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Mitchell v. J&M Securities, LLC

Court of Appeals of Missouri, Eastern District, First Division

October 22, 2019

J&M SECURITIES, LLC AND SHANNON METZGER, Respondents/Cross-Appellants.

          Appeal from the Circuit Court of St. Louis County Hon. Stanley J. Wallach

          ROBERT G. DOWD, JR., JUDGE

         Velma Mitchell, Tanisha Winston and Kayla Sanders (collectively "Plaintiffs") appeal from the judgment dismissing their petition for failure to state a claim against J&M Securities, LLC and Shannon Metzger (collectively "Defendants"). Defendants cross appeal, challenging the denial of their motion for attorney fees. We affirm.

         All of the claims in Plaintiffs' petition were premised on allegations that Defendants engaged in the unauthorized practice of law. J&M is a limited liability company, solely owned by Metzger, and it holds itself out as a "professional judgment enforcement firm." J&M is not a law firm, and Metzger is not licensed to practice law in Missouri. According to the petition, J&M obtained judgments through collection lawsuits or by assignment. With respect to Plaintiff Mitchell, J&M obtained a default judgment against her in a collection lawsuit arising from unpaid rent. Plaintiffs Winston and Sanders also had unpaid rent, resulting in consent judgments that were allegedly assigned to J&M. To collect on each of these judgments, Metzger "filed a garnishment application and interrogatories" on behalf of J&M. The requests were directed to Mitchell's bank account and Winston's and Sanders's employers, respectively. None of these documents were signed by an attorney. Copies of these garnishment applications and interrogatories were attached to the petition.

         Plaintiffs alleged that because J&M is a limited liability company, only a Missouri licensed attorney was authorized to "submit court filings" on its behalf. The petition alleged that because he was not a licensed attorney, Metzger's "filing of garnishment applications and interrogatories" on J&M's behalf was the unauthorized practice of law. Plaintiffs alleged in Count I that Defendants' unauthorized practice of law constituted a deceptive practice, misrepresentation, false promise or unfair practice in violation of the Missouri Merchandising Practices Act ("MMPA"). In Count II, Winston and Sanders sought to hold Defendants liable for "money had and received," alleging that it would be unjust for Defendants to retain the money that had been withheld from those Plaintiffs' wages via Metzger's unauthorized practice of law. Plaintiffs sought to establish a class action, asserting that Defendants had engaged in this practice in hundreds of cases in Missouri.

         Defendants filed a motion to dismiss for failure to state a claim. Defendants argued that, according to Division of Employment Security v. Westerhold, 950 S.W.2d 618 (Mo. App. E.D. 1997), seeking a garnishment is not the practice of law and therefore the entire theory of liability in both counts failed. The court agreed, granted the motion to dismiss and ordered the petition dismissed with prejudice. Defendants moved, as the prevailing party, for attorney fees under the MMPA on the ground that Plaintiffs had pursued vexatious and frivolous claims because they directly contradicted the clear holding of Westerhold. The court entered an amended judgment, adding that the lawsuit was not frivolous and there was no basis for awarding attorney fees. This appeal and cross-appeal followed. Plaintiffs challenge the dismissal of their petition, and Defendants challenge the denial of attorney fees.

         Motion to Dismiss

         We review the trial court's grant of a motion to dismiss de novo and must affirm if dismissal was appropriate on any ground supported by the motion. A.F. v. Hazelwood School District, 491 S.W.3d 628, 631 (Mo. App. E.D. 2016). A motion to dismiss for failure to state a claim is solely a test of the adequacy of the plaintiffs petition. Id. The averments in the petition are taken as true, and all reasonable inferences therefrom are liberally construed in the plaintiffs favor. Id. When the facts alleged are insufficient as a matter of law, dismissal is proper. Missouri Municipal League v. State, 489 S.W.3d 765, 768 (Mo. banc 2016). Because we conclude that Metzger's acts as alleged in the petition did not, as a matter of law, constitute the unauthorized practice of law, dismissal of the petition-based entirely on that theory-was proper.

         J&M is a limited liability company, which is a statutory entity. See Sections 347.010 to 347.187 ("Missouri Limited Liability Company Act"). A statutory entity cannot act at all except through individuals acting on its behalf. Naylor Senior Citizens Housing, LP v. Side Construction Company, Inc., 423 S.W.3d 238, 243 (Mo. banc 2014). No individual can practice law on behalf of another without being a licensed attorney. Id. at 244. Thus, while an individual can represent herself without a license to practice law- because she is not, in that situation, representing another-only a licensed attorney can act on an LLC's behalf in legal matters. See id. at 244-45.

         Metzger is not a licensed attorney and he acted on behalf of the LLC, not himself, when he submitted the applications for garnishments and accompanying interrogatories. Plaintiffs insist that because garnishment is a "legal matter," Metzger was unauthorized to act in any way on J&M's behalf in the garnishment proceedings and our inquiry ends here. We disagree. As the Court in Naylor and other cases cited herein did, we must analyze the particular acts in which the non-attorney engaged to determine if they fit within the scope of the practice of law as defined by our judiciary. Id. at 245. In Naylor, little analysis was actually required because the act in question was the filing of an original petition, and "no matter what else may or may not be included ... the act of appearing in court to assert or defend claims on behalf of another lies at the very heart of the practice of law." Id. (noting that "[a] precise and comprehensive definition of the practice of law has proved elusive over the last two centuries"). But this case does not involve the filing of a petition, and we are not led "inescapably" to the conclusion that it is the practice of law as was the Court in Naylor. And, unlike that Court, we cannot avoid a deeper look into the "elusive" definition of the practice of law.

         The judiciary is the sole arbiter of what constitutes the practice of law. Hargis v. JLB Corporation, 357 S.W.3d 574, 578 (Mo. banc 2011). The legislature's definitions relating to the practice of law-unchanged since 1915-"merely act in aid of [the Supreme] Court's regulation of the practice of law and cannot supersede or detract from, the power of the judiciary to define and control the practice of law." Id. (internal quotation marks and citations omitted). Nonetheless, the Supreme Court routinely uses the statutory definitions in Section 484.010 "as a reference point for determining the scope of the practice of law." Id. That statute provides:

1. The "practice of the law" is hereby defined to be and is the appearance as an advocate in a representative capacity or the drawing of papers, pleadings or documents or the performance of any act in such capacity in connection with proceedings pending or prospective before any court of record, commissioner, referee or any body, board, committee or commission constituted by law or having authority to settle controversies.
2. The "law business" is hereby defined to be and is the advising or counseling for a valuable consideration of any person, firm, association, or corporation as to any secular law or the drawing or the procuring of or assisting in the drawing for a valuable consideration of any paper, document or instrument affecting or relating to secular rights or the doing of any act for a valuable consideration in a representative capacity, obtaining or tending to obtain or securing or tending to secure for any person, firm, association or corporation any property or property rights whatsoever.

         Decades ago, the Supreme Court also crafted its own definition-not intended to be all-inclusive-of the practice of law, which encompasses elements from both of the above statutory definitions:

[O]ne is engaged in the practice of law when he, for a valuable consideration, engages in the business of advising persons, firms, associations, or corporations as to their rights under the law, or, appears in a representative capacity as an advocate in proceedings pending or prospective, before any court, commissioner, referee, board, body, committee, or commission constituted by law or authorized to settle controversies, and there, in such representative capacity, performs any act or acts for the purpose of obtaining or defending the rights of their clients under the law. Otherwise stated, one who, in a representative capacity, engages in the business of advising clients as to their rights under the law, or while so engaged, performs any act or acts either in court or outside of court for that purpose, is engaged in the practice of law.

Clark v. Austin, 101 S.W.2d 977, 982 (Mo. 1937).[1]

         Under the above definitions, it is the character of the acts that is dispositive under these definitions, not whether the acts occurred in or out of court. Reed v. Labor and Industrial Relations Commission, 789 S.W.2d 19, 21 (Mo. banc 1990), receded from on other grounds in Haggard v. Division of Employment Security, 238 S.W.3d 151, 155 (Mo. banc 2007); see also Hoffmeister v. Tod, 349 S.W.2d 5, 13 (Mo. 1961) ("[T]he character of the act performed, and not the place where it is performed, is the controlling factor"). In Reed, the Court stated that the definition of the practice of law-citing to both the judicial and statutory definitions above-encompassed "a broad range of activities," but it is "the character of the acts done . . . that constitutes the decisive factor in determining whether the acts fall within the practice of law." 789 S.W.2d at 21. To determine the character of the acts at issue there, the Court looked to whether they involved any legal skill or knowledge. Id. The Court found that submitting applications to the Labor and Industrial Relations Commission for review of unemployment benefits decisions were not "merely ministerial acts." Id. Rather, the statutes governing that review "require[d] the applicant to assert facts and legal theories supporting reversal, which requires some degree of legal skill and knowledge." Id. The Court found that applying for review required advocating a legal position, namely in that case that the claimant was not entitled to benefits because she had been discharged due to "misconduct connected with work," which was a legal standard. Id. As such, the non-attorney employees who filed the applications on behalf of the corporation was asserting the corporation's legal rights and, because they were not licensed, that conduct constituted the unauthorized practice of law. Id. at 23.

         Following Reed, our courts have found that representational activities involving the application of legal knowledge and skill and the assertion of legal rights and claims constitute the practice of law. See Strong v. Gilster Mary Lee Corporation, 23 S.W.3d 234, 239 (Mo. App. E.D. 2000) ("there can be no doubt" preparing and filing application for review in workers compensation case and appearing at hearing involved application of legal skill and knowledge and assertion of legal rights). On the other hand, when the acts in question involve no legal skill or knowledge, they are not the practice of law. In State ex rel Missouri Department of Social Services v. Administrative Hearing Commission, the Western District addressed the act of petitioning the Administrative Hearing Commission for review of a Medicaid benefits reimbursement decision. 814 S.W, 2d 700 (Mo. App. W.D. 1991). Unlike the application in Reed, that court found "no requirement that the applicant for review specify the grounds upon which he claims the decision of the Department of Social Services was erroneous." Id. at 702. Rather, the applicant only had to identify the party appealing, identify the decision and request an appeal therefrom. Id. The AHC was then required to "take cognizance of the appeal and proceed;" it had no discretion to reject the appeal if the applicant failed to state grounds for relief. Id. Thus, the court concluded, drafting and filing the petition for review in that case required "no legal skill or legal training." Id. As such, the non-lawyer employees of the respective hospital providers who filed the petitions for review had not engaged in the practice of law. Id.

         In Westerhold-relied on by Defendants and the trial court in this case-we applied the above principles to the act of requesting a garnishment. 950 S.W.2d at 619. There, the Division of Employment Security assessed Jeffrey Westerhold, an employer, for unpaid contributions to the State's unemployment fund. Id. Westerhold appealed, and the decision was affirmed at all stages of the administrative review process and on appeal to the circuit court. Id. The chief of contributions at the Division then filed in the circuit court a certificate of assessment, as required by Section 288.190, which specified for the court the amount due to the Division. Id. Years later, another agent of the Division filed a request for garnishment of Westerhold's wages, and a writ of garnishment issued. Id. Westerhold moved ...

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