as systematic and continuous.  

Conclusion
 

This multi-jurisdictional issue particularly problematic in the esports industry, given how few experienced lawyers there are that handle esports transactional law.  I cannot offer a solution at this point, other than to consider admission in state's where a sizable proportion of your transactional work originates.  At this point, California (which actually has a more relaxed standard for UPL, and is therefore outside the scope of this article) and New York are the biggest scenes for esports, and will likely remain that way for the foreseeable future.  Any aspiring esports lawyers should consider admission into at least one of those two bars.  

 

If any of my readers have anything to add to this discussion I'd be more than happy to speak with you.  You can reach my via email (found at the bottom of the website) or on Twitter

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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