Wall Street just developed a headache the size of Florida. Basically, any firm that uses out-of-state lawyers (from the home office, for example) to represent the firm in Florida-based cases will now have to use Florida-licensed lawyers.
That’s because the Florida Supreme Court decided on Feb. 20 that a lawyer, Albert Rapoport, who lives in Florida but is not licensed to practice law in the state, is not allowed to give advice on or handle securities arbitration cases. The ruling, by extension, bars all counsel not licensed in Florida from such cases.
This poses a big problem for Wall Street firms, which often send out-of-state lawyers to respond to arbitration claims and to handle related legal matters. Under the Feb. 20 ruling, these lawyers would have to be licensed in Florida in order to participate in these cases.
The effect of the ruling is already being felt. Lawrence Klayman, a Boca Raton-based attorney, says a major case he was bringing against a Wall Street firm is being held up as lawyers for the firm ask for a postponement. (He declined to name the firm.)
“The wirehouses are scrambling right now,” says Klayman. “Even inside counsel are concerned that if they file a pleading, that it’s going to be a bar violation. And if it’s a violation in Florida, it becomes a violation in New York.”
According to Lori Holcomb, the Florida Bar’s in-house expert on unlicensed practice of law, the Feb. 20 decision is based on a 1997 opinion stating that out-of-state attorneys cannot act as lawyers in securities arbitration cases in Florida. The opinion included a response from the Counsel for Investment Arbitration Consultants stating that because arbitrators themselves do not have to be attorneys, the cases should not be considered a “practice of law.”
The Florida bar pursued Rapoport in Jan. 2001, after he’d advertised his services in the Fort Lauderdale Sun-Sentinel. Rapoport’s lawyer, Ainslee Ferdie of Coral Gables, is arguing that the Federal Arbitration Act preempts state laws.
Ferdie says lawyers from other states have been in touch with him on the matter. They are concerned about having to postpone hearings because of the state’s ruling. “I’ve gotten calls from three states with problems on pre-set arbitrations,” he said.
The NASD put a notice out on its Web site of the ruling, but NASD officials did not have any immediate comment.
An SIA spokeswoman, however, said association is looking at the decision with its member firms for further clarification. “We feel in-house counsel should have a chance to participate without having to register with that state’s bar,” the spokeswoman said.