Most people are familiar with a legal concept in criminal cases where an individual has the right to legal counsel or, alternatively, to represent themselves. The right to represent oneself is called pro se. It may be tempting to think that this right is extended to corporations since, in United v. FEC, the Supreme Court ruled that corporations as an entity are considered people, which gives them the right to spend money in a way that aligns with their values and beliefs.
But rather, the opposite is true. It has been legally established that a corporation or LLC cannot represent itself in court proceedings but must appear through an attorney. The idea that a corporation cannot represent itself in court comes from Merco Constr. Engineers, Inc. v. Municipal Court (1978) 21 Cal. 3d 724, 789.This idea has been upheld since that time.
There are three rationales for this ruling including:
- Since many corporations and LLCs are special entities with multiple shareholders insulated from personal responsibility, the court requires a single designated spokesperson who can be held accountable. Additionally, this distinction helps to maintain the wall between the corporation as an entity and its individual shareholders, directors, and officers.
- Unlike corporate officers, attorneys are subject to professional rules of conduct. Accordingly, any pro se representative sent on behalf of the corporation would be engaged in the unauthorized practice of law.
- Attorneys are trained with the required legal skills and knowledge to participate competently in litigation and other court proceedings. The rule ensures that qualified professionals will appear in the court, thereby increasing justice’s efficient and proper administration.
These reasons establish the distinction between an artificial individual and a natural person. A corporation or LLC is considered an artificial person in the legal realm. A licensed attorney must represent any corporation or LLC that wants to file a response or cross-complaint. Individuals that own the corporation or LLC may only represent themselves if they are sued individually, but they cannot represent the entity as a whole or any other person.
Suppose a corporation or LLC attempts to file a response to a complaint or a complaint. In that case, it will likely be rejected on the grounds that it is not filed in accordance with the laws of the state of California, or it may result in a default judgment against your company. A dismissal of a complaint may result in missing a statute of limitations if you retain counsel later, depending upon the legal violation. And a default judgment against your company can be costly and infuriating since you weren’t able to plead your case. Both of these scenarios show why it is essential to secure legal representation as soon as possible.
In addition to California, many other states have legal rulings that ensure that corporations cannot represent themselves in court.
Exceptions to the Rule that Allow for Pro Se Representation
In the state of California, there are two statutory exceptions to the rule that an attorney must represent a corporation or LLC.
- From California’s Code of Civil Procedure, Section 116.510 ruled that a corporation can appear pro se in small claims court by sending a corporate representative.
- From California’s Code of Civil Procedure, section 708.150(d), the passage states,”A corporation, partnership, association, trust, or other organization, whether or not a party may appear at an examination through any authorized officer, director, or employee, whether or not the person is an attorney.” This provision is specific for judgment debtor examinations.
While many people may think that they can avoid the pro se limitation if their LLC or corporation is either very small or simply owner-operated. Unfortunately, this is also false. The rule that all corporations and LLCs must hire an attorney applies even if your company only consists of you. With only the two exceptions above, all corporations and LLCs in California must retain legal counsel for any other legal proceedings.
Suppose a corporation or LLC has retained legal counsel, but the judge has granted a motion by the attorney to withdraw. In that case, the corporation or LLC must find alternative legal counsel as quickly as possible. The courts generally provide a twenty to thirty-day window for the corporation or LLC to identify a new attorney once it has granted the withdrawal.
Providing representation for your corporation or LLC during complex business litigation isn’t only required; it can also result in the best possible legal outcome for your company. To learn more about complex business litigation, contact Grellas Shah today.