Thursday, January 23, 2020
A case summary from the Ohio Supreme Court web page (Dan Trevas)
The Ohio Supreme Court today clarified there is no blanket rule that deems a nonlawyer who negotiates the settlement of a debt on behalf of another as engaging in the unauthorized practice of law. Those who are “rendering legal services” as part of the negotiation, however, are in violation.
In a 5-2 decision, the Supreme Court found only one violation out of 31 allegations of the unauthorized practice of law levied against Mario W. Watkins and a Columbus business he formed to negotiate debt settlements between 2008 and 2013. The Court found Watkins, who is not a lawyer, illegally offered legal advice and counsel to a church facing a bank foreclosure. The Court fined Watkins $1,000 and ordered him to cease engaging in the unauthorized practice of law.
Writing for the Court majority, Justice Melody J. Stewart stated the board misinterpreted earlier court rulings when it concluded that any negotiation of a debt settlement by a nonlawyer on behalf of another was against Court rules. In those cases, the individuals “used legal tactics and methods” to affect the results, she wrote. Except in the case involving the church, Watkins acted mostly as a messenger helping to negotiate a settlement, and nothing in his behavior involved rendering legal services, the Court ruled.
Chief Justice Maureen O’Connor and Justices Judith L. French, Patrick F. Fischer, and Michael P. Donnelly joined Justice Stewart’s opinion.
In a concurring and dissenting opinion, Justice R. Patrick DeWine stated that the Ohio State Bar Association, which filed the complaint, failed to prove Watkins engaged in any unauthorized practice of law. Justice DeWine said Watkins, like many people, expressed opinions with legal implications, which is not the same as providing legal advice and counsel. Justice Sharon L. Kennedy joined Justice DeWine’s opinion.
Settlement Businesses Raise Concerns
Watkins has been the owner and sole employee of Watkins Global, a limited liability company he first registered with the Ohio Secretary of State in 2007. The company represents small businesses in their debt-settlement negotiations with creditors.
In August 2012, Watkins registered the fictitious name Jones, Marco & Stein for Watkins Global. Although the name suggests otherwise, Watkins was the only individual associated with the company, and he sent out marketing letters to potential clients from August to October 2012 on Jones, Marco & Stein letterhead. Watkins gained no business from the solicitations, but did draw the attention of the state bar association, which inquired about the business’ practices.
Watkins responded to the bar association’s letter and produced records of his debt-settlement business from 2007 to 2013. He also stated he ceased using the name Jones, Marco & Stein to seek clients after receiving the bar association’s letter.
In 2014, the bar association filed a complaint with the board alleging that Watkins and his company engaged in the unauthorized practice of law on 31 occasions, with each occasion relating to a separate business debtor that Watkins aided in debt settlement negotiations. The complaint alleged that the clients were harmed by paying more than $70,000 in fees to Watkins. The bar association sought summary judgment from the board, and the board found in the bar association’s favor. The board recommended that the Court fine Watkins $1,000 for each violation for a total of $31,000, and order that he not engage in any future unauthorized practice of law.
Court Examines Practices
Justice Stewart explained the unauthorized practice of law includes both holding oneself out as a lawyer without being licensed to practice law, and “rendering legal services for another” when not admitted to practice law in Ohio. The opinion stated that for “decades” the Court has maintained the rendering of legal services includes appearing in court on behalf of another, preparing pleadings and other papers for use in legal actions, preparing legal instruments of all kinds, and providing legal advice and counsel.
The opinion notes in three cases, most recently the 2004 Ohio State Bar Assn. v. Kolodner decision, the Court ruled that a nonattorney who negotiates on behalf of an individual or business in the attempt to resolve a collection claim between debtors and creditors is engaged in the unauthorized practice of law.
The board believed the Court’s statement in Kolodner to be a “per se rule” that any debt-settlement negotiation by a nonlawyer on behalf of another business or individual is the unauthorized practice of law, the opinion stated. The Court today said the rule is not that broad, but rather a determination that a nonlawyer is rendering legal services turns on the specific actions a person takes while attempting to negotiate a settlement. In Kolodner, the nonattorney described himself as an “attorney-in-fact” and admitted advising, counseling, and representing various customers in debt settlements.
The Court further explained that the board’s apparent belief that all debt-settlement negation is the practice of law is inconsistent with the Court’s ruling in its 2006 Cleveland Bar Assn. v. CompManagement decision, in which the Court found nonlawyers who engaged in back-and-forth negotiations to assist clients in debt settlement without the use of legal tactics were not practicing law.
The Court found that Watkins did not use legal tactics to settle debts. Instead, his method involved familiarizing himself with the facts surrounding a client’s debt and asking how much the client thought it could either pay immediately or in installments. He would relay that information to the creditor or its lawyers, and if the creditor accepted the reduced amount, he would inform his client. He said he would rely on the attorneys representing the creditors to prepare any documentation of the agreement.
“Nothing about his behavior involves rendering legal services,” the majority opinion stated.
Church Debt Involved Advice
Unlike the 30 other client cases, Watkins was found to have provided legal advice and counsel in 2012 to Trinity Baptist Church in Marion. The church hired Watkins to represent it in a mortgage foreclosure matter with a bank. By the time Watkins became involved, the bank had secured a foreclosure judgment and was set to auction off the church property.
A form Trinity signed to authorize Watkins to negotiate a settlement on its behalf listed Trinity as the borrower and another person, who by that time had died, as the “co-borrower.” Watkins suggested to the bank’s counsel that the matter should be mediated instead of litigated, and advised Trinity to find a solution before the matter got out of hand. When the bank accepted a highly reduced settlement amount of about $6,200, Watkins advised the church to accept the offer and begin raising money to pay it.
The bank then rescinded the offer when it determined the church was not the borrower. Watkins admitted that before negotiating the deal, he knew someone else other than the church might owe the debt. He further admitted to using this fact to his advantage to secure a reduced settlement amount. Because Watkins used a legal tactic to negotiate the settlement, the Court found he engaged in the unauthorized practice of law.
Opinion Concurring in Part and Dissenting in Part Finds No Unauthorized Practice
In his opinion concurring in part and dissenting in part, Justice DeWine stated he agreed with the majority that Watkins did not violate the rules in 30 charges against him, but he also would have held that the record did not show that Watkins was practicing law when he assisted Trinity Baptist.
He noted that while the Ohio Constitution grants the Court the authority to regulate the practice of law, that grant comes with an implicit limitation “what cannot plausibly be considered the practice of law is beyond [the court’s] authority to proscribe.” He further explained, that “to unduly extend the boundaries of what constitutes the practice of law risks infringing upon the rights of nonlawyers to pursue their own chosen professions.”
The opinion suggested the Court should be careful not to consider a person’s “legally laden opinions” as the practice of law, and gave examples, such as when a hospital employee discusses what practices are necessary to comply with privacy laws, or when a journalist tries to access public records by telling a public official the law is on her side.
The opinion stated many professions — such as accountants, human-resource representatives, and real estate agents — might provide advice to their clients that has legal implications, but advising the clients about those matters is not the same as providing legal advice and counsel.
“The law infuses a great many parts of life. Lawyers don’t have a monopoly on something just because the law touches it.,” the opinion stated.
The record demonstrated only that Watkins provided debt-negotiation services “during which he voiced a few ancillary opinions with legal implications.” “That’s not good enough” to find a violation of the rules, the opinion concluded.