Opinion ID: 2823810
Heading Depth: 2
Heading Rank: 3

Heading: Application of the Legal Services Exemption in the Original DMSA to Morgan Drexen

Text: Â¶23Â Â Â Â Â Our task is to ascertain and give effect to the General Assemblyâs intent. Nowak v. Suthers, 2014 CO 14, Â¶20, 320 P.3d 340, 344. If statutory language is clear, we interpret it according to its plain and ordinary meaning. Specialty Rests. Corp. v.Â Nelson, 231 P.3d 393, 397 (Colo. 2010). If, however, statutory language is âreasonably susceptible to multiple interpretations, it is ambiguous and we determine the proper construction by examining the legislative intent, the circumstances surrounding its adoption, and possible consequences of various constructions.â Williams v. Kunau, 147 P.3d 33, 36 (Colo. 2006); see also Bostelman v. People, 162 P.3d 686, 690 (Colo. 2007) (explaining that if statutory language is ambiguous âwe may consider other aids to statutory construction, such as the consequences of a given construction, the end to be achieved by the statute, and legislative historyâ).
Â¶24Â Â Â Â Â The original DMSA exempts from regulation â[l]egal services provided in an attorneyâclient relationship by an attorney licensed or otherwise authorized to practice law in this state.â Â§ 12-14.5-202(10)(A), C.R.S. (2008). The exemption therefore contains three separate legal components. First, the debt-management services provider must be âan attorney licensed or otherwise authorized to practice law in this state.â Second, the attorney must provide âlegal servicesâ (and services cannot constitute âlegal servicesâ unless the person performing them is authorized to practice law, as explainedelsewhere in the DMSA). 3 And third, the attorney must provide those services âin an attorneyâclient relationship.â Â¶25Â Â Â Â Â As used in the exemption, the scope of the term âattorneyâ is âreasonably susceptible to multiple interpretations.â On the one hand, these three legal components arguably signify that the exemption applies only where the provider is an attorney. On the other hand, some ambiguity exists as to whether the exemption also encompasses nonlawyer assistants, such as paralegals, secretaries, and administrative assistants. Because the exemption covers âlegal servicesâ as a whole, it arguably extends to some services performed on behalf of an attorney. 4 We must therefore turn to extrinsic aids to statutory construction to ascertain legislative intent.
Â¶26Â Â Â Â Â Legislative history supports the interpretation that the legal services exemption in the original DMSA can apply to nonlawyers. During the March 21, 2011 Senate Committee hearing on that yearâs amendments, Administrator Udis stated that an âimportant partâ of the 2011 amendment was to âtighten up the exemption . . . to make it very clear that the exemption applies only to attorneys . . . but not to third parties that may be involved in the process but are not themselves attorneys.â Hearing on H.B. 11-1206 Before the S. Judiciary Comm., 68th Gen. Assemb., 1st Sess. 5â7 (Colo. 2011) (statement of Administrator Laura Udis) (emphasis added). This statement suggests that exemption coverage under the original DMSA does extend to âthird parties that may be involved in the process but are not themselves attorneys.â Â¶27Â Â Â Â Â This interpretation also comports with the well-established notion that attorneys often rely on nonlawyer assistantsâa reality that is reflected in Supreme Court precedent, Coloradoâs attorneyâclient privilege statute, and Colo. RPC 5.3. Â¶28Â Â Â Â Â The United States Supreme Court observed in the context of an application for attorneysâ fees under 42 U.S.C. Â§ 1988 that attorneys often use nonlawyer personnel to carry out tasks under attorney supervision: It has frequently been recognized in the lower courts that paralegals are capable of carrying out many tasks, under the supervision of an attorney, that might otherwise be performed by a lawyer and billed at a higher rate. Such work might include, for example, factual investigation, including locating and interviewing witnesses; assistance with depositions, interrogatories, and document production; compilation of statistical and financial data; checking legal citations; and drafting correspondence. Much such work lies in a gray area of tasks that might appropriately be performed either by an attorney or a paralegal. Missouri v. Jenkins by Agyei, 491 U.S. 274, 288 n.10 (1989) (emphasis added); see also Zimmerman v. Mahaska Bottling Co., 19 P.3d 784, 790 (Kan. 2001) (noting, in applying ethical rules to nonlawyers, that â[n]onlawyer personnel are widely used by lawyers to assist in rendering legal servicesâ (emphasis added) (internal quotation marks omitted)). Â¶29Â Â Â Â Â In addition, Coloradoâs statutory protection of attorneyâclient communications implicitly acknowledges that nonlawyer personnel routinely work on behalf of attorneys: An attorney shall not be examined without the consent of his client as to any communication made by the client to him or his advice given thereon in the course of professional employment; nor shall an attorneyâsÂ secretary, paralegal, legal assistant, stenographer, or clerk be examinedÂ without the consent of his employer concerning any fact, the knowledgeÂ of which he has acquired in such capacity. Â§ 13-90-107(b), C.R.S. (2014) (emphasis added); accord Wal-Mart Stores, Inc. v.Â Dickinson, 29 S.W.3d 796, 804 (Ky. 2000) (finding that the attorneyâclient privilege extends to paralegals because â[a] reality of the practice of law today is that attorneys make extensive use of nonattorney personnel, such as paralegals, to assist them in rendering legal servicesâ). Â¶30Â Â Â Â Â Finally, Coloradoâs Rules of Professional Conduct implicitly approve of this practice. Rule 5.3 outlines an attorneyâs âresponsibilities regarding nonlawyer assistants.â See Colo. RPC 5.3; see also id. cmt. 1 (espousing the basic, and uncontested, principle that â[l]awyers generally employ assistants in their practice, including secretaries, investigators, law student interns, and paraprofessionalsâ). Â¶31Â Â Â Â Â Given that attorney use of nonlawyer assistants is commonplace, we decline the Stateâs invitation to categorically preclude nonlawyer assistants from coverage under the legal services exemption. But that does not mean, conversely, that coverage is categorically extended to nonlawyer assistants. At a minimum, the person seeking an exemption must work for the attorneyâin substance, not just in nameâand under the attorneyâs supervision. With this thought in mind, we turn to Morgan Drexenâs contention that its services fall within the exemption because it acts on behalf of lawyers as a ânonlawyer assistantâ within the confines of Colo. RPC 5.3.
Â¶32Â Â Â Â Â Though Colo. RPC 5.3 does reflect the common use of nonlawyer assistants in the legal world, Morgan Drexenâs attempt to evade regulation through an expansive interpretation of the rule is unavailing for several reasons. Â¶33Â Â Â Â Â First, the DMSA is a remedial statute enacted to protect consumers, and we must construe it liberally to effectuate that purpose. See, e.g., Shapiro & Meinhold v. Zartman, 823 P.2d 120, 124 (Colo. 1992) (stating that the Fair Debt Collection Practices Act âshould be construed liberally because its purposes are remedialâ). Likewise, we must apply its exemptions narrowly so as not to frustrate the DMSAâs remedial purposes. See Showpiece Homes Corp. v. Assurance Co. of Am., 38 P.3d 47, 53 (Colo. 2001) (explaining that âin determining whether conduct falls within the purview of the CCPA, it should ordinarily be assumed that the CCPA applies to the conductâ so as not to frustrate the CCPAâs âstrong and sweeping remedial purposesâ); see also In re Gentry, 463 B.R. 526, 531 (Bankr. D. Colo. 2011) (â[E]xceptions to remedial legislation should be construed narrowly.â). Applying these principles, the remedial nature of the DMSA militates in favor of a narrow construction of Rule 5.3 in this context. 5 Â¶34Â Â Â Â Â Second, Rule 5.3 does not purport to establish who qualifies as a nonlawyer assistant; rather, it sets forth an attorneyâs professional responsibilities toward ânonlawyers employed or retained by or associated with a lawyer.â Colo. RPC 5.3. 6 Â¶35Â Â Â Â Â Third, even assuming Rule 5.3 applies, Morgan Drexenâs actions place it outside the ruleâs parameters. While those parameters may be somewhat nebulous at the outer margins, the Rule clearly contemplates meaningful instruction and supervision. Here, such instruction and supervision is conspicuously absent. Morgan Drexen requires its engagement counsel to execute carefully crafted contracts, which portray Morgan Drexen as subordinate to the law firms and acting under an attorneyâs supervision when it comes to legal matters. But the substance of their relationship reveals that âthe tail wags the dog.â Even the limited record before us now demonstrates that Morgan Drexen is not acting for the lawyer in rendition of the lawyerâs professional services; rather, the lawyer is acting for Morgan Drexen. Â¶36Â Â Â Â Â This courtâs function under Rule 56 is not to decide issues of fact but rather to determine âwhether there is an issue of fact to be triedâ and, if not, to resolve the question raised as a matter of law. Morlan v. Durland Trust Co., 252 P.2d 98, 100 (Colo. 1952) (internal quotation marks omitted). Exercising de novo review, we conclude that no genuine issue of fact exists as to the lack of supervision by engagement counsel over Morgan Drexen, despite Williamsonâs affidavit that he and Moore âdirect and supervise the services [they] outsource to Morgan Drexen to performâ and âmaintain full control over the course of the representation and exercise such control according to [their] own independent judgment.â As detailed below, the overwhelming evidence in the record shows the opposite. Â¶37Â Â Â Â Â A litigant âcannot avoid a summary disposition of his caseâ âby merely asserting a fact, without any evidence to support it.â Norton v. Dartmouth Skis, Inc., 364 P.2d 866, 868 (Colo. 1961) (internal quotation marks omitted); see also Annett v. Univ. of Kan., 371 F.3d 1233, 1237 (10th Cir. 2004) (â[U]nsupported, conclusory allegations . . . donot create a genuine issue of fact.â (internal quotation marks omitted)); Bernard v. Grp.Â Publâg, Inc., 970 F. Supp. 2d 1206, 1213 (D. Colo. 2013) (explaining that unsubstantiated, self-serving testimony in an affidavit does not create a genuine issue of material fact for summary judgment purposes where the record does not contain corroborating evidence). See generally C.R.C.P. 56(e) (â[A]n adverse party may not rest upon the mere allegations or denials of the opposing partyâs pleadings, but the opposing partyâs response by affidavits or otherwise provided in this Rule, must set forth specific facts showing that there is a genuine issue for trial.â). Â¶38Â Â Â Â Â The subordinate nature of the attorneysâ relationship is reflected in the payment arrangement: engagement counsel receives minimal feesâas low as two dollars per month per debtorâclient. It is also reflected in the documents that define and govern the relationship between Morgan Drexen and engagement counsel. For example, those documents reveal: Morgan Drexen âcoordinatesâ the attorneysâ efforts to negotiate with creditors on behalf of clients and to offer budget-planning services to clients. Morgan Drexen maintains âthe right to change the method, manor [sic] of, and procedures for servicing clients from time-to-timeâ without the attorneysâ approval. Morgan Drexen prepares advertisements to promote debt-management programs for engagement counsel, approves business names to be used by engagement counsel to ensure the names comply with applicable law, places advertisements in media, and performs screening and client intake services. Morgan Drexen provides engagement counsel with a representative âunsecured debt negotiation/settlement attorney/client fee agreement,â sample correspondence for creditors (which it describes as âpre-approvedâ by an attorney), and sample correspondence for clients, including a letter offering to assist with legal representation if debtors are sued. Morgan Drexen specifically directs that both the creditors and the attorneysâ clients contact Morgan Drexen alone. 7 Sample settlement agreements in the record are on Morgan Drexenâs letterhead. Morgan Drexen sets out a fee schedule that details what engagement counsel can charge if a client engages the attorney separately (including fees for preparation of pleadings, discovery responses, and summary judgment responses). If engagement counsel terminates its relationship with Morgan Drexen but maintains a debtorâclient, it must pay Morgan Drexen $1100 per client. In sum, the record shows that the attorneys do not provide meaningful instruction and supervision to Morgan Drexen. 8 Thus, Morgan Drexen does not qualify for the legal services exemption.