Tuesday, November 30, 2010

Bankruptcy Petition Preparer, Legal Document Assistant and Paralegal Prevails Against U.S. Trustee

You think it will never happen to you, yet you fear one day it could. You do everything you can to make certain it won't and then, it does, despite your good efforts.

Bankruptcy Petition Preparers are strenuously regulated by the Trustees and for good reason - consumer protection. Legal Document Assistants and Paralegals suffer risk as BPPs due to the nature of their experience and alternate use of titles. The code was written to protect consumers from non-attorneys who could be construed as sharing their "legal knowledge" which is unlawful. Non-attorneys do not have adequate education or credentials to provide legal advice.

A motion pursuant to 11 U.S.C. 110 was brought by a Trustee against me, personally, and my legal document assistant and paralegal service, Catalyst Legal, concerning the use of the term "legal" as a component of my business name. The Trustee claimed that a business name is a form of advertisement and that Catalyst Legal sold bankruptcy petition preparation services in violation of the statute which sets forth at (f) "A bankruptcy petition preparer shall not use the word "legal" or any similar term in any advertisements, or advertise under any category that includes the word "legal" or any similar term."

What the Trustee refused to acknowledge is that I also own and operate Catalyst Bankruptcy, a debt relief agency, a completely separate business entity.

Today was the scheduled motion date. I thought about retaining counsel, but then realized that I really couldn't afford to hire an attorney. Two attorney friends offered to help, but one wanted me to pay for his travel and the other would have had to lose a day at her "other job" and I did not want for her to take time off just to speak on my behalf. An internet review of past BPP/Trustee cases with circumstances seemingly similar to mine which were heard with "benefit" of legal counsel proved that many of these cases were lost by the BPP with an additional waiver of personal civil rights. I figured I could do as poorly as the so-called "defense" attorneys in this type of case. So I decided to appear pro se'.

Last night I could not sleep and I absolutely had to be at the airport by 5 a.m. After shuttling to the rent-a-car lot and navigating my way to and through downtown Los Angeles in my little economy car, I finally found parking and I made my extremely tired way to the courtroom. It was packed with people - standing room only. Somebody said there were 68 cases to be heard! Since I was late, I figured that I would trail to the end of the calendar. This pleased me as this "Nervous Nellie," afraid to speak in front of a packed courtroom.

My case was the 8th or 9th case called and I introduced myself and wished the Judge "Good morning your Honor."

The Judge began to speak stating that he was inclined to deny the Trustee's motion inasmuch as the evidence and statements in my opposition proved that Catalyst Legal and Catalyst Bankruptcy were two separate and distinct business entities. The attorney for the Trustee argued his points and the Judge spoke again, reiterating the contents of my opposition and his agreement therewith. At one point I attempted to speak and the Judge directed me to wait for my turn. My response: "Yes sir."

The Judge and attorney argued back and forth while I listened. I realized that opening my big mouth could result in my saying something that could be deemed an admission or detrimental to my position. After all, this type of court hearing is not something for which I have expertise. I did manage to sit still and maintain a straight face. I so just wanted to grin and clap my hands and perhaps do a little jig as I listened to the Judge. It was obvious that he did not view the facts or the law through the same lens as the attorney. The Judge agreed with my position that Catalyst Legal and Catalyst Bankruptcy are two distinctly separate business entities and therefore, no violation existed. The Judge stated that he did not think that any other individual could go to any further lengths to maintain a petition preparation service separate from a legal document preparation service. He said that it was clear that I put a lot of work into maintaining the two businesses as separate and distinct entities.

The Judge then ruled "Motion Denied." I smiled and stood up saying "Thank you your Honor" and I was out of there in a flash.

All in all I believe I learned that I do way better on paper and by keeping my big mouth shut than I do trying to impress others with "my great oratory skills" and, that when the Judge is arguing your case 100% to your benefit you should absolutely NOT interrupt. I also came away from today's hearing fully believing that I should never be afraid to stand up for what I believe is right.

After the hearing I spoke to the attorney explaining that if he had any further issues with my business practices or model that I would like to be informed. He did say that the telephone number for Catalyst Legal is the same phone number for Catalyst Bankruptcy. He had argued this point with the Judge but the Judge said that phone numbers and addresses do not matter as they are not a form of advertising and they are not the business name. I responded to the attorney that Just Believe!, BFP Cruises, BFP Events, Katalicious, Adult Store to Your Door, and Missionary Legal all utilize the same number as Catalyst Legal and Catalyst Bankruptcy - but that I would obtain a new number for Catalyst Bankruptcy today. And I did.

Sometimes you have to throw them a bone.


Suzanne Bowlby (FKA Suzanne Ervine) said...

Kat, I am so proud of you, and I am absolutely DELIGHTED that you did not cave, and that you stood your ground and defended your right to earn a living, rather than stipulate to the non-existent wrongdoing the Trustee had alleged. When we emphasize compliance with the laws governing non-attorneys, that cuts BOTH ways! The Trustee would be wise to recognize that fact; and if he doesn't like the way the law is written, he should work on revising the legislation!

jen said...

Good Job...I love when the Judge argues the case for you! Wish I could say that was going to happen for me in 2 weeks...alas I am resigned to losing.

Kat said...

Thanks Suzanne - you are my inspiration and my intellectual muse. Jenn: I neglected to mention some of my secret strategies for winning:

1. Rebel Yell Red toe polish;
2. Red 4" open toe heels
3. My mother's pearls - the three strand multi length and earrings.

Rebel Yell, according to Suzanne - and others - is my theme song.
Red shoes are in my opinion, the shoes of a bold and strong woman who is not afraid to be noticed.
The pearls were my mom's who was a legal secretary and paralegal for 50 years and who taught me everything I know. I loved that woman.

With these items I had a feeling I had all my ladies right beside me.

Kenneth Diaz said...

Excellent. These stories of triumph against harassment keeps me believing that there still is justice. Thank heavens for independent judges and to professional and ethical LDAs like you.

Michael said...

Your opposition was truthful and fairly written; you follow every law in separate business entities; you even have two different 877 numbers for both businesses; so how could the judge side any other way.

I love it when you speak your mind; in this case by being quiet and letting the full envelope of your proper actions stand on their own. Many businesses may try to skirt the edges in the legal field; but you are more than legal; you are there for the consumer, at the best possible place.
Why is the Federal Trustee seeking to take down the best? With tiny bit more research; he would find the answers instead of acting like a Revenue Hunter for the Feds, using intimidation and scare tactics.
I am glad you stood up for truth; that you run your business(es) correctly and you also are on the board of ALDAP - The standards of law are already set, the evidence is everywhere; and you are even catching the errors of prohibitive language in CALIF AB 590 just days before the law was signed in legislation. Nobody buy you can catch that one. Just doing what you know in your heart.

Kathleen Mountjoy, Owner Catalyst Legal said...

The trustee erroneously determined that I was in violation of USC 110 with regard to the provision prohibiting the use of the words “legal,” “paralegal,” or “law” in a BPPs business name. This was a win for BPPs as the Trustee was attempting to apply his distorted version of the statute to his incomplete presentation of the facts. When the judge stated his agreement with my position and his refusal to grant the motion the trustee flushed beet red. He was not pleased with the judge’s decision.

The main issue is why would a trustee not understand the very law he is to uphold and audit. Is it that the trustee does understand and is merely attempting to edge out the non-attorney competition on behalf of his brethren? If so, then this brings into issue bigger issues such as anti trust, our system of free enterprise, and other civil rights issues. How many BPPs (who might not enjoy the legal background and knowledge that I enjoy) have been unfairly burdened with fines and enjoined from performing a service much needed by consumers, all due to a trustee’s reading into the law what is not there? How many BPPs have hired incompetent counsel who counsel them to sign away their rights while being sanctioned for the privilege? Is our government hiring attorneys who fail to comprehend the USC? We may never have an answer to these questions, but I felt that I was absolutely 100% in the right as did the judge who took the trustee to task using the arguments I presented in my pro se’ opposition. This trustee warned me prior to hearing that this judge does not ever rule in favor of BPPs and that he is known as the hanging judge. He also advised that a case with my very same circumstances had just been heard by this particular judge and that the BPP received not only a fine but was enjoined from working at her business. At that juncture, I realized that the trustee was trying to intimidate me and that perhaps he was employing this tactic to keep me from defending my conduct because his claims were bogus. That is when I decided to go for it. I am glad I did.

This trustee had additional issues with my BPP business model and I took note of those issues that day after the hearing. Upon return to my office I reviewed the code and believe with all my heart that the trustee was, once again, reading into the code what is not there. It isn’t even a matter of loose interpretation, it seems to be a matter of a general ignorance of the intention of the legislators and a basic inability to interpret the code as written. I also found it amusing that the trustee tried to explain to the judge California state laws concerning paralegals and LDAs and his comments were off-base and clearly, his own under educated perception of those particular statutes.

Suzanne remarked to me that the trustees should propose amendments to federal legislation if they wish to pursue claims not presently supported by the laws; not twist the law to suit an obvious agenda to edge out non-attorneys. His pursuit of my business practice model had nothing to do with consumer protections.

There are so many violators who are harming consumers - why are they still up and running if the trustee is so interested in taking down BPPs? Let's start with the true violators - you know the LDAs who offer "in house counsel" which is a clear violation of many of the statutes, or those who provide legal advice or instruct debtors on how to fill out the forms or select exemptions. There are also so many that use the words "legal" etc in their advertising. It makes no sense. What a waste of resources and tax dollars.

Jim said...

Congratulations on beating this.
From your description of the judge's comments and how the trustee acted, I have to agree that it appears more a case of one lawyer trying to eliminate non-lawyer competition. How absurd. As history shows, both lawyers and paralegals are needed today.
I completely agree that it was a great waste of resources and tax dollars.
Unfortunately, it was also a great waste of your time and money - but at least you won!

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