Nisha, LLC v. Tribuilt Constr. Grp., LLC

• Decision Date: 29 March 2012
• Docket Number: No. 11–927.,11–927.
• Parties: NISHA, LLC and Centennial Bank Formerly Known as Community Bank, Appellants. v. TRIBUILT CONSTRUCTION GROUP, LLC, Appellee.
• Court: Arkansas Supreme Court

2012 Ark. 130

388 S.W.3d 444

NISHA, LLC and Centennial Bank Formerly Known as Community Bank, Appellants.

v.TRIBUILT CONSTRUCTION GROUP, LLC, Appellee.

No. 11–927.

Supreme Court of Arkansas.

March 29, 2012.

Stuart W. Hankins, North Little Rock, J. Don Overton, Little Rock, for appellant.

Jack East III, Little Rock, for appellee.

ROBERT L. BROWN, Justice.

The issue in this case is whether a corporate officer, director, or employee, who is not a licensed attorney, engages in the unauthorized practice of law by representing the corporation in arbitration proceedings. We hold that such a person is so engaged, and we reverse the circuit court on this point. In addition, we reverse the circuit court's determination that an arbitrator, rather than the court, should determine issues regarding legal representation during arbitration proceedings.

This case began as a dispute over construction costs between TriBuilt Construction Group, LLC (TriBuilt), the appellee herein, and NISHA, LLC (NISHA) and Centennial Bank (formerly known as Community Bank) (Centennial), the appellants. TriBuilt was the general contractor hired by NISHA to build the Country Inn & Suites in Conway. Centennial entered into a Construction Loan and Security Agreement with NISHA, which assigned its interest in the construction contract with TriBuilt to Centennial as security for Centennial's entering into a construction mortgage for the project. After the project was completed, TriBuilt filed suit in the Sebastian County Circuit Court against NISHA and Centennial and asserted that when the project was completed, they refused to pay TriBuilt the $666,462.12 balance owed, defamed TriBuilt, and intentionally interfered with TriBuilt's ability to get bonding for the project.

NISHA moved to compel arbitration and contended that the contract with TriBuilt compelled the parties to arbitrate all disputes relating to the contract. Contemporaneously with this motion, NISHA moved to stay proceedings pending arbitration. The circuit court denied both of NISHA's motions regarding arbitration. Centennial later filed a second motion to compel arbitration and requested that TriBuilt voluntarily enter into arbitration proceedings. On January 12, 2010, the circuit court entered an order granting the motion to compel arbitration in part and denying it in part. ¹ The circuit court granted the motion to compel arbitration and stay proceedings with regard to TriBuilt's claims for breach of contract, quantum meruit, tortious interference with the contract, and conversion against Centennial and NISHA.

On January 26, 2011, the circuit court entered a second order permitting TriBuilt's counsel to withdraw from the case. TriBuilt's attorney subsequently withdrew from the arbitration proceedings as well. Rather than obtain new counsel to represent it in the arbitration proceedings, TriBuilt through its President, Alan Harrison, notified NISHA and Centennial that it intended to represent itself. Harrison, a nonlawyer, would present TriBuilt's case in the arbitration proceedings. On March 31, 2011, NISHA and Centennial filed a “Joint Petition for Permanent Injunction,” seeking to prevent Harrison from representing TriBuilt in either the circuit court case or in the arbitration proceedings. In support of its petition, NISHA and Centennial contended that a corporate entity cannot represent itself in litigation and litigation-related matters through agents who are not licensed attorneys. They requested that the circuit court permanently enjoin TriBuilt from permitting, authorizing, or condoning Harrison, or any other officer, director, or employee, from engaging in the unauthorized practice of law by representing TriBuilt in the circuit court proceedings or in the court-ordered arbitration proceedings.

On April 13, 2011, International Fidelity Insurance Company (IFIC) ² filed a response to the joint petition for permanent injunction. IFIC claimed that TriBuilt was not prohibited by law from representing itself in an arbitration proceeding and that the representation in such a proceeding did not constitute the unauthorized practice of law. It maintained that under the American Arbitration Association (AAA) rules, which governed the arbitration proceeding at issue, any party could be represented by counsel, pro se, or “by any other representative of that party's choosing.” IFIC claimed further that no Arkansas law prohibited a corporation from representing itself in arbitration proceedings.

On May 16, 2011, the circuit court entered an order granting NISHA and Centennial's joint petition so far as it pertained to proceedings before the circuit court but denying their petition for a permanent stay so far as it pertained to the arbitration proceedings for two reasons: (1) the circuit court did not agree that nonlawyer representation in an arbitration proceeding constituted the practice of law, and (2) the arbitration panel should decide that issue. NISHA and Centennial filed an interlocutory appeal to this court pursuant to Arkansas Rule of Appellate Procedure—Civil 2(a)(6). The circuit court issued a certificate under Arkansas Rule of Civil Procedure 54(b) and found that pro se representation by a corporate officer was an issue of first impression and that there was no just reason to delay entry of final judgment regarding whether Harrison could represent TriBuilt in the arbitration proceedings.

NISHA and Centennial raise two points in their brief on appeal: (1) this court should reverse the circuit court's finding that nonlawyer representation in arbitration proceedings does not constitute the unauthorized practice of law, and (2) that this court should reverse the circuit court's finding that the arbitrator should decide who can represent a party in arbitration proceedings. TriBuilt has not filed a brief in response in this appeal.

The circuit court's conclusions that nonlawyer representation in arbitration proceedings did not constitute the unauthorized practice of law and that the arbitrator had the authority to decide who could represent a party in arbitration proceedings are conclusions of law. As such, those conclusions are given no deference on appeal, and this court's standard of review is de novo on both issues. See Hill v. Kelly, 368 Ark. 200, 207, 243 S.W.3d 886, 890–91 (2006).

Although NISHA and Centennial present this as their second point for reversal, the question of whether the arbitrator or this court has the power to determine if a nonlawyer can represent a corporation during arbitration proceedings is jurisdictional and must be addressed first. See, e.g., Am. Abstract & Title Co. v. Rice, 358 Ark. 1, 186 S.W.3d 705 (2004) (holding that circuit courts have jurisdiction to determine issues regarding the unauthorized practice of law). The circuit court concluded that the arbitration body is entitled to determine what parties and representatives may participate in arbitration proceedings, as well as what rules apply in the process. That is in error. This court has the exclusive authority to regulate the practice of law. Preston v. Stoops, 373 Ark. 591, 594, 285 S.W.3d 606, 609 (2008) (“Oversight and control of the practice of law is under the exclusive authority of the judiciary.”); see alsoArk. Const. amend. 28 (“The Supreme Court shall make rules regulating the practice of law and the professional conduct of attorneys at law.”). Likewise, the unauthorized practice of law falls within this court's constitutional authority to control and govern the practice of law. Preston, 373 Ark. at 594, 285 S.W.3d at 609. Because the issue is whether representation of a corporation by a nonlawyer during arbitration proceedings constitutes the unauthorized practice of law, the issue falls squarely within the ambit of this court's constitutional powers and may not be decided by an arbitration body. We reverse the circuit court on this point.

NISHA and Centennial's second argument is that a corporate entity cannot represent itself during arbitration proceedings because that constitutes the unauthorized practice of law. They cite this court to Arkansas Bar Association v. Union National Bank, 224 Ark. 48, 273 S.W.2d 408 (1954), to support this contention.

In Union National Bank, the Arkansas Bar Association sought to enjoin a bank from engaging in the unauthorized practice of law. That opinion addressed the authority of the bank, as fiduciary, to prepare and present petitions and precedents for orders in the probate and chancery courts without representation by an attorney. Id. at 49, 273 S.W.2d at 409. In our opinion, this court made five broad conclusions regarding the practice of law in Arkansas:

• Corporations are prohibited from practicing law in this state and a corporate employee, officer, or director who is not a licensed attorney cannot hold himself or herself out as being entitled to practice law. Id. at 51, 273 S.W.2d at 410.

75 An individual can practice law for himself or herself, but a corporation can only represent itself in connection with its own business or affairs in the courts of this state through a licensed attorney. Id.

• A trustee or personal representative does not act on his or her own behalf and a person who is not a licensed attorney and who is acting as an administrator, executor, or guardian cannot practice law in matters relating to his trusteeship. Id. at 51–52, 273 S.W.2d at 410.

• When one appears before a court of record for the purpose of transacting business with the court in connection with any pending litigation or when any person seeks to invoke the processes of the court in any matter pending before it, that person is engaging in the practice of law. Id. at 53, 273 S.W.2d at 411.

• The practice of law is regulated by the judiciary. Id.

While the Union National Bank case is helpful in outlining the basic principles governing the practice of law in this state, it does not address the specific issue before this court, which,...