Ethics Opinon 1983-7

I
QUESTION PRESENTED

May a business entity or individual provide paralegal counseling and drafting services to the public related to matters such as corporate formation, bankruptcy filing, maintenance and dissolution, and real estate without engaging in the unauthorized practice of law? During the past few years, several paralegal services agencies have been formed to assist the public in a variety of legal or quasi-legal matters. This opinion is intended to provide advice concerning the parameters of proper activities by such paralegal agencies.

II
SUMMARY

The question present requires an analysis of two separate factors: (1) the character of the services provided, and (2) the presence and degree of lawyer supervision. While some purely ministerial tasks would not necessarily involve "lawyer work," "close questions" are to be resolved by deeming the activity to be the practice of law. Further, all lawyer work performed by paralegals must be supervised by an attorney to an appropriate degree depending upon the circumstances. The performance of most paralegal services by a business corporation which did not provide the appropriate degree of supervision by an attorney would constitute the unauthorized practice of law.

III
DISCUSSION

The unauthorized practice of law is prohibited in California by the Business and Professions Code, Sections 6125 and 6126. The first part of this opinion will discuss some of the types of activities which have been held to constitute the "practice of law." The opinion will then analyze the degree of lawyer supervision required to avoid unauthorized practice of law.

A. THE "PRACTICE OF LAW"

Although one who "fills in the blanks" in standard forms or otherwise performs only clerical work is typically not engaged in the unauthorized practice of law, a number of activities have been specifically identified in legal opinions as constituting the practice of law:

Among the acts which constitute the practice of law . . . are the preparation, drafting, or selection or determination of the kind of legal document, or giving advice with relation to any legal documents, or matters including the following:

offers, options, deeds, mortgages, contracts, leases, schedules, petitioners, etc., in bankruptcy, the formation, change, consolidation or dissolution of corporations or partnerships, trust deeds, powers of attorney. 15 Op.Cal.Atty.Gen. 7, 10-11 (1950).

Similarly, in Blair, et al. v. Motor Carriers Service Bureau, Inc., et al. (1939) 40 Pa. D.C. 413, defendant "Motor Carriers Service Bureau" held itself out through considerable advertising to be qualified to give advice regarding utility and interstate commerce activities. The Pennsylvania Court ruled that services dealing with the merger, consolidation and dissolution of corporations "require extraordinary legal skill and do constitute the unauthorized practice of law." Id. at 431. See also, Matter of Pace (1915) 170 App.Div. 818. Further, "[t]he preparation of corporate bylaws and resolutions required in connection with the organization of a corporation necessarily includes the giving of advice concerning matters of law, and insofar as they create, modify, surrender or secure legal rights, their drafting clearly constitutes the practice of law." See also, People v. Alfani (1919) 227 N.Y. 334, 125 N.E. 671.

Drafting of partnership agreements also involves unauthorized practice of law because such agreements "create and define legal rights and liabilities of an important character and their proper drafting requires considerable legal knowledge and skill." Id.

In Baron v. City of Los Angeles, (1970) 2 Cal.3d 535, 86 Cal.Rptr. 673, the California Supreme Court provided a general rule to be used in "close cases." Id. at 543. In Baron, an attorney contested a local ordinance requiring legislative advocates to register as such before attempting to influence municipal legislation. The court ruled the ordinance was valid. In explaining the definition of the "practice of law" the court said: "In close cases . . . the resolution of legal questions by another by advice and action is practicing law if difficult or doubtful legal questions are involved which, to safeguard the public, reasonably demand the application of a trained legal mind." Id. at 543.

In summary, although the definition of "practice of law" may to some extent depend on a case-by-case analysis, it is clear that many of the legal activities in which paralegals today have an ever-expanding role do clearly constitute the practice of law. See, e.g., San Diego County Bar Association, Formal Opinion 1983-4. In such cases, the paralegal activity is only lawful if accompanied by an appropriate degree of lawyer supervision.

B. LAWYER SUPERVISION

In order to determine whether performing an activity is the unauthorized practice of law, the degree of supervision by a licensed attorney must be considered. Where a non-lawyer is engaged in activities restricted to lawyers, the activities are not unauthorized practice of law if supervision by a lawyer accompanies the non-lawyer's work. The ABA Code of Professional Responsibility states that: "[D]elegation is proper if the lawyer maintains a direct relationship with the client, supervises the delegated work and has complete professional responsibility for the work product." (ABA Ethical Consideration 3-6.)

None of our research reveals any instances where a non-lawyer may perform lawyer activities without lawyer supervision.

The Rules for Practical Training of Law Students approved by the California State Bar Board of Governors, provides assistance in determining the level of attorney supervision necessary to various tasks. We assume that many of the same policies governing supervision of law students also apply to the need to supervise paralegals. According to these Rules, there are two distinct kinds of lawyer supervision: "general supervision" and "direct supervision." "General supervision" exists where the supervising attorney is absent, but the documents are subject to his review and approval. The attorney "must read, approve, and sign all pleadings and other papers prior to their filing, and must approve all documents prior to their submission for execution." (1 Witkin, "Cal. Procedure", at 183-184 (1970).) "General supervision" is required, inter alia, for all pleadings and other documents to be filed in court or with a public agency.

Activities requiring "direct supervision" by the attorney, according to these same Rules, include giving counseling and legal advice to clients and appearing on behalf of the client in any public trial, hearing or proceeding, or before any public agency, referee, commissioner or hearing officer to the extent approved by that body. "Direct supervision" is defined as "in the presence of the supervising attorney, and under his direct and immediate supervision, and with his approval and with the client's consent." Id.

In Crawford v. State Bar, (1960) 54 Cal.2d 659, the defendant attorney formed a partnership with his father, a disbarred attorney. The father advised clients regarding deeds, real estate deals, and the dissolution of a partnership without the supervision of his son. The son was reproved by the court for allowing the unauthorized practice of law.

The Crawford Court distinguished permissible legal clerking from unauthorized practice.

"[Permissible clerking] is the work of a preparatory nature such as research, the investigation of details, the assemblage of date (sic) and other necessary information and such other work as will assist the attorney in carrying the matter to a complete product, either by his personal examination and approval thereof or by additional effort on his part. The work must be such, however, as loses its separate identity and becomes either the product or else merged in the product of the attorney himself." Id. at 668.

The son was reproved because he "merely had knowledge of the existence of [lawyer activities] but not of their progress or disposition." Id.

Similarly, in Ferris v. Snively, (1933) 172 Wash. 167, 19 P.2d 942, a licensed law clerk was held to have practiced law in an unauthorized manner while preparing leases, mortgages, and contracts "upon his own initiative." The court said such activities would not have been unauthorized had they been of a preparatory nature, "enabling the attorney-employer to carry a given matter to a conclusion through his own examination, approval or additional effort." Annot. 13 A.L.R. 3d 1140 (1967).

Finally, according to the ABA Code of Ethics for Legal Assistants, "It shall be unethical conduct for a legal assistant . . . to set up business for themselves [sic] without the supervision of a duly licensed attorney." (Legal Assistant Code of Ethics, Number 2.)

Based on the foregoing, it is our opinion that without appropriate lawyer supervision, either direct or general, many paralegal activities, including activities relating to corporate formation, bankruptcy filing, maintenance and dissolution, and real estate transactions, would be considered unauthorized practice of law. This opinion is advisory only, and is not binding upon the State Bar, the Board of Governors of the State Bar, its agents or employees.

Disclaimer: This opinion was issued by the Legal Ethics Committee of the San Diego County Bar Association. It is advisory only and is not binding upon any member of the SDCBA, any other member of the State Bar of California, the State Bar of California or its Board of Governors, or any persons or tribunals charged with regulatory responsibilities. The SDCBA, its officers, directors, agents, and the Legal Ethics Committee members assume no responsibility or liability in rendering this opinion.