Ethical Considerations Particula

The purpose and policies underlying Minnesota’s Rules of Professional Conduct are fairly simple and straightforward to understand. Basically, since attorneys enjoy the luxury of being a “self-regulated” profession, higher ethical duties are placed upon them. See Minn.R.Prof.C. § Preamble: A Lawyer’s Responsibility (2005).[1] These higher duties are to an extent set forth in the Rules of Professional Conduct, controlling case law and other Court rules. Id.

The purpose of attorney disciplinary action is not to punish, but rather is to guard the administration of justice and to protect the courts, the legal profession and the public. In re Disciplinary Action Against Salmen, 484 N.W.2d 253, 254 (Minn.1992)

In that regard, the Rule’s Preamble quite succinctly, fittingly and correctly observes as follows:

However, a lawyer is also guided by personal conscience and the approbation of professional peers. A lawyer should strive to attain the highest level of skill, to improve the law and the legal profession and to exemplify the legal profession's ideals of public service. *** A lawyer's responsibilities as a representative of clients, an officer of the legal system and a public citizen are usually harmonious. Thus, when an opposing party is well represented, a lawyer can be a zealous advocate on behalf of a client and at the same time assume that justice is being done.

Obviously, attorneys are expected to demonstrate high degree of professionalism in dealing with the public at large and the legal system in particular. Although an adversarial system of justice may seem to be at odds with these ideals, in reality they can be harmonious when dealing with a competently represented opponent. However, as collection counsel, quite often you are collecting against unrepresented parties. This is particularly true when collecting consumer debts. See Minn.R.Prof.C. § 4.3 (Dealing with Unrepresented Persons).

The purposes of attorney discipline procedures are to protect the courts, the legal profession, and the public, guard the administration of justice, and deter similar misconduct. In re Disciplinary Action Against Isaacs, 451 N.W.2d 209, 211 (Minn.1990) citing In re Levenstein, 438 N.W.2d 665, 668 (Minn.1989); In re Weyhrich, 339 N.W.2d 274, 279 (Minn.1983). In determining the appropriate discipline, careful consideration is given to the nature of the misconduct; the cumulative weight of the disciplinary violations; the harm to the public; and the harm to the legal profession. Id. citing Levenstein, 438 N.W.2d at 668. The discipline imposed depends on the specific facts of the misconduct, together with any aggravating or mitigating circumstances. Id. citing In re Heffernan, 351 N.W.2d 13, 14 (Minn.1984).

Accordingly, a wide array of facts are considered in determining appropriate attorney discipline, with an emphasis on protection of the public and protection of the integrity of the legal system itself. Clearly this is a highly fact specific analysis, taking into consideration numerous facets of the particular situation and viewing the matter as a whole, while at the same time weighing the competing interests appropriately.

One the most unfortunate public perceptions is that if a lawyer’s mouth is open, he is “lying.” Although apparently fair-fodder for numerous lawyer jokes, the Rules of Professional Conduct impose a very serious burden on counsel and in statements they make to others. As noted by Minnesota’s Supreme Court, “Our legal system depends on the truthfulness of the testimony of witnesses and false testimony strikes at the very heart of the administration of justice.” In re Disciplinary Action Against Salmen, 484 N.W.2d 253, 254 (Minn.1992)(relating to an attorney offering false testimony as a witness).[2]

However, Rule 4 of the Minnesota Rules of Professional Conduct, “Transactions with Persons Other than Clients,” governs an attorneys’ truthfulness with other persons, and not just as a witness. See Minn.R.Prof.C. § 4 (2005). The application and particular implications this set of Rules governs arise frequently for collection counsel.

Rule 4.1 of the Minnesota Rules of Professional Conduct provides in full that, “[i]n the course of representing a client a lawyer shall not knowingly make a false statement of fact or law.” Although a fairly short and plain statement, ethical cases under Rule 4.1 show its application can be more complicated and cover an array of human behavior—especially in the debt collection arena.

In In Re DeVinny, 255 N.W.2d 832 (Minn.1977), a fairly recently admitted attorney represented a debt collection company named Rochester Collections, Inc. The attorney permitted his name, address, and status as an attorney to be listed on certain documents for the collection company and on its letterhead. Id. at 833.

In reality, the attorney maintained no office or desk at that company’s address, and he knew that all persons and employees at that address were employees of Rochester Collections, Inc. Id. Particular correspondence relating to the actual commencement and processing of collection matters in litigation were drafted in the attorney’s name, and employees of Rochester Collections, Inc. signed his name on letters. Id. Those letters were sent to debtors and may not have been seen or approved by the attorney in advance of being sent. Id. A checking account was maintained in the attorney’s name, as well as an unlisted telephone number used on pleadings, which were actually under the control of the debt collection company and not the attorney. Id.

At the time of the decision by the Supreme Court, our current version of the Rules of Professional Conduct were not in place (enacted in 1985), but a similar provision was in place regarding truthfulness in dealing with others. In this case and under these facts, the Court found a violation of DR 1-102(A)(4), Code of Professional Responsibility, which provided in part that: "(A) lawyer shall not: (4) Engage in conduct involving dishonesty, fraud, deceit, or misrepresentation." Id.

For an attorney to lend his name to a collection agency, without personally authorizing or supervising the procedures and processes which are pursued in his name, is a willful misrepresentation of his professional status and a grossly improper participation in the unauthorized practice of law for which he is subjected to severe public censure by this Court. Under other circumstances these violations might be grounds for suspension or disbarment. However, in view of the attorney's otherwise unblemished record, his recognition of the improprieties, and his cooperation with the Lawyers Professional Responsibility Board in acknowledging these violations, we deem public censure to be an appropriate sanction.

Id. at 834. As discussed above, the Court took many factors into consideration but did not mince words in condemning the attorney’s conduct and clearly found it to be deceitful and dishonest.

The case of In Re Luther, 374 N.W.2d 720 (Minn.1985) may have involved one of the more creative tactics in debt collection by a lawyer in Minnesota. In this case, the attorney’s “creative” tactics lead to a public reprimand and an order requiring the attorney to take an ethics course from a law school an retake and pass the required professional responsibility examination. Id. at 720.

The attorney in the Luther case admitted to having falsely told numerous people that his client had lost a class action suit and that they, or the person he was seeking, might be receiving a rebate because of the results of that action. Id. In doing so, the attorney then obtained the name, address and other information about the debtor, which he then used to pursue a collection action against the individual. Id. The attorney also used a pseudonym of “Mark Rose” in potentially troublesome collection calls to mask his identity. Id.

The attorney also opened an out-of-state checking account in the name of a fictitious foundation. Id. Under the name of Mark Rose, the attorney would issue small checks from that foundation to his clients’ judgment debtors in order to find out the location of the debtors' bank accounts so that he could try to garnish or levy on them. Id.

The Minnesota Supreme Court did not appreciate the attorney’s “creative” tactics and found he, as in the DeVinny case, had knowingly made false statements regarding a non-existent class action suit, in using a code name, and in using the fake foundation ruse. Id. Accordingly, the attorney had violated disciplinary rule DR-1-102(A)(4) among others and ordered the public reprimand. Id.

In June of 1977, Minnesota’s Lawyers Professional Responsibility Board adopted Opinion 10, entitled, “Debt Collection Procedures.” See Attached Copy of Opinion 10. That Opinion, although since repealed, as discussed below, is very instructive on how the Board views particular ethical aspects for collection counsel. The purpose underlying the adoption of the Opinion was to prevent the possibility of misleading the public or abusing debtors. Id. The Board further explained as follows:

The Opinion then sets out guidelines that if violated, were considered grounds for initiating disciplinary proceedings against an attorney. Id. First, the guidelines apply to any attorney representing a collection agency or performing work on a collection agency’s behalf. Second, the Opinion lists a litany of prohibited conduct, for example, an attorney may not “lend” her name to a collection agency, may not “share” an office address or telephone number with a collection agency or use the attorney’s name on advertising for a collection agency (See DeVinney above), among numerous other restricted practices. Id. Finally, the author of this material believes it would still be wise for collection counsel to be familiar with the Opinion’s guidelines in grasping a basic understanding of the unique ethical obligations imposed on collection counsel and encourages it to be reviewed in more detail.

In October of 2002, the Supreme Court decided the case In Re Panel File No. 99-42, 621 N.W.2d 240 (Minn.2001). In the No. 99-42 decision, the Supreme Court held that a lawyer could not be disciplined solely for violating a Lawyers Board Opinion, such as Opinion 10.

In light of the No. 99-42 decision, the Board has been reconsidering some of its opinions. See December 2, 2002 issue of Minnesota Lawyer, “Lawyers Board Repeals Four Opinions”; Kenneth L. Jorgensen, Director; Minnesota Office of Lawyers Professional Responsibility. At its October 2002 meeting, the Board decided to repeal 4 of its 17 Opinions and Opinion 10 was among those repealed. Id.[3] In so deciding the Board reasoned as follows:

Since the opinion was adopted in 1977, federal and state consumer protection laws, including most notably the Fair Debt Collection Practices Act (FDCPA), have encompassed and far exceeded the regulation of collection activities proscribed by the Lawyers Board opinion.

Within the past several years, federal court rulings have made it clear that the FDCPA applies not only to collection agencies, but also lawyers. Like Opinion No. 3, this opinion became obsolete due to the evolution of more comprehensive substantive law regulations.

The reasoning seems sound and practical, but ignores one important aspect—The utility of having a set of ethical guidelines laid out that is specifically tailored to collection attorneys. The reasoning as stated above, admittedly not encapsulating all considerations the Board undertook, falls short by stating the FDCPA has exceeded the regulations imposed by Opinion 10. True, the FDCPA will provide monetary and injective relief in factually specific situations, but it is not a substitute for the ethical rules. It should be noted that even though Opinion 10 is now repealed, the ethical rules it discusses as being violated by certain conduct are still valid and binding on collection counsel and will provide grounds for discipline if violated.

As stated above, the author believes that Opinion 10 served a useful purpose and still is an excellent primer on the unique ethical considerations with which all collection counsel should be familiar. Although repealed, it is highly recommended to read it and follow its guidance.

Rule 5.3 of Minnesota’s Rules of Professional Conduct requires lawyers to oversee and supervise their nonlawyer assistants. In debt collection practices, usually a significant number of support staff can be employed to handle numerous, routine administrative tasks. Accordingly, specific practices, policies and procedures should be formally in place (and enforced) in order to comply with Rule 5.3. Rule 5.3 provides in pertinent portion as follows:

With respect to a nonlawyer employed or retained by or associated with a lawyer:

(a) A partner in a law firm shall make reasonable efforts to ensure that the firm has in effect measures giving reasonable assurance that the person's conduct is compatible with the professional obligations of the lawyer;

(b) A lawyer having direct supervisory authority over the nonlawyer shall make reasonable efforts to ensure that the person's conduct is compatible with the professional obligations of the lawyer; and

(c) A lawyer shall be responsible for conduct of such a person that would be a violation of the Rules of Professional Conduct if engaged in by a lawyer if:

(1) the lawyer orders or, with the knowledge of the specific conduct, ratifies the conduct involved; or

(2) the lawyer is a partner in the law firm in which the person is employed, or has direct supervisory authority over the person, and knows of the conduct at a time when its consequences can be avoided or mitigated but fails to take reasonable remedial action.

Minn.R.Prof.C. § 5.3 (2005). In other words, the buck stops with the lawyer, who can be held responsible for a nonlawyers’ unethical conduct and potentially be disciplined.

Although each debt collection practice will obviously differ significantly, a few basic suggests may be helpful in ensuring compliance with Rule 5.3. First, written policies and procedures should be in place that takes into account the ethical obligations imposed under the Rules and also consider compliance with the FDCPA. Second, the written policies must be enforced and support staff’s compliance with the policies must be routinely checked. Once a debt collection firm has its policies in place, staff may be directed to draft specific forms that can not be varied from the policies written directives. Finally, all policies must be kept up to date with changes in the ethical obligations for attorneys and new developments under the FDCPA.

Although Rule 5.3 may not impose a strict liability standard on lawyers for the actions of nonlawyer assistants, it does require lawyers to take affirmative steps to avoid transgressions. See March 5, 2001 issue of Minnesota Lawyer “Responsibility for Non-Lawyer Assistants”; Timothy M. Burke, Senior Assistant Director; Minnesota Office of Lawyers Professional Responsibility. A failure to adequately supervise support staff may lead to professional discipline against the lawyer for a failure to have adequate protections in place. In that regard, a wise practice is to have in place and enforce written polices and procedures.

In order to prevent the possibility of misleading the public regarding its dealings with attorneys, it is imperative that the activities of attorneys be separate from — and be perceived by the public to be separate from — the activities of debt collection agencies. The blurring of the distinction between the actions of a lawyer seeking to collect on a claim for a client and the actions of a debt collection agency seeking to collect an account for a creditor may lead to abuses of debtors and adversely reflect upon the legal profession. To prevent the possibility of (a) misleading the public, or (b) abusing debtors, violations of the following guidelines by attorneys in connection with debt collection work shall be grounds for the initiation of disciplinary proceedings against an attorney:

1) An attorney who represents, or performs legal work for, a debt collection agency may not do any of the following:

a) If an attorney is engaged both in the practice of law and in the debt collection agency business, the attorney may not list his or her name in, or on any building office sign, building tenants’ directory, office sign or door sign of the debt collection agency. [DR 2-102(E)]

b) An attorney may not indicate on his or her letterhead, office sign or shingle, or professional card, that the attorney is in any way associated with a debt collection agency. [DR 2-102(A)(1), (3), (4); DR 2-102(E)]

c) An attorney may not identify himself or herself as a lawyer in any publication relating to the operation of a debt collection agency. [DR 2-101(B); DR 2-102(E)]

d) An attorney may not have, or use, the same telephone number as that used by a debt collection agency. [DR 2-102(E)]

e) An attorney may not use the same office address as that used by the debt collection agency. [DR 2-102(E)]

f) An attorney may not permit his or her name to be used in connection with any oral or written advertisement or solicitation for business by a debt collection agency. [DR 2-101; DR 2-102(E)]

2) An attorney who represents, or performs legal work for, a debt collection agency shall exercise reasonable care to insure that confidences and secrets of the attorney’s clients are not disclosed by employees of the debt collection agency to any person not authorized by the client to receive such information. [DR 4-101(D); EC 3-4; EC 3-6]

3) Except for purposes of effecting service of legal process according to law, no attorney shall permit any correspondence , pleadings, garnishment summonses, executions, releases, or other documents which bear his or her signature (or a facsimile thereof) to be used, or mailed, by persons who are not in the exclusive employ of the attorney’s law office. [DR 1-102(A)(5), (6)]

4) An attorney who represents, or performs legal work for, a debt collection agency shall be responsible for all acts of the attorney’s own lay employees, and the attorney may not permit, expressly, by implication or by non-action, lay employees to engage in conduct which, if engaged in by an attorney, would be in violation of the Code of Professional Responsibility. [DR 2-102(A)(2); DR 3-101(A); DR 4-101(D); EC 3-8)]

5) Form letters, pleadings, or other legal documents shall be signed by any attorney who represents or performs legal work for a debt collection agency in the completed form in which they are to be sent, served or delivered. [DR 1-102(A)(4), (5); EC 3-6)]

6) An attorney who represents, or performs legal work for, a debt collection agency shall not deliver to, or otherwise make available to, lay persons who are not in the exclusive employ of the attorney’s law office (a) rubber stamp signatures, (b) reproduced signatures, (c) mechanized signatures, or (d) other facsimile signatures of the attorney, for purposes of allowing use of the same on demand letters, original pleadings, or on any other documents used in debt collection. [EC 3-6; DR 1-102(A)(5); DR 3-101(A)]

7) An attorney shall not aid, abet, or assist any debt collection agency in the violation of the provisions of Minnesota Statutes §332.37, prescribing prohibited practices of debt collection agencies. Similarly, an attorney shall not aid, abet, or assist a debt collection agency in the violation of any other state or federal laws, rules, or regulations governing debt collection agency practices. {DR 3-101(A) DR 1-102(A)(6)]

[1] The Minnesota Supreme Court held a hearing on May 18, 2004, on the proposed amendments
to the Minnesota Rules of Professional Conduct. At the time of this writing, the proposed changes are still under advisement.

[2] See also Minn. Stat. § 481.071, which provides for criminal misdemeanor penalties and treble damages and states as follows: Every attorney or counselor at law who shall be guilty of any deceit or collusion, or shall consent thereto, with intent to deceive the court or any party, or who shall delay the attorney's client's suit with a view to the attorney's own gain, shall be guilty of a misdemeanor and, in addition to the punishment prescribed by law therefor, shall forfeit to the party injured treble damages, to be recovered in a civil action.

[3] The Lawyers Board process for the ongoing review of its opinions is discussed in more detail in the November 2002 issue of Bench & Bar. (See Bateman, “Opinions of the Lawyers Board,” 59 Bench & Bar 10 at p. 6.)

Ethical Considerations Particular to the Collection Attorney

Mark K. Thompson

Saint Paul, Minnesota