July 23, 2009
No Cause Of Action For Unauthorized Practice Prior To Statute
From the web page of the Ohio Supreme Court:
The Supreme Court of Ohio ruled today that it has exclusive jurisdiction over the unauthorized practice of law in this state, and held that there was no legal basis for a private lawsuit based on a claim of unauthorized law practice in Ohio prior to September 2004, when the General Assembly amended R.C. 4705.07 to expressly recognize such a cause of action.
Applying that analysis to a Cuyahoga County case, the Court ruled 6-1 that a home buyer had no legal basis to seek civil damages from a mortgage lender for allegedly using non-attorneys in 2002 to perform legal services for which the lender charged a “document preparation fee.” The Court’s majority opinion was written by Justice Maureen O’Connor.
The case involved a class action lawsuit filed on behalf of Gary Greenspan of Cleveland and other plaintiffs. Greenspan sought to recover from Third Federal Savings & Loan a $300 document preparation fee that was included in the transaction costs he was charged by Third Federal in 2002 in connection with closing on a residential mortgage. The complaint alleged that the drafting of promissory notes, mortgage agreements and similar documents constituted the practice of law, and that Third Federal had gained unjust enrichment by charging Greenspan and other borrowers for the preparation of legal documents by non-lawyer clerical employees. Citing prior court decisions holding that a non-attorney is not entitled to payment for any service that constitutes the unauthorized practice of law, Greenspan asked the trial court to order the lender to refund the $300 he had paid for document preparation services.
Greenspan did not file a grievance with the Ohio Supreme Court’s Board on the Unauthorized Practice of Law or a local bar association regarding the lender’s actions, and did not obtain a ruling by the board that Third Federal’s conduct constituted the unauthorized practice of law.
Third Federal filed a pretrial motion to dismiss Greenspan’s complaint. It argued that, prior to the adoption of amendments to R.C. 4705.07 effective in September 2004, Ohio did not recognize a private cause of action (legal basis for a civil lawsuit) based on the unauthorized practice of law. The trial court granted judgment in favor of Third Federal, stating in its judgment entry that at the time Greenspan was assessed and paid the document preparation fee in 2002, there was no provision of state law that authorized civil claims based on the unauthorized practice of law.
Greenspan appealed the order dismissing his suit. While Greenspan’s appeal was pending before the 8th District Court of Appeals, that court issued a decision in a virtually identical case, Crawford v. FirstMerit Mortgage Corp. In Crawford, the 8th District held that the plaintiff could not sue to recover document preparation fees he paid to a mortgage lender prior to September 2004 because a private cause of action for unauthorized practice of law did not exist in Ohio prior to the 2004 amendment of R.C. 4705.07. Despite the holding in Crawford, a different panel of the 8th District overruled the trial court in Greenspan’s case and reinstated his suit against Third Federal. The court held that because the unauthorized practice of law was available as a defense to breach-of-contract and fee-collection actions, it “inexorably” followed that it was also available as an affirmative cause of action. The appellate court acknowledged that its decision conflicted with Crawford, but declared that Crawford was “simply in error.”
Despite the Supreme Court’s mandate in In re J.J. (2006) and subsequent rulings that courts of appeals must convene en banc (with all judges participating) to resolve conflicting rulings by different three-judge panels, the 8th District did not convene en banc to settle the conflict between Crawford and Greenspan. Third Federal sought and was granted Supreme Court review of the 8th District’s decision.
Writing for the Court in today’s decision, Justice O’Connor rejected the 8th District’s finding that Greenspan’s suit did not make a direct claim for the unauthorized practice of law, but rather asserted common-law claims for unjust enrichment and money had and received. She observed that, notwithstanding the wording of Greenspan’s complaint, “(U)ltimately, he sought to recover for Third Federal’s purported unauthorized practice of law. The fact that Greenspan creatively framed the action as one for unjust enrichment and money had and received does not alter the essential nature of the action. ... Greenspan’s complaint alleges that Third Federal charged him for legal work performed by nonattorney employees. However styled, Greenspan seeks to recover for Third Federal’s purported unauthorized practice of law.”
Because the events giving rise to Greenspan’s claim occurred before September 2004, when the legislature created a statutory cause of action for unauthorized law practice, Justice O’Connor wrote, “(T)his case turns on whether a common-law right of action for the unauthorized practice of law existed prior to 2004. Greenspan cites a myriad of cases from various state and federal courts for the proposition that courts have long recognized common-law claims for unjust enrichment and money had and received when a person without a license performs a service for which a license is required. But the caselaw upon which Greenspan relies almost exclusively relates to architectural and engineering services. Caselaw acknowledging a common-law claim for recovery of fees charged by unlicensed architects and engineers does not establish the existence of a common-law claim for the unauthorized practice of law.”
“Greenspan also points to three cases involving legal services rendered by nonattorneys in support of his argument. However, none of these cases recognizes an affirmative common-law claim for either unjust enrichment or money had and received arising from the unauthorized practice of law. Instead, the cases involve breach-of-contract and fee-collection actions in which the court allowed defendants to raise the unauthorized practice of law as a defense to the plaintiffs’ attempts to recover fees for services rendered by nonattorneys. Contrary to the Eighth District’s holding, it does not ‘inexorably’ follow that because the unauthorized practice of law may be an affirmative defense in breach-of-contract and fee-collection actions, an affirmative cause of action for the unauthorized practice of law must exist. Greenspan cites no case law, and this court is not aware of any, that recognizes an affirmative common-law cause of action for the unauthorized practice of law.”
In addition to the lack of case law recognizing a common-law claim for the unauthorized practice of law, Justice O’Connor wrote: “Greenspan simply cannot escape the fact that the Supreme Court has exclusive jurisdiction over the practice of law, including the unauthorized practice of law. Section 2(B)(1)(g), Article IV of the Ohio Constitution confers on this court ‘exclusive power to regulate, control, and define the practice of law in Ohio.’ ... Greenspan argues that because trial courts have ‘original jurisdiction in all civil cases’ pursuant to R.C. 2305.01, they must have jurisdiction over civil actions arising from claims related to the unauthorized practice of law. We are not persuaded by that argument. A common-law claim for the unauthorized practice of law would require trial courts to make determinations explicitly reserved for this court.”
She also observed that, in enacting a statutory cause of action for the unauthorized practice of law in 2004, “ the General Assembly avoided invading this court’s exclusive jurisdiction over the practice of law by creating a statutory scheme under which a claimant may commence a civil action for the unauthorized practice of law only ‘upon a finding by the supreme court that the other person has committed an act that is prohibited by the supreme court as being the unauthorized practice of law.’...
Thus, although trial courts will preside over actions brought pursuant to R.C. 4705.07(C)(2), all determinations regarding the unauthorized practice of law remain within this court’s exclusive jurisdiction. Because courts did not recognize a common-law cause of action for the unauthorized practice of law, and because such a cause would invade this court’s exclusive jurisdiction over the practice of law, a private right of action for the unauthorized practice of law did not exist before September 15, 2004.”
The majority opinion was joined by Chief Justice Thomas J. Moyer and Justices Evelyn Lundberg Stratton, Terrence O’Donnell, Judith Ann Lanzinger and Robert R. Cupp. Justice Paul E. Pfeifer dissented without opinion, stating that he would affirm the ruling of the court of appeals.
The court's decision is linked here. (Mike Frisch)
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