Corporations Need Counsel

By Karen Federman Henry

It’s not really new—corporations cannot participate in court proceedings without an attorney.  The same concept applies to the otherwise informal process before an administrative agency.  So what should a corporation do when its counsel withdraws from an administrative proceeding?  The Court of Special Appeals recently answered the question in an unreported decision—retain counsel or say something to preserve the issue for further review.

In the Matter of Pessoa Construction Co., Inc., Sept. Term, 2018, No. 0056, arose from a matter before the Board of Contract Appeals in which Pessoa sought additional compensation from a contract it had with the State Highway Administration, as well as a reduction of liquidated damages that had been assessed against it.  During the pendency of the matter, Pessoa’s counsel withdrew and Pessoa did not enter new counsel, despite the Board’s notice identifying the regulation that requires corporations to participate in proceedings only through counsel.  When the State moved to dismiss the case, the Board granted the motion, and Pessoa’s subsequent petition for judicial review in the circuit court yielded no relief from that decision.

Before the Court of Special Appeals, Pessoa argued that the Board used an unlawful procedure in dismissing the case, that the Board should have issued a show cause order prior to granting the motion, and that Pessoa’s due process rights were violated.  The appellate court noted that, as a general matter, none of the issues were preserved for appellate review—once Pessoa was unrepresented, it failed to respond to the motion to dismiss or to raise any of the issues it presented on appeal.  The Court further emphasized the provision in the Code of Maryland Regulations that requires a corporation to be represented by counsel in any administrative proceeding.  Having failed to retain substitute counsel, or to raise any of the alleged deficiencies at the administrative level, the Court explained that it would affirm the dismissal.

Instead of leaving the matter there, however, the Court provided analysis of each issue as if it were preserved for review.  The Court highlighted the regulation that specifically requires a corporation to have counsel in an administrative proceeding, making that the first point where Pessoa failed to protect itself.  Also, the regulations allowed the agency to rule on the motion to dismiss, because the content amounted to a summary disposition, which the regulations permit.  As a result, no show cause was required prior to the Board ruling on the motion.  Finally, no due process violation occurred—there was no absence of procedural safeguards, but instead, Pessoa’s own actions in failing to avail itself of the procedures that exist caused any deprivation of rights that may have occurred.

What remains unanswered is why counsel withdrew—disagreement over the substance of the case?  A fee dispute?  Lack of cooperation of the client with the case?  Clearly, the court viewed the reasons stated in the motion to withdraw as adequate to approve it.  Moreover, the Court noted that the corporation had adequate time in which to obtain substitute counsel, and that Pessoa was not inexperienced in litigation, implying that the corporation understood the need for counsel.  Perhaps the corporation had internal disagreements over whether to pursue the case that led to the failure to obtain new counsel.

Whatever the answers to these questions might be, the opinion serves as a reminder that administrative proceedings, despite their informal characteristics, require counsel for corporations just like court proceedings.  The case also highlights the ramifications of an attorney’s withdrawal when a corporation fails to take the needed steps to pursue its administrative remedies, and suggests that caution is needed when seeking to withdraw from representation.

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