Professional Boundaries

In today’s business environment, the trend is toward more specialization within professional disciplines. However, there still exist certain participants who profess to be “generalists.” As long as one is competent in the areas in which it practices, it may be acceptable to be a generalist. However, where a professional license is required, the practitioner also must possess that license in order to perform professional services to comply with California law.

The practice of law is one of those problematic disciplines, and an area where many non-legal “professionals” may be violating California law. California prohibits the unlawful practice of law not to discourage “fomenting of litigation … but to afford protection against persons who are not qualified to practice the profession.”

For example, we regularly see “legal document assistants,” accountants and “consultants” assisting individuals and businesses in choosing a form of legal entity, organizing a corporation or limited liability company, drafting board and shareholder resolutions and drafting and negotiating contracts of real complexity. We see real estate brokers performing similar functions, such as advising clients on the kind of legal document they should utilize in order to effectuate their purpose, the terms and tax consequences of a real property transaction or preparing legal instruments (like leases and options). These types of services or advice may constitute the “practice of law” such that only a licensed attorney may perform them.

It is often tempting for individuals or businesses to employ a “legal document assistant” or an off-the-shelf contract service instead of hiring an actual lawyer. The non-lawyer services are cheaper, but for good reason. The work product they sell does not incorporate the expertise, experience and judgment of a trained lawyer. Over and over, we see well-meaning individuals who wanted to save a little money at the beginning of an enterprise, and so did not hire a real attorney, but instead went with a cheaper service that gave them some papers that “looked lawyery.” Those papers are often sloppily adapted from a different matter, lack crucial terms necessary for a client’s protection and are often so poorly drafted that, years down the line when the matter has fallen into dispute, lawyers and judges cannot assess the parties’ original intent.

“Legal document assistants” essentially are “typists” who are registered to provide limited “self-help” services to individuals who are representing themselves in legal matters. However, when they cross boundaries, they are not immunized from prosecution or liability for the unauthorized practice of law. Indeed, the State Bar of California has recently increased its efforts to prosecute non-attorneys for the unauthorized practice of law. And, the State Legislature has enacted new laws which enable the State Bar to shut down and “assume jurisdiction” over such “sham” practices.

In California, it is illegal to practice law unless the practitioner is “an active member of the State Bar [of California], or otherwise authorized pursuant to statute or court rule to practice law in this state.” The State Bar Act was designed to regulate the practice of law in California, but does not define the terms “practice of law.” However, courts have interpreted those terms to mean “in a larger sense, [providing] legal advice and counsel and the preparation of legal instruments and contracts by which legal rights are secured although such matter may or may not be pending in a court.” Sometimes it can be difficult to draw distinctions between what constitutes friendly “advice,” as opposed to the impermissible “practice of law.” Generally, if the services involve “the application of legal knowledge and technique,” it constitutes the practice of law and any doubt will be resolved against the practitioner. As a general rule, no one may practice law without a license.

Here are some examples of what California courts have determined to constitute the practice of law – acts which are reserved to licensed lawyers only: 1) appearing on behalf of another before a court, administrative board, commission or regulatory agency, 2) drafting legal instruments and documents, like contracts, deeds, wills and trusts, 3) organizing corporations, LLCs or other legal entities and preparing documents connected with those activities, 4) furnishing forms for a client’s use to rent property, evict tenants, etc., or suggesting the type of form that is appropriate for a particular transaction (i.e., a mortgage versus a trust deed), and 5) suggesting strategies to resolve a contract dispute and participating in settlement negotiations.

The consequences of practicing law without a license can be severe. For example, a nonlawyer may be punished with a crime and penalties include fines and/or jail time. In addition, the unauthorized practice of law may also lead to civil liability to the “victim.”

There are obvious reasons why the Legislature saw fit to regulate such activities and to require that they only be performed by licensed, competent professionals. If you need legal advice – see a trained, licensed lawyer. The lawyers at the Capobianco Law Offices have the practical experience and expertise to guide you on all business matters.