Med Controls, Inc. v. Hopkins, 55023

• Decision Date: 21 February 1989
• Docket Number: No. 55023,55023
• Citation: 61 Ohio App.3d 497,573 N.E.2d 154
• Parties: MED CONTROLS, INC., Appellant, v. HOPKINS et al., Appellees.
• Court: Ohio Court of Appeals

Page 497

61 Ohio App.3d 497

573 N.E.2d 154

MED CONTROLS, INC., Appellant, v. HOPKINS et al., Appellees.

No. 55023.

Court of Appeals of Ohio, Eighth District, Cuyahoga County.

Decided Feb. 21, 1989.

Thomas L. Meros, Cleveland, for appellant.

Kathryn K. Vanderwist, Cleveland, for appellees.

PATTON, Presiding Judge.

Plaintiff-appellant, Med Controls, Inc., a collection agency, appeals from a summary judgment rendered in favor of defendants-appellees Euclid Clinic Foundation et al. ("ECF"), a medical clinic that entered into an exclusive contract with Med Controls for collection of ECF's overdue accounts. The sole issue is whether the trial court correctly rendered summary judgment when it determined that the contract was unenforceable since it authorized Med Controls to engage in the practice of law while collecting on the overdue accounts.

The contract between Med Controls and ECF states in relevant part:

"ITEM III--DUTIES OF THE AGENT

" * * *

"The Agency will, upon request of the Clinic, or upon its own initiative, institute legal action, when in its discretion such action is required, and so as to collect specific accounts receivable. However, it is specifically understood, that the Agency will employ counsel of their own and separate choosing, and shall be responsible for the payment of any and all legal fees incident to said retention. * * *

"It is further understood and agreed that the Clinic hereby authorizes the Agency to undertake whatever legal action is necessary for the collection of said accounts, and that the Clinic will join with or do whatever other acts are necessary so as to provide for a propriety in parties in interest with reference to the bringing of any action for the collection of an account receivable so assigned to the Agency."

During the three-year term of the contract, Med Controls received compensation depending on how it collected an overdue account. If funds were collected without litigation, those funds were paid by the debtor directly to ECF and Med Controls received a twenty percent commission. If litigation were required, Med Controls would receive the funds directly from the debtor and would be entitled to a thirty-five percent commission.

Contracts in which collection agencies are allowed to prosecute claims before a court of justice on behalf of creditors are generally unenforceable since they authorize a collection agency to practice law. Public Serv. Traffic Bureau, Inc. v. Haworth Marble Co. (1931), 40 Ohio App. 255, 178 N.E. 703; United Radio, Inc. v. Cotton (1938), 61 Ohio App. 247, 14 O.O. 214, 22 N.E.2d 532; In re Incorporated Consultants (C.P.1965), 6 Ohio Misc. 143, 35 O.O.2d 280, 216 N.E.2d 912. The collection agency practices law by interposing itself as an intermediary between a licensed attorney and a client. In effect, the collection agency becomes the client of the attorney when it is not. This creates an absence of the attorney-client relationship that diverts the interest of the attorney from the entity whose real interests are at stake in the proceedings, thereby giving rise to a possible conflict of interest. See Case Comment, Legal Ethics: Unauthorized Practice of Law by...