When does software engage in the unauthorized practice of law?

February 8th, 2012

In In Re Reynoso, the 9th Circuit considered whether a computer program engaged in the unauthorized practice of law.

Here’s how the software operated:

Frankfort charged fees to permit customers to access web-based software. Frankfort’s software solicited information from the customers. Critically, it then translated that information into responses to questions on the bankruptcy forms, and prepared the bankruptcy forms for filing using those responses. As the BAP noted, “The software did not simply place the debtors’ answers, unedited and unmediated, into official forms where the debtors had typed them on a screen; rather, it took debtors’ responses to questions, restated them, and determined where to place the revised text into official forms.’ ” Reynoso, 315 B.R. at 552.


[6]Headnote Citing References In sum, for a fee, Frankfort provided customers with completed bankruptcy petitions. Customers merely provided the data requested by the software and printed the finished forms. This is materially indistinguishable from other cases in which individuals or corporations FN5 have been deemed bankruptcy petition preparers. See, e.g., Doser, 412 F.3d at 1059-60. It goes without saying that the customer must provide data to the preparer, and the customer’s role in printing or otherwise reproducing the forms before filing does not alter the role of the preparer. Moreover, § 110 does not require that bankruptcy petition preparers have in-person interactions with their customers. Cf. Ferm v. U.S. Trustee ( In re Crowe), 243 B.R. 43, 49-50 (9th Cir. BAP 2000) (holding*1124 that the author of an instructional book on bankruptcy petitions who guaranteed buyers of the book that he would complete their forms for free if they were unable to do so themselves was, in fact, presenting himself as a bankruptcy petition preparer as defined by § 110(a)(1)), aff’d,246 F.3d 673 (9th Cir.2000) (unpublished table decision); In re Doser, 281 B.R. 292, 303-04 (Bankr.D.Idaho 2002) (reasoning that a franchisor who receives information that was solicited in a face-to-face interaction between the franchisee and the customer and uses that information to prepare bankruptcy documents, but never meets with the customer directly, is a bankruptcy petition preparer), aff’d,412 F.3d 1056. The bankruptcy court and BAP did not err in concluding that Frankfort was a bankruptcy petition preparer.
The 9th Circuit agreed, and found that this software engaged in the unauthorized practice of law:

 California courts have long accepted that, in a general sense, “the practice of law ․ includes legal advice and counsel and the preparation of legal instruments and contracts.”  Baron v. City of L.A., 2 Cal.3d 535, 86 Cal.Rptr. 673, 469 P.2d 353, 357 (1970) (noting that this definition was adopted as early as 1922).   But they have recognized too that “ascertaining whether a particular activity falls within this general definition may be a formidable endeavor.”  Id. at 358;  see People v. Landlords Prof’l Servs., 215 Cal.App.3d 1599, 1605, 264 Cal.Rptr. 548 (1989) (observing that “whether any given activity is an unauthorized practice of law depends upon the context and situation involved”).

Determining whether particular assistance rendered in the preparation of legal forms constitutes the unauthorized practice is often especially challenging.   Cf. Landlords Prof’l Servs., 215 Cal.App.3d at 1605-09, 264 Cal.Rptr. 548 (observing, after reviewing prior cases, that merely clerical preparation services do not constitute the practice of law, and that impersonal instruction on form completion-such as may appear in a detailed manual-may also be permissible).

Several features of Frankfort’s business, taken together, lead us to conclude that it engaged in the unauthorized practice of law.   To begin, Frankfort held itself out as offering legal expertise.   Its websites offered customers extensive advice on how to take advantage of so-called loopholes in the bankruptcy code,8promised services comparable to those of a “top-notch bankruptcy lawyer,” and described its software as “an expert system” that would do more than function as a “customized word processor[ ].”

The software did, indeed, go far beyond providing clerical services.   It determined where (particularly, in which schedule) to place information provided by the debtor, selected exemptions for the debtor and supplied relevant legal citations.   Providing such personalized guidance has been held to constitute the practice of law.   See, e.g., Kaitangian, 218 B.R. at 110 (“[A]dvising of available exemptions from which to choose, or actually choosing an exemption for the debtor with no explanation, requires the exercise of legal judgment beyond the capacity and knowledge of lay persons.”);  In re Anderson, 79 B.R. 482, 484-85 (Bankr.S.D.Cal.1987) (finding that a non-lawyer had rendered legal services when he advised customer as to the consequences of filing for bankruptcy, solicited information from her and prepared the bankruptcy forms, and selected her exemptions);  see also Hastings v. U.S. Trustee (In re Agyekum ), 225 B.R. 695, 701 (9th Cir.BAP1998) (noting that bankruptcy petition preparers are prohibited from advising debtors as to the selection of exemptions under the Bankruptcy Petition Preparer Guidelines for the Northern District of California);  People v. Sipper, 61 Cal.App.2d Supp. 844, 142 P.2d 960, 962 (Cal.App. Dep’t Super. Ct.1943) (holding that the “clerical service” of filling out forms is not the practice of law, but that a defendant who goes further and makes determinations about the type of document appropriate engages in legal practice), disapproved on other grounds by Murguia v. Mun. Court, 15 Cal.3d 286, 124 Cal.Rptr. 204, 540 P.2d 44 (1975).

Frankfort’s system touted its offering of legal advice and projected an aura of expertise concerning bankruptcy petitions;  and, in that context, it offered personalized-albeit automated-counsel.   Cf. Landlords Prof’l Servs., 215 Cal.App.3d at 1609, 264 Cal.Rptr. 548.   We find that because this was the conduct of a non-attorney, it constituted the unauthorized practice of law.9

8.   Frankfort’s Bankruptcy Vault claimed to show customers how to structure bankruptcy “so that it is ․ invisible to Experian, Trans Union, and Equifax, etc.”, to “reestablish good credit in 3 months instead of 3 years,” and other such feats.

9.   Since we are asked only to consider the facts of the case presented (i.e., Frankfort’s system), we express no view as to whether software alone, or other types of programs, would constitute the practice of law.

I found this case in A Legal Theory for Autonomous Artificial Agents, which suggests this is one of the few cases that looks at whether a computer program that offers legal advice engages in the anauthorized practice of law. I keycited it, and could not find any other cases that cite it.