BILL ANALYSIS Ó
SENATE JUDICIARY COMMITTEE
Senator Noreen Evans, Chair
2013-2014 Regular Session
AB 888 (Dickinson)
As Amended May 8, 2013
Hearing Date: June 25, 2013
Fiscal: No
Urgency: No
BCP
SUBJECT
State Bar of California: Enforcement Actions
DESCRIPTION
This bill would require the State Bar of California to disclose,
in confidence, the information in its investigation of the
unauthorized practice of law to the agency responsible for
criminal enforcement, and allow the State Bar to request the
Attorney General or other public prosecutor to bring an
enforcement action for the unauthorized practice of law. This
bill would additionally allow the State Bar to bring a civil
action for any violation of the existing prohibitions on the
unauthorized practice of law, and require the court in those
actions to impose a civil penalty, consider providing relief to
any injured party, and award the State Bar reasonable attorney's
fees and costs.
This bill would, for actions referred to the Attorney General or
other prosecutor for enforcement, allow the State Bar to recover
their reasonable expenses incurred.
BACKGROUND
The State Bar of California is a public corporation and is
currently governed by a 23-member Board of Trustees. Attorneys
who wish to practice law in California generally must be
admitted and licensed in this state and must be a member of the
State Bar. As of May 2013, the State Bar had 178,050 active
members and 51,985 inactive members, which represents a slight
annual increase in both active members and inactive members.
Total State Bar membership is listed at 242,738, which includes
(more)
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2,122 judge members and 10,580 members who are "Not Eligible to
Practice Law."
Under existing law, no person can practice law unless the person
is an active member of the State Bar of California. With
regards to the history and scope of that general prohibition,
the California Supreme Court observed:
The California Legislature enacted [the prohibition on the
unauthorized practice of law (UPL)] in 1927 as part of the
State Bar Act (the Act), a comprehensive scheme regulating
the practice of law in the state. Since the Act's passage,
the general rule has been that, although persons may
represent themselves and their own interests regardless of
State Bar membership, no one but an active member of the
State Bar may practice law for another person in California.
The prohibition against unauthorized law practice is within
the state's police power and is designed to ensure that
those performing legal services do so competently.
Although the Act did not define the term "practice law,"
case law explained it as "'the doing and performing services
in a court of justice in any matter depending therein
throughout its various stages and in conformity with the
adopted rules of procedure.'" (Birbrower, Montalbano,
Condon & Frank v. Superior Court (1998) 17 Cal.4th 119,
127-128.)
In addition to the general UPL prohibition, existing law
specifically provides that any person advertising or holding
himself or herself out as practicing or entitled to practice law
who is not an active member of the State Bar, or otherwise
authorized to practice law, is guilty of a misdemeanor. The
State Bar has the authority to bring a civil action enjoin to
violations of those and other provisions that similarly prohibit
the UPL. Despite those provisions, an article by Laura Ernde in
the February 2013 California Bar Journal noted continued
difficulty in addressing the UPL by certain individuals,
specifically:
In California, the State Bar gets hundreds of complaints a
year about individuals and businesses practicing law without a
license, claiming that they can solve legal problems for
consumers, Assistant Chief Trial Counsel Dane Dauphine said
[]. Because it doesn't have jurisdiction over non-attorneys,
the State Bar generally tries to address the problem by
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sending cease-and-desist letters to the offenders and
reporting the offenders to other law enforcement agencies,
Dauphine said. . . . UPL, is a crime punishable by a
misdemeanor conviction.
But in reality, law enforcement has other higher priorities to
address, State Bar Deputy Executive Director Robert Hawley
said. Many of the biggest abuses occur in immigrant
communities where people don't understand that the legal
system here is different than in their home countries. (Laura
Ernde, State Bar to look at limited-practice licensing
program, Feb. 2013, California Bar Journal
[as of June 20, 2013.)
To address those issues, this bill would, among other things,
allow the State Bar to bring a UPL civil enforcement action in
which the court shall impose civil penalties for violations and
award reasonable attorney's fees and costs to the State Bar.
This bill would also allow the State Bar to refer UPL
enforcement to the Attorney General and other public
prosecutors, and, allow the State Bar to receive the amount of
any reasonable expenses incurred, as specified.
CHANGES TO EXISTING LAW
1. Existing law requires all attorneys who practice law in
California to be members of the State Bar and establishes the
State Bar for the purpose of regulating the legal profession.
(Bus. & Prof. Code Sec. 6000 et seq.)
Existing law provides that no person shall practice law in
California unless the person is an active member of the State
Bar. (Bus. & Prof. Code Sec. 6125.)
Existing law provides that any person advertising or holding
himself or herself out as practicing or entitled to practice
law or otherwise practicing law who is not an active member of
the State Bar, or otherwise authorized pursuant to statute or
court rule to practice law in this state at the time of doing
so, is guilty of a misdemeanor. (Bus. & Prof. Code Sec.
6126(a).)
Existing law provides that any person who has been
involuntarily enrolled as an inactive member of the State Bar,
or has been suspended from membership from the State Bar, or
has been disbarred, or has resigned from the State Bar with
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charges pending, and thereafter practices or attempts to
practice law is guilty of a crime punishable by imprisonment
in the state prison or county jail. (Bus. & Prof. Code Sec.
6126(b).)
Existing law provides that the willful failure of a member of
the State Bar, or one who has resigned or been disbarred, to
comply with an order of the Supreme Court to comply with
California Rules of Court Rule 955, which sets out the range
of allowable Supreme Court orders for resigned, disbarred, or
suspended attorneys, is an alternate felony-misdemeanor.
(Bus. & Prof. Code Sec. 6126(c).)
Existing law authorizes the State Bar to enjoin any violations
or threatened violations of the unauthorized practice of law
in a civil action brought in the superior court by the State
Bar. (Bus. & Prof. Code Sec. 6030.)
This bill would allow the State Bar to disclose, in
confidence, information in its investigation of the
unauthorized practice of law, as specified, to the agency
responsible for criminal enforcement, or, exchange that
information with that agency. The State Bar may request the
Attorney General, district attorney, or a city attorney acting
as a local prosecutor to bring an enforcement action, or the
State Bar may bring a civil action in its own name for
violations of the existing prohibitions on the unauthorized
practice of law (contained in Sections 6125 and 6126 of the
Business and Professions Code).
This bill , in a civil enforcement action brought by the State
Bar, in addition to other available remedies and relief
available, would require the court to:
impose a civil penalty in an amount not to exceed $2,500
for each violation, to be paid to the State Bar. In
determining the amount of the penalty, the court shall
consider any relevant circumstances presented by any of the
parties to the case, including, but not limited to, the
nature and seriousness of the misconduct, the number of
violations, the persistence of the misconduct, the length
of time over which the misconduct occurred, the willfulness
of the defendant's misconduct, and the defendant's assets,
liabilities, and net worth;
impose a civil penalty for the intentional violation of
any injunction prohibiting the unlawful practice of law, in
an amount not to exceed $6,000 for each violation, to be
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paid to the State Bar. If the conduct constituting the
violation is of a continuing nature, each day of that
conduct shall be deemed a separate and distinct violation.
In determining the amount of the civil penalty to assessed,
the court shall consider any relevant circumstances,
including, but not limited to, the extent of the harm
caused by the conduct constituting a violation, the nature
and persistence of the conduct, the length of time over
which the conduct occurred, the defendant's assets,
liabilities, and net worth, and any corrective action taken
by the defendant;
consider, when applicable, the relief available under
existing law in an enforcement action for any person who
obtained services or purchased goods that were offered or
provided in violation of the existing prohibitions on the
unauthorized practice of law, as specified; and
award reasonable attorney's fees and costs and, in the
court's discretion, exemplary damages.
2. Existing law provides that any person who engages, has
engaged, or proposes to engage in unfair competition shall be
liable for a civil penalty not to exceed $2,500 for each
violation, which shall be assessed and recovered in a civil
action brought in the name of the people of the State of
California by the Attorney General, by any district attorney,
by any county counsel, city attorney, or city prosecutor, as
specified. (Bus. & Prof. Code Sec. 17206(a).)
Existing law provides that if the action is brought at the
request of a board within the Department of Consumer Affairs
or a local consumer affairs agency, the court shall determine
the reasonable expenses incurred by the board or local agency
in the investigation and prosecution of the action. The
amount of those reasonable expenses must be paid to the board
or local consumer affairs agency, as specified. (Bus. & Prof.
Code Sec. 17206(e).)
This bill would additionally include actions brought at the
request of the State Bar, and, require the amount of
reasonable expenses incurred by the State Bar to be paid to
the State Bar to fund its investigation and enforcement of the
unauthorized practice of law.
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COMMENT
1. Stated need for the bill
According to the author:
The State Bar has little authority to stop the unauthorized
practice of law [(UPL)]. The limit of this authority was
recently highlighted by the post-foreclosure scam where
businesses would promise to help homeowners remain in their
homes for a period of time after they had already been
foreclosed on. The perpetrators would act as attorneys and
accept payment for services that they did not provide. . . .
To enhance the State Bar's enforcement of UPL, AB 888 would
allow the State Bar to obtain the same relief of civil
penalties, costs and attorney's fees, and remedies for
consumers that courts may now award in civil enforcement
actions by the Attorney General, district attorneys and city
attorneys. AB 888 would also allow the State Bar to recover
costs of its investigation when it turns over its
investigation to the Attorney General, a [district attorney]
or some other local prosecutor.
2. Unauthorized practice of law
This bill seeks to permit the State Bar to bring civil
enforcement actions for the unauthorized practice of law,
require the court to impose civil penalties to be paid to the
State Bar, and, award the reasonable attorney's fees and costs
to the State Bar. Specifically, this bill would authorize a
civil penalty of up to $2,500 per violation of the existing
prohibitions on the unauthorized practice of law, and, a civil
penalty of up to $6,000 for an intentional violation of any
injunction prohibiting the unlawful practice of law. The State
Bar would also be entitled to their reasonable attorney's fees
and costs in those civil enforcement actions. The State Bar,
sponsor, writes:
The unlicensed practice of law often occurs through consumer
scams where perpetrators pose as attorneys and take money
for services they never provide. While the State Bar has the
power to bring a civil action in the superior court to
enjoin the unlicensed practice of law, it cannot recover
civil penalties, including sanctions for violating the
injunction. Perpetrators who commit these scams simply set
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up a different entity and continue to operate as normal.
It should be noted that existing law contains both a general
prohibition on the unauthorized practice of law, and, a specific
provision making it a misdemeanor for any person who is not an
active member of the bar (or otherwise authorized) to advertise
or hold himself or herself out as practicing or entitled to
practice law. Other provisions apply similar restrictions on a
person who has been involuntarily enrolled as an inactive member
of the State Bar, suspended, disbarred, resigned with charges
pending, or who willfully fails to comply with an order of the
Supreme Court to comply with the California Rules of Court.
This bill would authorize the State Bar to bring civil
enforcement actions for a violation of all those provisions
relating to the unauthorized practice of law.
As the scope of existing law and the proposed authority depend
on what exactly is the "practice of law," it is important to
note that the definition is not codified in statute, but,
instead, has developed through case law. Regarding that
definition, the California Supreme Court found that:
[C]ase law explained [the "practice of law"] as " 'the doing
and performing services in a court of justice in any matter
depending therein throughout its various stages and in
conformity with the adopted rules of procedure.' " (People
v. Merchants Protective Corp. (1922) 189 Cal. 531, 535 [209
P. 363] (Merchants).) Merchants included in its definition
legal advice and legal instrument and contract preparation,
whether or not these subjects were rendered in the course of
litigation. (Ibid.; see People v. Ring (1937) 26 Cal.App.2d.
Supp. 768, 772-773 [70 P.2d 281] (Ring) [holding that single
incident of practicing law in state without a license
violates [Section] 6125] []) Ring later determined that the
Legislature "accepted both the definition already judicially
supplied for the term and the declaration of the Supreme
Court [in Merchants] that it had a sufficiently definite
meaning to need no further definition. The definition . . .
must be regarded as definitely establishing, for the
jurisprudence of this state, the meaning of the term
'practice law.' " (Ring, supra, 26 Cal. App. 2d at p. Supp.
772.) (Birbrower, Montalbano, Condon & Frank v. Superior
Court (1998) 17 Cal.4th 119, 128.)
As a result, while it could be argued this bill allows
enforcement of an unlawful activity that is not specifically
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defined, the prohibition has been subject to extensive
litigation and this bill does not seek to not modify what is
considered the unauthorized practice of law. Thus, if this
bill is enacted, acts that are currently prohibited will
remain prohibited, and, acts that are not prohibited continue
as such. Furthermore, since the proposed civil penalties must
be sought in a court, any party who believes that their
activities were not the practice of law would have the
opportunity to go before the court and explain why they did
not violate the law.
Staff notes that, as a practical matter, this bill would
primarily assist the State Bar by allowing them to bring civil
enforcement actions against non-attorneys for the unauthorized
practice of law, and to recover their costs in doing so.
Absent this bill, as noted above, the State Bar would likely
continue to address the issue by sending cease-and-desist
letters and reporting non-attorneys suspected of practicing
law without a license to law enforcement, who may or may not
prosecute these cases depending on circumstances and workload.
The State Bar reports that they have resolved 261 complaints
using that process since 2006, and, notes that 22 cases have
been filed under another section that allows the State Bar to
assume the practice of an unlicensed practitioner. (Bus. &
Prof. Code Sec. 6126.3.) The Bar further notes that while
they do currently have the authority to bring a civil action
to enjoin a violation, those actions are limited because the
Bar cannot recover civil penalties for violations of the
injunction. As a result, this bill seeks to place the Bar on
"equal footing" with public prosecutors by allowing them to
recover similar penalties and to be reimbursed for costs and
attorney's fees.
3. Opposition's concerns
The numerous opposition letters received by the Committee
express concern about giving the State Bar the ability to seek
civil penalties and to recover their attorney's fees and costs,
and, concern that the State Bar will use the civil enforcement
authority to target legal document assistants (LDAs), among
others.
a. Concerns raised by LDAs
As background, LDAs are authorized under existing law to
provide self-help service to a member of the public
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representing themselves in a legal matter. "Self-help"
service is defined as completing legal documents at the
person's direction, providing general published factual
information, making published legal documents available, and
filing and serving legal forms and documents at the direction
of a person representing himself or herself. (Bus. & Prof.
Code Sec. 6400 (d).) Under existing law, LDAs are expressly
prohibited from engaging in the unauthorized practice of law,
including, but not limited to, giving any advice or
recommendation to a consumer about possible legal rights,
remedies, defenses, option, selection of forms, or strategies.
Regarding the impact on LDAs, Cost Effective Legal Access
California asserts that this bill would give the State Bar
"enormous financial incentives to pursue UPL claims whether
they are legitimate or not . . . If LDAs or potential LDAs
are fearful of the risk imposed by the crippling legal
penalties allowed by AB 888 every time they attempt to legally
provide assistance, they will simply find another line of work
that does not offer this hazard." Other opposition letters
assert, among other things, that LDAs would not be able to
defend themselves "against a frivolous lawsuit against a
well-funded state agency such as the State Bar," that AB 888
would unjustly target non-lawyers and stifle competition, and
that the State Bar has a natural conflict of interest when it
comes to regulating LDAs because many of the Bar's members see
LDAs as competition.
b. Concern about attorney's fees and exemplary damages
In a civil enforcement action brought pursuant to this bill,
the State Bar would receive their reasonable attorney's fees
and costs and, in the courts discretion, exemplary damages.
That language is identical to language in existing law that
entitles the Attorney General, district attorney, or a city
attorney acting as a public prosecutor to recover those same
fees and costs when bringing an enforcement action for the
unauthorized practice of law. (Bus. & Prof. Code Sec.
6126.5(c).) Thus, this bill would place the State Bar on
equal footing with those public prosecutors.
The opposition expresses concern about the "one-way" attorney
fee provision, and argues that even in a completely frivolous
proceeding, a prevailing defendant would not be awarded his or
her fees. The opposition further contends that one-way fee
shifting "provides the State Bar with an easy way to put a
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perfectly legitimate LDA out of business, as most LDAs would
not be able to afford to pay for their defense."
c. Fines go to the State Bar
As noted above, this bill would allow the State Bar to bring
civil enforcement actions for the unauthorized practice of law
and seek penalties of up to $2,500 for each violation, and, up
to $6,000 for each intentional violation of an injunction
prohibiting the unlawful practice of law. In assessing the
penalty, the bill would require the court to consider any
relevant circumstances, thus, allowing a defendant who did
violate the law to present any mitigating circumstances to the
court for consideration.
The opposition generally contends that the civil penalties
create a financial incentive for the State Bar to act in its
own interest, and, argues that the penalties should instead be
paid to a consumer protection or other fund to help
self-represented litigants. With respect to ensuring that
injured consumers are made whole, staff notes that AB 888 does
incorporate the existing ability for a court to award an
injured person various types of relief, including, actual
damages, restitution, reasonable attorney's fees and costs
expended to rectify errors, and appropriate equitable relief.
Thus, the fact that the State Bar may get some penalty revenue
does not mean that the court will not also award substantial
relief to any party injured by the person practicing law
without a license.
Staff notes that, in addition to the provision directing civil
penalties to the State Bar, AB 888 would also allow the State
Bar to recover its reasonable expenses in cases that are
referred to law enforcement and brought by the Attorney
General or local public prosecutor for the unauthorized
practice of law under Business and Professions Code Section
17206 (unfair competition). For reasons similar to those
discussed above, the opposition expresses concern that the
recovery of those expenses creates a financial incentive for
the State Bar to aggressively pursue those who may be
committing the unauthorized practice of law.
It should be noted that the State Bar is fundamentally
different from many other state entities because their budget
relies upon bar dues paid by members of the State Bar. The
amount of those dues is set by the Legislature in the State
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Bar's annual dues bill, and, as part of the process, both the
Senate and Assembly Judiciary Committees examine the financial
state of the Bar and the justification for the requested bar
dues amount. Accordingly, the Legislature has direct control
over the budget of the State Bar and is in a position to
ensure that any amounts of penalty revenue do not result in a
windfall to the Bar itself.
Considering the importance of the Legislature's annual review
of the State Bar via the dues bill, the author should consider
amending this bill to require the State Bar to report
information about enforcement actions to the Legislature.
That amendment would allow the Legislature to continue to
review the proposed enforcement authority each year to ensure
that it is being used appropriately.
Suggested amendment:
Section 6126.7 is added to the Business and Professions
Code to read:
6126.7. The State Bar shall by April 30 of each year report
annually to the Assembly and Senate Judiciary Committees
concerning the numbers of complaints of unauthorized practice
of law received, of referrals under subdivision (a) of section
6126.6, and of the proceedings filed by the State Bar under
sections 6030, 6126.3, 6126.4, and 6126.6 in the preceding
calendar year. The report required by this section may be
included in the report described in section 6086.15.
d. Remaining opposition concerns
The remaining letters of opposition raise concerns that this
bill would allow the State Bar to target immigration
consultants and unlawful detainer assistants. Those letters
note that those service providers do provide the public with a
valuable service by ensuring that paperwork is in the proper
form and directing the public to sources of information.
Other opposition letters are from constituents who have used
LDAs and write to express satisfaction with their work. As
discussed above, this bill would not change the definition of
the unauthorized practice of law, thus, the State Bar could
only seek the proposed civil penalties in a circumstance where
the person had violated existing law, and, a court agrees that
existing law was violated.
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Support : None Known
Opposition : California Association of Legal Document
Assistants; Consumers for a Responsive Legal System; Cost
Effective Legal Access California; Nolo Press Occidental; Santa
Barbara Paralegal Association; 26 individuals
HISTORY
Source : State Bar of California
Related Pending Legislation : SB 345 (Evans) would authorize the
State Bar of California to collect active membership dues of up
to $390 for the year 2014. This bill is currently in the
Assembly Judiciary Committee.
Prior Legislation : None Known
Prior Vote :
Assembly Judiciary Committee (Ayes 10, Noes 0)
Assembly Floor (Ayes 74, Noes 0)
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