Wisconsin Lawyer
Vol. 78, No. 10, October
2005
The Unauthorized Practice of Law:
Court Tells Profession, Show Us the Harm
Before it will act, the Wisconsin Supreme Court
wants the State Bar of Wisconsin to gather demonstrable evidence that
additional regulation of the unauthorized practice of law is needed. The
court recently asked lawyers for quantifiable evidence not only of the
harm inflicted on the public when nonlawyers practice law but also of
the nature and extent of the harm. Members should submit data by Dec.
31.
by Thomas D. Zilavy & Andrew J. Chevrez
When nonlawyers practice law, their "clients" - the
public - can be harmed. The State Bar has responded to this harm by
petitioning the Wisconsin Supreme Court for a clear definition of the
unauthorized practice of law (UPL) and a regulatory system to administer
and enforce rules against UPL. Although the court denied the Bar's
latest petition, in a memo to its order, the court explained why:
"The court takes seriously the petitioners' assertion that it has
received increasing numbers of complaints from victims of fraudulent
practices allegedly committed by non-lawyers offering legal services.
However, before this court can contemplate a recommendation that it
establish a regulatory framework to administer and enforce rules on the
unauthorized practice of law, it needs demonstrable evidence that
additional regulation is truly needed. The court recommends that the
State Bar of Wisconsin ... document complaints or concerns received
from members of the public. Quantifiable evidence that a problem not
only exists, but the nature of the problem and its extent, will be of
significant value to this court. ...
|
Thomas D. Zilavy is chair of the State Bar UPL
Policy Committee.
|
Andrew J.
Chevrez is a member of the committee, as are attorneys Helen
Marks Dicks, Robert C. Leibsle, Thomas J. Basting Sr., John R. Zwieg,
Michelle A. Behnke, and State Bar staff Jason Westphal and Cathleen
Dettmann.
|
|
"We also ask that the State Bar assist this court by identifying
emerging consumer protection issues involving the practice of law. The
practice of law is changing, and technology is evolving rapidly. For
example, the prevalence of `on-line' legal advice and legal forms on the
Internet is a comparatively recent development with significant
implications for the `unauthorized practice of law.' ...
"Although we deny the Petition today, we anticipate that the State
Bar might establish its own task force to study the issue and submit a
petition addressing the issues set forth herein at some future
date."
The following explains the background and scope of the issue and,
more importantly, how your participation can aid the court in its
deliberations.
The Situation
Most states, including Wisconsin, permit only licensed lawyers to
practice law. Licensure and regulation by the Wisconsin Supreme Court
are primarily intended to assure consumers that lawyers admitted to
practice in our state possess a minimum level of ongoing competency and
to provide a potential remedy should a consumer be harmed by a lawyer's
unethical or incompetent behavior.
However, the kind of activity that constitutes the practice of law
and is reserved for licensed lawyers is not spelled out clearly by
statute or court rule. Until recently, in many states including
Wisconsin, the kinds of activities that constitute the practice of law
often were defined on a case-by-case basis in the course of litigation _
a disjointed approach that led to more confusion. While other states
have moved to define these kinds of activities, Wisconsin continues to
rely on a case-by-case approach. Charlatans who inflict harm on the
public either through their lack of training in the law or intent to
defraud have capitalized on these ambiguities.
Although many states including Wisconsin have criminalized UPL,
district attorneys often are reluctant to prosecute wrongdoers. Some
states have concluded that to properly and effectively protect the
public interest regarding UPL, it is necessary to create a comprehensive
and clear definition of the practice of law and to provide for
noncriminal methods of enforcement. Several states have already
accomplished this by supreme court rule.
The Court Has Jurisdiction to Define the Practice of Law
Other states have already recognized the extent of the harm to the
public caused by UPL and have proceeded to deal with the problem by
clearly defining the kinds of activities that constitute the practice of
law. Twenty-five states and the District of Columbia have already
proceeded to adopt a definition of the practice of law,1 and 14 of those jurisdictions have done so by
supreme court rule.2 To
protect the public, the State Bar of Wisconsin has been proactive in
seeking an effective UPL definition and policy, rather than waiting for
one to evolve through litigation.
It is well settled law that the Wisconsin Supreme Court has the sole
and exclusive authority to regulate the practice of law in
Wisconsin.3 In fact, the court also has held
that it has the authority to regulate nonlawyers who practice law in
Wisconsin.4 The court regulates lawyers
through a series of comprehensive rules that establish standards for a
person to operate as a lawyer in Wisconsin and that control the conduct
of lawyers in practicing law. The rules provide that only those persons
who are "admitted to practice in Wisconsin can practice law." None of
the court's rules, however, define what kind of activities constitute
the practice of law. The court's rules do prohibit a lawyer from
engaging or assisting another in the unauthorized practice of
law,5 but they do not describe what would be
UPL.
The Wisconsin Legislature in Wis. Stat. section 757.30 has made it a
crime to practice law without a license, but the statute's definition of
UPL is vague and, as a result, is rarely enforced. The statute begs the
question of exactly what kind of activities constitute the practice of
law.
Over the years the court has on occasion decided whether conduct is
or is not the practice of law given the particular limited facts of the
case before it. As such, the case law in Wisconsin does not present a
clear definition of the kinds of activities that constitute the practice
of law. Defining the practice of law on a case-by-case basis lends
little guidance and emboldens those nonlawyers who exploit consumers by
providing services that skirt the line. The result is that the public is
left unprotected because the court's overall regulatory scheme is
diluted and ineffective.
A son who had financial power of attorney for his
parents approached a real estate agent saying that his parents wished to
transfer the title of their property to the son. Without consulting
either party listed on the deed or reading the power of attorney
document, which did not allow for making gifts, the real estate agent
drew up the papers and transferred the property to the son/agent. The
son later evicted his parents from the home.
An elderly couple attended a seminar on how to avoid
probate and inheritance taxes. After being thoroughly frightened by the
salesman, the couple bought a trust from him for $5,000. When the
husband died, the wife discovered that no assets had been transferred to
the trust, with the result that the trust did not help the wife avoid
probate. Most of the couple's assets could have been titled jointly so
that probate would never have been an issue. Their estate was not large
enough to have had inheritance tax liabilities. The couple in effect
spent $5,000 for useless legal-looking documents.
A Wisconsin couple wished to divorce amicably, and
they thought they could cut costs by using the services of a "divorce
mediator," a person who had a Ph.D but was not an attorney. When the
mediator drafted the couple's marital settlement agreement, costly
mistakes were made when trying to divide the couple's jointly owned
businesses, resulting in frustrating and expensive litigation just a few
years later.
A Wisconsin surveyor, who was not a lawyer, drafted
for a landowner an easement that inadvertently affected a neighbor's
property. When confronted with the problem, the surveyor realized she
did not know how to fix the problem, and the local DA was unwilling to
prosecute under the unauthorized practice of law statute, section
757.30. The neighbor was forced to hire an attorney and file a civil
lawsuit to solve the problem.
An investment advisor assisted a couple in transferring their
assets to their children, promising that the transfer would mean the
government would pay for the sick husband's nursing home care. When the
wife applied for Medicaid for her husband, the couple was told they
would have an extended period of ineligibility for Medicaid due to the
divestment of assets. The investment advisor suggested the children pay
for the nursing home care and said he could not remedy the
situation.
State Bar Experience with UPL
It is important to understand that the State Bar, created by supreme
court rule, has no authority to deal with the conduct of nonlawyers who
engage in UPL. Since approximately 1992, a State Bar committee
consisting of volunteer lawyers has served as an informal repository of
sporadic complaints about nonlawyer conduct in Wisconsin, which conduct
probably constituted UPL. Those earlier complaints were forwarded by
lawyers who learned of the incidents from their clients. The State Bar
committee would consider the facts presented and in appropriate cases
refer matters to district attorneys, the Wisconsin Department of
Justice, or the Wisconsin Department of Agriculture, Trade and Consumer
Protection. Those officials and agencies have cooperated with the State
Bar in attempting to deal with the referrals, but they too have
sometimes been stymied in resolving consumer complaints due to the lack
of a clear definition of the practice of law either by supreme court
rule or statute.
The State Bar determined that there has to be a more direct way to
protect the public from the harm caused by the unauthorized practice of
law.
Recent History in Petitioning the Court
In 2003 the State Bar petitioned the Wisconsin Supreme Court
requesting that the court appoint a committee to develop a proposed
supreme court rule defining the practice of law and creating a system
for administering the new rule. The court held public hearings on the
State Bar's petition in 2003 and in 2004. The court requested that the
State Bar submit as a supplement to its 2003 petition a more definitive
mission statement of the committee to be appointed by the court.
The court recently rejected the State Bar's supplemental petition,
and thereby the Bar's original petition, primarily because the petition
lacked substantial evidence in the form of actual examples demonstrating
that the lack of a practice of law definition is detrimental to the
public interest. As quoted at the beginning of this article, the court
suggested in a memorandum that the State Bar collect evidence of
instances in which the unauthorized practice of law harmed members of
the public and that the State Bar devise a new rule for dealing with the
problem. The court expects the State Bar to re-petition the court with
appropriate evidence of public harm and a proposed solution to the
problem. In devising a solution, the court suggested the State Bar
involve other interested parties, such as the Board of Bar Examiners,
the Office of Lawyer Regulation, the Department of Regulation and
Licensing, and other agencies that may receive consumer complaints about
UPL.
Accordingly, the State Bar has launched an initiative to collect
examples of the unauthorized practice of law that have harmed consumers,
with the intention of presenting the evidence to the court. That's where
you come in. The State Bar needs its members to provide examples to add
to the body of evidence by Dec. 31, 2005. The committee will assess the
collected evidence in January and, when it has collected sufficient
evidence, the Bar will petition the court requesting that the court
adopt a new rule defining the practice of law in Wisconsin and creating
a method to administer and enforce the new rule.
In terms of enforcement methods, the State Bar believes that it is in
the public's best interests that noncriminal remedies should be
available to deal with cases involving UPL. Such enforcement methods
could include negotiated settlements, cease and desist orders, civil
contempt proceedings, and civil forfeitures.
How You Can Provide Examples
The State Bar's UPL Policy Committee will follow up on the court's
suggestions, beginning with collecting your examples of how UPL has
harmed the public.
Your input is critical. Members who have personal knowledge, or who
have clients who have knowledge, of instances they believe are examples
of UPL, are urged to report the facts and circumstances to the UPL
Policy Committee. If you question whether an incident is an example of
UPL, please report the incident and let the committee decide whether to
include it with the evidence to be presented to the court. Either the
member or the client can make the report.
A report form is available online in downloadable fillable Word
format and in printable PDF format, at www.wisbar.org/upl. Submit your
reports of incidents by Dec. 31, 2005 to: UPL Policy Committee, State
Bar of Wisconsin, P.O. Box 7158, Madison, WI 53708-7158; or fax to (608)
257-4343. Direct questions to Cathleen Dettmann, at (800)
728-7788, ext. 6045.
1The jurisdictions that have
adopted a definition of the practice of law are: Alabama, Alaska,
Arizona, Colorado, District of Columbia, Hawaii, Idaho, Kentucky,
Louisiana, Maine, Maryland, Michigan, Minnesota, Mississippi, Missouri,
Nebraska, North Carolina, Oklahoma, Oregon, Pennsylvania, South
Carolina, Utah, Virginia, Washington, West Virginia, and Wyoming. "2004
Survey of Unlicensed Practice of Law Committees," monograph, American
Bar Association, December 2004.
2The jurisdictions that have
adopted a definition of the practice of law by supreme court rule are:
Alaska, Arizona, District of Columbia, Idaho, Kentucky, Louisiana,
Maryland, Mississippi, Nebraska, Utah, Virginia, Washington, West
Virginia, and Wyoming. "2004 Survey of Unlicensed Practice of Law
Committees," monograph, American Bar Association, December 2004.
3See State ex rel.
Reynolds v. Dinger, 14 Wis. 2d 193, 109 N.W.2d 685 (1961).
4See State ex rel. State
Bar of Wisconsin v. Keller, 16 Wis. 2d 377, 114 N.W.2d 796
(1962).
5SCR 20:5.5.
Wisconsin
Lawyer