Arbitration Just Got More Expensive for Arkansas Companies: Self-Representation Disallowed by Ark. Supreme Court
The Supreme Court of Arkansas has joined Florida, Ohio, and Arizona (at least) in holding that a non-lawyer is guilty of the “unauthorized practice of law” if he or she attempts to represent a corporation in arbitration proceedings. Nisha v. Tribuilt Constr. Group, __ S.W.3d __, 2012 1034641 (Ark. Mar. 29, 2012).
Nisha involved a general contractor who claimed the owner owed it over $666,000 for completing construction of a hotel. A year after the trial court compelled arbitration, the contractor’s counsel withdrew, and the contractor’s President sought to represent the company in the arbitration. The owner objected and moved to enjoin the President from representing the contractor in arbitration, arguing that to do so constitutes the unauthorized practice of law. The trial court found that the arbitrators, not the court, should decide whether the contractor could proceed without a lawyer, but certified the issue for immediate appeal.
The Supreme Court of Arkansas seemed offended that the trial court punted this issue to the arbitrators. Just as the New York federal court noted in disqualifying lawyers from an arbitration, the courts have “exclusive authority to regulate the practice of law.” After firmly claiming jurisdiction over the issue, Arkansas’s high court held that companies must be represented by lawyers, both in court and in arbitration. The court cited two bases for its conclusion — first, Arkansas’s long-standing rule that corporations cannot engage in the practice of law through their officers, and second, “arbitration proceedings bear significant indicia of legal proceedings” and party representatives will make arguments, present evidence, and cross-examine witnesses. Those two factors won the day, despite the court’s concern that arbitration is supposed to be cheaper than litigating in court.
Legitimate concern about the “unauthorized practice of law” comes up regularly in arbitration. Not only for companies that may want to represent themselves, like the general contractor in Nisha, but also for out-of-state lawyers whose clients are contractually bound to arbitrate in another state (must I get admitted pro hac vice before the courts of Hawaii to represent a client at a hearing in Hawaii? It might be worth it…). Rule 5.5 of the ABA Model Rules of Professional Conduct (and its comments), and the relevant state’s equivalent rule, are the place to start for attorneys who are analyzing that issue. Some mediators and arbitrators are also concerned that their work may be considered the “practice of law” and therefore need to be sanctioned by each state court where they offer dispute resolution services. On top of these issues of how each state defines the practice of law, courts will likely have to consider the interplay of the FAA, and whether it preempts any state rules governing parties’ representation and choice of neutrals in arbitration. For now, though, this area is in flux and parties must be cautious when analyzing their compliance with state rules governing the unauthorized practice of law.