Capital Associated Industries v. Josh Stein
922 F.3d 198 (2019)
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Rule of Law:
State laws that prohibit corporations from practicing law do not violate the First Amendment rights of free association or free speech when the corporation seeks to provide legal services for commercial ends, as such laws are a constitutional regulation of professional conduct that only incidentally burdens speech.
Facts:
- Capital Associated Industries, Inc. (CAI) is a non-profit trade association representing approximately 1,100 employers in North Carolina.
- As part of its '2X' development plan to double membership and revenue, CAI desired to offer legal services to its members, including drafting legal documents and advising on employment law.
- CAI's plan involved offering some legal services as part of its membership fees, while charging hourly rates for other services.
- CAI's HR experts, who staff a popular member call center, are prohibited from giving legal advice, even if they are licensed attorneys.
- After unsuccessful lobbying efforts in 2011 and 2013 to amend the state's UPL statutes, the North Carolina State Bar issued a proposed ethics opinion stating that CAI's plan would violate those statutes.
- Under CAI's proposed structure for a legal department, its non-lawyer directors and president would set attorney salaries and the department's budget.
- Evidence showed that CAI's members were generally able to obtain legal counsel from private attorneys when needed.
Procedural Posture:
- Capital Associated Industries, Inc. (CAI) filed suit against the North Carolina attorney general and various district attorneys in the U.S. District Court for the Middle District of North Carolina.
- CAI sought declaratory and injunctive relief to prevent the enforcement of the state's unauthorized practice of law (UPL) statutes against it.
- The district court permitted the North Carolina State Bar to intervene as a defendant.
- The district court denied CAI's motion for a preliminary injunction.
- Following discovery, the parties filed cross-motions for summary judgment.
- The district court granted summary judgment for the defendants, rejecting all of CAI's constitutional claims.
- CAI, as the appellant, appealed the district court's grant of summary judgment to the U.S. Court of Appeals for the Fourth Circuit.
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Issue:
Do North Carolina's unauthorized practice of law (UPL) statutes, which prohibit corporations from providing legal services, violate a trade association's First Amendment rights of free association and free speech when applied to prevent it from offering legal services to its members for commercial purposes?
Opinions:
Majority - Diaz, Circuit Judge
No, North Carolina's UPL statutes do not violate CAI's First Amendment rights of free association or free speech. The statutes are a valid regulation of the legal profession. The First Amendment protection for associational rights established in NAACP v. Button does not extend to an organization's commercial activities, but rather protects collective activity undertaken to achieve political goals and ensure meaningful access to the courts. CAI's plan to offer legal services is for commercial ends—to increase revenue and membership—and its members already have access to legal services. Furthermore, the statutes are a regulation of professional conduct that only incidentally impacts speech. Such regulations are subject to intermediate scrutiny, which the UPL statutes survive because they are sufficiently drawn to serve the state's substantial interest in protecting the public, ensuring high ethical standards, and maintaining the professional independence of lawyers.
Analysis:
This decision reinforces the state's broad authority to regulate the legal profession against First Amendment challenges from corporate entities. It solidifies the distinction between protected expressive association for political ends, as in NAACP v. Button, and unprotected commercial activity, thereby limiting the expansion of constitutional protections to for-profit or commercially motivated corporate legal services. The court's application of intermediate scrutiny to a professional conduct regulation post-NIFLA provides a clear framework for upholding traditional unauthorized practice of law (UPL) statutes, signaling that such regulations remain on firm constitutional ground and will likely withstand similar challenges aimed at opening the legal market to non-lawyer ownership.
