MCLE Dragnet: Just the Facts Ma’am

The Review Dept. of the State Bar Court has granted the request of the Association of Discipline Defense Counsel and the Association of Southern California Defense Counsel for publication of the Court’s decision in In the Matter of Yee.

Yee is a case that arises out of State Bar’s annual audit of MCLE compliance, a practice that began in 2011.  The respondent in question was part of the first audit after she had affirmed her compliance with the 25 hour MCLE requirement on line on January 31, 2011.  When she was asked to provide proof, she was unable to locate her records. She completed the 25 hours required after the compliance period and paid a late fee.  In response to the State Bar’s investigation regarding her affirmation of compliance, she stated

At the time I made the affirmation, I recalled and believed that I had complied. In reviewing my records, I now believe that I made a mistake.” She explained, “I transitioned to a new job in mid-February 2009 and recall that I took classes prior to starting my new job. . . . I cannot find a record of those classes. [¶] . . . [¶] . . . [I]t is
possible that I may have confused classes that I took to satisfy the prior compliance period with
the current . . . period.” [She] acknowledged that “my records were and are lacking” and accepted
responsibility for her “error in memory and recordkeeping.”

The Office of Chief Trial Counsel argued that the respondent was culpable of intentionally misrepresenting her compliance with MCLE requirements and asked for thirty days of actual suspension.
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A Cold Place in The Sun

Consider the following chart which presents information from 21 discipline cases tried in State Bar Court where respondents were represented by discipline defense counsel since January 2013:

OCTC Demand                         State Bar Court Trial Result
1 Disbarment                                   6 month actual
2 Disbarment                                   6 month actual
3 Disbarment                                   2 year actual suspension
4 90 day actual suspension         Dismissal
5 90 day actual suspension         Dismissal
6 30 day actual suspension         Stayed suspension
7 Disbarment                                   Public Reproval
8 2 years actual suspension        1 year actual suspension
9 6 months actual suspension     30 days suspension
10 Disbarment                                 2 years actual suspension
11 Disbarment                                 Dismissal
12 2 years actual suspension      6 months actual suspension
13 Disbarment                                 2 years actual suspension
14 1 year actual suspension         90 days actual suspension
15 Disbarment                                 18 months actual suspension
16 90 days actual suspension      30 days actual suspension
17 Disbarment                                  1 year actual suspension
18 6 months actual suspension    Public Reproval
19 30 days actual suspension      Public Reproval
20 Disbarment                                 2 years actual suspension
21 Disbarment                                 90 days actual suspension

This is only a fraction of the cases tried in State Bar Court since January 1, 2013, of course. Continue reading

Do We Need Advertising Rules?

A startling thought given voice at the recent meeting of the Association of Professional Responsibility Lawyers (APRL) in Boston.  As I understand the concept, in the language most other jurisdictions speak, Model Rules 7.1 – 7.6 are not necessary in light of Model Rule 8.4’s prohibition on dishonesty.  Californians would look to our twin constellations of Rule 1-400 and Bus. & Prof. Code sections 6157 et seq.

Both the Model Rules and California law set forth rather detailed schemes dictating the form and content of attorney advertising.  By comparison, California’s false advertising statute Bus. & Prof. Code section 17500, offers a relatively concise scheme generally applicable to businesses (and expressly inapplicable to lawyers alone under section 17500.1.)  What real function does the rest of the filigree in the lawyers’ codes serve, so the argument goes. The real danger is dishonest or misleading advertising, so we only need a rule against that.

In the discipline world, that has a degree of truth as what we are generally fighting about is whether the advertising is “false, deceptive, or which tends to confuse, deceive, or mislead the public” under Rule 1-400(d)(2), which is roughly comparable to Bus. & Prof. Code section 6157 and Model Rule 7.1.  Most of the rest comes into play in California in the context of advising clients as to what the law requires.

The significance of the question lies less in the answer than in the fact that the question is seriously asked.  Why exactly does section 17500.1 exist and how is the lawyering business really different from any other business? The issuance of the Canadian Bar Association report on the future delivery of legal services casts a light that puts these questions in sharp relief.  Lawyer advertising was, after all, originally approved based on the rationale that it would help expand the availability of legal services and lower the cost (Bates v. State Bar of Arizona (1977) 433 U.S. 350.)  It hasn’t worked out that way.  Now those concerns are imperative to the survival of the legal profession.  Of course, if the CBA approach is followed, we are going to being junking a lot more than the advertising rules.

Some Want Discipline to be Punishment. Who Are They?

Senator Joseph Dunn, Executive Director of the California State Bar, had this to say about the Discipline Standards Task Force in the ABA Journal:

The task force’s efforts could be the first step toward a significant revamping of the attorney misconduct sanctions, says the bar’s executive director, Joseph L. Dunn. “This could lead to a substantial rewrite, a minor rewrite, or even a change in basic philosophical approach,” Dunn says. “For example, many disciplinary rules are based on a rehabilitation model. Some believe that attorney disciplinary standards should move to more of a punishment model. The mission of the task force is to determine whether the disciplinary standards in force adequately protect the public and ensure attorney compliance with the ethical rules.”

No one I know who is knowledgeable about the discipline advocates punishment as a goal of the discipline system. Who is Joe Dunn talking about?

 

Senator Joseph Dunn

Senator Joseph Dunn

 

Not the Discipline Standards Task Force.
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State Bar Moves Forward on Client Trust Account Audits

The State Bar is moving forward with random audits of attorney client trust accounts.  A presentation to the Regulation Admissions and Discipline Oversight Committee (RAD) Thursday April 17 detailed preliminary steps taken to institute such audits, including determination of the sample population and necessary changes in statutes or rules to authorize such audits and create an enforcement mechanism.  A consultant has been engaged to work on the sample issue and the State Bar Office of General Counsel has been tasked with reviewing the existing law and recommending changes.  It is hoped that the costs of such audits can be reduced by relying on attorney self-reporting through a detailed questionnaire, rather than relying on teams of full-fledged auditors to examine records.
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UPL and the Lawyer’s Halo of Trust

The Question

At the last panel of the State Bar Ethics Symposium in San Francisco in April 2014, John Steele posed a question to his fellow panelist, Chas Rampathal, General Counsel of Legal Zoom, about what ethical rules presented the biggest obstacles to the provision of alternative legal services.  Unfortunately, time ran out before the question could be fully discussed.

A recent published Review Dept. decision may help fill in the answer.  In the Matter of Huang deals with a highly commoditized form of legal service, representing borrowers in loan modification, and a lawyer’s culpability of aiding the unauthorized practice of law.

The Halo of Trust

Despite our negative image, lawyers are still perceived as professionals who can be trusted.   Non-lawyer legal service providers do not yet share this halo of trust.  Part of the purpose of lawyer discipline proceedings is to maintain that halo and non-lawyers legal service providers lack it because there are no comparable mechanisms to police their behavior.   Because what they do is illegal.  At least sometimes.

In the matter before us the clients engaged the services of respondent. They expected and were entitled to have the services of an attorney in evaluating and settling their personal injury claims. Instead, they got the services of an adjuster and his negotiators, housed in offices bearing respondent’s name, with phones answered in respondent’s name and correspondence and negotiations conducted in respondent’s name, with little or no input from respondent.

In the Matter of Bragg (Review Dept. 1997) 3 Cal. State Bar Ct. Rptr. 615 (1997 WL 215942).  Bragg involved an attorney who entered into a business relationship with a non-attorney “adjuster” to process his pre-litigation personal injury cases.  California Insurance Code section 15007 provides for a “public insurance adjuster [which] includes one who, for compensation, assists an insured in negotiating for or effecting a claim on behalf of an insured.

The Magic of the Lawyer’s Mantle

Bragg’s argument was essentially if the adjuster could do what he does on his own, how can I be culpable of aiding the unauthorized practice of law?  The Review Dept.’s answer was that those activities by a lay person, even if sanctioned by statute, become the unauthorized practice of law when that person is working under the aegis of an attorney.

Strangely, Bragg was not charged by the Office of Chief Trial Counsel (OCTC) with aiding the unauthorized practice of lawin violation of Rule Prof. Conduct 1-300(A). But they also had charged Bragg with acts of moral turpitude in his relationship with Hickman.  The Review Dept. found that Bragg “knew that he was abdicating his responsibilities as an attorney and acted purposefully in allowing Hickman to engage in activities which constituted the practice of law.”  OCTC didn’t spot the 1-300 violation; but Bragg was expected to.

The gravamen of what the Review Dept. articulated is a false advertising argument.  You hired an attorney but you got an adjuster.  You are entitled to individualized legal counsel, even if all you really wanted was the medical bills paid and legal extra cash.  In Richard Susskind‘s terms, you are entitled to (and presumably paying for) the “bespoke” legal services of a lawyer.   But something else comes with those “bespoke” services;  the expectation of an individual relationship of trust.

When a lawyer is involved, the nature of the service changes, transmutes.  It’s now imbued with the intangible, almost mystical, aspect of the lawyer as counselor.  Just as other cases dealing with unauthorized practice of law, there is almost religious qualify ascribed to the attorney-client relationship;  indeed, Benninghoff v Superior Court (2006) 136 Cal.App.4th 61, 68 speaks about what a “defrocked” lawyer may or may not do.

Huang, like Bragg, had an opportunity come his way.  It knocked in the form of the loan modification practice of an attorney who files had been seized by the Orange County DA.  Attached to those 100 files were two non-attorneys, Martinez and Campos, who operated under the name National Mitigation Service (NMS.) Mr. Huang had only been admitted three years when he began working with Martinez and Campos.  He told the Orange County and the State Bar that he would be hiring NMS to “process” the files.

The State Bar apparently did not inquire closely into what Huang’s role would be in that processing.  But just three years later it charged Huang with aiding the unauthorized practice of law.  The hearing judge found that the State Bar did not prove its that charge by clear and convincing evidence.  The Review Dept. seemed incredulous:

Huang created a lay negotiating service that permitted non-lawyers to practice law and elevated profit above the clients’ interests. …. “Although [loan modification] services might lawfully have been performed by . . . brokers, and other laymen, it does not follow that when they are rendered by an attorney, or in his office, they do not involve the practice of law. People call on lawyers for services that might otherwise be obtained from laymen because they expect and are entitled to legal counsel.” By delegating all the work on loan modification cases to nonattorney staff, Huang failed to “competently evaluate the client’s claim and represent the client appropriately.” [citing Bragg] Accordingly, we find he violated rule 1-300(A) in all eight client matters.

Emphasis added.  Huang’s practice had between 500 and 800 clients.  Those familiar with loan modification practice under programs like HAMP will know that it bore little relationship with the type of real time negotiating that lawyers typically engage in, except for occasional instances where a lawyer’s clout will have an impact.  This has changed a little with the enactment with the Homeowners Bill of Rights which has given lawyers a new and expanded potential role in loan modification.   But by and large it is the kind of commoditized legal service that could be more cheaply performed by someone who does not have the legal training of a lawyer.

 

The Missing Ingredient: Vitamin T

One can see why the Review Dept. granted OCTC’s motion to publish Huang.  It re-states the core selling value of the legal profession that lawyers are offering a highly individualized product:  a special relationship of trust with client.   That kind of personal attention to the client is often lacking when dealing with a highly commoditized high-volume practice such as loan modification.  Many aspects of a commoditized law practice can be more cheaply accomplished by non-lawyers but the lawyer has to be involved, not only in supervising the non-lawyers (who may know more about the subject matter of the practice) but to fulfill the client’s expectation of trust.  That means contact with the client.

Part of the reason that halo rests so heavily on the lawyer’s head is that lack of enforcement mechanisms like professional discipline for non-lawyer legal providers, a consequence of their general prohibition.   The State Bar of California is creeping slowly toward recognizing legal providers who are less credentialed than lawyers but the trend in the short term is to maintain, and indeed strengthen the remedies for non-lawyers delivering legal services.  The State Bar is actively seeking the ability to recover attorneys fees and costs in civil actions against such non-lawyers through former Assembly Bill 852.  A prior almost identical bill was vetoed by Gov. Brown after vocal opposition by the California Association of Legal Document Assistants (CALDA).

To bring the discussion full circle, Legal Zoom has found that the marketplace for commoditized legal services delivered by non-lawyers only went so far under the UPL rules.   So Legal Zoom now offers legal services from attorney licensed in all jurisdictions through its group legal plans.  The web site promises to help consumers “Find An Attorney You Can Trust” and “Build a Long Term Relationship With An Attorney You Can Trust..”

UPL

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