§2.3 Unauthorized Practice of Law

• Jurisdiction: Washington

III. UNAUTHORIZED PRACTICE OF LAW

It is virtually impossible to discuss the requirements for admission to practice (or the authority to regulate) without plunging into the large, complex, and often thorny topic of the unauthorized practice of law. Some of the relevant case law has already been discussed in this and the prior chapter. But here it is necessary to look more closely at the law on this topic in Washington.

In Washington, as in most states, the unauthorized practice of law is a crime. Any person who is not an active member of the state bar and who practices law or holds himself or herself out as entitled to practice law is guilty of a gross misdemeanor, and successive violations constitute class C felonies.²⁵⁵ Thus, unauthorized practice cases may arise in the criminal context. But the dearth of criminal cases shows that prosecutors do not tend to prosecute unauthorized practice except in the most egregious cases.²⁵⁶

Perhaps for this reason, the State Bar Act provides that the Act is not intended to affect the court's power to issue injunctive relief or to punish for contempt.²⁵⁷ Consistent with this caveat, there have been a number of Washington cases in which the WSBA has obtained injunctive relief against unauthorized practice. Furthermore, unauthorized practice issues may arise in connection with fee disputes and malpractice cases.²⁵⁸

A. Defining "Practice of Law"

In 2001, the Washington Supreme Court became the first court in the country to adopt, by rule, a formal definition of the "practice of law."²⁵⁹ Although the rule is a useful addition and does clear up a number of issues, the discussion that follows should make clear that Washington lawyers cannot afford to rely on the rule alone for an understanding of what might be considered the practice of law in Washington.

General Rule 24(a) begins by setting out a general principle: "The practice of law is the application of legal principles and judgment with regard to the circumstances or objectives of another entity or person(s) which require the knowledge and skill of a person trained in the law." Aside from being somewhat circular, this principle is also extremely broad and clearly requires examples. The rule, in fact, proceeds to enumerate more specific examples, which are introduced with the careful qualification that the practice of law "includes but is not limited to" the following:

(1) Giving advice or counsel to others as to their legal rights or the legal rights or responsibilities of others for fees or other consideration. (2) Selection, drafting, or completion of legal documents or agreements which affect the legal rights of an entity or person(s). (3) Representation of another entity or person(s) in a court, or in a formal administrative adjudicative proceeding or other formal dispute resolution process or in an administrative adjudicative proceeding in which legal pleadings are filed or a record is established as the basis for judicial review. (4) Negotiation of legal rights or responsibilities on behalf of another entity or person(s).²⁶⁰

Because Rule 24 expressly states that this enumeration of examples is not exhaustive, and because it is clearly building on prior case law, it is necessary to review some of that case law here.

Prior to issuing the current rule, the Supreme Court gave its most comprehensive explanation of what constitutes the "practice of law" in 1978 in Washington State Bar Ass'n v. Great Western Union Federal Savings & Loan Ass'n:²⁶¹

The "practice of law" does not lend itself easily to precise definition. However, it is generally acknowledged to include not only the doing or performing of services in the courts of justice, throughout the various stages thereof, but in a larger sense includes legal advice and counsel and the preparation of legal instruments by which legal rights and obligations are established. Further, selection and completion of preprinted form legal documents has been found to be the "practice of law."²⁶²

Just as with the current rule, this "definition" was broad enough to cover a breathtaking range of activities commonly engaged in by nonlawyers. In a society such as ours—interlaced with often confusing strands of statutes, regulations, and judicial rules with federal, state, and local overlays—it is difficult to imagine that a day goes by in which an adult does not ask a question for which the answer involves, at least in part, the giving of "legal advice." If you sign a depository agreement at the bank or an agreement for services with a contractor, or sign a credit card slip at the gas station, grocery, or department store, you are signing a "preprinted legal document" that has been selected and at least partially prepared and/or completed by another—often a nonlawyer. How can the court employ such a definition and not find itself unintentionally criminalizing much of what many nonlawyers do from day to day? We will return to this point in the commentary below. But here we will note that this broad definition has been utilized by the courts in Washington to conclude that the following kinds and assortments of activities constitute the practice of law by individuals:

(1)	representing other parties in courts of law, including preparation of pleadings and appearances;263
(2)	selection, drafting, and/or completion of most legal documents necessary or incident to real-estate transactions, including buy/sell (earnest-money) and lease agreements;264 deeds, mortgages deeds of trust, and promissory notes; and agreements modifying these documents;265
(3)	drafting wills and other estate-planning documents;266
(4)	representing clients in personal injury suits, including negotiating and drafting settlements, preparing affidavits, making discovery demands, performing legal; research and applying the results to clients' cases, and preparing pleadings and legal memoranda;267
(5)	insurance adjustment when the adjuster for an insured tortfeasor completed claims forms for victims, advised the claimants regarding the settlement process, and recommended that they sign a complete settlement and release.268
(6)	Preparing marital dissolution documents.269

In a few of these cases, the courts declined to enjoin the practice of law by unlicensed persons because of a procedural flaw in the plaintiff 's case.²⁷⁰ But in most of the cases, the practices were held to be the unauthorized practice of law and the guilty parties were enjoined, denied fees, or (in one case) criminally punished. To this Washington case law it would be possible to add an immense amount of case law nationwide—most of which reflects a similarly broad view about what constitutes the practice of law by nonlawyers and a similarly narrow view about what is authorized.²⁷¹

B. Determining When Practice of Law Is "Authorized"

Among the Washington cases, three are remarkable for taking a new approach to the question of unauthorized practice of law.²⁷²

In Cultum v. Heritage House,²⁷³ a real-estate agent for the Heritage House agency had assisted the plaintiff in finding a home and then had completed several standardized purchase and sale (earnest money) form agreements for Cultum. The forms had been drafted by an attorney, but the agent filled in the individual terms for Cultum's offers, and in the final offer, the agent had included a structural inspection contingency clause. After the inspection was done, a dispute arose between Cultum and the seller as to whether the defects reported were serious enough to justify rescission. Cultum demanded her earnest money back, and the seller threatened to sue the realtor if it was returned. Eventually, Cultum hired a lawyer and got her earnest money back. Then she sued the realtor, seeking damages for the loss of the use of her money while Heritage held it, an injunction against Heritage from engaging in the unauthorized practice of law, and attorney fees under the Consumer Protection Act (CPA). The trial court awarded Cultum $178.65 in lost interest, more than $32,000 in attorney fees and costs under the CPA, and a permanent injunction against the realtor "from completing, filling in the blanks, or otherwise preparing any clause with respect to any real estate purchase or sale agreement, earnest money agreement, addenda thereto, or any other document intended to create or define contractual rights or obligations in connection with any real estate transaction."²⁷⁴ But the Washington Supreme Court reversed.

In reversing the trial court's rulings in Cultum, the Supreme Court first held unequivocally that the kind of work the real-estate agent performed did constitute the practice of law. But it then engaged in a lengthy weighing of the competing interests in allowing nonlawyers to do certain kinds of things. On the side of prohibition, it recited the traditional grounds: "protection against incompetence, divided loyalties, and other evils."²⁷⁵ On the side of authorization, it identified interests enunciated in a Colorado case, Conway-Bogue Realty Investment Co. v. Denver Bar Ass'n:²⁷⁶

(1) The ready availability of legal services. (2) Using the full range of services that other professions and businesses can provide. (3) Limiting costs. (4) Public convenience. (5) Allowing licensed brokers and salespersons to participate in an activity in which they have special training and expertise. (6) The interest of brokers and salesperson in drafting form earnest money agreements which are incidental and necessary to the main business of brokers and salespersons.²⁷⁷

The Supreme Court noted further that realtors would complete these forms at no extra charge and that the drafting of form earnest money agreements is "incidental to the main business of real estate brokers and salespersons ... [,] part of the everyday business of the realtor and necessary to the effective...