Iowa Supreme Court Com'n v. Sturgeon

• Citation: 635 N.W.2d 679
• Decision Date: 10 October 2001
• Docket Number: No. 99-0417.,99-0417.
• Parties: IOWA SUPREME COURT COMMISSION ON UNAUTHORIZED PRACTICE OF LAW, Appellee, v. LeRoy James STURGEON, Appellant.
• Court: United States State Supreme Court of Iowa

635 N.W.2d 679

IOWA SUPREME COURT COMMISSION ON UNAUTHORIZED PRACTICE OF LAW, Appellee, v. LeRoy James STURGEON, Appellant.

No. 99-0417.

Supreme Court of Iowa.

October 10, 2001.

As Revised on Denial of Rehearing November 28, 2001.

LeRoy J. Sturgeon, Sioux City, pro se.

Thomas J. Miller, Attorney General, and Grant K. Dugdale, Assistant Attorney General, for appellee.

LARSON, Justice.

LeRoy Sturgeon has appealed from a district court order enjoining him from the unauthorized practice of law arising out of his bankruptcy business. We modify and affirm.

Sturgeon meets with clients in his office and interviews them to obtain information to prepare chapter 7 bankruptcy documents. Signs posted in his office, as well as his advertising, state he is a "non-attorney bankruptcy specialist" and "no legal advice" is given, although he was an attorney prior to his disbarment in 1992.¹ According to his testimony,

I conduct an initial interview to obtain information from them. I take that information and on some occasions have to seek out additional factual information and I input that data into a computer that contains bankruptcy software. And then that information fills in the blanks on the forms.

I then print off those forms, have those debtors return to my office, read them, let me know whether or not they're accurate. If they're not, I then make corrections or changes as they direct so that they're finally determined to be accurate.

And then they sign them so that they may be copied and filed with the Clerk of the United States Bankruptcy Court.

On April 13, 1998, our Commission on the Unauthorized Practice of Law (commission) sought an injunction against Sturgeon, claiming his bankruptcy business violated our unauthorized practice rules. The district court granted the injunction, and Sturgeon appealed.

Sturgeon's appeal raises six issues, which we consolidate into four: (1) the court's interpretation of 11 U.S.C. § 110, concerning the scope of work permitted to be performed by a nonattorney; (2) the adequacy of the factual record to support the charge; (3) the constitutionality of our unauthorized practice rules; and (4) the scope of the court's injunction.

I. Interpretation of 11 U.S.C. § 110.

Sturgeon argues 11 U.S.C. § 110 prevents Iowa from

totally ban[ning] all forms of non-attorney bankruptcy preparers.

....

... Congress could not have intended that some states may allow non-attorney bankruptcy preparers to perform the limited services in the federal courts located in those states, while other states may preempt this Congressional act and ban any and all such services.

However, the statute provides that states may do exactly that:

Nothing in this section shall be construed to permit activities that are otherwise prohibited by law, including rules and laws that prohibit the unauthorized practice of law.

11 U.S.C. § 110(k) (1994). "As a result of this provision, a document preparer may not use § 110 as a `safe harbor' if a rule or certain rules prohibit the unauthorized practice of law or the document preparer's activities are otherwise prohibited by law." In re Gabrielson, 217 B.R. 819, 826 (Bankr.D.Ariz.1998); see also In re Farness, 244 B.R. 464, 470 (Bankr.D.Idaho 2000)

(stating that the ability of nonlawyers to practice before bankruptcy courts in a given jurisdiction will be governed by the relevant state laws and rules prohibiting the unauthorized practice of law); Florida Bar v. Catarcio, 709 So.2d 96, 99 n. 1 (Fla.1998) ("[W]e disagree with his argument that 11 U.S.C. § 110 (1994), preempts this Court's authority to regulate the unlicensed practice of law in Florida in the bankruptcy context.").

We hold these unauthorized practice proceedings are not proscribed by 11 U.S.C. § 110 and therefore proceed to a determination of the merits of the charge.

II. Sufficiency of the Evidence.

This is an equity proceeding, so our review is de novo. Iowa R.App. P. 4. Sturgeon asserts the commission must prove the allegations of their complaint by a convincing preponderance of the evidence, citing Committee on Professional Ethics & Conduct v. Baker, 492 N.W.2d 695, 700 (Iowa 1992). Baker, however, was not an unauthorized practice case, so its standard of proof is not necessarily binding here. The commission, however, does not argue for a different standard of review, so for purposes of this appeal, we will assume the standard is a convincing preponderance of the evidence.

Iowa Court Rule 118A.1 authorizes injunctions against the unauthorized practice of law. The commission notes that this court has the inherent authority to define and regulate the practice of law, citing Baker. In Baker we approved the nonexclusive definition of the practice of law found in Ethical Consideration 3-5:

It is neither necessary nor desirable to attempt the formulation of a single, specific definition of what constitutes the practice of law. However, the practice of law includes, but is not limited to, representing another before the courts; giving of legal advice and counsel to others relating to their rights and obligations under the law; and preparation or approval of the use of legal instruments by which legal rights of others are either obtained, secured or transferred even if such matters never become the subject of a court proceeding. Functionally, the practice of law relates to the rendition of services for others that call for the professional judgment of a lawyer. The essence of professional judgment of the lawyer is the educated ability to relate the general body and philosophy of law to a specific legal problem of a client; and thus, the public interest will be better served if only lawyers are permitted to act in matters involving professional judgment. Where this professional judgment is not involved, nonlawyers, such as court clerks, police officers, abstracters, and many governmental employees, may engage in occupations that require a special knowledge of law in certain areas. But the services of a lawyer are essential in the public interest whenever the exercise of professional judgment is required.

Iowa Code of Prof'l Responsibility EC 3-5; see also Baker, 492 N.W.2d at 701

(approving a similar version of this definition).

Sturgeon claims that he merely typed information, furnished by his clients, into preprinted forms. The commission, however, has a different view: Sturgeon solicited information to complete the forms, chose the forms to be used, rendered advice to his clients as to the information that would be required, and inserted the information obtained into appropriate blanks in the forms. In at least one case, Sturgeon actually drafted a pleading to be filed in the bankruptcy case.

Cases have drawn the unauthorized practice line at the point at which data entry (either by typewriter or computer) crosses the line between copying written information provided by the client and oral solicitation of the information necessary to fill out documents selected by the preparer. See, e.g., Hastings v. United States Trustee (In re Agyekum), 225 B.R. 695, 702 (B.A.P. 9th Cir.1998) ("Soliciting information from a debtor which is then typed into [bankruptcy] schedules constitutes the unauthorized practice of law."); Farness, 244 B.R. at 472 (use of preprinted bankruptcy forms or bankruptcy software that automatically places solicited information in appropriate schedule does not save preparer from engaging in the unauthorized practice of law); In re Kaitangian, 218 B.R. 102, 110 (Bankr.S.D.Calif.1998) ("Plugging in solicited information from questionnaires and personal interviews to a pre-packaged bankruptcy software program constitutes the unauthorized practice of law."); In re Bachmann, 113 B.R. 769, 774 (Bankr.S.D.Fla.1990) ("[Preparer] engaged in the unauthorized practice of law when he solicited information from [his clients] which he reformulated and typed into their bankruptcy petition ... [but] `[t]yping services' ... may type bankruptcy forms for their clients, provided they only copy the written information furnished by [their] clients."); Catarcio, 709 So.2d at 98, 100 (finding preparer to be engaged in unauthorized practice of law by "taking information from [client] orally to complete the bankruptcy petition and amendment" and enjoining preparer from "making inquiries and answering questions as to the particular bankruptcy forms that might be necessary, how best to fill out the forms, the information necessary to complete the forms, and where to properly file such forms"); see also Gabrielson, 217 B.R. at 827

("It is possible that in other cases, in other situations, where a particular document preparer ... only takes the official forms and types them based upon handwritten or printed information from the debtor, the assistance would not be the unauthorized practice of law.").

Sturgeon conducted an initial interview to solicit information, which he then typed into the computer. He also advised clients to bring certain information with them to the interview. He stated, "I believe at least I can provide a service to minimize the occasion of pro se debtors in bankruptcy who fill [documents] out incorrectly or who perhaps don't know that they also have to file a statement of financial affairs or will only file this set of documents and not that one." Clearly, Sturgeon counseled clients on which documents they needed to file, and this has been held to be the practice of law. See Bachmann, 113 B.R. at 773

("[S]ecretarial services may not make inquiries nor answer questions from their clients as to ... the particular forms which might be necessary ...." (citing Florida Bar v. Brumbaugh, 355 So.2d 1186, 1194 (Fla.1978))).

Sturgeon's own testimony established that he did more than merely fill in blanks in computer-generated forms. It is clear he drew on his knowledge and experience in bankruptcy matters. He testified:

Quite some time ago I learned that people were able to purchase what I call store

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