Legal Profession Blog

"I Have Personal Failings Like Everyone Else, And I Have Not Been True to My Values And the Behavior My Family Deserves"

Posted by Jeff Lipshaw

I am in Detroit for a family matter.  I spoke to my wife from the car at about 7 a.m.  She asked me if I would pick up and bring home some of her favorite pecan sticky buns from one of the local bakeries.  For some reason, I got fixated on the idea of sticky buns in my carry-on, and said I didn't want to, getting quite heated about it in the process.  I was a total jerk.  I called home and two minutes later and apologized.  I hope my sponsors will understand.

[This has been a test of the "15 Minutes of Fame Network".  This is only a test.  Had it been a real 15 minutes of fame event, you would have been instructed to turn to CNN, Fox News, MSNBC, or Pardon the Interruption for instructions on how to parlay personal failings or brazen chutzpah into hours of media entertainment.  This has been a test of the "15 Minutes of Fame Network."  We now return you to your regular blogging.]

UPDATE:  What is it about guys?  Another one bites the dust.  Maybe I'm just such a nerd that I'm never faced with the temptation that seems to have lured Rick Pitino, David Letterman, Tiger Woods, John Edwards, Eliot Spitzer, Gary Hart, yadda, yadda, yadda.  A fellow university professor once told me this story.  He was teaching undergrads at a large urban university.  He had given a failing grade on an exam to a female student.  She approached him after a class, saying that if she failed the class, she would lose her financial aid, and that she would do "anything" to raise the grade.  He said (with a leer), "anything?"  She said, "Anything."  He said:  "Then why not try reading the material, coming to class, and studying?"

The Silverdome and the Fixed Cost Dilemma

Posted by Jeff Lipshaw

Mark Edwards (William Mitchell, left), a guest blogger at Concurring Opinions, has an interesting post on the recent fire sale disposition of the Silverdome, the former home of the Detroit Lions, primarily on the subject of bargaining power between landlords and tenants, and the importation of contract law principles into residential and commercial leasing.  Mark commented on the "Michigan" aspect of the Silverdome's decline, and I felt a personal tug, because I'm a Michigander born and bred, still own a home there, and I started kindergarten at the Herrington School about a mile from the Silverdome, in a little neighborhood just across Featherstone Road from what many years later would become the site of the Silverdome.  I wrote a comment over there I'm re-posting in large part here, because there is, it turns out, something kind of Michigan about the problem.

Mark suggests that the Silverdome problem has to do with the commercial power of the tenant, but I see it somewhat differently.  It strikes me that it arises because of the non-fungible and substantial fixed nature of the asset (which indeed was dictated by the tenant at the outset). You could have a very powerful tenant in an attractive office building in mid-town Manhattan, able to dictate terms versus the owner, and not have the Silverdome problem. You could also have a smaller building and not have the Silverdome problem (I see a lot of restaurants that clearly used to be A&W Root Beer Drive-Ins.)

If there is something particularly “Michigan” about the Silverdome problem, it’s the problem of dealing with the redeployment of large fixed assets when the forces of creative destruction take down an industry. As a former executive in the chemical industry, I can attest to the dilemma of the rational impulse to continue to operate fixed assets, even when they are not returning their total costs, because, in the short term, there is a marginal return on the marginal cost. It’s Microeconomics 101 – you operate at a loss on total costs until you reach the shutdown point of no marginal profit. If it were just one chemical plant sitting somewhere that has been made non-competitive (somewhere after not returning total costs and extending to shutdown), it would be unsightly, and the owners would have taken the loss, but it wouldn’t be a crisis. It’s a crisis in Michigan because it’s happened to an entire industry at the same time.

It’s also not the first time it’s happened to an industry in Michigan. Take a drive some time around the Keweenaw Peninsula, the part of the U.P. that juts into Lake Superior. Calumet, Michigan and the surrounding township used to have 25,000 people there, mining copper. I think about a thousand live there now. Copper Harbor, at the very tip of the peninsula, still has street grids laid out.

Nor is it unique to Michigan – see steel towns in Pennsylvania, mills and factories in Massachusetts. But I’m not sure anything has ever compared to the auto industry in terms of the dependence of whole regions and nations. During the Chrysler bailouts of the 1980s, I remember hearing George Will, supporting the idea, say that something like one-sixth of the U.S. GDP was related to the auto industry.

Change Coming To California

From the web page of the California Bar Journal:

After nine years of work by its Rules Revision Commission, the State Bar Board of Governors has approved 35 revisions of the California Rules of Professional Conduct on issues ranging from lawyers as third-party neutrals and fees to communication with a represented person and competence.

“Approving the first batch of new Rules of Professional Conduct is an important step towards finalizing the process,” said Michael Marcus, chair of the Discipline Oversight Committee. “All California lawyers owe a debt of gratitude to the Rules Revision Commission for its years of hard work.”

For easier reference, the numbering of all the new rules are being changed to conform to the numbering system and subject area of the ABA Model Rules of Professional Conduct.

At its November meeting, the Board of Governors approved rule revisions that:

• Require an attorney serving as a third-party neutral to explain the difference between an advocate and third-party neutral to someone unlikely to be aware of the distinction. (Rule 2.4)
• Retain California’s current standard prohibiting, for disciplinary purposes, an “unconscionable fee.” The commission had been considering adopting the ABA’s standard that prohibits an “unreasonable fee.” (Rule 1.5)
• Follow the ABA Model Rule that expands ex parte communication to include all represented “persons.” The current rule applies only to a represented “party.” (Rule 4.2)
• State that a lawyer shall not intentionally, recklessly or repeatedly fail to perform legal services with competence. The rule defines “competence” in any legal service as applying the diligence, learning, skill and mental, emotional and physical ability reasonably necessary for the performance of such service. (Rule 1.1)

Proposed rules dealing with sex with a client and conflicts of interest were referred back to the commission for further work. Proposed rules on reporting the egregious behavior of another attorney and business transactions and adverse interests were tabled until the January meeting for further discussion.

Attention Ohio Lawyers

Important news for Ohio lawyers from the web page of the Ohio Supreme Court:

The Supreme Court of Ohio has adopted amendments that concern a lawyer’s duty to safeguard client funds and property in which third persons claim an interest. The amendments become effective Jan. 1, 2010. Justices concurred 7-0 in adopting the amendments.

The amendments to Prof. Cond. R. 1.15(d) and Comment [4] are based on a 2007 Advisory Opinion issued by the Board of Commissioners on Grievances & Discipline and recommendations issued in late 2008 by a special Ohio State Bar Association committee.

The current rule requires a lawyer to protect the interest of a third-party in client funds and property held by the client, unless the claim is frivolous. The amendments specify that a lawyer must have “actual knowledge” of a third person’s interest and that the claimed interest must be “a statutory lien, a final judgment addressing disposition of the funds or property, or a written agreement by the client of the lawyer on behalf of the client guaranteeing payment from the funds or property.”

Changes to the comment portion of the rule offer guidance about a lawyer’s ethical duties depending on whether the funds or property is in dispute and whether the client or third person’s claim to the funds or property is lawful. Where there is a dispute over interest in the funds or property, a lawyer must hold the funds or property in a trust account separate from the lawyer’s funds, until the dispute is resolved.

Based on the 16 public comments submitted during the public comment period, the Supreme Court approved three revisions:

• The word “lawful” was inserted in the first sentence of division (d) in light of the Supreme Court’s decision in W. Broad Chiropractic v. Am. Family Ins. This change also conforms the rule and Comment [4].

• The word “specific” was inserted in the second sentence of division (d) to clarify that an otherwise lawful claim must provide for payment from specific funds or property in the lawyer’s possession, and not from any client funds or property that the lawyer may possess. This change also conforms the rule and Comment [4].

• Use of the word “resolve” rather than “arbitrate” in the next-to-last sentence of Comment [4]. Some viewed the use of “arbitrate” in the former rule and proposed amendment as referring to the process of arbitration.

View the final rule to access the final rule.

As disciplinary counsel will tell you, there few things more dangerous to an attorney's license than non-compliance with the duty to safeguard entrusted funds. (Mike Frisch)

No Waiver Of ABA-Accredited Law Degree For Georgia Applicant

The Supreme Court of Georgia affirmed a determination of the Board of Bar Examiners declining to waive the requirement that an application for bar admission graduate from an ABA-accredited law school. The applicant had a degree from "a correpondence law school utilizing internet-based, online, and recorded instruction. Further, the applicant had a masters of law from an accredited institution. She had passed the "first-year" California state bar examination and the MPRE.

The court found that '[t]he Board's procedures provide the opportunity to show good cause why the traditional educational requirements should be waived" but that the board did not abuse its discretion here. (Mike Frisch)

Fieger In Arizona

Geoffrey Fieger was admitted on examination in Arizona in 1980. He also is admitted in Michigan (where he principally practices) and Florida. He was administratively suspended in 1993 for failure to complete Arizona CLE obligations. There are no such requirements in Michigan. He inquired in 1996 about curing the suspension and was told that he need only pay fees and take courses. When he later proceeded to take these steps, he was advised that he must take and pass the bar exam. He proceeded to file a petition for reinstatement.

A Hearing Officer has issued a report in which he recommends that the exam requirement be waived. The hearing officer notes that Fieger has been a competent and able attorney with a national practice for almost 30 years. The civil litigation against him was dismissed in the main and the discipline imposed in Michigan did "not call into question [his] fitness and/or competence to practice law." (Mike Frisch)

SuperLawyer Law School Rankings - Balloon Boy Redux

Posted by Jeff Lipshaw

Or something like that.  To pile on top of what Alan has to say, what I mean to say is the seeking of publicity for the sake of publicity.  And I say that as somebody who was a Super Lawyer in Indiana back in 2004 or so.  For whatever the hell that's worth (see certificate suitable for framing below).  Just make a ranking (or pull off a hoax) and get your fifteen minutes.

Geez, another magazine wants to get in on the rankings game by measuring schools by how many Super Lawyers went to the school.  Yes, as Brian Leiter and others point out, it has most to do with size.  There's another problem (or bias).  Super Lawyers are overwhelmingly lawyers in the private sector, practicing in law firms, the primary reason for which is that if you are named a Super Lawyer, you have the opportunity, provided to you by the publisher, to purchase advertising space in the magazine!  Something which of course is of little use to judges, academics, government lawyers, in-house lawyers, and people with law degrees who don't practice law.  (For the record, there is a category for in-house lawyers, and that was mine.  I was one of four in-house lawyers, of the bazillion lawyers in Indiana so honored, and no doubt because one of the lawyers at one of the big firms to whom we referred multi-hundreds of thousands of dollars of work nominated me.  That's not to say she didn't admire my skills and my charming personality, but somehow I don't think she would have nominated me on stellar reputation alone.  The point is somebody had to go out of her way even to get an in-house person nominated.) 

Not that I feel sorry for Yale (or Stanford, my poorly ranked alma mater) but if you put a disproportionate number of your graduates into non-private practice pursuits, you are going to get dinged.

Oh, and by the way, my current employer, the Suffolk University Law School, ranked 33.

Florida Adopts New Computer-Access Advertising Rule

The Florida Supreme Court, in response to a petition from the Florida Bar, has withdrawn its earlier opinion on proposed amendments to rules regulating computer-accessed attorney advertising and adopted a version of the Bar's proposed amendments. The new Rule is appended to the court's opinion.

In a separate order, the court adopted extensive amendments to its rules regulating the practice of law. (Mike Frisch)

The Bear Stearns Acquittals - A Causation Versus Blame View

Posted by Jeff Lipshaw

I've given talks now twice in the last two weeks, once to a group of faculty and students at the Brooklyn Law School, and once to the faculty at Suffolk, based on my article The Epistemology of the Financial Crisis.  One of my colleagues just sent me a note with a newspaper quote from one of the jurors who acquitted the Bear Stearns hedge fund managers who seemed to be of two minds (one private and one public?) regarding the future of the investment funds under their management:  "The entire market crashed. You can't blame that on two people." Giving the talks on the paper helped me refocus on what I think is its central thesis, namely that the paradigm of causation in law is blame-seeking, not explanation. As I said in the article about forward-looking regulation:

The overriding theme is that regulation needs to have an epistemological modesty about it, a certain lack of presumptuousness, all of which is belied by disciplines that think that complex causes can be reduced to (a) simple and singular utility functions (rational actor economics), (b) complex functions that can actually model the world's almost infinite contingency (behavioral economics), or (c) an after-the-fact ascription of blame (law). The right answer, I suggest, is that broad policy requires relatively simple models, the necessary downside being there is only so much regulation of a complex world can accomplish. The crisis of epistemology in 1755 was that even after Newton's accomplishments in physical science, an earthquake still destroyed Lisbon, and the crisis of epistemology in 2009 is that all the algorithms in the world are not going to stop financial bubbles. The problem is endemic to all forward-looking judgments. Nobody knows until after the fact whether the entrepreneur is a peerless visionary or a self-deluded wacko, any more than I really know until after the fact that today is the day I should jump ship from the public securities markets because today they became a bubble.

My response to my colleague this morning was that I had a similar take on what had happened in the Bear Stearns trial. The jurors understood intuitively the distinctions between causation as scientists and ordinary people consider it, and blame (as causation) as lawyers consider it.  And the seeming inconsistencies of the managers loving and hating the market are precisely the uncertainties we all live with looking forward rather than backward. 

Larry Ribstein suggests this is a problem with the application of the criminal law to business; I think it's something slightly different, particularly as a number of us try to construct an approach to teaching students what they need to know in order to practice law in transactions versus law in litigation.  The profession is vested in the job of blame-finding and it's something of a rigged game.  That is, a common justification for the presence of transaction lawyers is to anticipate the blame-finding that they can expect their sibling professionals to be undertaking once the deal is done.  This is always a tricky position for me to take and defend, because the immediate response is that I'm suggesting quietism or passivity in the face of wrongdoing.  No.  It's that there's more of a "shit happens" world out there than our teleological (purpose-inferring or end-inferring) instincts would like to admit, and the line between misfortune and injustice (as my friend Linda Meyer puts it) doesn't map very well against the line drawn by FRCP 11 or its equivalents on meritorious legal allegations.

A Fun Read

Jayanth Krishnan at Indiana (Bloomington) is expanding his ouevre of comparative legal profession studies with his latest on SSRN, The Joint Law Venture: A Pilot Study (here).  As with his other work, this one's an interesting (and, yes, fun) read.  Congrats, Jay!

(Posted by Nancy Rapoport)

Tennessee Bar Admission Change Proposed

The Tennessee Supreme Court has called for comments on a proposed revision to its rules governing bar admission. If adopted, an applicant will no longer be required to aver that an intent to practice in Tennessee. The order and propored new rule are linked here. (Mike Frisch)

Huge Fine For Unauthorized Practice

From the web page of the Ohio Supreme Court:

The Supreme Court of Ohio today imposed a civil penalty of $6,387,990 against two companies and their co-owners for engaging in the unauthorized practice of law, and issued an injunction permanently barring those companies, their principals and employees from any future marketing or sale of living trusts or other estate planning documents or services to Ohio residents.

In a 7-0 per curiam decision, the Court found that American Family Prepaid Legal Corporation and Heritage Marketing and Insurance Services Inc., their co-owners, Jeffrey and Stanley Norman, and multiple employees of those firms engaged in more than 3,800 acts of unauthorized law practice by virtue of their participation in a “trust mill” operation from March 2003 through March 2005. 

The Court noted that American Family, Heritage, the Normans, and employees of the two companies had been the subject of a prior unauthorized practice of law complaint and investigation by the Columbus Bar Association (CBA) in 2002 that was resolved by the signing of a March 2003 consent agreement. In that agreement, the respondents acknowledged that providing estate planning advice and marketing and preparing trust agreements and other estate planning documents constitutes the practice of law, and promised to permanently cease and desist from such activities in Ohio.

The Court agreed with findings by its Board on the Unauthorized Practice of Law that, after signing the 2003 decree, American Family, Heritage and their owners used third-party marketing firms to send direct mail ads to lists of Ohioans 65 and older and also targeted senior citizens with magazine advertising containing exaggerated claims regarding the costs and complications of disposing of their assets through a will. Persons responding to the ads were subjected to high-pressure in-home presentations in which American Family’s non-attorney sales representatives provided them with legal advice including inflated “estimates” of the costs of probating their estates and the purported savings the customer would realize by purchasing American Family’s standardized living trust document – regardless of the size or composition of that individual’s estate or his/her existing estate planning documents.

In rejecting American Family’s claim that its actions were authorized because it had registered as the operator of a “prepaid legal services plan,” the Court wrote: “In arranging these appointments, American Family telemarketers did not refer to a prepaid legal plan and did not inform the customer that he or she would be solicited to buy a prepaid legal plan or living trust. The telemarketers did ask, however, whether the prospect already had a living trust. In sales presentations, usually occurring in a customer’s home, American Family’s agents focused on convincing a customer that he or she needed a living trust. If sold, the customer paid a $1,995 fee purportedly for an array of legal services relative to landlord/tenant law, businesses, domestic relations, bankruptcy, and other legal fields, at discounted fees, from a number of listed Ohio attorneys. Almost exclusively, however, the only legal service that the plan members received was the preparation of a living-trust document and related estate-planning instruments such as powers of attorney and a living will. For this reason, for the thousands of memberships sold, few if any members obtained legal assistance other than a living-trust portfolio.”

The Court noted that despite the fact that American Family used sales persons who had never been licensed as attorneys to “advise” customers about their estate planning needs and persuade them to purchase a trust, and that other non-attorneys in California actually prepared the trust documents, the company attempted to legitimize its unauthorized law practice by passing each transaction through a Columbus attorney, Edward P. Brueggeman. Brueggeman seldom spoke with the customers who were purported to be his “clients,” and was paid a flat fee by American Family for every trust document he approved.

In its decision, the Court wrote: “From the start of his employment until March 2005, Brueggeman had an office within American Family/Heritage offices on Citygate Drive in Columbus.  Brueggeman did not pay rent and used the supplies and services provided by American Family and Heritage employees to perform his role. Brueggeman did not hire or supervise the American Family sales agents. Brueggeman, after receiving the agreement, sent a form letter to the purchasers of the plans thanking them for choosing him to prepare their living trusts and their estate-planning documents. The letter also stated that the drafting process would take four to six weeks and invited the customer to call him with questions. … Brueggeman rarely, if ever, actually met an American Family plan member in person.” A formal complaint alleging that Brueggeman’s conduct violated state attorney discipline rules is currently pending before the Board Of Commissioners on Grievances & Discipline (Disciplinary Counsel v. Brueggeman, Case No. 08-090).

The Court noted that the “trust mill” operated by American Family, Heritage and the Normans was similar to other such operations that the Court has found to be illegally engaged in the unauthorized practice of law at the expense of vulnerable consumers, usually senior citizens. The Court wrote: “A living-trust package is often not needed and may even be harmful for persons who are without significant assets, who have simple estates, or whose estates may need court supervision. A basic living-trust package, such as those sold by some of the respondents, may likewise be insufficient or even completely inappropriate for those having more substantial assets and who may need specific legal advice or even tax advice to meet their needs. For this reason, we have repeatedly held that these enterprises, in which the laypersons associate with licensed practitioners in various minimally distinguishable ways as a means to superficially legitimize sales of living-trust packages, are engaged in the unauthorized practice of law. We have also repeatedly held that by facilitating such sales, licensed lawyers violate professional standards of competence and ethics, including the prohibition against aiding others in the unauthorized practice of law. Today, we reaffirm these holdings and admonish those tempted to profit by such schemes that these enterprises are unacceptable in any configuration.”

In imposing a civil penalty of $6,387,990 jointly and severally against American Family, Heritage and their co-owners, the Court noted the aggravating factors that the respondents had been advised of  and acknowledged the illegality of their involvement in the marketing and sale of trusts in the 2003 CBA consent agreement, but shortly thereafter resumed the same activities and engaged in thousands of acts of unauthorized practice that resulted in potential or actual harm to many of their customers for a period of two years. The Court also imposed civil penalties of $10,000 against American Family’s state marketing director, Paul Chiles, $7,500 against office manager Harold Miller, and $2,500 against multiple American Family and Heritage agents who continued to engage in the unauthorized practice of law after signing the 2003 consent agreement.

In its injunction, the Court permanently barred American Family, Heritage, Jeffrey and Stanley Norman, other named parties and “their successors, assigns, subsidiaries and affiliates” from marketing, selling or preparing wills, living trusts, durable powers of attorney, deed transfers or other legal products in Ohio; offering legal advice to anyone concerning estate planning or the execution of legal products; offering or selling prepaid legal plans of any kind to Ohio residents; and from engaging in a wide range of other enumerated activities.   

Today’s decision also approved consent decrees entered into by the CBA and two separate sets of parties to resolve contractual issues arising from their participation in the prepaid legal services plan previously operated by American Family.

The court's opinion is linked here. (Mike Frisch)

Is managing for USNWR rankings like "earnings management"?

Over on my own blog, I've commented on the yearly trend towards taking action to improve schools' USNWR rankings (see here).  Other blogs are also noticing some schools' moves.  TaxProf Blog noticed that some Texas schools are dropping the size of their classes, even in a time when budgets are an issue (see here).  And Brian Leiter has called "shenanigans" on some schools dropping their PT programs, now that PT programs are counted in the rankings (see here). 

If schools are changing their programs for good reasons--e.g., on the theory that smaller class sizes provide better learning experiences for students--I have absolutely no beef with those decisions.  But if schools are changing their programs to improve their rankings, and for no other reason, how different is "rankings management" from "earnings management," where businesses hide flaws in order to make themselves look "stronger" than they are?

(Posted by Nancy Rapoport)

Admitted With Conditions

The Louisiana Supreme Court granted the conditional admission of an attorney licensed in Wisconsin and Illinois. The problem with admission involved allegations of unauthorized practice when the attorney enrolled pro hac vice in several cases without complying with court rules. The court appointed a commissioner to consider the matter. The commissioner took evidence and heard testimony on a variety of issues and had recommended conditional admission.

The conditions will apply for two years. The admittee must repay student loans as per agreement with a student loan coordinator, perform 200 hours of community service, complete more CLE than is mandatory for all Louisiana lawyers and enter into a formal plan with the Office of Disciplinary Counel. (Mike Frisch)

Ohio Supreme Court Proposes Rule Changes For Felon-Applicants

From the web page of the Ohio Supreme Court:

The Supreme Court of Ohio will accept public comment until Oct. 21 on a proposed rule change to expand mandatory Supreme Court review of the character, fitness and moral qualifications of applicants seeking to be admitted to the practice of law to anyone convicted of a first- or second-degree felony. The rule currently requires mandatory review of applicants convicted of aggravated murder, murder, attempted murder or rape.

In addition, the proposed amendments would allow the Board of Commissioners on Character & Fitness more discretion in reviewing and approving the character, fitness and moral qualifications of applicants convicted of other felonies.

View the text of the proposed rule. Comments on the amendments should be submitted in writing to: Lee Ann Ward, Director of Bar Admissions, Supreme Court of Ohio, 65 S. Front St., 5^th Floor, Columbus, Ohio 43215 or leeann.ward@sc.ohio.gov.

(Mike Frisch)

Blogging, the Difference Between Talking and Writing, and How Blogging as Writing Supports Scholarship

Posted by Jeff Lipshaw

One of the reasons I like blogging is that it forces me to write my thoughts instead of speaking my thoughts.  I worry about e-mail, and instant messaging, and Tweet, because they all blur the distinction between what is meant to be read and what is meant to be heard.  Many years ago, I argued a case in the Michigan Supreme Court, and not to put too fine a point on it, the appellee's brief was moderately incoherent.  I thought then the reason was it clearly had been dictated and transcribed, and not written.  That was talking when it should have been writing.

On the other hand, blogging as though you're writing can be boring.  There's certainly a lighter and more conversation style.  I'm using it right now.  But there is something about seeing the letters appear magically in the text box that imposes (on me, at least) a certain discipline.  Unlike my spoken words, which evaporate as they are spoken (be quiet!), the written ones, even in cyberspace, live on. 

That gray area between talking and writing has an analog in the production of scholarly thinking.  I'm not sure if it's passe now, but only a couple years ago there was a whole day colloquium at Harvard on whether blogging counted as scholarship (I remember sitting in my home office in Indianapolis, which means it was early 2006, listening to a web cast and hearing Kate Litvak dis it, and Larry Solum promote it).  Not that I would ever go out of my way to do an ego-search on Westlaw (cough, cough), but as long as I was there, I noticed that the last several citations to my work have been blog posts, not articles!

Over at The Conglomerate, Darian Ibrahim scribed some interesting thoughts on rational actor economics and behavioral economics as the theoretical bases of regulation, particularly comparing entrepreneurial markets and public markets.  I wrote a comment, and when I got done, I realized that I had capsuled a point better there than I had in my paper to which I referred.  It was, I am sure, the discipline of writing, even if ephemerally.   This morning I just got done modifying it into the concluding paragraph of the introductory section of The Epistemology of the Financial Crisis:  Complexity, Causation, Law, and Judgment (happily soon to appear in a prestigious law review near you!).  For what it's worth, here's the paragraph:

The overriding theme is that regulation needs to have an epistemological modesty about it, a certain lack of presumptuousness, all of which is belied by disciplines that think that critical causes can be reduced to (a) simple utility functions (rational actor economics), (b) complex functions that can actually model the world's almost infinite contingency (behavioral economics), or (c) an after-the-fact ascription of blame (law). The right answer, I suggest, is that broad policy requires relatively simple models, the necessary downside being there is only so much regulation of a complex world can accomplish. The crisis of epistemology in 1755 was that even after Newton's accomplishments in physical science, an earthquake still destroyed Lisbon, and the crisis of epistemology in 2009 is that all the algorithms in the world are not going to stop financial bubbles. The problem is endemic to all forward-looking judgments. Nobody knows until after the fact whether the entrepreneur is a peerless visionary or a self-deluded wacko, any more than I really know until after the fact that today is the day I should jump ship from the public securities markets because today they became a bubble.

Hmm. I wonder if the law review editors are going to want to take out "wacko"?

Foreclosure Advice Is Unauthorized Practice

A decision today from the Ohio Supreme Court:

The Supreme Court of Ohio ruled today that Cincinnati-based Foreclosure Solutions L.L.C. and the company’s owner, Timothy A. Buckley engaged in the unauthorized practice of law by giving legal advice and negotiating with lenders on behalf of thousands of property owners facing foreclosure of their mortgages.  

In a 7-0 per curiam decision, the Court accepted the recommendation of its Board on Unauthorized Practice of Law that it issue an injunction ordering Foreclosure Solutions and Buckley, who has never been licensed as an attorney,  from engaging in any future acts that constitute the practice of law and impose a $50,000 civil penalty for the company’s past illegal conduct.

According to joint stipulations of fact in the case, Foreclosure Solutions sent direct solicitations to property owners against whom foreclosure actions had been filed and also marketed its services on two Internet sites. In exchange for a fee of from $700 to $1,100, the company and property owners  entered into a business agreement under which the owners agreed to make regular deposits into a bank account as evidence of their solvency. Foreclosure Solutions used a portion of the owner’s fee to pay an attorney hired by the company to file an answer to the foreclosure complaint, forestalling an immediate default judgment. It then used non-attorney employees to negotiate with the lender for an adjustment of the owner’s mortgage terms, using the owner’s bank deposits as a bargaining chip. As part of the business agreement, the homeowner agreed  to file for  bankruptcy protection only as the “last alternative” to save their home.

In today’s decision, the Court observed that: “In Ohio, the practice of law is not limited to the conduct of cases in court but embraces ‘the preparation of pleadings and other papers incident to actions,’ ‘the management of such actions,’ and ‘in general all advice to clients and all action taken for them in matters connected with the law.’ …  In Cincinnati Bar Assn. v. Mullaney (2008), … we sanctioned lawyers for, among other forms of professional misconduct, aiding Foreclosure Solution agents in the unauthorized practice of law …  In that case, three lawyers facilitated a widescale operation in which respondents and their agents promised legal assistance to allow thousands of debtors to avoid foreclosure. Respondents hired the lawyers to appear in court and delay pending foreclosure proceedings while the agents, principally nonlawyers, obtained financial information from the customers and negotiated with mortgagees to reinstate the loan. Contrary to professional duties and responsibilities, the three lawyers in Mullaney did not assess individualized needs of Foreclosure Solutions customers to determine the best course of legal action for relieving their financial distress, including whether to petition for bankruptcy immediately. They instead pursued the single strategy that respondents offered as a resolution – to stall the pending foreclosure proceedings in the hope of the agents’ or lawyers’ negotiation of a settlement with the mortgagee. By surrendering their professional judgment in this way, the lawyers aided respondents in engaging in the in the unauthorized practice of law.”

Quoting further from its decision in Mullaney, the Court wrote: “‘Counseling debtors in financial crisis as to their best course of legal action requires the attention of a qualified attorney.’ … Here, however, respondents and their agents implemented a one-size-fits-all plan to protect customers’ legal interests when they did not have the qualifications and training required of the legal profession nor were they constrained by the ethical standards with which lawyers must comply. … We have repeatedly held that nonlawyers engage in the unauthorized practice of law by attempting to represent the legal interests of others and advise of their legal rights during settlement negotiations. … And we have specifically so held with regard to nonlawyers attempting to advise debtors of their legal rights and the terms and conditions of settlement in negotiations to avoid pending foreclosure or other collection proceedings. … Finally, we have long ago concluded that laypersons may not insulate themselves from responsibility for engaging in the unauthorized practice of law by using powers of attorney executed by the customers or by simply informing customers facing foreclosure that the layperson is not an attorney and is, therefore, incapable of giving legal advice.”

The Court concluded: “We accept the recommendation of the board. We enjoin respondents Foreclosure Solutions, L.L.C., and Timothy A. Buckley, their officers, agents, employees, successors, and assigns from attempting to represent the legal interests of others or attempting to advise others of the terms and conditions of settlement in negotiations to avoid pending foreclosure proceedings and from engaging in all other acts constituting the unauthorized practice of law. We also order respondents Foreclosure Solutions, L.L.C., and Timothy A. Buckley to pay civil penalties, assessed jointly and severally, in the amount of $50,000, representing the amount obtained through the unauthorized practice of law.  Costs are taxed to respondents.”

The opinion of the court is linked here. (Mike Frisch)

Jury Trial Right Not Waived

A case summary from the web page of the Tennessee Court of Appeals:

The dispositive issue on appeal pertains to a party’s fundamental and constitutional right to a jury trial guaranteed by Tenn. Const. art. I, § 6, and whether the defendants impliedly waived their right to a jury trial by being late for court. Both defendants had timely demanded a jury trial in their respective answers to the complaint; however, neither defendant was in the courtroom when court convened at 9:10 a.m. on the morning of trial. When the defendants appeared, the trial judge required that the case proceed to trial without a jury. The facts in this case reveal that the case was set to begin at 9:00 a.m. on July 5, 2007, that the trial judge convened court at 9:10 a.m., that immediately upon taking the bench the trial court ascertained that the defendants were not in thecourt room, and that without making any inquiry concerning their absence made the finding that the defendants had implicitly waived their right to a jury trial. The facts also reveal that one of the defendants, Alan Siliski, had been in the courtroom prior to court being convened, but went outside to await the arrival of his attorney, who had called to advise he was running late. As for the other defendant, Jennifer Siliski, the facts reveal that the plaintiff voluntarily dismissed its case against her during a pretrial conference three days earlier; however, a few hours after the conference the plaintiff informed the court, but not Ms. Siliski, that it had reconsidered and determined that Ms. Siliski was an indispensable party, therefore, it was not dismissing its case against her. Plaintiff contends Ms. Siliski received word of the change via a circuitous route from plaintiff’s counsel to Mr. Siliski’s counsel to Mr. Siliski, who was to inform Ms. Siliski that she was again a party in the fraudulent conveyances action. Ms. Siliski, however, insists that no one informed her that she was once again a party. It is undisputed that the plaintiff did not directly inform Ms. Siliski of this important fact and no one else testified that they personally informed Ms. Siliski of the change of circumstances prior to the morning of the trial. We have determined the above facts are not sufficient to support a finding that either defendant impliedly waived his or her right to a jury trial because a waiver should not be inferred without reasonably clear evidence of an intent to waive. Therefore, the defendants are entitled to a jury trial as each defendant had timely demanded. Accordingly, the judgments entered against the defendants as a result of the bench trial are vacated, and this matter is remanded for a jury trial on the issues.

The plaintiff is an attorney who had sued her former client for breach of contract and fraudulent conveyance. The court's opinion is linked here. (Mike Frisch)

Attention Ohio Lawyers

From the web page of the Ohio Supreme Court:

The Supreme Court of Ohio Office of Attorney Services issued a warning today about an Internet scam affecting Ohio lawyers. Multiple individual attorneys and law firms have contacted the Supreme Court about the scam.

Here’s how the scam works: An Ohio lawyer receives an e-mail purportedly from another lawyer for collection of a debt.  A follow-up e-mail arrives from the supposed debtor (who is also the client), seemingly legitimate, who sends a bogus check for payment. The Ohio lawyer is instructed to pay the debt by wiring some of the funds to the creditor and to keep a portion of the funds as payment for his/her attorney fees. The Ohio lawyer then deposits the check in his/her Interest on  Lawyers Trust Account (IOLTA), wires funds to the creditor, and retains the agreed upon amount as attorney fees.

Meanwhile, the check goes through international banking channels until it’s eventually discovered that insufficient funds are available in the account to cover the amount. The bank debits the IOLTA for the amount of the returned check, while the lawyer has wired “good,” client funds to the purported creditor.

The proposed client is typically an actual Asian company—although the scammers have no connection with the company. Also, sometimes the scammers use real lawyers’ names in the initial e-mail.

Attorneys are advised to exercise caution when approached by unknown attorneys seeking to enter into financial transactions involving foreign entities. To report a suspected online crime, contact the FBI at www.ic3.gov.

Susan Christoff, Attorney Services director, said bad checks deposited in IOLTAs, however small, can have a negative impact on the delivery of legal services for those who need them most.

Each Ohio attorney – or the attorney’s employer – that escrows funds of others that are nominal in amount or held for a short period of time must have an IOLTA. Interest from IOLTAs funds the Ohio Legal Assistance Foundation, which distributes these funds to the state’s legal aid societies to provide free legal aid to the poor.

(Mike Frisch)

Permanent Office Not Required

The Mississippi Supreme Court has amended its rules governing admission by reciprocity. An applicant is no longer required to certify that she intends to establish a "permanent office for the active practice of law" in Mississippi. The amended rule took effect on August 1, 2009. (Mike Frisch)