State Bar of Montana


QUESTION PRESENTED: Can paralegals employed by law firms appear on behalf of creditors at Section 341 hearings in bankruptcy proceedings to question and examine debtors?

ANSWER: No. The appearance of a paralegal without a supervising attorney would constitute an unauthorized practice of law.

ANALYSIS: It is true that a bankruptcy trustee is not required to be a lawyer pursuant to 11 U.S.C. Section 321. However, a trustee is an individual who is "competent" to serve as trustee, who is required to furnish a bond, and who is fully subject to review by the Court. It is often the case as well, that the bankruptcy judge's law clerk is not a licensed attorney, but assists the judge in writing opinions and performing legal research. The heart of the concept in these matters, is that these individuals are, in essence, arms of the Court, and assist the Court in its proper functioning. In Montana, Section 37-61-101, M.C.A. 1987, states unequivocally that the Supreme Court has the authority to determine whether any agents or employees of any law firm are possessed of the requisite skill, competence and ethics necessary to practice law in the State of Montana. The Supreme Court has that power to make that determination through a bar examination, yearly continuing legal education requirements and the Code of Professional Responsibility. In the case of Bennion, Van Camp, Hagen and Ruhl, vs. Kassler Escrow, Inc., 635 P.2d 730 (1981), the Supreme Court of the State of Washington stated, "The 'practice of law' does not lend itself easily to precise definition. . . selection and completion of pre-printed form legal documents has been found to be 'practice of law'." Id at page 732. The Washington Supreme Court in the Bennion decision, referred to another case, Washington State Bar Association vs. Great Western Union Federal Savings and Loan Assoc., 586 P.2d 870 (1978), which stated that it was the duty of the Court to "protect the public from the activity of those who because of lack of professional skills, may cause injury whether they are members of the bar of persons never qualified for or admitted to the bar." In another case, Washington State Bar Assoc. vs. Washington Assoc. of Realtors, 251 P.2d 619 (1952), the Court stated that "there is no such thing as a simple legal instrument in the hands of a layman."

In Montana, Section 37-61-201, M.C.A. 1987, states that "any person who shall hold himself out . . . or who shall appear in any court of record or before a judicial body, referee, commissioner, or other officer appointed to determine any question of law or fact by a court or who shall engage in the business and duties and perform such acts, matters, and things as are usually performed by an attorney at law in the practice of his profession for the purposes of Parts 1 through 3 of this chapter, shall be deemed practicing law." It seems pretty clear from this statutory definition, which dates back to the laws of 1917, that a paralegal appearing in a Section 341 meeting would be deemed to be practicing law in Montana.

In Florida Bar vs. Pascual, 424 So.2d 757 (1982), the Supreme Court of Florida ruled that a "paralegal who represented a party in purchase and closing of restaurant purchase without supervision of attorney . . . engaged in the unauthorized practice of law . . . " In this particular case, the paralegal was also the president of the Atlantic Title Corp., and had a great deal of expertise, but held the closing of the restaurant without the active supervision of the attorney involved.

In the Matter of Bradford Arthur, U.S. Bankruptcy Court (E.D. Penn. 1981), involved the activities of a paralegal advising and counseling "clients" as to the various provisions of the bankruptcy code, including exemptions, dischargability and automatic stay, advising and counseling members of the general public on the relative advantages of filing a petition for liquidation under Chapter 7 petitions, and preparing and filing applications to pay filing fees in installments. The Bankruptcy Court held that such activities constituted the unauthorized practice of law in a bankruptcy proceeding whenever such an individual was not a member of any bar, not authorized to practice law in any jurisdiction, and cited 11 U.S.C. Sections 701 et seq., 1101 et seq. and 1301 et seq. Further, the Bankruptcy Court held that "courts have the inherent authority , independent of the statute, to decide what acts constitute the practice of law." The Court also went on to say that "as generally understood the practice of law involved the performance of services in a court of law in conformity with adopted rules of procedures." Perhaps the strongest statement that the Bankruptcy Court made in this case was the holding that "when a judgment requires the abstract understanding of legal principles, and a refined skill for their concrete application, the exercise of legal judgments is necessary, and the 'practice of law' is involved."

In the case of In re Bryan W. Pearson, U. S. Bankruptcy Court (S.D. Fla. 1986), the Bankruptcy Court discharged an attorney as debtor's attorney, and enjoined the attorney from further practice in the Bankruptcy Court until such time as he completed a minimum of nine hours in continuing legal education in the area of bankruptcy and filed an affirmative statement that he was now conversant with bankruptcy matters and qualified to represent a client in bankruptcy matters in accordance with D.R. 6-101 and E.C. 6-1, 6-2, 6-3 and 6-4 of the Rules of Professional Responsibility. In this case, before the Bankruptcy Court, the attorney admitted in a motion to vacate the Court's dismissal of a Chapter 13 case, that he had not undertaken a bankruptcy petition in a number of years and was not aware of a Chapter 13 statement and plan requirement. The attorney stated that he had relied upon the advice given by the assistant clerks in the bankruptcy clerk's office, who told him that he had submitted all required forms and schedules and that the forms and schedules were purchased at an office supply store pursuant to the clerks instructions. The Bankruptcy Court stated, "It is outrageous that an attorney, who has achieved a law degree and obtained admission to the Florida Bar, publicly admits that he practices based on advice of assistant court clerks and products available in a stationary store." Inherent in this statement is the obvious injunction that a paralegal, no matter how knowledgeable, must be subject to a qualified attorney's active supervision.



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