Barry L. Taub v. Mark H. Weber, Acting United States Trustee for Region 18 Ilene J. Lashinsky, United States Trustee for Region 18Barry L. Taub v. Mark H. Weber, Acting United States Trustee for Region 18 Ilene J. Lashinsky, United States Trustee for Region 18
This case arises out of an adversary proceeding by the United States Trustee (“Trustee”) against Barry Taub, a bankruptcy petition preparer. Applying Oregon law, the issue we decide is whether Taub engaged in the unauthorized practiсe of law by interpreting the terms “market value” and “secured claim or exemption” in connection with completion of bankruptcy forms. Here, Taub’s discretionary application of a legal principle took him far outside the role of a scrivener. We agree with the bankruptcy court and the district court that Taub engaged in the unauthorized practice of law.
The facts are undisputed. The Green-waldts hired Taub to prepare their Chapter 7 bankruptcy documents for filing with the United States Bankruptcy Court for the District of Oregon. Taub is not licensed to practice law in Oregon. Rather, he is a “bankruptcy petition preparer” within the meaning of 11 U.S.C. § 110. 1
Taub and the Greenwaldts disagreed about how to treat a 401(k) retirement account on the bankruptcy forms. Schedule B, an official form included with the Greenwaldts’ Chapter 7 filing, required listing the “market value” of the debtors’ personal property. The heading on the form read: “CURRENT MARKET VALUE OF DEBTOR’S INTEREST IN PROPERTY, WITHOUT DEDUCTING ANY SECURED CLAIM OR EXEMPTION.” In their draft documents, the Greenwaldts indicated that the retirement account held approximately $80,000. The Greenwaldts also noted that they had borrowed $39,000 against the account. The Greenwaldts thus filled out draft bankruptcy forms listing what they believed was thе net value of the account — $41,000. Taub, however, prepared the forms with a market value listing of $80,000. As the bankruptcy court explained: “The discrepancy was pointed out, but Taub gave no explanation. [The] Greenwaldts asked him to сhange the entry but he refused. They eventually relented, assuming that he knew what he was doing.”
In the Greenwaldts’ Chapter 7 bankruptcy case, and two other matters where Tmb was the petition preparer, the Trust^Kled motions to disgorge excessive fees c^fced by Taub. Around the same time, i^^separate Chapter 7 bankruptcy case where Taub was the petition preparer, the Trustee filed an adversary proceeding against Taub seeking disgorgement of excessive fees and injunctive relief on the ground that Taub engaged in the unauthorized practice of law. The bankruptcy court consolidated the various proceedings for trial. After trial, the bankruptcy court found, and the district court affirmed, that Taub had engaged in the unauthorized practice of law while preparing the Green-waldts’ petition. Taub was ordered to disgorge the fees.
II. Discussion
We have jurisdiction over this appeal pursuant to 28 U.S.C. § 158(d). “We independently review the bankruрtcy court’s determinations and do not give deference to the district court.”
Ferm v. United States Tr. (In re Crawford),
Bankruptcy courts have the power to regulate the activities of bankruptcy petition preparers under 11 U.S.C. § 110. Section 110(k) states that nothing in the section shall be construed to permit “the unauthorized practice of law.” Bankruptcy courts generally look to state law for guidance when determining whether a person has engaged in the unauthorized practice of law.
See 2 Collier on Bankruptcy,
par. 110.12 (15th ed. 2004) (“Section 110(k)) provides that the ability of nonlaw-yers to practice before bankruptcy courts in a given jurisdiction will be governed by ‘[relevant state] law, including rules and laws that prohibit the unauthorized practice of law,’ as well as by seсtion 110 itself.” (alteration in original);
see also, In re Kangarloo,
Under Oregon law, “no person shall practice law ... unless that person is an active member of the Oregon State Bar.” Or.Rev.Stat. § 9.160(1) (2001).
2
The Oregon legislature has not defined the practice of law.
See Oregon State Bar v. Security Escrows, Inc.,
Although the Oregon courts have not defined the outer limits of the practice of law in Oregon, two lеading decisions by the Oregon Supreme Court inform our conclusion that Taub engaged in the unauthorized practice of law.
In
Security Escrotos,
For the purposes of this case, we hold that the practice of law includes the drafting or selection of documents and the giving of advice in regard thereto any time an informed or trained discretion must bе exercised in the selection or drafting of a document to meet the needs of the persons being served...; [A]ny exercise of an intelligent choice, or an informed discretion in advising another of his legal rights and duties, will bring the activity within the practice of the profession.... The line is drawn at the point where there is any discretion exercised by the escrow agent in the selection or preparation for another of an instrument, with or without costs.
Id. at 339 (emphasis added).
Applying this analysis, the court held: “If the draftsmanship is the product of an intelligent choice between alternative methods, and the choice is made by the escrow representative, then we agree that it must be enjoined.” Id. at 340. Significantly, the court carved оut a role for someone who is not practicing law, concluding that the defendants could not be enjoined from acting “as scriveners.”. Id. at 340. The court went on to articulate the essence of its holding in simple terms: “If the customer does not know what forms to use or how to direct their completion, then he needs legal advice. If the customer does know what he wants and how he wants it done, he needs only a scrivener.” Id. at 340.
The Oregon Supreme Court again addressed the issue of unauthorized practice of law in
Oregon State Bar v. Gilchrist,
[A]ll personal contact between defendants and their customers in the nature of consultation, explanation, recommendation or advice or other assistance in selecting particular forms, in filling out any part of the forms, or suggesting or advising how the forms should be used in solving the particular customer’s marital problems does constitute the practice of law ....
Id. at 919.
Gilchrist
reaffirmed the principle articulated in
Security Escrows
— a non-lawyer may not exercise discretion to assist customers with filling out legal forms. Thus, in Oregon, at a minimum “the ‘practice of law1 means the exercise of professional judgment in applying legal principles to address another person’s individualized needs through analysis, advice, or other assistance.”
Smith,
Here, Taub points to
Smith
claiming that he did not exercise profеssional judgment because he “simply follow[ed] the instructions and directions accurately on the Official Bankruptcy forms.” Taub relies on the assumption that following the instructions on the forms is a simple task that any layman can do without exerсising discretion. The circumstances here do not support this assumption. Rather, Taub invoked his “professional judgment in applying legal principles to address [his customers’] individualized needs,”
Smith,
As Taub admits, the directions on Schedule B tell the debtor to list the “CURRENT MARKET VALUE OF DEBTOR’S INTEREST IN PROPERTY, WITHOUT DEDUCTING ANY SECURED CLAIM OR EXEMPTION.” “Market value” is not fully defined on Schedule B, but it is defined in the “Instructions for Completing Schedule B— Personal Property.”
3
The question was how to fix a market value of the retirement account and whether the loan qualified as
Determining whether a loan taken by a debtor from a 401(k) plan or other retirement account constitutes a “claim” under the code is surely an exercise of legal judgment. Indeed, some courts have held that similar loans do not constitute claims. For еxample, in
In re Esquivel,
AFFIRMED.
Notes
. "bankruptcy petition preparer” is "a per-other than an attorney or an employee of ^^^ttorney, who prepares for compensation a document for filing” in a bankruptcy case. 11 U.S.C. § 110(a)(1).
. In 2003, the Oregon legislature amended Oregon Revised Statutes § 9.160(1) to read: "Except as provided in this section a person may not practice law or represent that person as qualified to practice law unless that person is an active member of the Oregon State Bar.” See S.B. 43 (Or.2003) (enacted). We need not decide whether this amendment applies retroactively to Taub. The amendment to this subsection does not substantively change the law as it relatеs to Taub; nor does it affect our result.
. The full text of the portion of the instructions regarding market value reads:
6) The “current market value” describes the market value on the date the petition was filed. Value is not the same as purchаse price; rather it usually is a fraction of that. "Market value,” is a term that is subject to interpretation and may vary with the nature of the market for particular items. The market for used clothing and household furnishings is very different from the market for bluе chip stocks. For cars, the National Automobile Dealers Association (NADA) publishes current market values. The NADA book is available at public libraries and on the Internet. The values stated should be appropriate for the prоperty described.
7) Debtors should make sure that the market values of the items of property listed in this schedule are consistent with those stated in Schedules C and D. While certain categories, such as cash, are easy to value, the correct market value of other categories may be more difficult to pinpoint. When the debtor cannot find the market value, the debtor should state the approximateamount, based on the market for the property and include with the schedule a statement of the method of valuation used.
Official Instructions for Completing Schedule B — Personal Property, available at http:// www.uscourts. gov/bltforms/official/b 6b-insl. pdf.