Thursday, February 07, 2008

PA Lawyers & State Consumer Protection Laws

On January 29, 2008, the electronic newsletter of the Disciplinary Board of Pennsylvania highlighted an important court decision that exempts attorneys in Pennsylvania from application of the Commonwealth's Consumer Protection Act.

Since that communication was public, and since I still cannot find it on its website yet, I repost that message in full for educational purposes (with some links added).

Supreme Court Rules Consumer Protection Act
Does Not Apply to Attorney Misconduct

The Supreme Court handed down a major decision in the case of Beyers v. Richmond et al. No. 38 EAP 2006, decided December 28, 2007 [PDF, 16 pages]. The case apparently does not have an Atlantic Reporter number at press time, but the opinions may be read at the AOPC Web site. Links are provided with the discussion of the opinions.

The issue was whether the [Pennsylvania] Unfair Trade Practices and Consumer Protection Law [PDF, 13 pages] (UTPCPL), 73 Pa.C.S. Sections 201-1- 209-6, applies to an attorney's conduct in collecting and distributing settlement proceeds.

An attorney within a firm had misappropriated settlement proceeds, and the client brought an action against the responsible attorney and his firm on counts of negligent supervision, negligence, conflict of interest and breach of fiduciary duty, violation of consumer protection laws (UTPCPL), assumpsit in the form of forfeiture of attorneys' fees, and fraudulent misrepresentation.

The trial court found in favor of the client on all counts, including treble damages under the UTPCPL.

The Superior Court affirmed the judgment of the trial court, and adopted its reasoning, holding that appellants' actions did not arise from the practice of law, and therefore appellants could not use their profession as a shield from the application of the UTPCPL.

The majority opinion, by Justice Fitzgerald, held that application of the UTPCPL under these circumstances would encroach upon this Court's exclusive power to regulate the practice of law in this Commonwealth. The Court noted a statutory issue that led the Superior Court of Pennsylvania to hold that the UTPCPL does not apply to treatment provided by another category of professionals: physicians. Observing that the misappropriation of client funds is directly addressed by the Rules of Professional Conduct, the Court held on constitutional grounds that action under the RPC is the exclusive remedy for such conduct, and that the UTPCPL does not create a separate remedy for the same conduct.

Chief Justice Cappy wrote a concurring opinion, in which he noted, "Because the issue of the UTPCPL's applicability is resolved on statutory grounds, any discussion of the constitutional grounds for the majority's holding is unnecessary." He thus concurred in the result and the opinion only to the extent it discussed the statutory applicability, but not to the extent it addressed constitutional issues. Justice Baer joined in the Chief Justice's opinion.

Justice Eakin filed a dissenting opinion, joined by Justice Saylor, in which he argued, "The UTPCPL is not a law directed at regulating attorneys; rather, it is a law of general applicability. Appellants should not be exempted from the reach of the UTPCPL simply because of their status as attorneys." Justice Saylor filed a separate dissenting opinion in which he added that "core functions of legal representation were not implicated by Appellant's ancillary activity regarding the handling of the settlement proceeds...[as] this conduct does not involve the exercise of legal judgment."