Unauthorized Practice of Law in South Carolina, 0920 SCBJ, SC Lawyer, September 2020, #42

• Author: By Kevin R. Eberle
• Position: Vol. 32 Issue 2 Pg. 42

Unauthorized Practice of Law in South Carolina

Vol. 32 Issue 2 Pg. 42

South Carolina BAR Journal

September, 2020

By Kevin R. Eberle

Just as Web M.D. has made everyone a doctor, the internet has also given everyone the confidence to assert bold opinions on nuanced legal topics. When people chime in on Facebook about hot button legal issues from headline-making Supreme Court opinions to municipal decisions about curfews, lawyers roll their eyes and know that the postings will quickly be forgotten. But in the ordinary course of business, well-intentioned individuals can find themselves in hot water by practicing law without a license, clients can be easily injured by accepting legal advice from non-lawyers, and lawyers can find themselves facing discipline for not protecting their clients.

Unfortunately, the only thing clear about the unauthorized practice of law (UPL) in South Carolina is that it is unlawful. Beyond the broad prohibitions, the issue quickly becomes murky. Our Supreme Court has repeatedly explained that even the nature of practicing law itself is best reviewed on a case-by-case basis instead of setting clear rules. Even when some activity is deemed to be the practice of law, there are a host of exceptions, safe harbors, and pitfalls waiting, which are themselves unclear.

Just what is the practice of law?

The South Carolina Supreme Court regulates the practice of law in South Carolina. S.C. Const. art. V, § 4; In re Unauthorized Practice of Law Rules, 309 S.C. 304, 305, 422 S.E.2d 123, 124 (1992); see also S.C. Code Ann. § 40-5-10 (2011). A bedrock rule is that the practice of law is limited to licensed attorneys. Brown v. Coe, 365 S.C. 137, 139, 616 S.E.2d 705, 706 (2005).

The Court does not prohibit UPL to create a monopoly for lawyers, but instead to protect the public in the pursuit of justice by preventing incompetent and unlearned persons from rendering legal services. State ex rel. Daniel v. Wells, 191 S.C. 468, 5 S.E.2d 181, 186 (1939). By excluding laypersons, the Court can “protect the public from the potentially severe economic and emotional consequences which may flow from the erroneous preparation of legal documents or the inaccurate legal advice given by persons untrained in the law.” Linder v. Ins. Claims Consultants, Inc., 348 S.C. 477, 486, 560 S.E.2d 612, 617 (2002).

The most frequently quoted definition for the practice law came more than a century ago in In re Duncan, 83 S.C. 186, 65 S.E. 210 (1909). When Jim Saunders failed to pay a $10 criminal fine, he was put onto a county chain gang to work off the debt. Id. at 186, 65 S.E. at 211. Even though John Duncan had been disbarred a year earlier, he agreed to help Nita Saunders have her husband released. Id. Mrs. Saunders was to pay Mr. Duncan $15 for his help ($5 paid up front for his services and a future $10 to settle her husband’s fine). When the case dragged out, Mrs. Saunders became dissatisfied, so Mr. Duncan returned her $5 and dropped the matter. Id.

The attorney general fled the case against Mr. Duncan for violating the Court’s earlier disbarment order. Id. Mr. Duncan responded that he had not practiced law in helping Mr. Saunders; he had not, after all, fled any new case for Mrs. Saunders or reopened the criminal case against Mr. Saunders. Id. It seems that he was simply handling the payment of the fine and the administrative release of Mr. Saunders.

The Supreme Court disagreed. After noting that Mr. Duncan had spoken to both the original and replacement magistrates about having Mr. Saunders released upon the late payment of the $10 fine, the Court wrote that [i]t is too obvious for discussion that the practice of law is not limited to the conduct of cases in courts. . . . [I]t embraces the preparation of pleadings, and other papers incident to actions and special proceedings, and the management of such actions and proceedings on behalf of clients before judges and courts, and, in addition, conveyancing, the preparation of legal instruments of all kinds, and, in general, all advice to clients, and all action taken for them in matters connected with the law.

Id. at 186, 65 S.E. at 211; see also Matter of Easler, 275 S.C. 400, 272 S.E.2d 32 (1980). In other words, apart from appearing in a courtroom on a client’s behalf, practicing law includes preparing pleadings and other litigation documents, managing cases, preparing legal instruments, giving advice, and all other actions for clients connected to the law. Because Mr. Duncan’s services were clearly connected to a legal matter, they were practicing law even if they might have been handled by Mrs. Saunders for herself.

More than a century later, the Supreme Court has still not settled on an objective test for identifying the practice of law. But “[t]he absence of a precise definition is deliberate” precisely because “what constitutes the practice of law must be decided on the facts and in the context of each individual case.” Boone v. Quicken Loans, Inc., 420 S.C. 452, 460-61, 803 S.E.2d 707, 711-12 (2017). Indeed, the South Carolina Bar created a special committee to make recommendations about UPL. After 13 years (including a year spent drafting the proposals), the committee submitted its recommendations, but the Supreme Court declined to adopt the rules, remarking that doing so would be “neither practicable nor wise.” In re Unauthorized Practice of Law Rules Proposed by S.C. Bar, 309 S.C. 304, 305, 422 S.E.2d 123, 124 (1992).

Even if the exact definition of legal practice is undefined, the Court has at least been consistent in some of the analytical steps for making the call. For example, the Court has always focused on the character of the services. State ex rel. Daniel v. Wells, 191 S.C. 468, 5 S.E.2d 181, 186 (1939), holding modified by In re Unauthorized Practice of Law, 309 S.C. 304, 422 S.E.2d 123. There, the Court considered whether it was practicing law to represent a party before an administrative hearing run by a commissioner of the South Carolina Industrial Commission. Id. An employer and employee could resolve their differences or could appear before a commissioner who would receive evidence and decide the matter based on the law.

The Court agreed that preliminary matters such as investigating the facts of a claimant’s injuries would not be the practice of law. State ex rel. Daniel, 191 S.C. 468, 5 S.E.2d at 186. However, if the parties could not reach an agreement and had to appear before a commissioner, the matter would become legal. For instance, a party had to understand relevance to make objections and needed to understand the law to select information to present since, on further appeal, the full commission would typically not consider any new materials. Id. at 191 S.C. 468, 5 S.E.2d at 185. The Court was not swayed by the lack of formal pleadings and the lack of a courtroom; the substance of the matter showed that it was the practice of law: “We are not unmindful that the Commission is frequently denominated an administrative tribunal. But it is the character of the services rendered, and not the denomination of the tribunal before whom such services are rendered, which controls in determining whether such services constitute the practice of law.” Id. (emphasis added).

While the Court has refused to create bright-line rules about UPL overall, it has, either through analysis of earlier cases or by simple, judicial fat, ruled that some common practices are either safe harbors or pitfalls in the UPL area.

Lawyer v. scrivener

Merely selling blank legal templates which an end-user completes himself or herself is not UPL. State v. Despain, 319 S.C. 317, 320, 460 S.E.2d 576, 578 n.2 (1995) . At the other extreme, deliberating over a client’s needs and drafting special instruments in response is unambiguously practicing law. Id. at 319-20, 460 S.E.2d at 578. Between those endpoints, the outcome turns on whether the layperson is a mere scrivener or more.

Laypeople can represent themselves, so if someone merely helps carry out their wishes and dutifully acts at their direction, there is typically no UPL; the actor is merely the instrument by which the layperson practices law himself while the actor does not. However, if that actor exercises discretion or nudges the client in legal choices, he can find himself engaged in the practice of law.

In Franklin v. Chavis, 371 S.C. 527, 640 S.E.2d 873 (2007), the Court ruled that a layperson had crossed the line between scrivener and lawyer while helping an elderly woman prepare her will. The decedent had contacted layperson Ernest Chavis to help with her estate planning. She told Mr. Chavis how she wanted her property divided, and Mr. Chavis used commercial software to generate the probate forms. Id. at 531, 640 S.E.2d at 875.

The Court began by reemphasizing that the ban on UPL is to protect the public. As the court pointed out, “‘The amateur at law is as dangerous to the community as an amateur surgeon . . . .’” Id. at 876 (quoting In re Baker, N.J. 321, 338, 85 A.2d 505, 514 (1951)). Obviously, creating legal documents at a client’s behest out of whole cloth is the practice of law, but even preparing standard forms that require no creative drafting can be UPL if one acts as more than a mere scrivener. State v. Buyers Service Co., 292 S.C. 426, 430, 357 S.E.2d 15, 17 (1987). The line is crossed when the assistance is not just filling in the blanks on someone else’s behalf but “when such preparation involves the giving of advice, consultation, explanation, or recommendations of matters of law.” Franklin, 371 S.C. at 532, 640 S.E.2d at 876.

In Franklin, the layperson’s mistake was not in filling in the probate forms per se, but in failing to document that he had carried out the decedent’s exact instructions and nothing more. The Court suggested that a scrivener is a dictation machine: “We construe the role of ‘scrivener’ in this context to mean someone who does nothing more than record verbatim what the decedent says.” Id. M r . Chavis was unable to show that the decedent had reviewed the forms he had prepared for her, and he had not contemporaneously recorded the decedent’s instructions. The absence of such evidence was “significant.”

Apart from the decedent’s will, the Court focused on the nature of the forms. On the one hand, the power of attorney Mr. Chavis prepared was not a fill-in-the-blank form at all and was full of legal phrases. On the other hand, some of the administrative forms used in a probate case were even supplied by the probate court itself, and they were completed by simply typing names, addresses, and dates into the blank forms. The former was UPL; the latter was not.

The lessons from Franklin were brought forward to the internet era in Medlock v. LegalZoom.com, Inc. where the attorney general argued that LegalZoom was engaged in UPL. No. 2012-208067, 2013 S.C. LEXIS 362 (Oct. 18, 2013). LegalZoom sells do-it-yourself documents completed using automated processes such as corporate bylaws, wills and uncontested divorces. Of the forms that supposedly amounted to UPL, 19 of the 20 could be downloaded from South Carolina agencies’ own websites; a “Pet Protection Agreement” was the exception. Id. at *6. Going forward, LegalZoom agreed to offer only those forms that were otherwise available through government websites or that had been reviewed by a South Carolina lawyer. Additionally, LegalZoom agreed that its forms would be completed using only the verbatim fill from customers. Id. at *7.

The circuit court judge whom the Supreme Court had appointed to hear the case, decided that the practices of LegalZoom did not qualify as UPL, at least as carried out under the settlement agreement. Id. at *8. Importantly, LegalZoom’s client-by-client review of the final forms considered only ministerial matters such as misspellings and skipped questions. The software did not exercise any judgment or use any more discretion than how “mail merge” function operates.

Corporate counsel

One situation that is both a pitfall and a safe harbor concerns corporations. The frst case in South Carolina to take up the issue of corporate representation in this context was State v. Wells, 191 S.C. 468, 5 S.E.2d 181 (1939), modified by In re Unauthorized Practice of Law, 309 S.C. 304, 422 S.E.2d 123. Having decided that the activities there constituted lawyering, the layperson made the following argument: (1) A corporation can act only through human agents whose actions are the actions of the corporation, and (2) a party may choose to represent himself whether he is a lawyer or not. Thus, the logic went, a corporation should be able to represent itself through human agents who are not lawyers. Id. at 468, 5 S.E.2d at 186.

The Supreme Court rejected the argument and seems to have been troubled by the all-or-nothing results the layperson’s analysis would produce. The Court pointed out: “If a corporation could appear in court through a layman upon the theory that it was appearing for itself, it could employ any person, not learned in the law, to represent it in any or all judicial proceedings.” Id. Rather than throwing the door open to lay representation of corporations, the Court ruled that “[i]n legal matters, [corporations] must act, if at all, through licensed attorneys.” State v. Wells, Id. at 468, 5 S.E.2d at 186.

More than 50 years later, the Court cracked the door open. In In re Unauthorized Practice of Law, 309 S.C. at 306, 422 S.E.2d at 124, the Court declined to adopt rules offered by the South Carolina Bar concerning UPL but modified Wells and announced—without any discussion—that “a business [can] be represented by a non-lawyer officer, agent or employee, including attorneys licensed in other jurisdictions and those possessing Limited Certificates of Admission pursuant to Rule 405, SCACR, in civil magistrate’s court proceedings.” The Court did not explain its rationale, but its caveats indicate that the Court was again willing to let clients make their own choices even if they would sacrifice protections offered by having a lawyer; not only would corporations have to submit written authorizations but would have to “assume[] the risk of any problems incurred as the result of such representation.” Id.

Since 1992, the door has not cracked opened any more. In Renaissance Enterprises, Inc. v. Summit Teleservices, Inc., 334 S.C. 649, 650, 515 S.E.2d 257, 258 (1999), a lay agent for a corporation sought permission to represent a business in the circuit and appellate courts too. The Court recognized that the majority rule is that laypeople can represent corporations at all levels of courts but was unwilling to follow along. Rather, the prohibition on UPL is to protect the public, and allowing non-lawyer representation outside of magistrate’s courts was a step too far: “Thus, a corporation may appear pro se only in magistrate’s court.” Id. at 650, 515 S.E.2d at 259.

Real estate

In South Carolina, many real estate matters have been declared to be the practice of law. In State v. Buyers Service Co., 292 S.C. 426, 357 S.E.2d 15 (1987), a business served as the intermediary between buyers of real estate and lenders. It completed many forms necessary to buy the real estate with a loan, conducted title searches when needed, and distributed the loan proceeds. Id. at 428-29, 357 S.E.2d at 16. The Court quickly decided that generating the client-specific closing documents went beyond being a mere scrivener and held that preparing the document was UPL. Id. at 432, 357 S.E.2d at 18. Checking the chain of title for weak links was a service that the buyers relied upon in buying their real estate that required legal knowledge and thus was UPL. Likewise, even if driving forms to the deeds office to be recorded is not legal, giving the register instructions on what to do with the forms was and needed a lawyer’s involvement. Id. at 434, 357 S.E.2d at 19.

Even the actual closing of the deal (i.e., orchestrating the various signatures) was ruled UPL. Id. The Court recognized that the actual closing process was not technically legal, but it is so fraught with the chance to cross the line that it h as to have a lawyer involved: “We agree this approach [of allowing laypeople to conduct closings as long as they did not answer legal questions], in theory, would protect the public from receiving improper legal advice. However, there is in practice no way of assuring that lay persons conducting a closing will adhere to the restrictions. One handling a closing might easily be tempted to offer a few words of explanation, however innocent, rather than risk losing a fee for his or her employer.” Id.

After Buyers Service Co. went through the real estate process and identified legal steps in the process, the Court revisited the real estate scenario to rule on the actual disbursing of the funds which had not been at issue in earlier real estate cases. The Court again noted that simply passing out checks might not require any special knowledge, but as with conducting a closing, the matter is just too intertwined in the real estate process to be treated differently. The Court therefore added a final step that must involve an attorney—the disbursement of funds. Doe Law Firm v. Richardson, 371 S.C. 14, 18, 636 S.E.2d 866, 868 (2006).

In general, real estate closings and funding involve the practice of law, but the Court has carved out a small safe harbor for modifying an existing loan. In Doe v. McMaster, 355 S.C. 306, 585 S.E.2d 773 (2003), the Court considered a refinancing and declared that, like the issuance of an original loan, legal services were involved. The Court found that there was a distinction without importance between the original financing (declared to be legal by Buyers Service Co.) and a new loan which just so happened to pay off the frst loan. Id. at 312, 585 S.E.2d at 776. However, when an existing loan was simply being modified but remained in place, lawyers did not need to be brought in to complete and record the forms or to disperse the money. Crawford v. Central Mortgage Co., 404 S.C. 39, 47, 744 S.E.2d 538, 542 (2013). The Court again relied in part on the value of having a lawyer involved versus the cost to the consumer for that extra value and decided that the benefit was potentially outweighed. Id.

Police as prosecutors

The Court’s recognizing the practicality of bringing a lawyer into the mix applies in some criminal cases as it does in private matters. For many years, an arresting officer has been allowed to prosecute a criminal case in magistrate’s court. State v. Messervy, 258 S.C. 110, 113, 187 S.E.2d 524, 525 (1972). When the procedure was challenged, the Court recognized that using non-lawyers to prosecute criminal cases was “not without its faults” but also that at least a judge was present to keep things from going awry and that an appeal was possible if prejudice resulted—neither of which would be true in a private transactional matter like a real estate closing. Id. Moreover, having lawyers prosecute every case was simply not possible given the volume of cases.

The Court has been willing t o go only so far in the name of practicality. Therefore, only sworn officers of the state may prosecute criminal cases in magistrate’s court. In re Richland Cty. Magistrate’s Court, 389 S.C. 408, 412, 699 S.E.2d 161, 163–64 (2010) (“The convenience and fiscal economy of private prosecution may be facially appealing, but we must not embrace them at the expense of fundamental fairness and justice.”). And even among sworn officers of the state, only arresting officers or their supervisors can prosecute the criminal matters, not any sworn officer. State v. Sossamon, 3 298 S.C. 72, 78 S.E.2d 259 (1989).

Supervision: The ultimate safe harbor

Just because some activity is lawyering does not mean that it must actually be performed by a lawyer—as long as a lawyer supervises the activity. One of the reasons for approving supervision of what would otherwise be UPL is the very practical reason that it keeps costs down. In Boone v. Quicken Loans, Inc., 420 S.C. 452, 469, 803 S.E.2d 707, 716 (2017), the Court reviewed the different steps of the loan refinancing process and found that a South Carolina lawyer had adequately reviewed and approved the steps even if he did not actually do the title search or draft the documents himself. Could the lawyer have personally checked the titles and completed the standardized forms? Yes, but the cost of hiring a lawyer to perform “myriad clerical tasks” would hardly be in the client’s best interest so long as the mechanical process was coordinated by a lawyer. Id. at 465, 803 S.E.2d at 714. While having a lawyer involved in overseeing the process was “vital and necessary,” the cost-benefit analysis shifted in favor of having non-lawyers do much of the work: [W]e believe a finding that Respondents’ conduct constituted UPL would mark an unwise and unnecessary intrusion into the marketplace. We believe this is especially so, as the attorney involvement and supervision serve the goal of protecting the public. Once it is determined that sufficient attorney involvement is present and further that the interest of the public is protected, this Court should stay its hand and let the marketplace control.

Id. at 470, 803 S.E.2d at 716.

Conclusion

Identifying when some conduct amounts to practicing law is itself so nuanced that it probably should best be left to lawyers to decide. Obvious cases aside, there are several safe harbors and pitfalls waiting that are not easily applied to cases that introduce unique facts. Given the Court’s reluctance to rule with broad strokes, a cautious approach is justified, and while it might seem self-interested, a lawyer is justified in deciding that lawyers should be involved at least in a supervisory capacity in many matters.