United States: New Illinois Rules Regulate In-House Counsel

In an important development for companies with in-house counsel in Illinois, the state’s Supreme Court has adopted new rules regulating the practice of law by in-house counsel who are not members of the Illinois bar. Effective July 1, 2004, the new rules apply to lawyers who are "employed in Illinois" as in-house counsel for a single business (or a group of related businesses) and are not members of the Illinois bar. The rules are contained in revisions to Supreme Court Rule 706 and in new Supreme Court Rule 716 and impose obligations on both covered lawyers and their employers.

Lawyers subject to the new rules are required to obtain a limited license to practice law from the Illinois Supreme Court, pay an annual registration fee and submit to the disciplinary authority of the Illinois Attorney Registration & Disciplinary Commission (www.iardc.org). Licensed in-house counsel are essentially restricted from providing legal services relating to the business and affairs of their employer. The limited license does not, by itself, authorize lawyers to appear as counsel in any Illinois court or administrative tribunal; admission pro hac vice in accordance with the rules of the tribunal or body is still necessary.

Employers of in-house counsel subject to the new rules are required to submit a certification in connection with each lawyer’s application for the limited license. The certification must affirm, among other things, that the applicant works exclusively for the employer providing legal services on its behalf, and the employer will promptly notify the clerk of the Illinois Supreme Court if the applicant’s employment is terminated. An employer may withdraw a certification at any time without cause being stated. If a covered in-house counsel moves from one in-house position in Illinois to another with no more than 120 days separating the two employments, his or her limited license will remain in effect if, among other things, the original employer provides a certification stating that the lawyer’s employment was not terminated based upon the lawyer’s character and fitness or failure to comply with this rule.

When is an in-house counsel not admitted to practice in Illinois considered to be "employed in Illinois" and, therefore, subject to the new rules? Certainly any in-house counsel whose primary office is in Illinois must register pursuant to these rules if they are not already a member of the Illinois bar. It may also be advisable for all Illinois-based employees who are lawyers to register, even if their responsibilities do not primarily involve the practice of law, if any aspect of their responsibilities involves providing legal services. Similarly, any in-house counsel who maintains an office in Illinois on a regular basis should probably be licensed, even if their primary office is in a state where they are licensed to practice law.

Most in-house counsel subject to the new rules should find it relatively easy to obtain a limited license. That may not be true, however, for lawyers with a disciplinary history. They will probably have to file a motion with the Supreme Court requesting special permission to be licensed, since the new rules require a certificate from each jurisdiction in which the lawyer is admitted establishing, among other things, that the lawyer has never been suspended, disbarred or disciplined. Such lawyers, but probably few others, can expect to undergo screening by the Committee on Character and Fitness.

Failure to obtain the requisite limited license could theoretically subject covered lawyers to liability for engaging in the unauthorized practice of law in Illinois. Lawyers responsible for supervising such in-house counsel may run afoul of their own ethical responsibility to avoid assisting the unauthorized practice of law. There is also some risk that practice in Illinois by in-house counsel who fails to obtain a limited license could vitiate the attorney-client privilege otherwise applicable to communications with that lawyer.

Lawyers not licensed in Illinois who are employed as in-house counsel in the state on July 1, 2004, have one year from that date in which to apply for a limited license. Lawyers not licensed in Illinois who are newly employed as in-house counsel in the state after July 1, 2004, have 180 days from when their employment commences in which to apply for a limited license.

The new Illinois rules relate to one aspect of the broader subject of multijurisdictional practice. Spurred by the Report of the ABA Commission on Multijurisdictional Practice, states across the nation can be expected to liberalize the ability of lawyers admitted in other jurisdictions to practice in their states under specified circumstances. As with registration of in-house counsel, the quid pro quo for that right will sometimes entail formal registration, payment of specified fees and express submission to the state’s attorney disciplinary rules.