Forbes Magazine: Non-Lawyers Find It Hard Avoid Breaking Bar’s Vague Rules. Kentucky Bar Association Cited for Improper Interference with Federal Mandates re: consumer protection

 

 By Daniel Fisher Forbes Magazine Staff                         August 22, 2011

I am a senior editor at Forbes, covering legal affairs, corporate finance, macroeconomics and the occasional sailing story. I was the Southwest Bureau manager for Forbes in Houston from 1999 to 2003, when I returned home to Connecticut for a Knight fellowship at Yale Law School. Before that I worked for Bloomberg Business News in Houston and the late, great Dallas Times Herald and Houston Post. While I am a Chartered Financial Analyst and have a year of law school under my belt, most of what I know about financial journalism, I learned in Texas.

For the better part of a decade, Della Tarpinian has been locked in a Kafkaesque battle with a trade association she doesn’t belong to, the Kentucky Bar Association. She’s been fined $5,000 and ordered to pay the costs of her investigation, for violating rules that the average non-lawyer might find maddeningly vague and hard to understand.

Such as: “A person is guilty of unlawful practice of law when, without a license issued by the Supreme Court, he engages in the practice of law.” That one tripped up Tarpinian, 53, who runs a small document-preparation firm in Owensboro, Kentucky specializing in uncontested divorces, wills and other simple legal matters.

After a lengthy investigation, the Kentucky Bar determined that Tarpinian’s clients couldn’t possibly have figured out how to fill out the paperwork they filed in court, without her coaching them behind the scenes. What surprised Tarpinian — and many other document-preparers around the country — is that the Bar could drag her before the state Supreme Court and have her fined for, as she sees it, competing against its members. Especially since a jury acquitted Tarpinian of similar charges in a 2004 criminal trial, after less than half an hour of deliberations.

“They only charge people that’s making money,” said Tarpinian, who has a paralegal degree and worked in a lawyer’s office before opening her own document-preparation firm in Owensboro. “It’s so ambiguous, so unclear.”

Small firms aren’t the only ones running afoul of their local bar association. LegalZoom, a nationwide provider of incorporation documents, divorce papers, wills and other legal forms, has been investigated in North Carolina, Pennsylvania and other states. It’s being sued by lawyers in Missouri who want to form a class action on behalf of consumers statewide, even though there are no consumer complaints referenced in the case.

All 50 states have rules and laws prohibiting the unauthorized practice of law, ostensibly to protect consumers. Defenders of these laws  make the analogy to doctors: You wouldn’t want an unlicensed doctor to remove your appendix, would you? But the analogy isn’t precise. While it’s true an unlicensed person can’t perform surgery or prescribe medicine, the American Medical Association doesn’t have the power to fine, say, a massage therapist who advises a client to take St. John’s Wort instead of Paxil. When it comes to the law, the bar associations of many states have the power not only to identify people who are violating their rules, but haul them into court.

This self-regulatory scheme bothers experts like Gillian Hadfield of the University of Southern California Law School, who thinks lawyers can use it to squelch  competition and innovations such as automated legal document services.  The U.K. never had unauthorized-practice rules, she notes, and in 2007 it established an independent commission to oversee all types of legal services including lawyers. The feds have also been critical at times of the legal profession’s attempt to maintain a closed shop. The Federal Trade Commission sent a threatening letter to the American Bar Association in 2002, warning that a proposed model standard for unauthorized practice would “raise costs for consumers and limit their competitive choices.”

There seem to be some glaring exceptions when it comes to enforcement. Members of politically powerful Realtors organizations rarely get dragged before state UPL commissions, even though they routinely provide contracts and advice involving the largest investment most consumers will ever make. Bank employees in many states can preside over mortgage closings.

The Kentucky Bar Association tried to close these loopholes in 1999, but the  U.S. Justice Department intervened. In a 2003 ruling, the state Supreme Court sided with the feds, noting that the Bar Association failed to provide any evidence consumers had been harmed.

State motor-vehicle departments also have teams of operators standing by to offer advice on how to obtain or recover another essential modern legal right, the right to drive. But lawyers who specialize in traffic tickets keep a sharp eye out for unlicensed competitors. Don Bailey first ran afoul of Ohio bar officials in 1996 when he was investigated for providing legal advice along with his service of filing vehicle-related paperwork. He signed a consent agreement — a typical pattern in these cases — then proceeded to build his License Resque into a prosperous business by providing paperwork and shuttling it to the local motor-vehicle bureau.  The Cincinnati Bar Association repeatedly investigated him and filed legal actions against the firm. Finally in 2006, the state Supreme Court fined Bailey $50,000, citing his long-ago consent agreement.

Bailey refuses to pay, claiming he is indigent. Indignant, too. The Supreme Court decision says Bailey advised clients on time limits for filing forms, requirements for reinstating licenses, and communicated with motor vehicle department personnel on behalf of clients. Bailey says his advice ran to telling consumers how to fill out paperwork, when it needed to be filed, and practical tips like “if you’re filing with the court to recover your driving privileges, for God’s sake, don’t get another ticket.’”

“Is that being a lawyer?” he asks. “I can’t tell them what my experience has been over the years?”

A spokesperson for the Ohio Supreme Court, in a statement, said the rules are clear, citing “more than 80 years of case law from the Supreme Court of Ohio that clearly delineates what is and is not permitted.” The rules are designed for consumer protection, the court spokesperson said, although the court also hears complaints brought by lawyers. The state has prosecuted 34 cases since 2004, levying $22 million in fines but collecting only about $79,000 of that. The spokesperson couldn’t provide figures on how many cases began with consumer, as opposed to lawyer, complaints. The biggest fines were levied against American Family Prepaid Legal Corp., which targeted elderly consumers with “Living Will” products that supposedly bundled a broad array of legal services along with annuities and insurance. State consumer-protection laws cover the type of activity American Family was accused of, including misleading customers about the nature of the services it provided.

In Arizona, it’s the lucrative, high-volume business of processing immigration paperwork that has drawn the interest of unauthorized-practice officials. In 2003 the state created a licensing regime for document preparers, over the objections of lawyers.

“There’s been an ongoing battle here ever since,” said lawyer Kevin Torrey. He represents Karina Morales, a licensed document preparer who has been sued by the state licensing board for filing immigration papers for her clients. Torrey says the case stems from a disgruntled — and unlicensed — competitor who was sued by the bar and then filed a complaint against Morales because she remained in business. An administrative law judge has indicated he thinks document preparers should not be able to handle immigration matters, Torrey said, even though U.S. Customs rules have allowed the practice for more than a decade. Customs encourages people to use professional document preparers because of the volume and complexity of forms that must accompany an application, Torry said.

 “People who can’t afford a lawyer, I don’t know how they could ever fill out that paperwork,” said Torrey.  “My client after 12 years knows all the ins and outs.”

Tarpinian first got in trouble with the Kentucky Bar in 2001, shortly after she had moved from L.A. As with Bailey, the bar sent her a letter in 2003 warning her that an investigators had determined she was practicing law without a license. Tarpinian ignored the letter, and then the district attorney in Owensboro mounted an undercover sting operation, enlisting a state trooper to obtain a will. Tarpinian was indicted for the misdemeanor crime of practicing law without a license, with a possible sentence of 90 days in jail.

Her lawyer, Galen Clark (paid-up member of the Kentucky Bar) said the prosecutor tried to negotiate a plea bargain but Tarpinian refused. The case went before a six-member jury in 2004 that quickly acquitted her of the charge.

“From 2004 to 2010 they left me alone,” Tarpinian said. But meanwhile, judges in Owensboro started complaining about people who came into court with divorce and other papers that looked suspiciously well-prepared. Some judges began to refusing to process divorces if Tarpinian had prepared the paperwork, even though her clients weren’t complaining.

Shawn Dowden told me she filed an uncontested divorce in Daviess County Court in March, 2008 on forms Tarpinian had supplied.

“The court threw it out because of her, so I had to completely start over,” said Dowden, who had no complaint about Tarpinian. “The judge said she filled out my paperwork for me, but I filled it out myself.”

The judges filed a complaint with the Bar in 2010, Clark said, and Tarpinian was accused of violating the 2003 cease-and-desist letter even though she’d never signed it. Her crimes included preparing nine uncontested divorces and filling out a child support worksheet in which she calculated child-support obligations.The court concluded that Tarpinian’s clients representing themselves or pro se, couldn’t have drafted the documents they filed with the court.

These petitions are legally sophisticated pleadings, citing case law and court rules. They evidence legal knowledge well beyond the legal knowledge of an ordinary person. Each of these petitions are signed by the litigants, pro se. These pro se litigants did not create these petitions.

Tarpinian, like Bailey, has refused to pay her $5,000 fine.

“I pay my taxes, I’ve never broken any laws, and I’ve helped thousands of people who can’t afford an attorney and don’t want one,” she told me. “I’m still working even though they scared me to death.”

For document-preparers like Tarpinian, determining the fuzzy line they can’t cross over is difficult. One lawyer struggled to come up with a definition and finally told me the practice of law is giving advice that two lawyers can disagree upon, with neither one committing legal malpractice. That goes to the heart of any profession, which is exercising judgment honed by specialized education and experience. The judicial branch has a particular interest in insuring that people who collect fees to represent clients in court are qualified to be there.

But if even lawyers have trouble delineating the boundaries of the legal profession outside of court, how are non-lawyers expected to figure it out?

 

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