Thursday, September 4, 2008

"Impending Financial Doom"

The North Dakota Supreme Court issued a bar discipline opinion yesterday suspending a lawyer for six months. The lawyer (McCray) had accepted employment with a California corporation that performed credit repair services for its clients. The corporation had sought a North Dakota lawyer because "[it] was one of the few states that allows trade names to be used for a law firm and...has no credit repair organizations act." The lawyer became the sole shareholder of the North Dakota corporation that was created and was paid a salary to  work with an out-of-state services provider (Bellwether, Inc.) to perform the credit-repair related services.

A bar complaint was filed by a Georgia dentist (McKenzie) who had attended a seminar and retained the corporation to assist her. She was concerned about the quality of the services in letters generated on her behalf:

The information contained in the letters was not factual and McKenzie was "absolutely horrified" when she saw the letters. McKenzie thought she was paying for letters to credit reporting agencies written by attorneys on Bradley Ross Law, P.C., letterhead. She did not deny that the accounts mentioned in the letters were accurate. Furthermore, McKenzie, who has a doctorate degree, was upset that the letters purportedly sent by her contained misspellings and poor grammar. Although the record does not indicate that McCray made a knowing decision about which form letters to send on McKenzie's behalf, the hearing panel found "McCray knowingly authorized the use of form letters which contained false information in that the letters were purportedly written and mailed by the client, contained inaccurate information about the client, and claimed that the client did not recognize the accounts on the credit report."

The court sustained a number of charges of misconduct including violations in the charged fees:

McCray testified he spent between 10 and 40 hours per week working for Bradley Ross Law, P.C. Assuming for the sake of argument McCray worked 40 hours per week during the 10 months or approximately 45 weeks McKenzie was a client, he would have spent 1,800 hours servicing approximately 9,450 clients, including McKenzie. According to our calculations, this results in .19 hours, or less than 12 minutes, McCray spent working for each client during the 10-month period. We agree with the hearing panel that this is an insufficient amount of time to adequately represent McKenzie along with his other clients.

We also agree that "little in the way of meaningful legal work" was performed for McKenzie. It appears the vast majority of the work performed consisted of simply inundating credit reporting agencies with dispute letters written in the consumer's name to trigger the obligation of those agencies under the Credit Repair Organizations Act, 15 U.S.C., § 1679 et seq., to respond to all consumer disputes within 30 days and remove any legitimately challenged item that cannot be verified within the 30-day period. See Federal Trade Comm'n v. Gill, 265 F.3d 944, 952 (9th Cir. 2001); 15 U.S.C. § 1681i. The persons who prepared and mailed the dispute letters were located in Indiana. Moreover, the panel's finding that Bradley Ross Law, P.C., did not until recently verify that work was performed for clients each month they were billed is supported by McCray's own testimony.

Other violations involved false statements to third parties, improper solicitation of legal employment through client-generating seminars, dishonesty, assisting the unauthorized practice of law and sharing fees with non-lawyers.

A concurring and dissenting opinion expressed concern about the solicitation misconduct as broadly applied to educational seminars:

Enforcement of our anti-solicitation rules within constitutional bounds permits lawyers to present educationally oriented classes, seminars and speeches to and for current and potential clients. Violation of 7.3 occurs when the seminar "serves no discernible purpose other than the attraction of clients." Lawyers with questions of whether particular educational or solicitation activities are permitted can request and rely on ethics opinions from the State Bar Association of North Dakota pursuant to N.D.R. Lawyer Discipl. 1.2(B). Here, however, I agree with the Majority that McCray's client solicitations exceeded the limits permitted by a constitutional application of our rules.

Also from that opinion:

Both the hearing panel and the Majority fixated on the fact McCray generated millions of dollars and paid ninety-five percent of that sum to Bellwether or an affiliate...That a lawyer spends ninety-five percent of his or her gross income with one contract vendor may speak of the lawyer's impending financial doom. But it does not speak of per se unethical conduct. To have such a rule would improperly, unwisely and, perhaps, unconstitutionally bring discipline on lawyers paying significant costs associated with starting a law practice, on lawyers engaging in heavy but authorized advertising to grow a practice, or on lawyers purchasing an existing law practice.

The concurring/dissenting opinion also was not impressed with the "simple math" method of the majority to determine the fee issues:

The expansive factual findings made by the majority and by the hearing panel are suspect because we have only McKenzie's case file and the testimony of McKenzie, McCray and a former member of Inquiry Committee West. We have neither the testimony of, nor the case files for, any of McCray's other 9,449 clients. We therefore must exercise care about the sweeping conclusions being applied to all of McCray's clients based on the very small pool of evidence in this case.

Thus, it is argued, the court improperly concluded that there was a basis in the evidence for a finding that the lawyer had rendered little or no meaningful work on the client's behalf. (Mike Frisch)

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Comments

Lawyers who cause people credit repair headaches should be held responsible for their actions. There are bad apples in every industry. Some in the payday loan industry have given it a bad name.

Everyone seems to hate Payday Loans these days except those who are enlightened about the source the negative media. I am trying to get a positive message our about payday loans because Big Banks and there sky high overdraft fees, late fees, and fees on top of fees are putting millions into the anti-payday loan campaigns as a way to stiffle commercial competition and free trade.
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Posted by: Lady Payday Advocate | Sep 10, 2008 10:26:12 PM

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