Summary
holding that secretarial service may type bankruptcy forms for clients provided it only involves copying the information given in writing by clients; it may not advise clients as to available remedies, make inquiries or answer questions from clients regarding which forms are necessary and how to best fill them out, or otherwise assist them in preparing the forms
Summary of this case from In re SkobinskyOpinion
Bankruptcy No. 88-04588-BKC-AJC.
March 30, 1990.
David C. Vladeck, Alan B. Morrison, Public Citizen Litigation Group, Washington, D.C., for Paul C. Meyer.
Neil Chonin, Coral Gables, Fla., for Paul C. Meyer.
Robert L. Roth, Miami, Fla., trustee.
Christopher and Charlene Bachmann, Miramar, Fla., pro se.
David D. Bird, Asst. U.S. Trustee, Miami, Fla.
The Florida Bar, Paul N. Gross, Staff Counsel, Miami, Fla.
MEMORANDUM OPINION
On November 15, 1988, the debtors, Christopher Bachmann and Charlene Rae Bachmann, filed a joint bankruptcy petition under Chapter 13 of the United States Bankruptcy Code. During the administration of this case, it was alleged that a typing service in South Florida was abusing the Bankruptcy system.
At the confirmation hearing on December 20, 1988, the Chapter 13 trustee advised the Court that he had examined the Chapter 13 plan and discussed the plan with the debtors at the first meeting of creditors. The trustee advised the debtors that the plan was improperly prepared and could not be recommended for confirmation. The Chapter 13 plan as filed by the debtors was vague, indefinite, contrary to the Code, and only provided for payment of twenty percent of the unsecured indebtedness, notwithstanding available additional income.
The debtors told the Chapter 13 trustee that the debtors knew nothing about Chapter 13 nor did they understand how to prepare or file a plan. The debtors told the trustee that a typing service advised them to file a Chapter 13 petition and prepared the plan for them. The debtors identified Paul C. Meyer of Capital Business Services, Inc. as the typing service.
The Court, sua sponte, entered an "Order to Show Cause Why Paul C. Meyer and Capital Business Services, Inc. Should Not Be Held in Contempt of Court For The Unauthorized Practice of Law" and set a hearing thereon. The hearing was convened twice and continued twice at the request of Mr. Meyer. Thereafter, the United States Trustee, on the order of this court, began an investigation, and, on March 17, 1989, filed a Motion For En Banc Hearing To Find Paul C. Meyer of Capital Business Services, Inc. In Civil Contempt Of Court and Other Relief (C.P. No. 25a).
An Evidentiary Hearing was held on March 31, 1989. Paul C. Meyer and Capital Business Services, Inc. were represented by David C. Vladeck and Allan B. Morrison of Public Citizen Litigation Group. The Assistant United States Trustee appeared by counsel.
There is little factual dispute. Paul C. Meyer was forthright and candid. He testified that he is the vice president of Capital Business Services, Inc. (hereinafter referred to as Capital). It is not disputed that he is not a licensed attorney-at-law. Mr. Meyer testified that Capital provides services similar to those provided the debtors in this case to individuals who desire to file voluntary petitions for bankruptcy. Capital also sells bankruptcy forms to debtors. Mr. Meyer described the services performed. Based on his testimony and the documentary evidence, it appears that Mr. Meyer d/b/a Capital did more than merely sell and type the bankruptcy forms. The evidence indicates that Mr. Meyer d/b/a Capital, is or has been engaging in the unauthorized practice of law.
Capital advertised in The Flyer and The Pennysaver, local community newspapers. The advertisements suggest that Capital provides bankruptcy services. See Appendix, Exhibits A, B, C, D. The Bachmanns, suffering financial misfortune, read one of these advertisements. On October 5, 1988, the Bachmanns went to Capital. At Capital, the Bachmanns were given Mr. Meyer's business card which indicates that Mr. Meyers is a trained paralegal. See Appendix, Exhibit E. The Court is unaware of any authority allowing a paralegal to practice law, assist in the practice of law, or provide services to clients where the paralegal is not supervised by a licensed attorney at law.
Mr. Meyer d/b/a Capital held himself out, through both newspaper advertisements and his business card, as being qualified to provide legal services as a paralegal to individual debtors who are in need of the relief provided under the Bankruptcy Code. According to Mr. Bachmann's testimony, Mr. Meyer not only selected the bankruptcy Chapter for the debtors, but also prepared the plan and prepared the debtors' petition.
Mr. Meyer prepared a "Notice to Individual Consumer Debtor(s)." The "Notice To Individual Consumer Debtor(s)", signed by both debtors and dated November 2, 1988 has an "x" typed in front of "chapter 13." This notice does not require an "x" at this point. The document is a certification by the debtors that they have read and presumably understand the options available to them. Apparently, neither the debtors nor Mr. Meyer understand this form or know how to complete it.
The court file contains the Voluntary Joint Petition, neatly typed. The remainder of the schedules are also neatly typed. The Chapter 13 plan, under Section 2(c), consists of only the following typed paragraph:
Payments for and towards the UNSECURED DEBTS of $15,298.26 shall be made to the extent of only 20% of the indebtedness to each creditor, and without interest, in no more than 12 payments and should such 20% of proved and allowed unsecured indebtedness be sooner paid out before the designated 12 month period, the payments and debt obligations of the debtor shall terminate thereat.
This language does not state a confirmable plan. The debtors told the trustee that they neither composed nor understood this language. This language is not the product of the debtors. It is the language of Mr. Meyer, and it is insufficient.
A good definition of what constitutes the practice of law is set forth in Howton v. Morrow, 269 Ky. 1, 106 S.W.2d 81 (Ct.App. 1937) which says:
The practice of law is not limited to the conduct of cases in Court. According to generally understood definition of the practice of law in this country, it embraces the preparation of pleadings and other papers incident to actions and special proceedings and the management of such actions and proceedings on behalf of clients before Judges and Courts and, in addition, conveyancing, the preparation of legal instruments of all kinds and, in general, all advice to clients and all action taken for them in matters connected with the law and, `attorney at law' is one who engages in any of these branches of the practice of law. Id. 106 S.W.2d at 83.
In the opinions that the Court has reviewed with regard to the unauthorized practice of law before United States Bankruptcy Courts, the courts have looked to state law for guidance. In re Anderson, 79 B.R. 482 (Bankr.S.D.Cal. 1987); In re Arthur, 15 B.R. 541 (Bankr.E.D.Pa. 1981); In re Preston, 82 B.R. 28 (Bankr.W.D.Va. 1987). Accordingly, it is appropriate for this Court to look to Florida law with regard to the instant matter.
It should be noted that another Division of this Court has dismissed a debtor's petition where the unauthorized practice of law was involved.
Persons not licensed as attorneys-at-law are prohibited from practicing law within the State of Florida. Fla. Const. of 1968 art. V. § 15 (1989). The Supreme Court of Florida broadly defines the practice of law. In State v. Sperry, 140 So.2d 587, 591 (Fla. 1962) the Supreme Court of Florida stated that:
. . . . if the giving of such advice and performance of such services affects important rights of a person under the law, and if the reasonable protection of the rights and property of those advised and served requires that the persons giving such advice possess legal skill and a knowledge of the law greater than that possessed by the average citizen, then the giving of such advice and the performance of such services by one for another as a course of conduct constitutes the practice of law.
In determining whether a particular act constitutes the practice of law, the Court's concern is the protection of the public. However, any limitation on the free practice of law necessarily affects important constitutional rights. This decision definitely affects Mr. Meyer's constitutional right to pursue a lawful business. This decision also affects Mr. Meyer's First Amendment right to speak and print what he chooses. However, the Court must balance Mr. Meyer's rights against the public policy of protecting the public from being advised and represented in legal matters by unqualified persons over whom the judicial department can exercise little, if any, control in the matter of infractions of the Code of conduct which, in the public interest, lawyers are bound to observe. Sperry, at 595.
Florida Bar v. Brumbaugh, 355 So.2d 1186 (Fla. 1978), clearly stated which services secretarial businesses in the State of Florida may lawfully provide. The Supreme Court of Florida held that secretarial services may sell printed materials purporting to explain legal practice and procedure to the public in general and may sell sample legal forms. Id. at 1194. The Supreme Court further held that such businesses may provide secretarial services and type forms for clients, provided that this involves only copying the information given in writing by clients. Id. Additionally, the Florida Supreme Court allowed secretarial services to advertise their business of providing secretarial, notary and typing services, as well as providing legal forms and printed general information. The Supreme Court held that secretarial services may not engage in advising clients as to the various remedies available to the clients, or to otherwise assist them in preparing forms . . . (emphasis added). Id. The Supreme Court held that secretarial services may not make inquiries nor answer questions from their clients as to, (1) the particular forms which might be necessary, (2) how to best fill out such forms, and (3) how to present necessary evidence at court hearings. Id.
The Brumbaugh opinion has been consistently followed by the Supreme Court of Florida in The Florida Bar v. Furman, 376 So.2d 378 (Fla. 1979); The Florida Bar v. Furman, 451 So.2d 808 (Fla. 1984); The Florida Bar v. Weissman, 508 So.2d 327 (Fla. 1987).
In Brumbaugh, the Florida Supreme Court's opinion dealt with the unlicensed practice of law in the context of dissolution of marriages. Nonetheless, it applies to other unauthorized legal assistance. The Florida Supreme Court indicated in its ruling that Brumbaugh would apply to other activities. Id. The Supreme Court cited the preparation of wills and real estate transactions as examples of such activities. Id. Secretarial services may sell legal forms for appropriate proceedings, and type instruments with data or information supplied by their clients. However, secretarial services may not engage in personal legal assistance in conjunction with business activities. This Court believes that the Supreme Court of Florida did not intend a limited application of its opinion. Accordingly, the Court holds that the opinion in Brumbaugh is correctly applied to the instant case.
The Court finds that Mr. Meyer d/b/a Capital was engaged in the unauthorized practice of law. The advice and counselling which Mr. Meyer d/b/a Capital provided the debtor concerning Bankruptcy law constitutes the unauthorized practice of law. The advice and counselling given to the debtors in this case constitutes the unauthorized practice of law because such advice requires the use of legal judgment requiring legal knowledge, training, skill, and ability beyond that possessed by the average lay person. The drafting and preparation of various legal documents by Mr. Meyer, including Chapter 13 petitions, statements, and schedules, on a regular basis for a fee constitutes the unauthorized practice of law. The act of soliciting debtors constitutes the solicitation for the unauthorized practice of law because these advertisements imply that Mr. Meyer d/b/a Capital is qualified to perform legal services. Mr. Meyer also engaged in the unauthorized practice of law when he solicited information from the Bachmanns which he reformulated and typed into their bankruptcy petition. Further, Mr. Meyer and/or Capital conducted the unauthorized practice of law when he advised the debtors to file a Chapter 13 Petition and when he composed the debtors' insufficient Chapter 13 plan.
Although Mr. Meyer d/b/a Capital Business Services, Inc. has engaged in the unauthorized practice of law in this case, the Court is satisfied that Mr. Meyer's actions were without intent to violate the law. Therefore, the Court does not determine Mr. Meyer to be in contempt of this Court. Rather it is deemed appropriate to enjoin Mr. Meyer d/b/a Capital Business Services, Inc. from further engaging in the unauthorized practice of law.
In order to assist Mr. Meyer d/b/a Capital and other typing services in determining what services may and may not be provided to possible debtors, the Court offers the following guidelines.
"Typing services", including Mr. Meyer, may type bankruptcy forms for their clients, provided they only copy the written information furnished by his clients. They may not advise clients as to the various remedies and procedures available in the Bankruptcy system. Mr. Meyer and representatives of typing services may not make inquiries nor answer questions as to the completion of particular bankruptcy forms or schedules nor advise how to best fill out bankruptcy forms or complete schedules. They may legally sell bankruptcy forms and any printed material purporting to explain bankruptcy practice and procedure to the public. Under no circumstance may they engage in personal legal assistance in conjunction with typing service business activities, including the correction of errors and omissions.
A problem arises when information is taken orally. Under these circumstances, we are faced with determining what was actually said. From Mr. Meyer's testimony, it is clear that his memory is not good in that area and the memory or notes of a typing service representative are not sufficient. There were numerous questions asked about what was said that Mr. Meyer just did not remember. Accordingly, it is suggested that typing services may take information from clients orally provided that they record the conversations and preserve the tapes. These tapes must be available at the first meeting of creditors. There is no reason why Mr. Meyer or others cannot charge additional compensation for the cost of using and storing the tapes. The small charge will be more than offset by the precision of the record.
Another problem arises with regard to advertising. Mr. Meyer is enjoined from using the word "paralegal" on his business cards. Mr. Meyers may advertise his business activities of providing secretarial, notary, and/or typing services. Mr. Meyer may also advertise that he sells bankruptcy forms and general printed information with regard to those forms. However, Mr. Meyer may not advertise in any misleading fashion which leads a reasonable lay person to believe that he offers the public legal services, legal advice or legal assistance regarding Bankruptcy.
Neither Mr. Meyer, nor his company, claim to be an attorney at law. 11 U.S.C. § 329 covers debtors and transactions with attorneys, including attorneys who are not attorneys-at-law. It states in part:
Any attorney representing a debtor in a case under this title, or in connection with such a case,. . . .
Congress did not define "attorney" in Section 101 of the Code, and therefore, it is appropriate to use a broad definition for attorney. "An attorney is one who is legally appointed by another to transact business for him." Webster's New Collegiate Dictionary 72 (7th ed. 1965). Examples of attorneys that are not attorneys-at-law are attorneys-in-fact and powers of attorney.
Clearly, Mr. Meyer and his company meet that definition. If he is in the form-preparing business and someone comes to his business establishment and requests legal forms be typed for a charge, that is a lawful attorney (not an attorney-at-law) relationship under the Webster Dictionary definition. The Court believes that this definition is broad enough to fit within the area to which Congress referred when enacting Section 329, Title 11, U.S.Code.
Section 329 deals with the compensation paid by debtors. It has two purposes. The first purpose is to protect debtors from paying exorbitant or unreasonable compensation which would be to their own detriment and to the detriment of the unsecured creditors of an estate. Section 329 also prevents dishonest debtors from making disparate payments to unentitled persons so that the bankruptcy estate would be diminished to the detriment of unsecured creditors. For this reason Congress provided under Section 329 that such compensation is subject to review.
Additionally, Bankruptcy Rule 2017 provides that:
On motion by any party in interest or on the court's own initiative, the court after notice and a hearing may determine whether any payment of money or any transfer of property by the debtor, made directly or indirectly and in contemplation of the filing of a petition under the Code by or against the debtor, to an attorney for services rendered or to be rendered is excessive.
In this case the United States Trustee in its Motion and report moved to review the compensation. It is appropriate to review the compensation of Mr. Meyer d/b/a Capital and to determine whether or not the compensation was appropriate for the services rendered. 11 U.S.C. § 329 (1984).
Mr. Meyer testified that it takes approximately one and a half hours to two hours to type the bankruptcy forms. The bankruptcy forms required to file a petition cost approximately ten dollars ($10.00). Allowing for a reasonable typing fee as well as a reasonable profit on the bankruptcy forms sold to the debtors, the Court finds that under all the circumstances of the instant case a reasonable fee is $60.00 for the selling of the bankruptcy forms to the debtors and typing the relevant information. Accordingly, it is
ORDERED that Mr. Meyer return to the Chapter 13 trustee in this case, the sum of $50.00. This sum represents the difference between the $110.00 fee which the debtors were charged by Mr. Meyer d/b/a Capital for the preparation of their Chapter 13 Petition and the $60.00 determined to be a reasonable fee in this case.
The Court in its ruling is sympathetic to the needs of indigent debtors. The Court must also be cognizant of the purpose for which Congress enacted the Bankruptcy Code. This decision is not made to protect the members of the legal profession either in creating or maintaining a monopoly or closed shop. Tragically there are few attorneys-at-law available to represent debtors in this fee range. This opinion is entered specifically to clarify congressional efforts to protect the public from being advised and represented in bankruptcy legal matters by unqualified persons and to protect them from being overcharged. Further, the Court must take into account the rights of the innocent creditors which may be adversely impacted. Therefore, after consideration, it is
ORDERED as follows:
1. Paul C. Meyer, d/b/a Capital Business Services, Inc., is permanently enjoined and restrained from engaging in the unauthorized practice of law.
2. Paul C. Meyer d/b/a Capital Business Services, Inc., is enjoined from advertising such as that set forth in Exhibits A, B, C, and D attached hereto.
3. Paul C. Meyer d/b/a Capital Business Services, Inc., is enjoined from using the title paralegal or advertising himself as a paralegal. He may seek dissolution of this portion of the injunction upon presentation of adequate evidence that he is qualified to be a paralegal and is working under the supervision of a licensed attorney.
4. Paul C. Meyer d/b/a Capital Business Services, Inc., is directed to turn over to the trustee herein the sum of $50 as a return of excessive compensation, pursuant to 11 U.S.C. § 329.
DONE and ORDERED.
APPENDIX
The Appendix consists of copies of newspaper advertisements placed by Capital Business Services, Inc. in the following publications:
Exhibit A: The Pennysaver at pg. 21 June 16, 1988, col. 1.
Exhibit B: The Flyer at pg. 21, May 18, 1988, col. 3.
Exhibit C: The Flyer at pg. 28, October 19, 1988, col. 4.
Exhibit D: The Flyer at pg. 6, October 26, 1988, col. 3.
Exhibit E is Mr. Meyer's business card.