Disciplinary Counsel v. Smidt (Slip Opinion)

[Until this opinion appears in the Ohio Official Reports advance sheets, it may be cited as
Disciplinary Counsel v. Smidt, Slip Opinion No. 2020-Ohio-3258.]
NOTICE
This slip opinion is subject to formal revision before it is published in
an advance sheet of the Ohio Official Reports. Readers are requested
to promptly notify the Reporter of Decisions, Supreme Court of Ohio,
65 South Front Street, Columbus, Ohio 43215, of any typographical or
other formal errors in the opinion, in order that corrections may be
made before the opinion is published.
SLIP OPINION NO. 2020-OHIO-3258
DISCIPLINARY COUNSEL v. SMIDT.
[Until this opinion appears in the Ohio Official Reports advance sheets, it
may be cited as Disciplinary Counsel v. Smidt, Slip Opinion No.
2020-Ohio-3258.]
Unauthorized practice of law—Preparing and negotiating modification of loan
that was subject of pending foreclosure proceeding—Permanent
injunction issued and civil penalty imposed.
(No. 2019-0827—Submitted April 8, 2020—Decided June 11, 2020.)
ON FINAL REPORT by the Board on the Unauthorized Practice of Law
of the Supreme Court, No. UPL 18-01.
_______________________
Per Curiam.
{¶ 1} In an April 2018 complaint, relator, disciplinary counsel, charged
respondent, Melissa M. Smidt, d.b.a. A Perfect Solution, with engaging in the
unauthorized practice of law in Ohio. The complaint alleged that Smidt, who is
not licensed to practice law in Ohio, agreed to assist Deborah Krantz with a
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foreclosure matter that was pending in the Franklin County Court of Common
Pleas and sought to modify the terms of the subject loan during the pendency of
the lender’s foreclosure proceeding. The complaint further alleged that although
Smidt represented that she undertook those actions as a paralegal under the
supervision of an attorney, the attorney was unaware of and did not participate in
Smidt’s representation of Krantz.
{¶ 2} Smidt was served with a copy of relator’s complaint by certified
mail, but she did not file an answer. On August 16, 2018, relator filed a motion
for default. Smidt also did not respond to relator’s motion, which states that it
was served on her by ordinary U.S. mail and by e-mail.
{¶ 3} A three-member panel of the Board on the Unauthorized Practice of
Law granted relator’s motion for default on October 10, 2018. The panel also
submitted to the board a report finding that relator’s motion satisfied the
requirements of Gov.Bar R. VII(7)(B)(1) through (6) and that Smidt had engaged
in the unauthorized practice of law. The panel recommended that Smidt be
enjoined from engaging in additional acts of the unauthorized practice of law and
be ordered to pay a civil penalty of $5,000 for her violation. The board
considered the panel’s report at its March 22, 2019 meeting and adopted its
findings and recommendations.
{¶ 4} After reviewing the record, we agree that Smidt engaged in the
unauthorized practice of law in Ohio and that an injunction and civil penalty are
warranted.
Smidt’s Conduct
{¶ 5} The evidence submitted with relator’s motion for default shows that
Smidt operated A Perfect Solution in the Bay Village, Ohio area. The business
purported to be a “knowledgeable, fully committed professional company
preparing Loan Modifications and Bankruptcy Petitions under the direct
supervision of Consumer Bankruptcy Attorneys.” Although Smidt previously had
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been employed by an attorney as a contract paralegal assistant, she was not
licensed to practice law in Ohio.
{¶ 6} In March 2015, Deborah Krantz hired Smidt and paid her a flat fee
of $1,000 to prepare and negotiate the modification of a loan that was the subject
of a pending foreclosure proceeding—despite the fact that Krantz already had an
attorney representing her in the foreclosure. In the fee agreement, Smidt stated
that she would prepare and negotiate the loan modification, “along with, attending
any/all mediation hearings, written statements, telephone conferences.”
{¶ 7} During the course of the representation, Smidt sent two letters to
Krantz’s mortgage lender on the letterhead of attorney J. Norman Stark. In the
first letter, Smidt identified herself as a paralegal and “the legal representative
appointed to act or speak on behalf of Ms. Deborah Krantz, for the limited
purpose of negotiating a loan modification.” In the second letter, Smidt related
the hardships that had prevented Krantz from satisfying her loan obligations and
opined that Krantz was an excellent candidate for a loan modification.
{¶ 8} Smidt later informed Krantz that she had spoken with one of the
attorneys representing the lender and implored him to stay the execution of the
sale in the foreclosure proceeding to give her time to submit a loan-modification
packet. She also e-mailed Krantz’s foreclosure attorney and informed him that
she had spoken with the underwriter for Krantz’s loan but that the lender needed
more time to make a loan-modification offer. To that end, Smidt suggested that
the attorney prepare and file—with her help—a motion to stay execution of the
judgment, a motion to return the foreclosure case to mediation, or a motion for
relief from judgment under Civ.R. 60(B) to delay the foreclosure proceeding.
Smidt also informed the attorney that she had spoken with the supervisor of the
court’s mediation department and that he had told her that although the
foreclosure case had been referred to mediation, the case had been returned to the
court’s docket because no one had appeared for the scheduled mediation. Smidt
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opined that the judge would likely deny a request to return the case to mediation
but stated, “I would place a strong argument for a return to mediation as a full
loan modification of over 100 pages was provided to the Lender and currently,
we’re in the middle of negotiations with the Lender.”
{¶ 9} Smidt’s efforts to delay the foreclosure proceedings were not
successful, and the court confirmed the sheriff’s sale of Krantz’s real property on
June 19, 2015. On July 1, 2015, Krantz terminated Smidt’s services and
requested the return of her documents and a full refund of her fee, but Smidt did
not comply with either request.
{¶ 10} In her correspondence with relator—before she stopped
participating in this matter—Smidt claimed that the actions she took on behalf of
Krantz were taken under the supervision of attorney Stark. She also furnished
relator with several documents, including the two letters she had sent to Krantz’s
mortgage lender on Stark’s letterhead.
{¶ 11} In a March 2017 affidavit, however, Stark denied that he had
represented Krantz and stated that he had received no fee or retainer from her. He
also stated that he had terminated Smidt’s employment as a “paralegal assistant”
due in part to her unauthorized practice of law and her unauthorized use of his
law-office letterhead. Stark averred that after he terminated Smidt’s employment,
she continued to use his letterhead without his knowledge or consent. Although
he repeatedly demanded that Smidt cease and desist from that conduct, he
received no response from her. There is no evidence that any other licensed
attorney was supervising Smidt’s provision of legal services.
{¶ 12} Based on relator’s evidence, the board found that Smidt had
engaged in the unauthorized practice of law by attempting to represent Krantz in
her pending foreclosure matter and by contacting Krantz’s mortgage lender in an
attempt to modify the terms of the loan.
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Smidt Engaged in the Unauthorized Practice of Law
{¶ 13} This court has original jurisdiction over the admission to the
practice of law in Ohio, the discipline of persons so admitted, and “all other
matters relating to the practice of law,” Article IV, Section 2(B)(1)(g), Ohio
Constitution, which include the regulation of the unauthorized practice of law.
Royal Indemn. Co. v. J.C. Penney Co., Inc., 27 Ohio St. 3d 31, 34, 501 N.E.2d 617
(1986); Greenspan v. Third Fed. S. & L. Assn., 122 Ohio St. 3d 455, 2009-Ohio-
3508, 912 N.E.2d 567, ¶ 16. The purpose of that regulation is to “protect the
public against incompetence, divided loyalties, and other attendant evils that are
often associated with unskilled representation.” Cleveland Bar Assn. v.
CompManagement, Inc., 104 Ohio St. 3d 168, 2004-Ohio-6506, 818 N.E.2d 1181,
¶ 40.
{¶ 14} We have defined the unauthorized practice of law to include both
the “rendering of legal services for another” and the “[h]olding out to the public
or otherwise representing oneself as authorized to practice law in Ohio” by any
person who is not authorized to practice law under our rules. Gov.Bar R.
VII(2)(A)(1) and (4). Although unlicensed persons may provide certain types of
assistance in the rendering of legal services, “the individual’s actions must be
closely supervised and approved by a licensed attorney.” Disciplinary Counsel v.
Casey, 138 Ohio St. 3d 38, 2013-Ohio-5284, 3 N.E.3d 168, ¶ 10. In the absence
of such supervision, the provision of legal services by an unlicensed person
constitutes the unauthorized practice of law. Id.
{¶ 15} We have held that nonlawyers engage in the unauthorized practice
of law “by attempting to represent the legal interests of others and advise them of
their legal rights during settlement negotiations,” Cincinnati Bar Assn. v.
Foreclosure Solutions, L.L.C., 123 Ohio St. 3d 107, 2009-Ohio-4174, 914 N.E.2d
386, ¶ 25, particularly when those nonlawyers are “attempting to advise debtors of
their legal rights and the terms and conditions of settlement in negotiations to
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avoid pending foreclosure or other collection proceedings,” id. at ¶ 26, citing
Ohio State Bar Assn. v. Kolodner, 103 Ohio St. 3d 504, 2004-Ohio-5581, 817
N.E.2d 25, and Cincinnati Bar Assn. v. Telford, 85 Ohio St. 3d 111, 707 N.E.2d
246 (1999).
{¶ 16} Recently, in Ohio State Bar Assn. v. Watkins Global Network,
L.L.C., __ Ohio St.3d __, 2020-Ohio-169, __ N.E.3d __, ¶ 10, we clarified that
there is no per se rule that any nonlawyer who negotiates a debt settlement on
behalf of another engages in the unauthorized practice of law. Instead, we held
that “whether a person engages in the unauthorized practice of law turns on the
specific actions a person takes while attempting to negotiate a settlement and
whether those actions constitute the rendering of legal services,” id., such as
giving legal advice, drafting legal documents, or asserting legal defenses as part
of the negotiation process, id. at ¶ 11.
{¶ 17} Watkins represented the interests of a debtor in loan negotiations
with a bank during the pendency of a mortgage foreclosure action in which the
bank had secured a final judgment in foreclosure and the relevant property was
scheduled to be auctioned. Id. at ¶ 17. In that representation, he engaged in the
unauthorized practice of law by giving legal advice to his client, by making a
legal recommendation to an attorney in the foreclosure proceeding, and by using
legal tactics in an effort to negotiate a better settlement for his client. Id. at
¶ 17-18.
{¶ 18} Like Watkins, Smidt represented Krantz in a foreclosure
proceeding in which the court had already issued a final judgment of foreclosure
and scheduled a sheriff’s sale. Although the board found no evidence that Smidt
gave legal advice directly to any of her “clients,” Smidt gave litigation advice to
Krantz’s counsel of record in an effort to delay the foreclosure proceeding and to
buy more time to negotiate a modification of the loan with Krantz’s lender. She
also contacted a court representative on Krantz’s behalf.
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{¶ 19} On these facts, we accept the board’s finding that Smidt engaged in
the unauthorized practice of law.
An Injunction and Civil Penalty Are Warranted
{¶ 20} Because we have found that Smidt engaged in the unauthorized
practice of law, we adopt the board’s recommendation that we issue an injunction
prohibiting her from further engaging in the unauthorized practice of law in Ohio.
{¶ 21} The board also recommends that we impose a civil penalty of
$5,000 pursuant to Gov.Bar R. VII(8)(B), which instructs us to consider (1) the
degree of a respondent’s cooperation during the investigation, (2) the number of
times the respondent engaged in the unauthorized practice of law, (3) the
flagrancy of the respondent’s violations, (4) any harm that the violations caused to
third parties, and (5) any other relevant factors, which may include the
aggravating and mitigating circumstances identified in UPL Reg. 400(F).
{¶ 22} Smidt’s participation in relator’s investigation was almost
nonexistent. She provided a partial reply to one of relator’s letters of inquiry, but
she did not answer relator’s complaint, respond to its motion for default, or
otherwise appear in this proceeding.
{¶ 23} Although relator charged Smidt with engaging in the unauthorized
practice of law only in the Krantz matter, he did submit evidence that Smidt had
engaged in similar instances of the unauthorized practice of law with respect to
other persons. Moreover, Smidt’s conduct was flagrant. Smidt’s use of the
designations “ACP” (Advanced Certified Paralegal) and “RP” (Registered
Paralegal) in the signature line of her correspondence indicates that she is a
trained paralegal. Therefore, she would have received instruction regarding the
actions she was permitted and not permitted to take as a paralegal. She not only
chose to ignore those instructions but also engaged in the unauthorized use of
attorney Stark’s law-office letterhead—even after receiving his demand to cease
and desist. Her intentional and deceitful misuse of Stark’s letterhead
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demonstrates her knowledge that in the absence of direct supervision by a
licensed attorney, the actions she took on behalf of Krantz constituted the
unauthorized practice of law.
{¶ 24} In light of these aggravating factors, we agree that a civil penalty of
$5,000 is warranted for Smidt’s single instance of the unauthorized practice of
law.
Conclusion
{¶ 25} Accordingly, we enjoin Melissa M. Smidt from engaging in further
acts constituting the unauthorized practice of law in Ohio. We also order Smidt to
pay a civil penalty of $5,000. Costs are taxed to Smidt.
Judgment accordingly.
O’CONNOR, C.J., and FRENCH, FISCHER, DONNELLY, and STEWART, JJ.,
concur.
DEWINE, J., concurs in judgment only, with an opinion joined by
KENNEDY, J.
_________________
DEWINE, J., concurring in judgment only.
{¶ 26} I agree with the majority that Melissa Smidt violated our rules
prohibiting the unauthorized practice of law. I have no problem reaching that
conclusion, because her actions, especially her use of an attorney’s letterhead,
falsely conveyed that she was working with an attorney. And she persisted in this
conduct despite being told by that attorney to stop using the letterhead. Her
behavior would mislead a reasonable person about the nature of the services
Smidt was offering and therefore violated our rules.
{¶ 27} But I wish to highlight a few points of departure from the majority.
First, as I have previously explained, merely offering an opinion with legal
implications is not, on its own, sufficient to count as the unauthorized practice of
law. See Ohio State Bar Assn. v. Watkins Global Network, L.L.C., __ Ohio St.3d
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__, 2020-Ohio-169, __ N.E.3d __, ¶ 38-39 (DeWine, J., concurring in part and
dissenting in part). Rather, to count as the practice of law, the behavior must
more closely resemble that which is paradigmatic of what attorneys do. And in
making this assessment, we must be mindful that the purpose of the unauthorized-
practice-of-law rules is to protect the public, but in a way that doesn’t impose
impractical and unnecessary technical constraints. See Henize v. Giles, 22 Ohio
St.3d 213, 218, 490 N.E.2d 585 (1986), citing Cowern v. Nelson, 207 Minn. 642,
647, 290 N.W. 795 (1940).
{¶ 28} To hastily conclude that someone has engaged in the unauthorized
practice of law simply because she has voiced a legal opinion runs the risk of
unnecessarily and improperly burdening the activities of many people, including
accountants, human-resource representatives, and real-estate agents, whose jobs
require them to opine on legally relevant matters. It also risks running afoul of
various constitutional protections and antitrust limitations. See Watkins Global at
¶ 33-35 (DeWine, J., concurring in part and dissenting in part).
{¶ 29} Second, I do not agree that debt negotiation, even in the context of
a foreclosure, is necessarily the practice of law. To find that someone has
engaged in the practice of law depends on first determining that she provided
legal services—that is, engaged in behavior that is paradigmatically the exclusive
work of lawyers. Insofar as the majority seems to suggest that debt negotiation,
even in the context of a foreclosure, is presumptively the practice of law, I believe
that it errs.
{¶ 30} Third, like it did in Watkins Global, this court has again suggested
that legal opinions expressed by a nonattorney to an attorney count as the
unauthorized practice of law. While that may be correct in rare instances, we
ought to be cautious about reaching such a conclusion and not forget the point of
our rules, which is protect the public. One can reasonably presume that in most
cases, attorneys can safely form their own views about the law and legal strategy,
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regardless of what opinions a nonattorney might express. In most cases, there
will be little more reason to think that expressing a legal opinion to an attorney is
the practice of law than to think that expressing play-calling opinions to Woody
Hayes is coaching football.
{¶ 31} So, while I believe that Smidt violated our rules, elements of the
majority’s analysis suggest an overly broad understanding of what might count as
the unauthorized practice of law. For that reason, I concur in judgment only.
KENNEDY, J., concurs in the foregoing opinion.
_________________
Joseph M. Caligiuri, Disciplinary Counsel, and Stacy Solochek Beckman,
Assistant Disciplinary Counsel, for relator.
_________________
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