What are a California lawyer's ethical duties when serving as outside counsel for a corporate debt-collection business whose nonlawyer staff drafts the pleadings and processes the collection cases?

Plain-English summary

The opinion considers X Corporation, a collection business whose paraprofessional employees prepare complaints, motions, discovery, abstracts, writs, and other litigation documents. The corporation retains a part-time attorney on hourly basis to serve as counsel of record. The attorney reviews and signs pleadings prepared by the corporation's staff and appears in court. The corporation pursues collection on its own debt and on debt assigned to it for collection, and seeks statutory attorney's fees including amounts attributable to its nonlawyer staff's work.

The committee addresses three questions.

First, is the corporation itself engaged in the unauthorized practice of law? The committee concludes that, under Le Doux v. Credit Research Corp. (1975) and the assignment-for-collection line of cases, a collection company that takes assignments and prosecutes its own claims through retained counsel is not engaged in UPL, but a corporation must be represented by counsel in court (Merco Construction Engineers (1978) 21 Cal.3d 724).

Second, does the attorney aid and abet UPL by signing pleadings prepared by the corporation's nonlawyer staff? The committee concludes yes, if the attorney's role is merely a rubber stamp. The duty of competence under former Rule 3-110(A) includes "the obligation to supervise the work of non-attorney employees or agents." The attorney "must have an active role and may not act as merely a rubber stamp for the work done by the Company's employees." Under Bus. & Prof. Code section 6105, an attorney may not lend the attorney's name to an unlicensed person, and supervision must be sufficient that the legal work is the attorney's.

Third, may the attorney pursue an award of statutory attorney's fees that includes the nonlawyer staff's services? The committee concludes the attorney may not misrepresent the role or qualifications of the persons performing the work. Former Rule 5-200 prohibits a lawyer from seeking to mislead the judge, and a fee request that conceals the nonlawyer character of the work would violate that rule and Bus. & Prof. Code sections 6068(d) and 6106.

The opinion also flags collateral duties under the federal Fair Debt Collection Practices Act (15 U.S.C. section 1692 et seq.) and the California analog (Civ. Code section 1788.2(c)). A lawyer may not assist a creditor in creating collection letters that falsely imply the lawyer is meaningfully involved (citing Masuda, Martinez, Taylor v. Perrin, Abels, Navarro). Former Rule 3-210 prohibits advising the violation of any law, including the FDCPA.

In practice

The opinion holds that, under California's rules as they stood in 2009, outside counsel for a corporate collector must actively supervise the corporation's nonlawyer staff's work on litigation matters, may not lend the attorney's name without real involvement, must accurately characterize the work in any fee application, and may not advise or assist FDCPA violations.

This opinion predates California's November 1, 2018 rule revisions and is framed under former Rules 1-120, 1-300, 3-110, 3-200, 3-210, and 5-200. Current California Rules 5.3 (nonlawyer assistants), 5.5 (UPL), 1.2.1 (advising violation of law), and 3.3 (candor to the tribunal) carry forward the equivalent concepts.

Common questions

Q: I'm part-time outside counsel for a debt-collection company. The company's collectors prepare the pleadings; I sign them. Is that OK?

A: Per the opinion, only if you actively supervise the work, not if you act as a rubber stamp. The committee treats inadequate supervision as aiding UPL under former Rule 1-300 and as misuse of the attorney's name under Bus. & Prof. Code section 6105.

Q: Can the collection corporation recover statutory attorney's fees for its own employees' time?

A: The opinion declines to opine on what the corporation may keep. It does conclude that the lawyer may not pursue the fee award in a way that misrepresents the nature or qualifications of the persons performing the work. Former Rule 5-200 and the candor duties apply to the fee application.

Q: If the staff are paralegals under section 6450, does that change the analysis?

A: The opinion notes paralegals are regulated under Bus. & Prof. Code section 6450 and that fee recovery for paralegal time may depend on whether the paralegal's qualifications are established (citing White v. GMRI). The duty to supervise applies in any event.

Q: Does the FDCPA matter to my ethical duties?

A: Per the opinion, yes. Former Rule 3-210 prohibits advising violation of any law, and Bus. & Prof. Code section 6068(a) anchors the duty. The opinion treats letters that misrepresent the lawyer's involvement as a federal violation that the lawyer must not assist.

Q: What is the line between adequate supervision and a rubber stamp?

A: The opinion declines to define the line, noting it is fact-specific. Active control over preparation of pleadings and monitoring of FDCPA compliance are identified as elements of "proper supervision."

Background and rules framework

The opinion interprets former California Rule 1-300 (no aiding UPL), Rule 1-120 (no soliciting or inducing rule violation), Rule 3-110(A) (competence, including supervision), Rule 3-200 (no acceptance of representation in objectively meritless matters), Rule 3-210 (no advising violation of law), and Rule 5-200 (truthfulness in court statements). It applies Bus. & Prof. Code section 6125 (UPL), section 6105 (lending name), section 6068(d) (duty not to mislead), section 6106 (moral turpitude), and section 6450 (paralegals). The FDCPA framework (15 U.S.C. section 1692 et seq.) and California Civil Code section 1788.2(c) supply the collection-practice duties.

Citations and references

Rules of Professional Conduct:

• Former California Rule 1-120 (no soliciting or inducing rule violation)
• Former California Rule 1-300 (no aiding unauthorized practice of law)
• Former California Rule 3-110(A) (competence and supervision)
• Former California Rule 3-200 (acceptance of representation)
• Former California Rule 3-210 (no advising violation of law)
• Former California Rule 5-200 (truthfulness in court statements)

Statutes:

• Bus. & Prof. Code section 6068(d) (duty not to mislead)
• Bus. & Prof. Code section 6105 (lending attorney name)
• Bus. & Prof. Code section 6106 (moral turpitude)
• Bus. & Prof. Code section 6125 (only active bar members may practice law)
• Bus. & Prof. Code section 6450 (paralegal regulation)
• Civil Code section 1788.2(c), section 1788.13(c) (California debt-collection)
• FDCPA, 15 U.S.C. section 1692 et seq.

Cases:

• Le Doux v. Credit Research Corporation, 52 Cal.App.3d 451 (1975), collection-assignee rule
• Merco Construction Engineers, Inc. v. Municipal Court, 21 Cal.3d 724 (Cal. 1978), corporation must appear by counsel
• Bluestein v. State Bar, 13 Cal.3d 162 (Cal. 1974), aiding UPL
• Jacoby v. State Bar, 19 Cal.3d 359 (Cal. 1977), permissibility of paralegals
• McGregor v. State Bar, 24 Cal.2d 283 (Cal. 1944), unsupervised lay employees
• Townsend v. State Bar, 210 Cal. 362 (Cal. 1930)
• Sanchez v. State Bar, 18 Cal.3d 280 (Cal. 1976)
• Snyder v. State Bar, 18 Cal.3d 286 (Cal. 1976)
• Spindell v. State Bar, 13 Cal.3d 253 (Cal. 1975)
• Vaughn v. State Bar, 6 Cal.3d 847 (Cal. 1972)
• Moore v. State Bar, 62 Cal.2d 74 (Cal. 1964)
• Trousil v. State Bar, 38 Cal.3d 337 (Cal. 1985)
• Rodgers v. State Bar, 48 Cal.3d 300 (Cal. 1989)
• Matter of Bragg, 3 Cal. St. Bar Ct. Rptr. 615 (Rev. Dept. 1997)
• PCLM Group v. Drexler, 22 Cal.4th 1084 (Cal. 2000)
• Zamora v. Clayborn Contracting Group, Inc., 28 Cal.4th 249 (Cal. 2002)
• Alderman v. Jacobs, 128 Cal.App.2d 273 (1954)
• Cohn v. Thompson, 128 Cal.App.Supp. 783 (1932)
• Masuda v. Thomas Richards & Co., 759 F. Supp. 1456 (C.D. Cal. 1991), FDCPA lawyer-signed letters
• Martinez v. Albuquerque Collection Services, Inc., 867 F. Supp. 1495 (D.N.M. 1994)
• Abels v. JBC Legal Group, P.C., 227 F.R.D. 541 (N.D. Cal. 2005)
• Navarro v. Eskanos & Adler, 2007 U.S. Dist. LEXIS 15046 (N.D. Cal. 2007)
• Taylor v. Perrin, Landry, deLaunay & Durand, 103 F.3d 1232 (5th Cir. 1997)
• White v. GMRI, Inc., Civ. S-04-0620 (E.D. Cal. 2006), paralegal-fee qualifications

Other opinions cited:

• California State Bar COPRAC Formal Opinion 1982-68 (lawyer letterhead used by creditor staff)

See also

• LACBA Opinion 524: Screening Nonlawyer Hires Who Possess Confidential Information
• No other sibling opinions yet indexed.

Source

• Landing page: https://lacba.org/?pg=ethics-opinions
• Original PDF: https://lacba.org/docDownload/2010580