Would that be legal? If so, is it done? If not, why not?
This would not be legal.
In house counsel has one client, the employer.
When third-party clients are served, you start to be treated as a law firm subject to all rules that apply to them, and not as in house counsel.
This said, there is some work which is classified as the practice of law in some places but not others.
For example, in New York State, a determination that there is marketable title to real estate in advance of a purchase and sale or mortgage financing transaction is considered to be the practice of law and if it is done for third-parties must be done by a law firm.
But, in Colorado, the same work is not considered to be the practice of law and can be performed by a non-law firm title company (which still is subject to title company licensing requirements imposed and administered by the state government) with the assistance of an in house general counsel (who is, strictly speaking, representing the title company in making a decision to insure or not insure title to real property, rather than directly representing the title company).
There are a variety of circumstances that are gray areas concerning the issue of whether or not something constitutes the practice of law. For example, consider the following:
- Selling generic legal forms or law books or legal research materials is generally not considered to be the practice of law.
- Helping people fill out court forms without providing legal advice or guidance on how to do so is often not considered to be the practice of law.
- Notarizing a document is not considered to be the practice of law.
- Serving people with legal process is not considered to be the practice of law.
- Non-legal research, even in connection with a court case (e.g. by a private investigator or skip tracer), is usually not considered to be the practice of law.
- Court reporting (i.e. making verbatim transcripts of oral court or deposition proceedings) is not considered the practice of law.
- Many of the judgments informed by legal knowledge, and documents with legal effect, that are made or prepared by real estate agents, property managers, securities brokers, financial planners, insurance agents, car dealers, finance company employees, bankers, collection agency employees, accountants, surveyors, bail bondsmen, bounty hunters, and law enforcement officers in the course of their occupations is not considered the practice of law even though lawyers make judgments on the same issues, or draft documents, using the same resources in their legal practices.
- Mediation and arbitration services are not necessarily the practice of law.
Local custom and practice is a much a factor concerning what constitutes the practice of law as any rational legal standard that can be meaningfully applied.