NORTHERN DISTRICT OF CALIFORNIA
LEONARD FORD POWELL, No. 01-10718
Memorandum of Decision
The actions of Randy Wilson and Terry L. Clark, doing business as Professional Paralegal
Services, constitute a classic example of how bumbling non-lawyers can cause serious problems for their
"clients" even in very simple bankruptcy cases.
The matter now before the court has its antecedents in another case, that of Coby and Carmen
Dick, No. 00-12130. The court first became aware of the existence of Wilson and Clark when the
Dicks sought approval of a reaffirmation agreement with a creditor who held a non-possessory, non-purchase money security interest in some of their household goods. The Dicks had evidently sold some
of their household goods at a garage sale and were concerned about the ramifications. Any bankruptcy
attorney would have advised the Dicks to wait until after the bar date for filing dischargeability actions
to pass and then seek to avoid the lien. Unfortunately, the Dicks asked Wilson and Clark for advice
and, unfortunately, Wilson and Clark felt competent to give it. They advised the Dicks to reaffirm the
debt. The reaffirmation agreement was signed six days before the dischargeability deadline and filed the
same day as the discharge.
When the court questioned the Dicks about the reaffirmation, it quickly determined that it was
not in their best interests to approve it because the creditor's lien was fully avoidable pursuant to §
522(f)(1)(B) of the Bankruptcy Code. Unfortunately, instead of going to a lawyer the Dicks went back
to Wilson and Clark who found a form of motion avoiding a lien in a "do-it-yourself" bankruptcy book
and prepared and filed a motion on behalf of the Dicks. The motion was not noticed and was not
properly served, and was filed two months after the case was closed. It has still never been granted.
Nonetheless, for reasons the court still does not fathom, Wilson and Clark decided that they knew how
to avoid non-possessory non-purchase money security interests.
In this case, Wilson and Clark advised debtor Leonard Powell that such a motion was necessary
and selected the form they used to prepare and file the motion. They again failed to properly serve it.
They failed to sign or identify themselves as the preparers of the motion, as required by § 110 (b) and
(c) of the Bankruptcy Code. They included a notice of hearing, but it was for a date and time when the
court was not sitting. The court then ordered them to appear and justify their conduct. They have
admitted most or all of the foregoing.
A federal court has inherent authority to regulate the conduct of all who practice in it. State law
is properly considered in determining whether the unauthorized practice of law has occurred in a
bankruptcy court. In re Evans
, 153 B.R. 960, 966 (Bkrtcy.E.D.Pa.1993); In re Harris
, 152 B.R. 440,
444 (Bkrtcy.W.D.Pa.1993); In re Bachmann
, 113 B.R. 769, 772 (Bkrtcy.S.D.Fla.1990). The conduct
of Wilson and Clark constitutes the unauthorized practice of law under both federal and California law.
A non-lawyer engages in the unauthorized practice of law when he or she determines for a party
the kind of legal document necessary in order to effect the party's purpose. People v. Landlords
Professional Services, Inc.
, 178 Cal.App.3d 68 (1986); People v. Sipper
, 61 Cal.App.Supp.844, 846
(1943); In re Glad
, 98 B.R. 976, 977 (9th Cir.BAP 1989); In re Anderson
, 79 B.R. 482, 484
(Bkrtcy.S.D.Cal.1987). By selecting a form that they thought was appropriate for Powell's purposes,
Wilson and Clark were engaged in the unauthorized practice of law.
IV. Conclusions and Sanctions
Pursuant to this court's inherent powers and § 6127 of the California Business and Professions
Code, the court finds Wilson and Clark in contempt of court for the preparation and filing of the
debtor's motion to avoid liens in and associated papers in this case. The court further finds that Wilson
and Clark violated § 110(b) and § 110(c) of the Bankruptcy Code by failing to identify themselves as
the persons who prepared those papers. Belated compliance, after issuance of the court's order to show
cause, does not undo the violation. Accordingly, the court will assess the following sanctions:
1. Clark and Wilson shall each pay a fine of $1,000.00 to the Clerk of the Court. Provided,
however, that payment of this fine shall be reduced to $500.00 each if they provide a competent,
licensed attorney to represent Powell in his attempt to avoid the lien at no cost to Powell.
2. Clark and Wilson will be suspended from acting as petition preparers and may not charge
any debtor or any other person any sum whatsoever for any service related to a bankruptcy filing in any
division of the Northern District of California for a period of 90 days from the date of this
memorandum. Thereafter, they may act as petition preparers only after the fine set forth in paragraph 1
has been paid.
3. Clark and Wilson will be permanently enjoined from obtaining, selecting or recommending
any form of pleading on behalf of a debtor from any source, or giving any debtor any kind of legal
advice whatsoever including, but not limited to, advice concerning reaffirmation of debts and avoidance
A separate order will be entered.
Dated: May 7, 2001 ___________________________