VIRGINIA UPL OPINION 150


Lay Employees of Collection Agency Preparing Warrants in Debt; Referring Claims to Agencyís Counsel; Unilaterally Arranging Payment Plans, Collecting and Disbursing Monies Initiating Decisions and Actions to Continue Cases

 

Inquiry:
A Virginia State Bar member wishes to know if it would constitute the unauthorized practice of law for collection agency [“Agency???] non-lawyer personnel to prepare Warrants in Debt and conduct other activities for the purpose of initiating suits in General District Court for the collection of creditor-clients’ outstanding medical accounts. The VSB member also requested that the Committee opine as to whether the attorney’s actions, when claims are referred to him, constitute his encouragement of the unauthorized practice of law in Virginia.

In one circumstance, warrants, which show creditors’ address and telephone number as that of Agency, are then submitted to an attorney [“Attorney???] for review, signature and forwarding to the Court for filing along with Agencyís check for filing fees. Subsequently, Agency arranges payment plans; collects and disburses all monies, including Attorneyís fees; agrees to continue cases if it believes that to be in the best interest of the creditor; and provides an Agency employee to be present along with a creditorís employee on the warrant return date to answer questions regarding payment plans and receipt of funds. Attorney also writes to creditor advising that Attorney’s loyalty is to creditor only.

In a second circumstance, warrants, which show actual address of creditor but telephone number of Agency, are then submitted to creditor for review and signature. The Agency advises Attorney of the return date and Attorney states that he has no involvement with the process but simply appears “pro bono??? for the creditor. Representatives of both the creditor and the Agency appear on the return date, along with Attorney.

Opinion:
The Committee also directs the inquirer’s attention to Va.Sup.Ct.R. 7B:7 which precludes any judgment for a plaintiff except on request made in person in court by the plaintiff, plaintiff’s attorney, or plaintiff’s regular and bona fide employee. See also Va. Code §16.1-88.03 and Va. Code §55-246.1.

The Committee has previously opined that it was not the unauthorized practice of law for a collection agency to draft, on behalf of its customers, statements of account, affidavits and memoranda for civil warrants. UPL Op. 51 [emphasis added]. Similarly, the committee has opined that it does not constitute the unauthorized practice of law for a regular and bona fide employee, of either an individual or a corporation...to have warrants issued.... UPL Op. 53 [emphasis added]. Subsequently, UPL Op. 97 found that a non-lawyer employee of a creditor or of a collection agency cannot represent (other than in the presentation of facts, figures or factual conclusions, as opposed to the presentation of legal conclusions) the interests of the creditor in general district court. Finally, with regard to the provisions of UPR 3-102, the Committee opined that it was not the unauthorized practice of law for a collection agency to retain counsel on its behalf, to assist in the collection of a debt, only if the creditor had assigned the claim to the agency and retained no interest in the claim. UPL Op. 120.

The Committee is of the opinion that the agency’s activities as described in both circumstances would constitute the following violations of the Unauthorized Practice Rules for the reasons stated:

(1) Referral of Claims

The agency's routine referral of claims to its own counsel on behalf of a creditor without either offering the creditor the opportunity to select a lawyer of his own choosing or providing the creditor with a list of lawyers from which the creditor may make his selection is violative of the plain language of UPR 3-102(A).

(2) Control of Claims

The Committee believes that the agency’s activities following the referral of the claim to the attorney [including unilaterally arranging payment plans, unilaterally collecting and disbursing monies, including Attorney’s fees, and initiating decisions and actions to continue cases] imply that the agency has a right to control the actions of the lawyer in the handling of the creditor’s claim. The Committee is of the opinion that such activities are in violation of UPR 3-102(B). However, the agency may suggest payment plans and collect and disburse monies, including attorney fees, upon attorney’s prior approval.

(3) Disruption of the Attorney/Client Relationship

The Committee is of the further opinion that the activities described constitute the collection agency’s interposing itself between the creditor/client and the attorney, in an attempt to act as the only conduit of information between the two, thus preventing the attorneyís direct personal responsibility for his client’s matter, in violation of UPR 3-101(C).

(4) Preparation of Warrants in Debt

The Committee believes that the agency's preparation of warrants in debt listing the creditors’ addresses as in care of the collection agency, and subsequent submission of those documents to Attorney or creditor for review, signature and filing with the general district court constitutes a violation of UPR 3-103(C), since the agency is preparing pleadings for creditors, i.e., documents which require legal training and the application of legal principles to factual situations. The Committee views a warrant in debt as a pleading, a document which initiates a civil action in a general district court and begins the legal process by which a claim is adjudicated or resolved. See Potts v. Mathieson Alkali Works, 165 Va. 196, 207 (1935); Va. Code §16.1-86. Therefore, the Committee is of the opinion that such pleadings may only be prepared (a) by the creditor directly; (b) by an attorney licensed to practice law in Virginia; or (c) by a licensed attorney’s full?time or otherwise regular and bona fide employees under his direct supervision. The committee believes it is bound by the definition of “pleading??? as set forth by the Virginia Supreme Court, and that only an amendment to the statutes regulating the filing of civil warrants in General District Courts would authorize preparation and filing of such civil warrants by individuals not enumerated above.

Prior UPL Opinion 51 does not address the form pleading now promulgated by the Supreme Court of Virginia, i.e., a form Warrant in Debt which combines the earlier-referenced memorandum and the Warrant. Therefore, the Committee is of the opinion that a non-lawyer’s completion of such form pleadings does constitute the unauthorized practice of law. In addition, by issuance of this Opinion 151, the committee hereby restates and reaffirms its conclusions as stated in prior UPL Opinions cited herein, i.e., Opinions 53 [December 1, 1982], 97 [November 13, 1986], and 120 [August 10, 1988].

In response to the inquiry regarding whether the attorney’s actions, when claims are referred to him, constitute his encouragement of the unauthorized practice of law in Virginia, the Committee believes that such question falls within the purview of the Standing Committee on Legal Ethics and thus outside the scope of this Committee’s authority. As a general premise, however, the Committee believes that where an activity is determined to constitute per se unauthorized practice of law, the involvement of a Virginia State Bar member would appear to raise questions as to compliance with Disciplinary Rule 3-101(A) which prohibits a lawyer from aiding a non-lawyer in the unauthorized practice of law.

This opinion is based only on the facts provided and the questions posed and is subject to review by Bar Council at its next regularly scheduled meeting in accordance with Part Six: Section I: ¶10(c)(iv) of the Rules of the Virginia Supreme Court. Should Council approve the Opinion, it will then be reviewed by the Supreme Court pursuant to Part Six: Section I: ¶10(f)(iii).

Summary:
Activities undertaken by a collection agency [“Agency???] or its non-lawyer employees as to:

(l) routine referral of claims to the Agency’s own counsel without offering the creditor the opportunity to choose an attorney;

(2) unilaterally collecting and disbursing monies, including attorney’s fees, and initiating decisions and actions to continue cases;

(3) interposing Agency between the creditor and the attorney, in an attempt to act as the only conduit of information between the two; and

(4) preparing warrants in debt constitute violations of Unauthorized Practice Rules 3-102(A), 3-102(B), 3-101(C), and 3-103(C). Any determination as to whether the Attorney’s involvement in the process constitutes an impropriety under the Code of Professional Responsibility is outside the scope of the authority of the Standing Committee on Unauthorized Practice of Law.

Committee Opinion
Issued November 1, 1991

Remanded to Committee by Council
February 22, 1992

Reconsideration Issued
September 14, 1992

Approved by Council
October 30, 1992

Approved by the Supreme Court of Virginia
February 26, 1993, Effective May 1, 1993

 

Updated: Aug 28, 2006