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What About a De Minimis Cost Exception To Unauthorized Practice of Law?

For a long time, I’ve wanted to come up with the definitive blog post on what constitutes unauthorized practice of law. I figured that if I could develop a clear set of principles, then I could create an online tool to help solos and smalls evaluate if a particular scenario constituted practice of law and thus, help keep them out of trouble. But after dozens of false starts and a bunch of research, I’m back to where I started – without any clear, comprehensive way to define the practice of law.

Before I offer up an alternative approach, here’s an example of a common definition of “practice of law” this one from People ex Rel. Chi. Bar Asso. v. Barasch, 406 Ill. 253 (Ill. 1950):

“The “practice of law” has been defined as “`the giving of advice or rendition of any sort of service by any person, firm or corporation when the giving of such advice or rendition of such service requires the use of any degree of legal knowledge or skill.”

Here’s the problem. Essentially, the Barasch case says that an activity is the practice of law when it requires the use of legal knowledge.  So, then what kinds of activity requires legal knowledge? The practice of law. In other words, the court’s definition is completely circular.

Other cases are more activity specific – and focus on characterizing one activity or another as the practice of law. Under this approach, courts have found UPL when a non-attorney engages in refinancing an existing mortgage without attorney supervision (Doe v. McMaster, 355 S.C. 306 (S.C. 2003)), preparing a deed for another (In the Matter of Easler, 275 S.C. 400 (S.C. 1980)) or doing anything more than simply typing a bankruptcy petition. In re Guttierez, 248 B.R. 287 (Bankr. W.D. Tex. 2000).  

Maybe someday an AI-powered robot will comb through all the cases dealing with unauthorized practice and develop an algorithm to assess whether a particular activity is UPL.  But I’m not hopeful. I’ve always thought that AI tools depend upon an underlying system of logic and rules in order to build an algorithm — but which are features that are utterly lacking from most regulatory decisions. Thus, it may be years before  rulings like these  will become comprehensible to machines. And so, as we wait for tech to catch up to help us figure out what constitutes the practice of law, I thought I’d propose my own concept which is this:

Any matter that involves courts, contracts, wills, advice on rights or obligations that has a value of less than $10,000 is not the practice of law.  Admission to the bar is not required to represent clients in this category of matters.

At first glance, my approach seems arbitrary, but here’s my thinking. One of the reasons that parties are often unrepresented in certain matters is because lawyers turn down cases that don’t make sense from a financial perspective.  Most lawyers won’t litigate a $500 breach of contract action because from an economic perspective, it doesn’t make sense to bill a client 3 hours of time at $300/hour to recover $500 in damage.  Given that most lawyers won’t take these cases on, are they property characterized as legal matters at all? (yup, I can do circular logic just as well as any regulator!).

The same is true for traffic tickets. Many consumers don’t bother fighting minor speeding tickets – even if they believe they have grounds to do so. Even if a lawyer were to accept the case for free, it’s not worth it for most consumers to have to take an hour out of their day to meet with an attorney, and then a morning off from work to show up at the courthouse – all to avoid a $100 fine. And most lawyers who might accept this kind of case would need to charge a few hundred dollars to make it even remotely economically viable. To be sure, traffic tickets have characteristics of a traditional legal matter – they involve parties rights and require an appearance before the court. But if lawyers aren’t willing to take the lower value traffic ticket cases, why bother to characterize them as legal issues?

Sure there are exceptions – situations where points apply or a license could be suspended – which ups the value of the matter. But as a general rule of thumb, why do we even glorify penny-ante matters that lawyers don’t want to handle by suggesting that they’re the practice of law?

Think I’m crazy?  There’s at least some data to back up my hunch. Take a look at the  Learned Hands, an online game developed by the Suffolk Lit Lab and Stanford Law’s Legal Design Lab  that asks users to determine whether a particular question (which are aggregated from Reddit) involves a legal issue, and if so, in what practice area. I played a couple of hours worth of Learned Hands and found that my knee-jerk reaction to most of the questions was “well, maybe there’s a contract issue here or a tort issue there, but what lawyers is going to take a case that involves a $200 dry cleaning bill?). 

What would be the effect of simply exempting matters smaller than $10k from the definition of the practice of law? For starters, we’d encourage development of more sophisticated AI-powered tools to handle these matters without having the chilling effect of a UPL claim hanging over these companies and investors. Here’s a real world example out of Florida which for the past two years has been battling TIKD, a sophisticated app that handles ticket defense for clients in one fell swoop. Clients pay TIKD the citation amount and the company then hires a lawyer to challenge the ticket. If TIKD wins and the ticket is dismissed and points aren’t assessed, it keeps the fee. If points are assessed, the consumer receives a refund. Because of data that TIKD aggregates and analyzes on the ticketing process, it pretty much knows in advance how many tickets will be dismissed or how many fines will be reduced, so it can make the numbers work in the way that an individual law firm can’t.

In January 2019, a report by a Florida bar referee concluded that TIKD’s services did not constitute the practice of law because TIKD did not represent parties in court. But the Florida regulators have challenged the referee report, arguing on brief that TIKD essentially offers legal services – i.e., ticket defense to consumers and therefore is engaged in UPL. And the regulators’ brief mentions one case where a consumer’s license was at risk of suspension because TIKD did not pay a fine. These kinds of outliers are often used to ban an entire business. By contrast, under my proposed approach, TIKD would continue to be allowed to handle low value cases while more serious cases with economic consequences – such as a license suspension for a consumer who relies on his license a job – would still need to be handled by a lawyer.

The second benefit to exempting low value cases from the definition of the practice of law is that it would open the door for lawyers to handle these cases. As I mentioned earlier, most lawyers can’t make a $500 case economically viable. But there may be ways to do it if lawyers could handle these small matters not only in their local jurisdiction but on a national basis. In addition, there are many lawyers such as military wives or retired lawyers traveling the country who find themselves temporarily in a new jurisdiction where they are not licensed and may even have to take another bar exam to gain admission. Currently, lawyers in this category can take work on a contract basis for as little as $40 or $50/hour. But financially, these lawyers would be just was well off, if not more so, if they could handle a couple of small fry FKA legal matters for two or three hundred dollars a case.

Lawyers have been trying to define what constitutes the practice of law for a century or more – and have never gotten much further than the Potter Stewart-esque “I’ll know it when I see it” test. But what we do know – or can easily figure out – is the types of cases lawyers take and decline for economic reasons. And since we know that many lawyers won’t accept certain matters – like traffic tickets or tiny contract disputes or even uncontested divorces with minimal property or small estates – then why bother to call it the practice of law at all?

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