Monday, July 27, 2009

Ohio unauthorized practice "right of action" prior to Sept. 2004

The Ohio Supreme Court last Thursday held that "there was no legal basis for a private lawsuit based on a claim of unauthorized law practice in Ohio prior to September 2004, when the General Assembly amended R.C. 4705.07 to expressly recognize such a cause of action."
(Holding) (Court's Summary)

The case was one evolving out of a homeowner's seeking to recover civil damages from a mortgage company for allegedly using non-attorneys in 2002 to perform legal services, such as the drafting of promissory notes & similar documents, for which it then charged "document preparation fees." Citing prior court decisions that held that a non-attorney was not entitled to payment for any service that constitutes the unauthorized practice of law, Plaintiff Gary Greenspan had asked the trial court to order the lender to refund the $300 he had paid for document preparation services. He hadn’t filed a grievance with the Ohio Supreme Court's Board on the Unauthorized Practice of Law or a local bar association regarding the lender's actions, nor did he obtain a ruling by the board that the lender's actions constituted the unauthorized practice of law. Defendant lender had filed a pretrial motion to dismiss asserting that prior to the adoption of amendments to Revised Code 4705.07 in 2004, there was no legal basis for a civil lawsuit in Ohio. That motion, granted by the trial court, was appealed to the 8th. District Court of Appeals in Cuyahoga County.

"While Greenspan's appeal was pending before the 8th District," the Supreme Court recounted, " that court issued a decision in a virtually identical case, Crawford v. FirstMerit Mortgage Corp, in which it held that that plaintiff could not sue to recover document preparation fees he paid to a mortgage lender prior to September 2004 because a private cause of action for unauthorized practice of law did not exist in Ohio prior to the 2004 amendment of R.C. 4705.07. Despite its holding in Crawford, a different panel of in the 8th District overruled the trial court in Greenspan's case and reinstated his suit. The court held that because the unauthorized practice of law was available as a defense to breach-of-contract and fee-collection actions, it "inexorably" followed that it was also available as an affirmative cause of action. The appellate court did acknowledged that its decision now conflicted with Crawford, but declared that Crawford was "simply in error."

"Because the events giving rise to Greenspan's claim occurred before September 2004, when the legislature created a statutory cause of action for unauthorized law practice," Justice Maureen O’Connor wrote, "(T)his case turns on whether a common-law right of action for the unauthorized practice of law existed prior to 2004. Greenspan cites a myriad of cases from various state and federal courts for the proposition that courts have long recognized common-law claims for unjust enrichment and money had and received when a person without a license performs a service for which a license is required. But the case law upon which Greenspan relies almost exclusively relates to architectural and engineering services. Case law acknowledging a common-law claim for recovery of fees charged by unlicensed architects and engineers does not establish the existence of a common-law claim for the unauthorized practice of law."

The Court further held that "contrary to the Eighth District's Greenspan holding, it does not 'inexorably' follow that because the unauthorized practice of law may be an affirmative defense in breach-of-contract and fee-collection actions, an affirmative cause of action for the unauthorized practice of law must exist. Greenspan cites no case law, and this court is not aware of any, that recognizes an affirmative common-law cause of action for the unauthorized practice of law."

Greenspan v. Third Federal S. & L. ( Appeals Court decision )

ORC 4705.07(C)(2)HB 38 {adding §4705.07 (C); effective Sept. 15, 2004}
[ Legislative Service analysis ]

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