Local Counsel in NC Federal Court: Additional Obligations

In a recent article, Claire Modlin pointed out the importance of knowing the local rules of any federal court in which you’ve agreed to serve as local counsel, and in a couple of earlier articles, Mark Scruggs also emphasized how important it is to make sure the ultimate client knows and consents to the limited role you’ve agreed to assume whenever serving as local counsel.  You should certainly follow that advice.

But at least in North Carolina’s federal courts, the obligations of local counsel go well beyond knowing the rules and showing up. Anyone who envisions themselves as a mere briefcase-carrier or local rulebook guru needs to think again.

In North Carolina’s federal courts, local counsel are personally on the hook not only to appear in person at significant proceedings but also for Rule 11 compliance—the latter requiring either direct compliance (in the Middle and Western Districts) or indirect compliance (by ensuring that lead counsel complies with Rule 11, in the Eastern District). You cannot avoid that consequence by getting the client to agree you are not responsible for substantive matters—even though that’s still a good idea. The responsibility arises from your obligation to the court, as an officer of the court, rather than from your obligation to the client.

The fact that this costs the client more than they expected, or that you will have to do more than lead counsel may have led their client to expect, doesn’t matter. For example, in a case in which I was involved, Judge Auld refused to excuse local counsel from attending a pretrial conference to discuss discovery issues, even where we as opposing counsel had consented, saying that even where the defendants’ lead counsel was “most knowledgeable about this case” and even though “it would be significantly more expensive for defendant to have both its counsel attend the hearing,” that was “not a proper basis” to excuse local counsel from their rule-imposed obligations. He also emphasized that local counsel “shares full responsibility for the representation of the client” and must have sufficient knowledge of the case and issues to provide meaningful representation. Duke University v. Universal Products, Inc., 2014 U.S. Dist. LEXIS 62336 at *6-*8 (M.D.N.C., May 6, 2014).

What does that mean? It means you not only must show up for hearings and the trial unless excused by the court, but you also must take enough steps to ensure that each pleading you sign—and local counsel must sign all pleadings—complies with the following requirements:

(1) it is not being presented for any improper purpose, such as to harass, cause unnecessary delay, or needlessly increase the cost of litigation;

(2) the claims, defenses, and other legal contentions are warranted by existing law or by a nonfrivolous argument for extending, modifying, or reversing existing law or for establishing new law;

(3) the factual contentions have evidentiary support or, if specifically so identified, will likely have evidentiary support after a reasonable opportunity for further investigation or discovery; and

(4) the denials of factual contentions are warranted on the evidence or, if specifically so identified, are reasonably based on belief or a lack of information.

You do not have to do the underlying work, but reasonable diligence is required. You are required to undertake “an inquiry reasonable under the circumstances,” which cannot be mere blind faith that lead counsel necessarily did everything right. Even if lead counsel is well-qualified, “trust but verify” is an appropriate mantra.

The E.D.N.C. local rules are not a reliable safety net. In the Eastern District, L.R. 83.1(d) says that a local counsel who appears “solely” to bring lead counsel into compliance with the local rules and includes a special rules-prescribed signature line to that effect, “does not make the certification required by Rule 11 of the Federal Rules of Civil Procedure. Nevertheless, the requirements of Rule 11 must be complied with by any out-of-state attorney.”  In a CLE program held shortly after that rule went into effect, the judges of the District warned that local counsel remain responsible for ensuring that lead counsel comply with Rule 11, and that this does in fact require oversight by local counsel. A hands-off approach is not acceptable. No decision since that time has held otherwise, so local counsel should assume they do have a more-than-negligible function even in the E.D.N.C.

What happens if you do not fulfill your obligations? Sanctions! Rule 11 allows sanctions against each lawyer and law firm who “violated the rule or is responsible for the violation.”  Note the “or.” Even where local counsel didn’t author a pleading, they become “responsible for” the violation by signing it or failing to object to its filing.

This is not just a theoretical or potential problem. It’s one that has tripped up multiple North Carolina lawyers and resulted in very real sanctions in each of our federal districts.

A case that’s particularly worth reading is Williams v. Estates, LLC, 663 F. Supp. 3d 466, 478-79, 488 (M.D.N.C., March 23, 2023). There, one of local counsel played what many believe is the true role of a local counsel. He “had little or no role in the various phases of the litigation except in his capacity as sponsoring counsel,” and his signature appeared on the pleadings ‘because the Rules required it and not because he was a contributor.” Far from approving counsel’s “rubber stamp” role, the court pointed out that all counsel of record are “responsible to this Court for the conduct of the litigation” and that local counsel in particular are required to “review and sign all pleadings.”

“[T]otal reliance on other counsel” can itself be “a violation of Rule 11,” see In re Kunstler, 914 F.2d 505, 514 (4th Cir. 1990), especially when the relying attorney has represented to the Court that he is responsible for the litigation and his co-counsel’s adherence to the Local Rules ...

Local counsel was ultimately fined and publicly sanctioned, on the basis that as a result of his failure to properly supervise and review the pleadings, he was “equally responsible for the filing of a motion without legal and factual support.”

Similarly in the Western District, in In re Kazuko Banner, No. 15-31761 (Bankr. W.D.N.C. June 2, 2016), a local attorney submitted pleadings in a bankruptcy case for a national law firm. The national firm’s procedure included soliciting clients nationwide and then hiring local attorneys as “local partners” to meet jurisdictional requirements. In this case, the local attorney supplied their login credentials to the national firm, and pleadings were filed using that login by the national firm’s counsel, which were not reviewed by the local attorney. The court described local counsel’s role as “the expectation of easy money for little or no work.” The pleadings had numerous deficiencies, many were filed late, and local counsel did nothing to review or correct them. A full refund to the client was ordered and monetary sanctions were imposed not only against lead counsel but also against the local attorney. In addition, the local attorney was disbarred from practice in bankruptcy court for one year, with additional requirements to be met prior to filing any application for readmission.

The older Eastern District case of Harris v Marsh, 123 F.R.D. 204 (E.D.N.C. 1988) took a similar stance and is cited in law review articles, which also point out that the advisory committee’s note to the 1993 amendments to Rule 11 says that attorneys who sign, submit, or advocate for a pleading have a nondelegable responsibility for compliance. There is no “local counsel exception.”

In short, it is “difficult for a lawyer to disclaim all responsibility for documents bearing his name,” as the M.D.N.C. held in an earlier case. Coburn Optical Indust. v. Cilco, Inc., 610 F.Supp. 656, 660 (M.D.N.C. 1985).

Your takeaways if you choose to be local counsel in federal court:

• Do realize that you must appear for critical hearings and for trial.
• Do realize that you must review all the pleadings, not just from a rulebook perspective but substantively as well, to an extent sufficient to ensure they comply with Rule 11.
• Factor those costs into any fee estimate you provide to lead counsel and their client, who is becoming your client, and make sure they understand that whatever they may be used to in other states, North Carolina’s federal courts require the substantive as well as procedural oversight of local counsel.
• Do ensure that the client consents to your role. You don’t have to do everything, but the client must agree to any limitations. When you will be relying on reports of factual investigation that have been performed by lead counsel or their team rather than doing that work yourself, make sure the client agrees to this. Include your limited role and the client’s consent to your reliance on lead counsel’s factual investigations and legal research as part of your representation agreement.