Capital Associated Industries v. Josh Stein

PUBLISHED
UNITED STATES COURT OF APPEALS
FOR THE FOURTH CIRCUIT
No. 17-2218
CAPITAL ASSOCIATED INDUSTRIES, INCORPORATED,
Plaintiff − Appellant,
v.
JOSH STEIN, in his official capacity as Attorney General of the State of North
Carolina; NANCY LORRIN FREEMAN, In her official capacity as District
Attorney for the 10th Prosecutorial District of the State of North Carolina; J.
DOUGLAS HENDERSON, In his official capacity as District Attorney for the
18th Prosecutorial District of the State of North Carolina,
Defendants – Appellees,
and
NORTH CAROLINA STATE BAR,
Intervenor/Defendant – Appellee.
Appeal from the United States District Court for the Middle District of North Carolina, at
Greensboro. Loretta C. Biggs, District Judge. (1:15-cv-00083-LCB-JLW)
Argued: December 13, 2018 Decided: April 19, 2019
Before GREGORY, Chief Judge, DIAZ, Circuit Judge, and DUNCAN, Senior Circuit
Judge.
Affirmed by published opinion. Judge Diaz wrote the opinion, in which Chief Judge
Gregory and Senior Judge Duncan joined.
ARGUED: Reid Lloyd Phillips, BROOKS, PIERCE, MCLENDON, HUMPHREY, &
LEONARD, L.L.P., Greensboro, North Carolina, for Appellant. Alan William Duncan,
MULLINS DUNCAN HARRELL & RUSSELL PLLC, Greensboro, North Carolina, for
Appellees. ON BRIEF: Jennifer K. Van Zant, Charles E. Coble, Craig D. Schauer,
BROOKS, PIERCE, MCLENDON, HUMPHREY & LEONARD, L.L.P., Greensboro,
North Carolina, for Appellant. Stephen M. Russell, Jr., MULLINS DUNCAN
HARRELL & RUSSELL PLLC, Greensboro, North Carolina, for Appellee North
Carolina State Bar. Joshua H. Stein, Attorney General, Matthew W. Sawchak, Solicitor
General, NORTH CAROLINA DEPARTMENT OF JUSTICE, Raleigh, North Carolina,
for Appellees Joshua H. Stein, Nancy Lorrin Freeman, and J. Douglas Henderson.
2
DIAZ, Circuit Judge:
Capital Associated Industries, Inc. (“CAI”) is a trade association representing
North Carolina employers. As part of a plan to expand its membership, CAI wants to
provide legal services to its members. But it cannot because state law forbids
corporations from practicing law. Following unsuccessful lobbying efforts to change the
law, CAI sued state prosecutors to enjoin the enforcement of state unauthorized practice
of law (“UPL”) statutes against it. After the North Carolina State Bar intervened to
defend the statutes, the defendants obtained summary judgment. On appeal, CAI
contends that North Carolina’s UPL statutes violate its constitutional rights to free
association, free speech, and commercial speech; lack a rational basis; are void for
vagueness; and violate the state constitution. For the reasons that follow, we affirm.
I.
A.
Since 1931, the State of North Carolina has forbidden corporations from practicing
law. N.C. Gen Stat. § 84-5(a). 1 To address the unauthorized practice of law, the State
Bar and state prosecutors may sue for an injunction, and prosecutors may bring
misdemeanor charges. Id. §§ 84-37, 84-7, 84-8(a). The UPL statutes do, however, allow
1
North Carolina is not alone in doing so. Almost all other states have similar laws
on the books. J.A. 754. One state allows unincorporated nonprofit “association[s]” to
practice law. 42 Pa. Cons. Stat. § 2524(b)(1). And CAI points to trade associations
practicing law in a few other states. J.A. 181, 197, 213. But at least one of those states
bans corporations from practicing law. See 705 Ill. Comp. Stat. 220/1.
3
the practice of law by lawyer-owned professional corporations, public interest law firms,
and in-house counsel representing their employers. Id. §§ 55B-8, 84-5.1.
CAI is a North Carolina nonprofit corporation that claims a tax exemption under
26 U.S.C. § 501(c)(6) as a trade association of employers. It has about 1,100 North
Carolina employers as members and describes its mission as fostering successful
employment relationships. CAI charges its members an annual fee adjusted for each
member’s size. It competes with for-profit businesses in providing some services, such
as recruiting, background checks, consulting, training, conferences, and affirmative
action planning.
One of the most popular services it provides its members is a call center, where
members can speak to CAI’s staff of human resources experts. The experts can advise on
HR issues. But they can’t give legal advice, even if they are licensed attorneys. So,
when legal issues arise, CAI’s HR experts have to steer the conversation elsewhere, end
the conversation, or refer the member to outside counsel.
While it disclaims any interest in representing its members in court, CAI would
like to help them draft legal documents (such as contracts or employee handbooks) and
answer questions about employment and labor law. If it could practice law, CAI would
offer most legal services without charge as part of its membership fees, but it would
charge hourly fees for certain services.
CAI has spent years trying to change the UPL statutes as part of its “2X”
development plan to double its membership and reach. In 2011, CAI’s lobbyists
persuaded state lawmakers to introduce bills that would have allowed corporations to
4
practice law. CAI tried and failed to get the State Bar to support the bills. The State Bar
instead actively opposed the bills, and they were not enacted. CAI’s lobbying efforts met
a similar fate in 2013. That same year, the State Bar adopted a proposed ethics opinion
advising that CAI would violate the UPL statutes if it employed lawyers to give its
members legal advice.
B.
After two failed bids to achieve its goals through legislation, CAI turned to the
courts. It challenged the UPL statutes in federal district court, naming as defendants the
attorney general of North Carolina and certain district attorneys. The complaint sought
declaratory and injunctive relief that would prevent enforcement of North Carolina’s
UPL laws against it. It pleaded five claims under 42 U.S.C. § 1983 (concerning due
process, free association, free speech, vagueness, and commercial speech) and one claim
under the state constitution.
The district court allowed the State Bar to intervene as a defendant. It then denied
CAI’s motion for a preliminary injunction and the defendants’ motions to dismiss and for
judgment on the pleadings. Capital Associated Indus., Inc. v. Cooper, 129 F. Supp. 3d
281 (M.D.N.C. 2015); Capital Associated Indus., Inc. v. Cooper, No. 1:15CV83, 2016
WL 6775484 (M.D.N.C. June 23, 2016). After discovery, the parties cross-moved for
summary judgment.
Before the district court, State Bar representatives expressed concerns about
nonlawyers controlling litigation and receiving attorney fees, confidentiality, excessive
fees, and the State Bar’s inability to discipline corporations. Regarding CAI, they
5
worried about conflicts of interest due to its large base of members and the fact that its
directors and officers don’t have to be lawyers and thus wouldn’t have obligations under
the State Bar’s Rules of Professional Conduct.
To assuage these concerns, CAI filed declarations from three trade organizations
practicing law in other states, and it outlined a plan to comply with ethics rules. CAI’s
lawyers would control legal services, make decisions about conflicts of interest, and have
sole access to privileged communications. But CAI’s directors and president would set
the attorneys’ salaries and the legal department’s budget. And CAI declined to offer
assurances that it would require its directors and officers to be attorneys.
Some of CAI’s members testified that allowing CAI to practice law would mean
that they could obtain more efficient and cost-effective legal representation. But almost
all those members said they had received legal advice from private attorneys. Just one
member said it had gone without counsel in low-risk situations, but even it found counsel
for more serious matters. And according to CAI’s President and CEO, no member has
left CAI because it doesn’t offer legal services.
Addressing the cross-motions for summary judgment, the district court first held
that CAI had standing because it faced “a credible threat of prosecution” if it practiced
law. Capital Associated Indus., Inc. v. Stein (CAI), 283 F. Supp. 3d 374, 380 (M.D.N.C.
6
2017). 2 The district court then turned to the merits and rejected all six of CAI’s claims,
entering summary judgment for the defendants. Id. at 383–92.
This appeal followed.
II.
We review the district court’s grant of summary judgment de novo. Dreher v.
Experian Info. Sols., Inc., 856 F.3d 337, 343 (4th Cir. 2017). “[W]e apply the same legal
standards as the district court, and view all facts in the light most favorable to the
nonmoving party.” Id. (quoting Roland v. U.S. Citizenship & Immigration Servs., 850
F.3d 625, 628 (4th Cir. 2017)).
CAI framed all six of its claims as as-applied challenges, which test the
constitutionality of a statute applied to the plaintiff based on the record. Educ. Media Co.
at Va. Tech, Inc. v. Insley, 731 F.3d 291, 298 n.5 (4th Cir. 2013). Thus, CAI was not
required to prove that the UPL statutes are invalid in all circumstances. Id.
III.
2
While the parties’ briefs don’t address standing, this court must assure itself of
its jurisdiction. See Steel Co. v. Citizens for a Better Env’t, 523 U.S. 83, 94 (1998). We
agree with the district court that CAI faces a credible threat of prosecution. See
MedImmune, Inc. v. Genentech, Inc., 549 U.S. 118, 128–29 (2007); N.C. Right to Life,
Inc. v. Bartlett, 168 F.3d 705, 710–11 (4th Cir. 1999). That injury is traceable to state
prosecutors, and enjoining enforcement of the statutes would provide CAI relief. CAI,
283 F. Supp. 3d at 380–81.
7
We begin with CAI’s claim that the UPL statutes violate its freedom of
association. CAI contends that it is an expressive association seeking to improve
employment relationships in North Carolina and foster compliance with the law. 3 By
forbidding it from practicing law, CAI argues, the UPL statutes restrict its ability to carry
out that expressive mission. We agree with the district court, however, that the UPL
statutes do not unconstitutionally restrict CAI’s associational rights.
To support its argument, CAI relies on a line of cases beginning with NAACP v.
Button, 371 U.S. 415 (1963). In Button, the Supreme Court held that a Virginia law
forbidding organizations from retaining attorneys to represent third parties infringed on
the right of the NAACP and its members “to associate for the purpose of assisting
persons who seek legal redress for infringements” of their civil and constitutional rights.
Id. at 428.
The Court emphasized that for the NAACP, litigation is “not a technique of
resolving private differences; it is a means for achieving the lawful objectives of equality
of treatment.” Id. at 429. To win civil rights, the Court said, litigation may be the “sole
practicable avenue” and the “most effective form of political association.” Id. at 430–31.
3
The Supreme Court has recognized the right to associate “for the purpose of
engaging in those activities protected by the First Amendment,” which it termed
“expressive association.” Roberts v. U.S. Jaycees, 468 U.S. 609, 618 (1984). The
defendants contend that CAI forfeited review of whether the UPL statutes infringed on its
rights as an expressive association. Appellees’ Br. at 34–36. CAI did largely omit the
term “expressive association” below. But its arguments fall within expressive association
jurisprudence and the district court ruled on the issue, so it is preserved for review. See
Volvo Constr. Equip. N. Am., Inc. v. CLM Equip. Co., 386 F.3d 581, 604 (4th Cir. 2004).
8
Thus, what was at stake was “secur[ing] constitutionally guaranteed civil rights,” not
commercial ends. Id. at 442–43. And as the Court took time to emphasize, the law as
applied against the NAACP did not implicate “professionally reprehensible conflicts of
interest.” Id. at 443.
The Supreme Court has applied Button in two contexts. The first, involves public
interest organizations like the NAACP. See In re Primus, 436 U.S. 412 (1978). In
Primus, the Court held that South Carolina couldn’t forbid the ACLU from advising
people of their legal rights and informing them that the ACLU could represent them for
free. Id. at 431–32. The Court compared the ACLU’s role to that of the NAACP in
Button and contrasted it with “a group that exists for the primary purpose of financial
gain.” Id. at 427–31. It cast doubt on whether an organization operating for financial
gain would receive the same protection as organizations that promote the common
political aims of their members. Id. at 429–30, 437–38, 438 n.32.
The second context involves labor unions. See Bhd. of R.R. Trainmen v. Va. ex
rel. Va. State Bar, 377 U.S. 1 (1964). The Trainmen Court held that Virginia couldn’t
bar a union from recommending lawyers to its members for workers’ compensation suits.
Id. at 7–8. The Virginia law, the Court said, infringed on “the right of individuals and the
public to be fairly represented in lawsuits authorized by Congress to effectuate a basic
public interest” without adequate justification. Id.
The Court has extended Trainmen twice. First, it held that Illinois couldn’t
prevent a union from employing attorneys to represent its members in workers’
compensation claims. United Mine Workers v. Ill. State Bar Ass’n, 389 U.S. 217, 223–25
9
(1967). While the Court considered that law unjustified, it emphasized that the state did
possess an “interest in high standards of legal ethics.” Id. at 224–25. Second, the Court
held that Michigan couldn’t bar a union from recommending to its members certain
attorneys who had agreed to a maximum fee. United Transp. Union v. State Bar of
Mich., 401 U.S. 576, 585–86 (1971). “At issue,” the Court said, “is the basic right to
group legal action” and the right to “meaningful access to the courts,” which required
enabling union members to “meet the costs of legal representation.” Id.
The “common thread running through” these cases is that “collective activity
undertaken to obtain meaningful access to the courts is a fundamental right.” United
Transp. Union, 401 U.S. at 585–86; see also Lawline v. Am. Bar Ass’n, 956 F.2d 1378,
1387 (7th Cir. 1992) (United Mine Workers “supports the proposition that laypersons
have a right to obtain meaningful access to the courts, and to enter into associations with
lawyers to effectuate that end.”). Critically, however, the cases distinguish between the
commercial practice of law and “associating for non-commercial purposes to advocate
the enforcement of legal and constitutional rights.” In re N.H. Disabilities Rights Ctr.,
Inc., 541 A.2d 208, 213 (N.H. 1988) (Souter, J.).
The Supreme Court emphasized this distinction in Ohralik v. Ohio State Bar
Ass’n, the same day it decided Primus. 436 U.S. 447 (1978). In Ohralik, the Court
rejected a challenge to an Ohio law forbidding in-person solicitation of clients.
Solicitation of clients for commercial purposes, the Court held, did not implicate
“political expression or an exercise of associational freedom” or “mutual assistance in
asserting legal rights.” Id. at 458.
10
As applied to CAI, North Carolina’s UPL laws are closer to the statute in Ohralik
than the statutes in the Button cases. While this case is admittedly close, several
considerations distinguish CAI’s proposed practice from the Button line of cases. First,
what CAI seeks to accomplish would be for commercial ends and would address only
private concerns. Second, it would not facilitate access to the courts. And third, it would
pose ethical concerns not present in the Button cases.
When organizations like the NAACP and the ACLU solicit clients and retain
lawyers to represent them, they express their commitment to expanding and guarding
civil rights. See Button, 371 U.S. at 430–31; Primus, 436 U.S. at 428–30. CAI, in
contrast, wants to help its members “resolv[e] private differences” by drafting legal
documents and advising employers on labor and employment issues. Button, 371 U.S. at
429. Its goal, as set forth in its 2X plan, is to increase revenues and recruit new members
who will pay dues and additional legal fees. CAI would charge by the hour for some
services. While other services would be included in its membership fees, CAI’s
chairman said the trade association might increase its fees if it could practice law. CAI
thus seeks to practice law for commercial ends, like a private attorney—not to associate
for political or otherwise public goals. And while we accept that CAI engages in some
expressive activity, CAI proposes to practice law for commercial ends, not to express a
message.
Nor does CAI propose to engage in “collective activity undertaken to obtain
meaningful access to the courts.” Primus, 436 U.S. at 441 (quoting United Transp.
Union, 401 U.S. at 585). As described in the record, CAI’s members have consistently
11
had access to legal services and the courts. And CAI has no intention of litigating in any
forum. So, unlike the organizations in the Button cases, CAI would not facilitate access
to justice or vindicate its members’ constitutional or statutory rights. Cf. Trainmen, 377
U.S. at 7–8. CAI’s proposed practice might reduce some of its members’ legal bills. But
nothing in the record shows that CAI’s inability to practice law means that its members
can’t “meet the costs of legal representation” or obtain “meaningful access to the courts.”
United Transp. Union, 401 U.S. at 585–86.
The Supreme Court has, moreover, extended associational rights only when the
proposed practice of law wouldn’t raise ethical concerns. See Button, 371 U.S. at 443;
Trainmen, 377 U.S. at 6; Primus, 436 U.S. at 422, 429–30. CAI’s proposed practice, in
contrast, does raise ethical concerns. Specifically, its members would pay legal fees for
representation by attorneys supervised by officers and directors who are not attorneys.
That structure (even if housed in a nonprofit entity) could compromise the independence
and professional judgment of the lawyers involved, and the corporation’s interests could
trump loyalty to clients.
In sum, several features of CAI’s proposed practice distinguish it from the
organizations in the Button cases. As a result, like the solicitation statute in Ohralik,
North Carolina’s UPL statutes “only marginally affect[] . . . First Amendment concerns.”
436 U.S. at 459. Because they do not “substantially impair[] the associational rights” of
CAI, we need not examine whether the state’s interests suffice to justify them. United
Mine Workers, 389 U.S. at 225; see also Lawline, 956 F.2d at 1387 (declining to apply
12
heightened scrutiny because there was no deprivation of associational rights). We hold
that the UPL statutes do not violate CAI’s associational rights.
IV.
Next, CAI argues that the UPL statutes unlawfully burden its freedom of speech.
The district court rejected this claim based on the so-called “professional speech
doctrine.” CAI, 283 F. Supp. 3d at 385–86. When the district court ruled, this circuit and
others applied lesser standards of scrutiny to professionals’ speech to clients. See Pickup
v. Brown, 740 F.3d 1208, 1228–31 (9th Cir. 2014); King v. Governor, 767 F.3d 216, 224–
25, 228–29 (3d Cir. 2014); Moore-King v. County of Chesterfield, 708 F.3d 560, 569 (4th
Cir. 2013). But after the briefing in this appeal, the Supreme Court disapproved of this
doctrine as defined in Pickup, King, and Moore-King. See Nat’l Inst. of Family & Life
Advocates v. Becerra (NIFLA), 138 S. Ct. 2361, 2371–72, 2375 (2018).
In NIFLA, the Court addressed a California law requiring certain clinics that
primarily serve pregnant women to post notices about what services they didn’t offer and
about free state services. Id. at 2368–70. Although the law applied in a professional
context, the Court approached the case as it would any other involving compelled speech.
Id. at 2374–75. It held that the law was content-based. Id. at 2371. And because it held
that the law could not survive intermediate scrutiny, the Court declined to decide whether
strict scrutiny should apply. Id. at 2375–77.
The Court did, however, recognize two situations in which states have broader
authority to regulate the speech of professionals than that of nonprofessionals. First,
13
there is “more deferential review” for requirements that professionals “disclose factual,
noncontroversial information” in their commercial speech. Id. at 2372. Second, “[s]tates
may regulate professional conduct, even though that conduct incidentally involves
speech.” Id. As examples of this latter category, the Court cited cases about malpractice,
anticompetitive agreements, client solicitation, and informed consent. Id. at 2372–73.
On appeal, North Carolina describes the ban on corporate law practice as a
regulation of professional conduct that incidentally burdens speech, which only needs to
survive intermediate scrutiny. In contrast, CAI describes it as a content-based and
identity-based regulation of speech that must survive strict scrutiny. As explained below,
we agree with the state that the law passes—and only needs to pass—intermediate
scrutiny.
A.
North Carolina’s ban on the practice of law by corporations fits within NIFLA’s
exception for professional regulations that incidentally affect speech. 138 S. Ct. at 2372–
73. The ban is part of a generally applicable licensing regime that restricts the practice of
law to bar members and entities owned by bar members. Cf. Goldfarb v. Va. State Bar,
421 U.S. 773, 792 (1975) (“We recognize that the States have . . . broad power to
establish standards for licensing practitioners and regulating the practice of
professions.”). In this case, any impact the UPL statutes have on speech is incidental to
the overarching purpose of regulating who may practice law. Cf. Lawline, 956 F.2d at
1386 (holding that an ethical rule prohibiting lawyers from assisting in the unauthorized
practice of law has only an incidental impact on speech).
14
Many laws that regulate the conduct of a profession or business place incidental
burdens on speech, yet the Supreme Court has treated them differently than restrictions
on speech. For example, while obtaining informed consent for abortion procedures
implicates a doctor’s speech, the state may require it “as part of the practice of medicine,
subject to reasonable licensing and regulation.” Planned Parenthood of Se. Pa. v. Casey,
505 U.S. 833, 884 (1992) (opinion of O’Connor, Kennedy, & Souter, JJ.). Bans on
discrimination, price regulations, and laws against anticompetitive activities all implicate
speech—some may implicate speech even more directly than licensing requirements. But
the Supreme Court has analyzed them all as regulations of conduct. See Expressions
Hair Design v. Schneiderman, 137 S. Ct. 1144, 1150–51 (2017); Rumsfeld v. Forum for
Acad. & Inst. Rights, Inc., 547 U.S. 47, 62 (2006); Giboney v. Empire Storage & Ice Co.,
336 U.S. 490, 502 (1949).
As CAI recognizes, the practice of law has communicative and non-
communicative aspects. The UPL statutes don’t target the communicative aspects of
practicing law, such as the advice lawyers may give to clients. Instead, they focus more
broadly on the question of who may conduct themselves as a lawyer. Licensing laws
inevitably have some effect on the speech of those who are not (or cannot be) licensed.
But that effect is merely incidental to the primary objective of regulating the conduct of
the profession.
B.
Having determined that the UPL statutes regulate conduct, we turn to the
appropriate standard of review. CAI urges us to apply strict scrutiny, contending that the
15
UPL statutes restrict speech based on the content and on the speaker. We think the
correct reading of Supreme Court precedent, however, is that intermediate scrutiny
should apply to regulations of conduct that incidentally impact speech.
When the Supreme Court has reviewed restrictions on conduct that incidentally
burden speech, it has not applied strict scrutiny. It has not, for example, demanded that
laws against employment discrimination or anticompetitive agreements survive strict
scrutiny. See Rumsfeld, 547 U.S. at 62; Giboney, 336 U.S. at 502. Price regulations too
are not subject to strict scrutiny (though the standard for laws that only restrict
communications about prices is unsettled). Expressions Hair Design, 137 S. Ct. at 1150–
51. Even laws that implicate speech quite directly, such as laws requiring doctors—
through spoken words—to obtain informed consent from patients before an abortion have
not been subjected to strict scrutiny. Casey, 505 U.S. at 884 (opinion of O’Connor,
Kennedy, & Souter, JJ.).
Although the Court’s cases have not been crystal clear about the appropriate
standard of review, we do know that the state actors involved were not required to
demonstrate a compelling interest and narrow tailoring. And NIFLA itself provides
ample support for the view that strict scrutiny shouldn’t apply to the UPL statutes. As
noted, the NIFLA Court chose not to decide whether strict or intermediate scrutiny
applied to the law at issue. 138 S. Ct. at 2375–77. But the Court did highlight laws
regulating “professional conduct” as an area in which it “has afforded less protection for
professional speech.” Id. at 2372 (emphasis added). Thus, we can say with some
16
confidence that the standard for conduct-regulating laws can’t be greater than
intermediate scrutiny. 4
In sum, we hold that intermediate scrutiny is the appropriate standard for
reviewing conduct regulations that incidentally impact speech. We think this a sensible
result, as it fits neatly with the broad leeway that states have to regulate professions. See
Ohralik, 436 U.S. at 460; Goldfarb, 421 U.S. at 792. For laws with only an incidental
impact on speech, intermediate scrutiny strikes the appropriate balance between the
states’ police powers and individual rights.
C.
We turn then to consider whether North Carolina’s ban on the practice of law
survives this standard of review. To survive intermediate scrutiny, the defendant must
show “a substantial state interest” and a solution that is “sufficiently drawn” to protect
that interest. NIFLA, 138 S. Ct. at 2375. North Carolina’s interest in regulating the legal
4
CAI describes the UPL statutes as content-based and identity-based restrictions
on speech. Because the statutes regulate conduct, we need not engage with these
descriptors. See R.A.V. v. City of St. Paul, 505 U.S. 377, 389–90 (1992). Content-based
restrictions ordinarily receive strict scrutiny. See Reed v. Town of Gilbert, 135 S. Ct.
2218, 2226–27 (2015). But in many of the cases concerning conduct, a law had an
incidental impact on speech with particular content—such as anticompetitive agreements,
discriminatory statements, prices, or informed consent—yet the Supreme Court declined
to apply strict scrutiny. The NIFLA Court mentioned such cases to illustrate an exception
without any indication that they should receive strict scrutiny, see 138 S. Ct. at 2372–73,
despite the sweeping language about content-based restrictions in some recent cases, see
Reed, 135 S. Ct. at 2226–27. Finally, the Court has treated identity-based distinctions as
part of the inquiry into content-neutrality, not as a separate reason for finding a statute
unconstitutional. See Reed, 135 S. Ct. at 2230–31; Turner Broadcasting Sys., Inc. v.
FCC, 512 U.S. 622, 658 (1994). Thus, labeling the UPL statutes an identity-based
restriction doesn’t change our analysis.
17
profession to protect clients is at least substantial. In fact, the Supreme Court has
repeatedly described that interest in even stronger terms. See Ohralik, 436 U.S. at 460;
Goldfarb, 421 U.S. at 792.
Barring corporations from practicing law is sufficiently drawn to protect that
interest. Professional integrity could suffer if the state allows lawyers to practice on
behalf of organizations owned and run by nonlawyers and to collect legal fees from
clients. Nonlawyers would likely supervise lawyers representing third-party clients at
CAI, which could compromise professional judgment and generate conflicts between
client interests and the corporation’s interests.
The state has addressed these problems by proscribing law practice by
organizations that pose the most danger, while exempting organizations that pose little
danger. Professional corporations, for example, must be owned exclusively by lawyers.
N.C. Gen. Stat. § 55B-4(2). And public interest law firms “must have a governing
structure that does not permit” anyone except an “attorney duly licensed . . . to control the
manner or course of the legal services rendered.” Id. § 84-5.1. Plus, the restrictions on
the fees such firms may receive makes it impossible for them break even (much less turn
a profit) on legal work. Rev. Proc. 92-59, 1992-2 C.B.
Another state legislature might balance the interests differently. But intermediate
scrutiny requires only a “reasonable fit between the challenged regulation” and the state’s
interest—not the least restrictive means. United States v. Chester, 628 F.3d 673, 683 (4th
Cir. 2010) (internal quotation marks omitted); see Bd. of Trs. of State Univ. of N.Y. v.
Fox, 492 U.S. 469, 480–81 (1989). Because North Carolina has established a reasonable
18
fit between its UPL statutes and a substantial government interest, the UPL statutes
survive intermediate scrutiny.
V.
CAI also argues that the UPL statutes deny it due process because they lack a
rational basis. CAI doesn’t contend that its due process claim concerns fundamental
rights, so the UPL statutes are only subject to rational basis review. Hawkins v. Freeman,
195 F.3d 732, 739 (4th Cir. 1999) (en banc). To pass muster under rational basis review,
legislation “need only be rationally related to a legitimate government interest.” Star Sci.
Inc. v. Beales, 278 F.3d 339, 348 (4th Cir. 2002).
The state relies on the same justifications it provided in response to the First
Amendment claims. As our precedent counsels, “there is a rational basis to restrict
corporate . . . ownership of professional businesses” to protect consumers. Brown v.
Hovatter, 561 F.3d 357, 368 (4th Cir. 2009) (citing N.D. State Bd. of Pharmacy v.
Snyder’s Drug Stores, Inc., 414 U.S. 156, 166–67 (1973)). Accordingly, we agree with
the district court that the state’s justifications suffice. CAI’s remaining arguments—such
as the availability of less restrictive means—are inapposite for rational basis review. We
hold that the UPL statutes do not deny CAI due process.
VI.
CAI also contends that the UPL statutes are unconstitutionally vague because they
fail to provide fair notice of what it means to practice law. A statute is unconstitutionally
19
vague if it “fails to provide a person of ordinary intelligence fair notice of what is
prohibited, or is so standardless that it authorizes or encourages seriously discriminatory
enforcement.” United States v. Williams, 553 U.S. 285, 304 (2008). But “perfect clarity
and precise guidance have never been required even of regulations that restrict expressive
activity.” Ward v. Rock Against Racism, 491 U.S. 781, 794 (1989).
To determine if a statute is vague, we examine both the statute itself and any
limiting constructions from state courts or agencies. Martin v. Lloyd, 700 F.3d 132, 136
(4th Cir. 2012). State law defines the term “practice law” as “performing any legal
service.” N.C. Gen. Stat. § 84-2.1(a). The statutory definition provides a lengthy but
unexhaustive list of what does and doesn’t count as a legal service. Id. §§ 84-2.1(b), 84-
2.2. The statute prohibiting the unauthorized practice of law elaborates on the definition
further. Id. § 84-4. And North Carolina courts have expounded on this definition at
length. 5
CAI’s vagueness challenge fails. The statutes and state case law collectively
provide an extensive definition of what it means to practice law. Between them, a person
of ordinary intelligence would have fair notice of what the UPL statutes prohibit. Indeed,
5
See State v. Pledger, 127 S.E.2d 337, 338–39 (N.C. 1962); Seawell v. Carolina
Motor Club, 184 S.E. 540, 544 (N.C. 1936); State v. Williams, 650 S.E.2d 607, 611 (N.C.
Ct. App. 2007); Lexis-Nexis v. Travishan Corp., 573 S.E.2d 547, 549 (N.C. Ct. App.
2002); Duke Power Co. v. Daniels, 358 S.E.2d 87, 89 (N.C. Ct. App. 1987); N.C. State
Bar v. Lienguard, Inc., No. 11 CVS 7288, 2014 WL 1365418, at *10–12 (N.C. Super. Ct.
Apr. 4, 2014).
20
CAI itself understood what it means to practice law well enough to avoid giving its
members legal advice.
CAI points out that State Bar officials couldn’t present a clear answer to every
hypothetical question asked in their depositions. J.A. 670–76, 791–92. But fair notice
doesn’t require certainty about every hypothetical situation. Ward, 491 U.S. at 794. We
hold, therefore, that the UPL statutes are not void for vagueness.
VII.
CAI next contends that the UPL statutes violate the state constitution’s Monopoly
Clause, which provides that “[p]erpetuities and monopolies . . . shall not be allowed.”
N.C. Const. art. I, § 34. To construe state law, we look to decisions of the state’s highest
court or, if needed, decisions of the state’s intermediate appellate court. Assicurazioni
Generali, S.p.A. v. Neil, 160 F.3d 997, 1002 (4th Cir. 1998).
The Supreme Court of North Carolina has interpreted this clause to allow
“reasonable regulations” of commerce with a substantial relationship to public health,
safety, or welfare. In re Certificate of Need for Aston Park Hosp., Inc., 193 S.E.2d 729,
735 (N.C. 1973); see also Am. Motors Sales Corp. v. Peters, 317 S.E.2d 351, 358–59
(N.C. 1984). That court has long been deferential toward professional regulations,
regularly upholding professional licensing requirements. 6
6
See State v. Warren, 114 S.E.2d 660, 666 (N.C. 1960) (real estate brokers);
Roach v. City of Durham, 169 S.E. 149, 151 (N.C. 1933) (plumbers); State v. Lockey, 152
S.E. 693, 696 (N.C. 1930) (barbers); State v. Siler, 84 S.E. 1015, 1016 (N.C. 1915)
(Continued)
21
The state high court has twice upheld the ban on corporate law practice. In
Seawell, the Supreme Court of North Carolina affirmed an injunction against a
corporation for the unauthorized practice of law, holding that “[t]he statute in question
offends neither the State nor Federal Constitution.” 184 S.E. at 544. And in Gardner v.
North Carolina State Bar, that court held that an insurance company could not employ an
attorney to represent its insureds, finding that “[t]here is no merit to th[e] argument” that
the ban on corporate practice “violates Article I of the [state constitution] and the
Fourteenth Amendment.” 341 S.E.2d 517, 523 (N.C. 1986). Although it is unclear
whether Seawell and Gardner addressed Monopoly Clause arguments, they illustrate the
leeway North Carolina courts give the legislature to regulate the legal profession.
State v. Ballance, 51 S.E.2d 731 (N.C. 1949), a case relied on by CAI, is not to the
contrary. That case concerned a licensing requirement for professional photography,
which the court described as “a private business unaffected in a legal sense with any
public interest.” Id. at 735. The court saw no serious dangers from unlicensed
photography. Id.; see also Roller v. Allen, 96 S.E.2d 851, 859 (N.C. 1957) (invalidating
licensing regime for tile layers for similar reasons). In contrast, it is well established that
the practice of law affects the public interest and that the unregulated practice of law can
pose a danger. See Seawell, 184 S.E. at 544; In re Applicants for License, 55 S.E. 635,
(doctors); St. George v. Hardie, 60 S.E. 920, 923 (N.C. 1908) (riverboat pilots); State v.
Hicks, 57 S.E. 441, 442–43 (N.C. 1907) (dentists); State v. Call, 28 S.E. 517, 517 (N.C.
1897) (doctors).
22
636 (N.C. 1906); cf. Ohralik, 436 U.S. at 459–60. Based on the applicable state case law,
this court must conclude that the UPL statutes do not violate the Monopoly Clause.
VIII.
Last, CAI argues that it has a free speech right to advertise the legal services it
wants to offer. But this commercial speech claim is not an independent basis for granting
relief, and the state may forbid CAI from advertising legal services barred by law. Cent.
Hudson Gas & Elec. Corp. v. Pub. Serv. Comm’n of N.Y., 447 U.S. 557, 563–64 (1980).
IX.
The district court correctly granted the defendants’ motion for summary judgment.
Its judgment is therefore
AFFIRMED.
23