Zapata v. McHugh
296 Neb. 216
| Neb. | 2017Background
- John Zapata filed suit pro se styled “John Zapata, an individual and as an Assignee,” claiming assigned damages originally belonging to Coljo Investments, LLC (an LLC) against McHugh and related defendants for unpaid rent and repair costs.
- The complaint/attachments alleged specific monetary damages stemming from a lease and premises repairs; Coljo (the assignor) was not named as a party.
- At a pretrial conference the court questioned whether a lay assignee may prosecute claims that derive from a corporate/LLC assignor and ordered briefing.
- The district court dismissed, concluding Zapata’s prosecution of claims deriving from an LLC constituted the unauthorized practice of law and was therefore a nullity; the court held an assignment cannot be used to evade the rule that business entities must be represented by counsel.
- Zapata appealed, arguing he could proceed pro se both as an individual and under Nebraska statutes governing prosecution by a party in person; the Supreme Court reviewed the dismissal de novo.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| May an assignee prosecute in court pro se claims that derive from an LLC? | Zapata: as assignee he is the proper party and may proceed pro se under statutes permitting parties to prosecute in person. | Defendants: Allowing an assignee to proceed pro se would circumvent the rule requiring corporate entities to be represented by counsel; it is unauthorized practice of law. | Assignee cannot proceed pro se when claim derives from a distinct business entity; must be represented by counsel. |
| Does the rule barring corporate self-representation apply to LLC-related claims assigned to a layperson? | Zapata: assignment transforms the claim into his own, so he may litigate it personally. | Defendants: The assignment does not erase the entity-based requirement for counsel; public policy and procedural protections require counsel. | The court held the rule applies; assignments cannot be used to evade requirement that legal entities’ claims be prosecuted by attorneys. |
| Does prosecution of assigned corporate claims by a nonlawyer constitute unauthorized practice of law and render proceedings a nullity? | Zapata: contest of timeliness and applicability of unauthorized-practice challenge. | Defendants: Nonlawyer prosecution of another entity’s claims is unauthorized practice and may be raised to dismiss. | Court: such prosecution is unauthorized practice; proceedings are a nullity and dismissal was proper; timeliness objection rejected. |
| Does captioning the complaint to include the plaintiff’s individual capacity avoid the prohibition? | Zapata: caption shows he sued as an individual and assignee, so he should be allowed to proceed pro se on any individual interest. | Defendants: Substance of pleadings shows claims arise from the assignor; caption cannot change the capacity in which party sues. | Court: Character and capacity are determined from the pleadings, not caption; Zapata had no separate individual claim and caption did not avoid rule. |
Key Cases Cited
- Palazzo v. Gulf Oil Corp., 764 F.2d 1381 (11th Cir. 1985) (assignment cannot be used to evade requirement that corporations be represented by counsel)
- Jones v. Niagara Frontier Transp. Authority, 722 F.2d 20 (2d Cir. 1983) (corporate entities cannot appear pro se; rule is longstanding)
- Bischoff v. Waldorf, 660 F. Supp. 2d 815 (E.D. Mich. 2009) (policy reasons bar nonlawyer prosecution of assigned corporate claims)
- Steinhausen v. HomeServices of Neb., 289 Neb. 927 (Neb. 2015) (Nebraska precedent applying the prohibition to LLC-related claims prosecuted pro se)
- Eli’s, Inc. v. Lemen, 256 Neb. 515 (Neb. 1999) (assignee is the proper party but takes the assignor’s rights subject to same limitations)
- Shamey v. Hickey, 433 A.2d 1111 (D.C. 1981) (assignee acting as collection agent cannot be used to avoid attorney-representation requirement)