Business Litigation Alert
February 17, 2003

Corporation's CEO Prohibited from Litigating Claims on Behalf of Corporation

The North Carolina Court of Appeals held in a recent decision that a corporation must be represented by a licensed attorney and cannot represent itself in most litigation proceedings in North Carolina.

In Lexis-Nexis, Division of Reed Elsevier, Inc. v. Travishan Corporation, the CEO and President of Travishan filed an answer and counterclaim on behalf of the corporation in a breach of contract case brought by the plaintiff. The plaintiff made a motion to strike the defendant’s answer and counterclaim on the grounds that the officer’s representation of defendant Travishan violated North Carolina General Statute §84-4, which provides that a corporation may not practice law in North Carolina. Specifically, North Carolina General Statute §84-4 states that "it shall be unlawful for any person or association of persons, except active members of the Bar of the State of North Carolina admitted and licensed to practice as attorneys-at-law to appear as attorney or counselor at law in any action or proceeding before any judicial body except in his own behalf as a party thereto." Under this provision, the North Carolina Supreme Court has repeatedly held that a corporation cannot lawfully practice law, but rather it is a personal right belonging to the individual.

Although the prevailing rule in the majority of jurisdictions is that a corporation cannot appear and represent itself either in proper person or by its officers, but only by an attorney admitted to practice law, the North Carolina courts, prior to the Travishan decision, have never expressly addressed or adopted this general rule. The appellate courts, however, have recognized some common exceptions to the general rule. For example, the courts have held that a corporate employee, who is not an attorney, could prepare legal documents and that a corporation can represent itself in small claims court. In addition to these exceptions, the appellate courts have recognized that "a corporation may make an appearance in court through its vice-president and thereby avoid default." An "appearance" under this exception means that an officer of a corporation can come to court as a party to a lawsuit and notify the court that it is seeking legal representation, which would probably preclude the court from entering a default against the corporation if it failed to appear in court or have an attorney appear on its behalf.

Although Travishan’s officer argued that this final exception should operate to allow the corporation to represent itself in ensuing litigation through an officer, the North Carolina Court of Appeals disagreed. The Court found that the officer’s argument "misapprehends the substantial difference between permitting a corporation to make an appearance and permitting a corporation to practice law." The Court reasoned that while an agent of a corporation "may negotiate with an opposing party, and therefore make an implied appearance on behalf of a corporation, it does not follow that the agent may also litigate for the corporation."

Accordingly, by expressly adopting the rule that a corporation must be represented by a duly admitted and licensed attorney and cannot proceed pro se unless doing so under one of the exceptions, the Court sets forth clear boundaries as to what a corporation can and cannot do without engaging the services of an attorney authorized to practice law in North Carolina. The court’s ruling requires that a corporation, when faced with a lawsuit, retain an attorney to represent it in litigation proceedings. Accordingly, the best practice is for a corporation to immediately retain counsel once it learns of a lawsuit against it, no matter how baseless the corporation believes the action is.

If you have any questions regarding this bulletin, please contact Court Young at 704.342.5256 or cmyoung@poynerspruill.com.