Can a corporation represent itself in Texas courts?
You’ve done the work to set up your business properly, you retained corporate counsel to file the documents needed to form a legal business entity, your business is up and running, and now you are bringing in revenue.
If you are the sole corporate officer or the majority shareholder in your business, you may feel that you are the business, and, in many situations, that’s true.
Nevertheless, when someone files a lawsuit against your business or when you are forced to file a lawsuit after a business partner breaches their contracts with you, in most cases you will still need to retain corporate counsel to represent your business in court.
Below, we will go over the basics of when a corporation can and cannot represent itself in Texas courts and definitions of unauthorized practice of law in Texas.
Corporations Cannot Represent Themselves in Texas CourtsIn most cases, corporations cannot represent themselves in Texas courtrooms.
Even if you are the president, CEO, or sole shareholder of your company, you must retain corporate counsel to prosecute and defend claims.
Corporations Cannot Appear “Pro Se”Texas Rule of Civil Procedure 7 says that “Any party to a suit may appear and prosecute or defend his rights therein, either in person or by an attorney of the court.”
If you are an individual, this means that you can either
1) represent yourself “pro se”
2) retain an attorney to represent you in court.
If you are a business, though, it means that you must retain counsel.
Why? Legally, your business is not you.
It is a separate legal entity that can bring and defend claims on its own, but a business, which exists solely on paper and in the electronic storage of computers, cannot represent itself pro se.
Texas courts have long held that a corporation must be represented by a licensed attorney, although corporate officers can perform ministerial tasks related to a lawsuit like depositing cash with a court clerk in lieu of a cost bond.
See Kunstoplast of Am. v. Formosa Plastics Corp., 937 S.W.2d 455
(Tex. 1997); Wuxi Taihu Tractor Co. v. York Grp., Inc., NO. 01-13-00016-CV (Tex. App. Dec. 2, 2014).
What Happens if a Corporation Doesn’t Retain Corporate Counsel?If you file a lawsuit or other pleadings on behalf of your corporation (and if you are not a licensed attorney in the State of Texas), the court will not consider your filings.
The immediate and sometimes irreversible consequences could include:
Except in Small Claims Court…One exception to the rule is small claims court.
Each county in Texas has a “small claims court” where the amount in controversy cannot exceed $5000, and Texas Code § 28.003(e) states that “a corporation need not be represented by an attorney in small claims court.”
If a corporate officer represents their company’s interests in small claims court, however, they will be held to the same standards as an attorney, and the corporate representative will be expected to know the Rules of Civil Procedure, courtroom procedure, evidence rules, and case law that apply to their proceedings.
Even in small claims court, we recommend that you consult with corporate counsel before filing a lawsuit or defending claims filed against you.
What is the Unauthorized Practice of Law in Texas?When a non-attorney attempts to represent a corporation in a Texas court, that is one form of unauthorized practice of law – which, depending on the circumstances, can result in criminal and civil penalties.
What is the definition of unauthorized practice of law in Texas?
Texas Code § 81.202 defines who is permitted to practice law in Texas courts:
(a) Except as provided by Subsection(b), a person may not practice law in this state unless the person is a member of the state bar.
(b) The supreme court may promulgate rules prescribing the procedure for limited practice of law by:
(1) attorneys licensed in another jurisdiction;
(2) bona fide law students; and
(3) unlicensed graduate students who are attending or have attended a law school approved by the supreme court.
Texas Code § 81.101 defines the “practice of law” in Texas:
(a) In this chapter the “practice of law” means the preparation of a pleading or other document incident to an action or special proceeding or the management of the action or proceeding on behalf of a client before a judge in court as well as a service rendered out of court, including the giving of advice or the rendering of any service requiring the use of legal skill or knowledge, such as preparing a will, contract, or other instrument, the legal effect of which under the facts and conclusions involved must be carefully determined.
(b) The definition in this section is not exclusive and does not deprive the judicial branch of the power and authority under both this chapter and the adjudicated cases to determine whether other services and acts not enumerated may constitute the practice of law.
(c) In this chapter, the “practice of law” does not include the design, creation, publication, distribution, display, or sale, including publication, distribution, display, or sale by means of an Internet web site, of written materials, books, forms, computer software, or similar products if the products clearly and conspicuously state that the products are not a substitute for the advice of an attorney.
This subsection does not authorize the use of the products or similar media in violation of Chapter 83 and does not affect the applicability or enforceability of that chapter.
Although this will not necessarily apply to a corporate officer who, in good faith, files a pleading on behalf of their corporation, Texas Code § 38.123 makes the unauthorized practice of law a criminal offense – a Class A misdemeanor for the first offense or a third-degree felony for a second offense:
Sec. 38.123. UNAUTHORIZED PRACTICE OF LAW. (a) A person commits an offense if, with intent to obtain an economic benefit for himself or herself, the person:
(1) contracts with any person to represent that person with regard to personal causes of action for property damages or personal injury;
(2) advises any person as to the person’s rights and the advisability of making claims for personal injuries or property damages;
(3) advises any person as to whether or not to accept an offered sum of money in settlement of claims for personal injuries or property damages;
(4) enters into any contract with another person to represent that person in personal injury or property damage matters on a contingent fee basis with an attempted assignment of a portion of the person’s cause of action; or
(5) enters into any contract with a third person which purports to grant the exclusive right to select and retain legal counsel to represent the individual in any legal proceeding.
(b) This section does not apply to a person currently licensed to practice law in this state, another state, or a foreign country and in good standing with the State Bar of Texas and the state bar or licensing authority of any and all other states and foreign countries where licensed.
(c) Except as provided by Subsection (d) of this section, an offense under Subsection (a) of this section is a Class A misdemeanor.
(d) An offense under Subsection (a) of this section is a felony of the third degree if it is shown on the trial of the offense that the defendant has previously been convicted under Subsection (a) of this section.
Under Texas Code § 28.122, if a person “falsely holds himself or herself out as a lawyer,” when they are not a licensed attorney, they can be charged with a third-degree felony:
Sec. 38.122. FALSELY HOLDING ONESELF OUT AS A LAWYER. (a) A person commits an offense if, with intent to obtain an economic benefit for himself or herself, the person holds himself or herself out as a lawyer, unless he or she is currently licensed to practice law in this state, another state, or a foreign country and is in good standing with the State Bar of Texas and the state bar or licensing authority of any and all other states and foreign countries where licensed.
(b) An offense under Subsection (a) of this section is a felony of the third degree.
(c) Final conviction of falsely holding oneself out to be a lawyer is a serious crime for all purposes and acts, specifically including the State Bar Rules.
The bottom line is that corporate officers cannot represent their businesses in Texas courts unless the case is filed in small claims court (and remains in small claims court), and, even then, we recommend that you consult with corporate counsel before taking legal action.
Please feel free to contact one of our Murray Lobb Attorneys to obtain our legal advice regarding corporate litigation or what constitutes the unauthorized practice of law. We also remain available to help you with all your general construction law, business, corporate, and estate planning needs.