New Technology, Old Rules? Upsolve and the Fight Over "Legaltech" and Unauthorized Practice of Law
Articles are provided regularly by LACBA’s longstanding Professional Responsibility and Ethics Committee.
By William Simonsick1
The integration of law and technology has never been seamless, and the collision between electronic self-help resources and state unauthorized practice of law (UPL) statutes has been demonstrative of the uncertainty that new technologies face when intersecting with old rules. California and 9th Circuit case precedent has consistently ruled that electronic legal advice applications violate UPL. However, the Southern District of New York recently in Upsolve, found that the Free Speech Clause of the First Amendment can limit the application of UPL to the dissemination of legal assistance software toolkits.2 Notwithstanding the greater argument regarding the roles of attorneys and non-attorneys in addressing the access to justice crisis and the push for a civil Gideon3 the outcome of the recent Upsolve decision is notable for ethics practitioners and legaltech entrepreneurs alike. What it means for Californian practitioners remains unclear until the 9th Circuit or higher court revisits the issue, but we can expect this to remain a dynamic area of law that requires the utmost caution until such case precedents are reconciled.
California Unauthorized Practice of Law
Attorneys in California are regulated by both the Rules of Professional Conduct as well as the Business and Professions Code, the latter containing the State Bar Act and the rule against the UPL.4 This prohibits a “person advertising or holding himself or herself out as practicing or entitled to practice law or otherwise practicing law who is not an active licensee of the State Bar, or otherwise authorized…”, with misdemeanor penalties for those who violate the section.5 This is subject to limited exceptions for document preparing assistants and “self-help service[s]”6 Attorneys have ethical duties to refrain from aiding others to violate UPL.7 There are very limited exceptions to UPL, such as debt collecting if the non-attorney “merely undertakes to collect” the debt and doesn’t litigate or perform legal activities, assuming a licensed attorney supervises any legal activities, such as paralegals preparing documents.8 There may also be a limited exception for out-of-state firms to write legal documents for a California attorney if they sign and adopt the work as their own.9
However, transactional work completed out-of-state without Californian counsel generally, such as in Birbrower, constitutes UPL, regardless of physical presence10 There are limited exceptions for UPL for international arbitrations using California as a situs11 and some estate planning legal services, albeit for non-residents using attorneys in their jurisdiction but with probate administration in California, may be permitted.12 California Rules of Professional of Conduct (CRPC) Rule 5.5, mirroring the ABA Model Rules of Professional Conduct, potentially shields some remote work,13 but would not apply for matters with some nexus to legal practice in California. Merely clerical work, such as assisting with standard forms, is usually not UPL,14 and ghostwriting may not be UPL if there are no court appearances, signed court documents, or contact with the other side, and there is local counsel.15 Limited-scope representation and ghostwriting by attorneys in civil matters is generally permitted as long as the client is properly advised on the limitations of the attorney’s representation and informs clients of relevant collateral legal issues, while complying with other attorney duties such as competence.16
While multi-jurisdictional practice was the UPL issue of contemporaneity at the end of the twentieth century, internet and online legal information and advice applications are currently testing UPL jurisprudence. Bankruptcy preparation has already run afoul of UPL laws in Californian federal courts.17 Previous case precedent finds that the mere “determin[ation] for a party [of] the kind of legal document necessary” can be UPL,18 as well as “[i]nterpreting legal terms”,19 Previous 9th circuit precedent on online bankruptcy preparation assistance in particular held that it ran afoul of UPL, but involved for-profit software that went “beyond providing clerical services”.20 Interestingly, these cases post-date the self-help statute and appear to abrogate this unless interpreted as a non-profit exception. One of the primary limitations to the application of UPL laws is the First Amendment, as the provision of speech is usually protected. UPL essentially operates as an exception to the First Amendment, under the rationale that the regulation of the quality of legal representation is sufficiently within the state interest, with for-profit legal information and advice applications also subject to the greater limitations of commercial speech analysis.21
Upsolve
Upsolve v. James is a 2022 case from the Southern District of New York highlighting the federal First Amendment limits of UPL.22 Upsolve is a non-profit non-law firm organization that created free-to-use software based on DocAssemble to assist non-lawyer volunteers helping pro se litigants facing debt collection lawsuits and bankruptcy.23 Upsolve, concerned about the potential imposition of UPL by the New York State Attorney General, sought a preliminary injunction preventing this from occurring.24 While the court did not believe that their right to associate argument was likely to succeed on the merits, the court did find that there was sufficient merit to their argument that the UPL in this instance infringed on the Free Speech Clause to grant a preliminary injunction, enough to prevail for mandatory or prohibitory injunction standards.25 Finding that the legal advice was content-based speech, the court decided that as the non-lawyer volunteers are “limited to out-of-court verbal advice” as opposed to the transactional work that usually is presented in UPL suits, and that the Supreme Court case NIFLA “applied intermediate scrutiny to professional conduct regulations” at minimum, the correct analysis was strict scrutiny.26 While states have a “well-established interest in regulating attorney conduct…”, a “blanket ban” like New York’s UPL rules failed strict scrutiny as there are other options for regulations, as well as concurrent tort liability.27 Therefore, the preliminary injunction was granted.28
Impact of Recent Jurisprudence on California Attorneys
So does Upsolve result in a complete upheaval of UPL jurisprudence with its particular application of the First Amendment? For now, no, and currently the precedent of the 9th circuit is in conflict with Upsolve. That being said, there are certain peculiarities of the Upsolve case that may eventually signal a liberalization of UPL rules in regards to certain legal information and advice applications. For one, the legal information versus advice distinction that has generally guided self-help applications and services didn’t matter in the outcome of Upsolve – it was ‘legal advice’ that was protected, which has historically been considered UPL. It also signifies the possibility that legal advice is subject to intermediate to strict scrutiny in some situations under federal court adjudication, making it harder to apply UPL laws. However, keep in mind that commercial speech does not carry the same level of federal protection as other First Amendment speech does; while a move towards Upsolve-type jurisprudence may legalize non-profit and court-administrative self-help center activities beyond clerical form-assistance, it cannot be said that such a move would automatically legalize for-profit services such as LegalZoom. Such a distinction between for- and non-profit legal advice applications could reconcile Upsolve with Central District and 9th Circuit precedent, but remains to be seen when such cases inevitably reach California.
In the interim, the California State Legislature moved in the opposite direction, enacting AB2958 to put an end to the working group considering paraprofessional licensing. Furthermore, BPC 6400 et. seq. is scheduled to sunset next January, despite being used as an example of alternatives to blanket bans for non-lawyers, unless AB 690 (2023) is enacted.29 If federal jurisprudence collides with Californian legislative prerogative, it is unclear if this will lead to a judicially-created rule legalizing these activities.
Conclusion
With Upsolve, some federal courts have demonstrated a narrow First Amendment right to sharing legal advice electronically. At the moment, the impact appears limited to non-profit organizations in states that have UPL rules with no exception for document preparers or paralegals, but does indicate a potential shift in jurisprudence that may result in a judicially-led push towards liberalization of UPL for low-income legal advice. It is likely that we have not seen the last federal court case regarding the intersection of the First Amendment and UPL rules, and it remains to be seen where federal circuits (and higher) will draw the line between UPL and permissible legal advice by non-lawyers.
1 Author: William Simonsick, JD, LLM. The views of this article are solely the author’s and in no way reflect the views or opinions of any firm the author has or continues to work for.
2 Upsolve v. James, 604 F.Supp.3d 97 (S.D.N.Y. 2022)
3 See Gideon v. Wainwright, 372 U.S. 335 (1963)
4 Cal. Bus. & Prof. Code, §§ 6126-6127.
5 Cal. Bus. & Prof. Code, § 6126.
6 Cal. Bus. & Prof. Code, §§ 6400-6401.7. By the terms of 6401.7, this statute will be repealed as of next year, removing liability shielding for some self-help activities unless a pending Assembly Bill, AB 690, is enacted.
7 Rules of Professional Conduct, RPC 1-300. Attorneys are otherwise prohibited in assisting others in violating RPC or State Bar Act rules through RPC 1-120. LACBA PREC Opinion 522 (2009).
8 LACBA PREC Opinion 522 (2009).
9 LACBA PREC Opinion 518 (2006).
10 J. Balderson, Birbrower Montalbano, Condon & Frank P.C. v. Superior Court: A Defensible Outcome, but a Striking Example of the Need to Reform Unauthorized Practice of Law Provisions, 37 San Diego L. Rev. 871 (1999); P. Stewart, C. DiLeo, W. Peterson, Are You Engaging in the Unauthorized Practice of Law in Other States, 53 Orange County Lawyer (2011); Birbrower, Montalbano, Condon & Frank v. Superior Court, 17 Cal.4th 199 (1998)
11 J. Balderson, Birbrower Montalbano, Condon & Frank P.C. v. Superior Court: A Defensible Outcome, but a Striking Example of the Need to Reform Unauthorized Practice of Law Provisions, 37 San Diego L. Rev. 871 (1999); P. Stewart, C. DiLeo, W. Peterson, Are You Engaging in the Unauthorized Practice of Law in Other States, 53 Orange County Lawyer (2011); Birbrower, Montalbano, Condon & Frank v. Superior Court, 17 Cal.4th 199 (1998)
12 D. Kolkey, How to Enact an International Arbitration Statute, 28 Sw. J. Int’l L. 46 (2023).
P. Walsh, Multijurisdictional Practice of Law Issues in Estate Planning, 40 Est. Plan. 23 (2013) at 27, 28.
13 H. Udenka, Remote Work and the Unauthorized Practice of Law in California, 63 Orange County Lawyer (2021) at 48.
14 M. Munro, Deregulation of the Practice of Law: Placenta or Placebo, 42 Hastings L.J. 203 (1990) at 213. Changing these rules has been discussed periodically by the California Bar since 1988. Id at 219. However, there has not been any major statutory shift in this period, and the passage of AB 2958 in 2022 ended the most recent ‘regulatory sandbox’.
15 See Winterrowd v. American General Annuity Ins., 556 F.3d 815 (9th Cir. 2009); Orange County Bar Association Formal Opinion 2014-1; I. Smith, I Ain’t Afraid of No Ghost!: A Review of OCBA Formal Opinion 2014-1 on Ghostwriting by Contract Lawyers and Out-of-State Lawyers; 56 Orange County Lawyer (2014).
16 LACBA PREC Opinion 502 (1999).
17 See In re Bernales, 345 B.R. 206 (Bankr.C.D.Cal.2006); In re Pillot, 286 (Bankr.C.D.Cal.2002); In re Reynoso, 477 F.3d 1117 (9th Cir. 2007).
18 In re Powell, 266 B.R. 450, 452 (Bankr.N.D.Cal.2001).
19 In re Bernales, 345 B.R. 206 (Bankr.C.D.Cal.2006), citing Taub v. Weber, 366 F.3d 966 (9th Cir.2004).
20 In re Reynoso, 477 F.3d 1117, 1121, 1125 (9th Cir. 2007).
21 For historical discussions of the intersection of First Amendment arguments and UPL, see generally C. Lanctot, Scriverners in Cyberspace: Online Document Preparation and the Unauthorized Practice of Law, 30 Hofstra Law Review 3 (2002); C. Lanctot, Does LegalZoom Have First Amendment Rights? Some Thoughts About Freedom of Speech and the Unauthorized Practice of Law, 20 Temp. Pol. & Civ. Rts. L. Rev. 255 (2011).
22 Upsolve v. James, 604 F.Supp.3d 97 (S.D.N.Y. 2022); A. Godreau-Aubert, Lawyering in Times of Peril: Legal Empowerment and the Relevance of the Legal Profession, 97 N.Y.U. L. Rev. 1599 (2022) at 1627.
23 Upsolve at 103; Q. Steenhuis, D. Colarusso, Digital Curb Cuts: Towards an Inclusive Open Forms Ecosystem, 54 Akron L. Rev. 773 (2020) at 787.
24 Upsolve at 103.
25 Upsolve at 109, 110.
26 Upsolve at 112-118.
27 Upsolve at 117, 118, 119, 120. The court specifically cited non-lawyer assistance in California (BPC 6400 et. seq.) as an example of other ways to regulate non-lawyers.
28 Upsolve at 121. While the opinion was largely viewed through the lens of indigent legal services, it was not made a definitive factor so it is unclear exactly how much the indigent focus of Upsolve’s software can be relied on as a potential element of any UPL exception. Id.
29 California State Assembly Bill 690 (Chen) (2023)
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