Is a debt-adjustment company practicing law, and may a lawyer represent such a company that gets its clients through newspaper ads?

Plain-English summary

A company advertised in daily newspapers offering to relieve people burdened with debts. Debtors who answered would give the company a list of their creditors and agree to pay a fee on all their debts; the company would then adjust the debts with creditors and arrange for the debtor to pay a single check to the company, which would deduct its fee and prorate the balance among the creditors. In some cases the company took an assignment of the debtor's wages, filed it with the employer, and received the pay check directly. Creditors were given no say in whether their claims would be handled this way. The inquirer asked whether the plan was practicing law, and if so, whether it would be unethical for an attorney to represent such a concern.

The Board answered both questions in the affirmative. Drawing on its Advisory Opinion No. 11 and the definition of the practice of law in Re Duncan, it reasoned that the practice of law embraces the preparation of legal instruments and all advice and action taken for clients in matters connected with the law. The adjustment company advised its clients what it proposed to do and undertook to compromise or adjust the debts of another for a fee, which the Board treated as the direct practice of law. It cited several decisions holding similar corporate businesses to be the practice of law. A lawyer who handles the business of such a company, the Board said, is in effect a partner in soliciting business and aids a lay agency in the practice of law.

Currency note

This opinion was issued in 1933, decades before Oklahoma replaced its original Rules of Professional Conduct (patterned on the ABA Canons of Professional Ethics) with the Oklahoma Rules of Professional Conduct (adopted 1988) and the later Ethics 2000 revisions. The unauthorized-practice-of-law analysis and the bar on assisting a lay agency in practicing law are addressed today by separate provisions of current Oklahoma law and the Rules of Professional Conduct. Treat this page as historical context, not current guidance. Verify against current rules before relying on any specific principle mentioned here.

Common questions

Q: Was the debt-adjustment plan the practice of law?

A: Yes. The Board concluded the company gave advice and undertook to compromise or adjust the debts of another for a fee, which it treated as the direct practice of law.

Q: Could a lawyer represent or work for such a company?

A: No. The Board concluded it would be unethical, because the lawyer would be aiding a lay agency in the practice of law and would be, in effect, a partner in soliciting business.

Q: What authority did the Board rely on for the definition of practicing law?

A: Its own Advisory Opinion No. 11 (defining the practice of law as used in Sections 46 and 48 of the State Bar Act) and Re Duncan, along with several out-of-state decisions holding comparable corporate businesses to be the practice of law.

Background and rules framework

The opinion built on the Board's Advisory Opinion No. 11, which defined the practice of law as used in Sections 46 and 48 of the State Bar Act, and on Re Duncan, 83 S.C. 186, 65 S.E. 210. It treated a lay company's advising debtors and adjusting their debts for a fee as the practice of law, and treated a lawyer who handles such a company's business as aiding a lay agency's unauthorized practice.

Citations and references

Statutes:

• Sections 46 and 48 (State Bar Act): the practice of law and the unlawful practice of law, as defined in the Board's Advisory Opinion No. 11.

Cases:

• In re Duncan, 83 S.C. 186, 65 S.E. 210 (S.C. 1909), defining the practice of law.
• In re Cooperative Law Co., 198 N.Y. 479, 92 N.E. 15, corporate practice of law.
• In re Associated Lawyers Co., 134 App. Div. 350, 119 N.Y.S. 77.
• Meguire v. Corwine, 101 U.S. 108, lay solicitation of legal business.
• Additional cited decisions: Buxton v. Lietz; Meisel & Co. v. National Jewelers Board of Trade; Alpers v. Hunt; Midland Credit Adjustment Co. v. Donnelley; People ex rel. v. Jadrich; Holland v. Sheehan; Langdon v. Conlin; In re Shay; In re Newman; Matter of Clark.

Other opinions cited:

• Oklahoma State Bar Advisory Opinion No. 11: definition of the practice of law under the State Bar Act.

See also

• Okla. Bar Ethics Op. 49: Lawyer Representing Members of a Lay Cooperative Association
• Okla. Bar Ethics Op. 31: Law Firm Managing a Lay Adjustment Bureau
• Okla. Bar Ethics Op. 43: Out-of-State Firm Maintaining a Permanent Office in the State

Source

• Landing page: https://www.okbar.org/ethics/ethics-opinion-no-53/

Original opinion text

Reproduced from the official source for research purposes. The linked source is authoritative.

Adopted May 26, 1933

The Board of Governors is in receipt of the following inquiry:

"There is an association or an individual who carries the following ad in the daily newspapers, which reads:

'Are you burdened with debts and money worries? Our plan secures relief.

……… Adjustment Company, Inc.'

Persons who owe several store accounts and other debts, answer the above ad and go to the place of business designated in the advertisement, where they are told if they will give the concern a list of all of their creditors and agree to pay them a fee on all of their debts, that the concern will adjust their debts with their creditors and make an arrangement so the debtor can pay one check to the Adjustment Company and the Adjustment Company will prorate it among the creditors.

After such agreement is made with the debtor, without notice to the creditors, the Adjustment Company takes an assignment of the debtor's wages in some cases, and in some cases they do not take an assignment of the debtor's wages. Where an assignment is taken, it is filed with the employer and the employer sends the pay check to the Adjustment Company. The Adjustment Company deducts its fee and then pays back to the debtor a certain portion of his check for his own expenses and distributes the balance among the debtor's creditors.

The Adjustment Company gives the creditors no opportunity to decide whether they want the claim handled in that manner, and notifies the creditors if they do not want the money in that manner, that they will have to wait until all of the rest of the debts are paid.

Q. Is not the plan outlined practicing law?

Q. If it is practicing law, would it not be unethical for an attorney to represent such a concern that gets its business through newspaper advertisements?"

In response:

Both questions are answered in the affirmative.

In Advisory opinion No. 11, the practice of law as used in Sections 46 and 48 of The State Bar Act is defined. The language of the court in Re Duncan, 83 S.C. 186, 65 S.E. 210, 24 L.R.A.,N.S., 750, is used in discussing what constitutes practicing law, wherein it is stated "it embraces 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."

Undoubtedly the "adjustment company" advises or counsels its "client" or the person on whose behalf it undertakes or proposes to adjust existing indebtedness just what it proposes to do. This service not only constitutes giving advice and counsel as to secular law, but is direct practice of law in that it contemplates or undertakes to compromise or adjust debts of another for which a fee is charged.

Attention is also called to the following cases in which the business engaged in by corporations was held to constitute the practice of law. In re Cooperative Law Co., 198 N.Y. 479, 92 N.E. 15, 32 L.R.A.,N.S., 55; In re Associated Lawyers Co., 134 App.Div. 350, 119 N.Y.S. 77; Buxton v. Lietz, Mun.Ct., 136 N.Y.S. 829; Meisel & Co. v. National Jewelers Board of Trade, 90 Misc. 19, 152 N.Y.S. 913.

A lawyer who handles the business of such an adjustment company, is in effect, a partner in soliciting business, and is aiding a lay agency in the practice of law. Meguire v. Corwine, 101 U.S. 108, 25 L.Ed. 899; Alpers v. Hunt, 86 Cal. 78, 24 P. 846, 9 L.R.A. 483; Midland Credit Adjustment Co. v. Donnelley, 219 Ill.App. 271; People ex rel. v. Jadrich, 320 Ill. 344, 151 N.E. 241; Holland v. Sheehan, 108 Minn. 362, 122 N.W. 1, 23 L.R.A.,N.S., 510; Langdon v. Conlin, 67 Neb. 243, 93 N.W. 389, 60 L.R.A. 429; In re Shay, 133 App.Div. 547, 118 N.Y.S. 146; 196 N.Y. 530, 89 N.E. 1112; In re Newman, 172 App.Div. 173, 158 N.Y.S. 375; Matter of Clark, 108 App.Div, 150, 95 N.Y.S. 388; 184 N.Y. 222, 77 N.E. 1.