Opinion ID: 2302531
Heading Depth: 1
Heading Rank: 44

Heading: Case Law Re Limits on Suspended Attorneys

Text: As the ODC correctly states, no Delaware case addresses the precise issue of whether a suspended attorney can manage a real estate services company to supply settlement packages to attorneys who conduct closings from the same office with the same staff and the same phone as his prior law practice. A trilogy of cases address what a suspended lawyer can and cannot do while working as a paralegal in a law office to which we now turn for guidance: In re Sanders, 1985 WL 5255 (Del.1985), In Re Frabizzio, 508 A.2d 468 (Del.1986) and In Re Mekler, 672 A.2d 23 (Del.1995). In Sanders, the Supreme Court was asked to determine the circumstances under which a suspended attorney could serve as a paralegal in a law firm. The Court approved such employment but restricted the suspended attorney to: 1. Review and summarization of documents; 2. Legal research and drafting of intra-office memoranda and briefs; 3. Drafting of pleadings and other legal instruments, provided all such pleadings shall be reviewed, approved, and signed by a member or associate attorney of such firm; 4. Drafting of suggested correspondence as directed by and under the supervision of, the attorney primarily responsible for the case or matter in consideration; 5. Such similar duties which are customarily performed by paralegals under the supervision of attorneys except that there shall be no contact with clients, witnesses, or prospective witnesses. Furthermore, such duties, and those designated in the preceding paragraphs, shall in no event include advising or counseling clients or prospective clients of the firm in the client's legal relationships, rights, duties, or responsibilities, the legal consequences of any proposed action, or the application of law to any facts or circumstances of the client or prospective client. 6. The suspended attorney would be compensated on a salary basis and receive no share of any legal fee earned by the employer. 7. Respondent's employment with his employer shall not be mentioned in any professional announcement, office or building signs or directories, office letterhead, telephone listing or legal directory. Personal business cards, if used by respondent, will clearly designate his status as that of paralegal. Id. In Frabizzio the Delaware Supreme Court was asked to determine whether a lawyer suspended from the private practice of law could nonetheless work as a law clerk/paralegal in another attorney's private law practice with telephone and personal contact with clients, witnesses and prospective witnesses. The Court held that the suspended attorney could perform the tasks usually performed by law clerks and paralegals ... except that he may not have direct contact as a law clerk or paralegal with clients, witnesses, or prospective witnesses. Id. at 469. The Court explained its rationale for this restriction by citing with approval the words of the Florida Supreme Court as follows: To the layman, the difference between mere clerking and the unrestrained practice of law is not readily apparent. He observes an attorney, supposedly under suspicion for unethical conduct, walking into law offices; necessarily he must wonder whether the attorney is indeed being disciplined. This confusion is compounded when the disciplined attorney is interviewing witnesses as an investigator on behalf of the law firm or otherwise discussing cases with clients. The resulting detriment to the integrity and reputation of the Bar is obvious ... I am also concerned that the attorney who is suspended or disbarred for unethical conduct, upon returning to a law office, will encounter difficulty in confining himself to strictly preparatory functions. Id. at 469, quoting The Florida Bar v. Thomson, Fla.Supr., 310 S.2d 300, 303 (1975). The Court also cited with approval the observation of the Supreme Court of North Dakota that: A suspended lawyer is not the same as a layman. The public knows that he has a legal education, that he has engaged in the practice of law, and that his words and opinions are presumably more valuable on that account. We cannot accept the argument that a ... suspended lawyer may engage in all activities which non-lawyers also perform. Id.quoting Application of Christianson, N.D.Supr., 215 N.W.2d 920, 925 (1974). Following Frabizzio, in Mekler the Supreme Court denied a suspended attorney the right to have direct contact with clients or prospective clients or witnesses or prospective witnesses when acting as a paralegal or law clerk or under the supervision of a member of the Bar, or otherwise. Mekler, 672 A.2d at 26. The suspended attorney had sought to be able to have such contact while working as a paralegal under the supervision of an attorney with a Family Court practice. The suspended attorney had proposed that he be permitted such contact under appropriate safeguards including a written disclaimer to all clients in the fee agreement and elsewhere that the attorney was suspended and a commitment to offer no advice to clients or to convey the legal advice of opinions of the supervising attorney. Id. at 25. In denying this proposal the Court noted that Perception is often reality. It would be very difficult for the members of the public to be expected to understand Mekler's status if he were permitted such contacts.... It is the responsibility of this Court to protect members of the public in their dealings with those providing legal services and to prevent non-lawyers (including suspended lawyers) from the practice of law or the perceived practice of law. That responsibility would not be advanced if this Court were to accede to the Request. It must be clear to the public that this Court is effective in its discipline of members of the Bar, that its judgments will not be diluted and that it will not send mixed signals. Id. at 25-26. Of particular concern to the Mekler court was that Mekler had been suspended because of a failure to supervise his own non-lawyer staff in their dealings with clients. Id. at 26. The Court was concerned that Mekler as a non-lawyer would exceed the boundaries that limit what non-lawyers can do. Id. Notwithstanding Mekler's protestations that he would not exceed his limitations as a non-lawyer, the Court stated that ... [T]his Court cannot countenance conduct by a suspended lawyer which would leave the impression to a reasonable person that the Court would allow the same kind of business as usual which it has already found to be impermissible in Mekler's own case, or that it is de facto permitting a suspended lawyer to be doing any act which a reasonable member of the public could believe to be the practice of law. Id. The Supreme Court also has addressed what constitutes the practice of law relating to real estate settlements. In In the Matter of Mid-Atlantic Settlement Services, Inc., et al., File no. UPL 95-15 (Del. May 31, 2000), the Court concluded that a Delaware attorney is required to conduct a closing for the sale of Delaware real property or of a refinancing loan secured by Delaware real property. Specifically, the Court held that the following actions constitute the practice of law: a. Determining the proper legal description of the property (as set forth on the deed) to be included on Exhibit A to the mortgage; b. Explaining to the borrower(s) the terms of many legal documents, including the note, mortgage, Planned Unit Development Rider, the Truth-in-Lending Disclosure and the first payment letter. Id. at 17. The Court held that An attorney licensed to practice law in Delaware is required to be involved in a direct or supervisory capacity in drafting or reviewing all documents affecting transfer of title to Delaware real property or where Delaware real property is used as security for the repayment of a debt or the performance of an obligation, with the exception of home equity loans in which the lender is acting in a pro se capacity and no evaluation of exceptions to title is required. The participation of an attorney licensed to practice law in Delaware is necessary in evaluating the legal rights and obligations of the parties, representing the buyer in examining the title and removing exceptions to the title, supervising the disbursement of funds, and responding to questions concerning the legal effect of documents and ramifications of a transaction by which title to Delaware real property is used as security for the repayment of a debt or the performance of an obligation, with the exception of home equity loans in which the lender is acting in a pro se capacity and no evaluation of exceptions to title is required. Id. at 24-25. Petitioner also relies upon a Kansas decision rendered fifteen months after the Suspension Order in which the Kansas Supreme Court denied reinstatement to a suspended attorney who engaged an independent contractor to handle his legal practice while he was suspended, In re Miller, 290 Kan. 1075, 238 P.3d 227 (2010). The suspended attorney paid the independent contractor on an hourly basis and reported his compensation to the Internal Revenue Service as that of an independent contractor. No written agreement documented the relationship. The independent contractor worked out of the office of the suspended attorney. The suspended attorney made all financial decisions for the firm. The sole action taken by the suspended attorney to comply with the suspension order was to change the signature page on letters and pleadings and to hire the independent contractor to review and sign letters and pleadings and make court appearances. Id. at 232. On at least one occasion a letter on the letterhead of the suspended lawyer was sent on behalf of a client to an opposing party in a legal matter. When the disciplinary counsel investigated, the suspended lawyer failed to provide the file in that matter as requested by disciplinary counsel. The Kansas Supreme Court, in an opinion dated August 13, 2010, held that the suspended attorney had engaged in the unauthorized practice of law. The rationale for that conclusion was that Rather than going to work for an attorney, the Respondent appears to have hired an attorney to continue his legal work for him. The supervision that is required by the rules was not present in this case. Id. at 232. The Kansas Supreme Court held that as neither the suspended attorney nor his professional corporation could contract for the professional corporation to provide legal services, the suspended attorney lacked the authority to hire an independent contractor to provide legal services for the clients of the professional corporation. Id. at 236. Although none of these decisions addresses the facts present here, certain principles emerge. First, in the circumstance of a suspended attorney working in a law office under the supervision of a Delaware attorney, the Supreme Court has recognized that a suspended attorney may do work traditionally done by a paralegal or law clerk, including review and summarization of documents; legal research and drafting of intra-office memoranda and briefs; drafting of pleadings and other legal instruments, provided all such pleadings are reviewed, approved, and signed by a member or associate attorney of such firm; drafting of suggested correspondence as directed by and under the supervision of, the attorney primarily responsible for the case or matter in consideration; and such similar duties which are customarily performed by paralegals under the supervision of attorneys. Second, the Supreme Court consistently has held that there can be no contact with clients, witnesses, or prospective witnesses and no advising or counseling clients or prospective clients of the firm in the client's legal relationships, rights, duties, or responsibilities, the legal consequences of any proposed action, or the application of law to any facts or circumstances of the client or prospective client, even if the suspended attorney provides appropriate disclaimers. Third, in the context of a suspended lawyer working in a law firm or a law office, the Supreme Court has identified a major concern that members of the public not perceive that the suspended lawyer is nonetheless practicing law. That is why the Court did not accede to the suspended lawyer's request in Mekler to be allowed client contact while working as a paralegal in a law officemembers of the public might believe that a suspended lawyer meeting with clients in a law office was in fact practicing law, notwithstanding the disclaimers and protections the suspended lawyer offered to provide. Finally, the Kraus case indicates that a suspended attorney may not continue to cause his professional corporation to do legal work and receive legal fees for clients through an independent contractor where there is insufficient evidence that the suspended attorney received appropriate supervision. The parties agree that non-lawyers run and are permitted to run title and settlement service companies. [79] They also agree in part on the legal standard, i.e., that a suspended lawyer may not have direct contact with clients, witnesses or prospective clients or witnesses and may not engage in activities that a reasonable person may construe as the practice of law. Mekler, 672 A.2d at 25. The ODC contends that a suspended attorney may not meet with clients while suspended even if those meetings are unrelated to the provision of legal services while Davis contends that a suspended lawyer may meet with former law firm clients as long as he does not provide legal services and a reasonable former client does not reasonably believe that he is providing legal services. Neither party disagrees that the Supreme Court cannot countenance any conduct by a suspended lawyer leaving the impression that it is de facto permitting a suspended lawyer to be doing any act which a reasonable member of the public could believe to be the practice of law. Id. at 26. As a preliminary matter, the Panel rejects the argument of ODC that referral sources are legal clients. While it is true that referral sources for Davisrealtors and lenderswere the sources of his clients, his clients for his practice of law were the persons he represented prior to his suspension: homebuyers and homeowners. It is to those persons that he owed duties arising out of an attorney-client relationship. The ODC submits no authority for the ipse dixit that the Panel should view the referral sources as clients of Davis Law for purposes of the proscription against his meeting with clients or prospective clients during his suspension. [80] Second, the Panel does not find that the ODC met its burden to prove by clear and convincing evidence that Davis provided legal advice to realtors and lenders. ODC's claim that Davis provided legal advice to realtors and lenders is based upon the testimony of Marshall and Nixon. The Panel does not find general, uncorroborated testimony from Marshall or Nixon alone to be clear and convincing evidence that Davis in fact provided legal advice to realtors or lenders, given their bias and stated desire to do harm to Davis in the reinstatement process. [81] Also, Marshall could not identify by name a single realtor to whom Davis allegedly said that, although he was suspended, he could still provide legal advice. [82] Similarly, the only realtor Nixon identified as one to whom Davis allegedly provided legal advice was Stephen Marcus. Marcus testified that although he did call Davis to ask whether he could assist a client regarding a problem with a condo association Davis reminded him that he was suspended and referred the matter to Nixon. [83] Marcus further testified that Davis provided no legal advice and performed no legal services to him during Davis's suspension. [84] Both because of the lack of specificity and corroboration of the testimony by Marshall and Nixon, the Panel does not find that the ODC proved by clear and convincing evidence that Davis provided legal advice to realtors or lenders during his suspension. [85] Third, the Panel does not believe that the proscription on meeting with former clients during the period of suspension was intended to mean that Davis could not meet with them in settings where there was no expectation or any evidence of actual provision of legal services or legal advice. Thus, as explained below, the ODC adduced no evidence that Davis provided legal advice during his meetings with Nicholson, and therefore the Panel does not believe that Davis's meetings with Nicholson violate the Suspension Order. The harder question is the one of first impression: may a suspended Delaware real estate attorney whose legal practice prior to suspension included providing settlement services continue to provide the settlement services out of the same offices as long as a different Delaware attorney handles all closings, the suspended attorney avoids contact with clients or prospective clients, the suspended attorney eliminates all communications with the public under the name of the former firm, and the suspended attorney receives no legal fees? The Christianson case, cited approvingly by the Delaware Supreme Court in Frabizzio, well stated the issue: [T]o what extent, if any, may a suspended attorney engage in activities which, when performed by a licensed attorney, constitute a part of his practice of law, but which also may be performed lawfully by laymen.... On the one hand, it seems extremely harsh to rule that a suspended lawyer, who already has been subjected to the deprivation of his means of livelihood, should further be deprived of opportunities to earn a living by doing things which laymen are permitted to do, such as investigating accidents, preparing tax returns, filling out simple deed forms as a real estate broker and doing legal research as a law clerk to a licensed attorney. On the other hand, the petitioner appears to take the extreme position that he is permitted to do anything that a layman could do, and, as a law clerk, everything that an attorney could do except appear in court. To adopt this view would mean that a suspension of one's license to practice law would be a penalty lightly borne. Christianson, 215 N.W.2d at 924. See generally Nature of Legal Services or Law-Related Services Which May Be Performed for Others by Disbarred or Suspended Attorney, 87 A.L.R.3d 279 (1978) (hereafter  Nature of Legal Services ). Davis argues that as long as he complies with the exact terms of the Suspension Order and follows the guidance from the case law of no contact with clients or prospective clients, he should be free as a suspended attorney to engage in activities that non-lawyers otherwise routinely perform. Further, Davis does not consider it problematic that as a suspended attorney he supervises paralegals in the provision of the same settlement services from the same office at the same phone number from which he practiced law because he took appropriate steps to change the name and the signage and to ensure that he did not have contact with or provide advice to clients. Indeed, Davis concedes that for the settlement portion of his former practice, it was his intent to have the lenders and realtors know that it was business as usual. The Delaware case law provides that a suspended attorney cannot engage in all activities that non-lawyers may do. Thus, even accepting that paralegals for family law practitioners meet with clients, the Supreme Court in Mekler held that a suspended attorney may not do that because there was too great a risk that the suspended attorney would give legal advice and the public might be confused. Similarly, although a non-lawyer can run an incorporation service, a suspended lawyer may not necessarily incorporate entities for clients. Application of Christianson, 215 N.W.2d at 923. At least one court has found that a suspended attorney can perform title abstracts where he expresses no opinion as to the quality of the title and provides his work to a supervising attorney in an office other than his or the supervising attorney's law office. See In Re Stoldt, 37 N.J. 364, 181 A.2d 364 (1962). The principle allowing certain activities by a suspended lawyer that may be performed by non-lawyers was stated in Christianson as follows: A suspended lawyer may engage in some such activities if he is otherwise qualified to do so, but not if his qualifications come from having been a lawyer. For example, a suspended lawyer who is also a public accountant may prepare tax returns as a public accountant. But a suspended lawyer may not prepare the papers necessary to incorporate a corporation merely because one of the stockholders of the corporation might also be able to fill in the blanks on a printed form by himself. When professional expertise enters into the activity, and when the activity is one which is customarily performed by lawyers, then such activity is forbidden to a suspended attorney, even though under some conditions members of other professions may sometimes be allowed to perform the same acts. Christianson, 215 N.W.2d at 926 (emphasis supplied). See also Nature of Legal Services at 9[b]. The evidence at the hearing established that the provision of settlement services is not customarily done by lawyers alone but instead is often done by companies where no attorneys are involved. The ODC does not contend that work by those entities is the practice of law. [86] The Panel is not persuaded as a general matter that a suspended attorney who manages an office that provides settlement services violates a suspension order or engages in the unauthorized practice of law, as long as the suspended attorney follows scrupulously the terms of the suspension order and the existing case law regarding what a suspended lawyer can do. The ODC argues that Davis explained at two seminars for realtors and lenders how a change in the law affected the HUD-1 forms and that that conduct exceeded the limit of what a suspended attorney is permitted to do. Davis does not dispute that he conducted two such seminars post-suspension but testified that his remarks were limited to explaining how the new four-page forms differed from the former two-page forms. The sole attendee who testified at the hearing, Helena Davidson, a realtor, testified that in her view Davis offered no legal advice to any person and that no homebuyers attended. [87] The Panel finds that the ODC failed to prove by clear and convincing evidence that Respondent's speaking at seminars to realtors and lenders violated the Suspension Order. The ODC offered no evidence of what Respondent said at those seminars other than the testimony of Respondent which did not reflect the giving of legal advice. We note that Respondent avoided homebuyer seminars post-suspension which would have reflected improper communications to potential clients. The Panel finds that the ODC failed to prove by clear and convincing evidence that Respondent presented at such homebuyer seminars post-suspension.