Federal district judge dismisses lawsuit alleging that the North Carolina’s regulation of UPL is unconstitutional

Hello everyone and welcome to this Ethics Alert which will discuss the recent opinion of a federal district judge in North Carolina dismissing a non-profit corporation’s claims that the state’s UPL statute is unconstitutional.  The case is: Capital Associated Industries Inc. v. Josh Stein et al., Case No. 1:15-cv-00083 (U.S. District Court, Middle District of North Carolina).  The September 19, 2017 order and opinion is here: http://www.abajournal.com/images/main_images/NCBar.pdf

A corporation called Capital Associated Industries Inc. (CAI) filed the lawsuit after the North Carolina State Bar issued a proposed ethics opinion which found that CAI’s plan to provide legal services would constitute unlawful UPL.

According to the order and opinion of U.S. District Judge Loretta Biggs, CAI is a non-profit (and non-legal) corporation which provides human resources services to members, who pay annual dues. The corporation proposed to provide employment-related legal advice through its own lawyers as part of its membership services. It also proposed charging a separate fee of $195.00 an hour for other legal services, including drafting employment agreements and potential representation before the Equal Employment Opportunity Commission.

CAI argued that North Carolina’s UPL Statutes, as applied to them, “violate CAI’s right to substantive due process because the statutes are not rationally related to any legitimate governmental interest.  The State Bar responds that the NC UPL Statutes “are rationally related to North Carolina’s interest in avoiding potential ‘conflicts of interest and loyalty,’ as well as its interest in avoiding the ‘impairment of attorney independence.’”

The order and opinion held that the statute was sufficiently related to the government’s interest in avoiding potential conflicts of interest and loyalty, and in avoiding the impairment of attorney independence.  “North Carolina could rationally decide that nonlawyers would be more likely than lawyers to encourage the attorneys whom they supervise to violate the ethical canons that govern the legal profession.”

CAI also argued that the UPL Statutes “violate the freedom of speech guaranteed by the First Amendment, as applied to its proposed provision of legal services.  Specifically, CAI argues that the UPL Statutes restrict CAI’s speech on the basis of its content; that the UPL Statutes prohibit CAI from speaking on the basis of its corporate identity; and that this restriction on its speech cannot survive strict scrutiny.  The State Bar argues that the UPL Statutes operate as permissible regulation of a profession and not a restriction on speech that is entitled to First Amendment protection.”

The order and opinion stated that the UPL statute is not subject to strict First Amendment scrutiny since CAI’s proposed communications with members on employee legal questions are professional speech.  “The Fourth Circuit has held that under the professional speech doctrine, ‘a state’s regulation of a profession raises no First Amendment problem where it amounts to ‘generally applicable licensing provisions’ affecting those who practice the profession.’”  Pursuant to same, CAI “has no First Amendment right to advertise legal services since its right to provide such services is unlawful under the (UPL) statutes.”   According to media reports, CAI’s attorney has stated that the organization will appeal to the Fourth Circuit Court of Appeals.

Bottom line:  This opinion appears to strengthen the regulation of UPL by state Bars such as the North Carolina Bar.  The opinion also analyzes the constitutional scrutiny that applies in cases involving the regulation of professional speech “where it amounts to ‘generally applicable licensing provisions’ affecting those who practice the profession.”

Disclaimer:  this e-mail is not an advertisement, does not contain any legal advice, and does not create an attorney/client relationship and the comments herein should not be relied upon by anyone who reads it.

Joseph A. Corsmeier, Esquire

Law Office of Joseph A. Corsmeier, P.A.

29605 U.S. Highway 19 N. Suite 150

Clearwater, Florida 33761

Office (727) 799-1688

Fax     (727) 799-1670



Joseph Corsmeier


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Filed under joe corsmeier, Joseph Corsmeier, U.S. Constitution and UPL regulation- professional speech and application of UPL rules, Unauthorized practice of law, Unlicensed practice of law, UPL and professional speech, UPL North Carolina federal judge opinion on regulation of UPL

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