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Monday
Apr142014

NC Business Court enjoins national lien filing firm for UPL

Many thanks to Matt Bouchard for bringing this to my attention, and for writing up his own blog entry on the topic...

The North Carolina State Bar obtained judgment on the pleadings against Lienguard, Inc., which operates a nationwide website advertised as a "commercial lien filing service," based on allegations that the company engaged in the unauthorized practice of law ("UPL").  According to the opinion, Lienguard admitted that its former president is not a duly licensed attorney and is not authorized to practice law in North Carolina.

On April 4, Judge James Gale of the NC Business Court entered an order indicating that the State Bar was entitled to a permanent injunction against Lienguard prohibiting the company from preparing claims of lien for others without being licensed to do so, from providing legal advice in connection with the preparation of claims of lien, and from holding itself out that the company is competent and entitled to prepare claims of lien.  The injunction is expected to be submitted to Judge Gale not later than April 24.

In reaching its conclusion, the court held that a claim of lien is a "legal document" under the intended reach of Chapter 84 of the North Carolina General Statutes.  The opinion also held that Lienguard's services went beyond that of a mere scrivener, and therefore did not fall into that exception to the UPL laws.  Judge Gale further found that Lienguard held itself out as having specialized knowledge and experience, including a statement that it had a staff "fully experienced in the construction industry which offers the highest quality of service" to its clients.  

Lienguard's defenses included a contention that the UPL statutes were unconstitutionally vague, and that they somehow formed an unlawful monopoly for the preparation of legal documents.  The court rejected those claims, as well as a claim that the action violated Lienguard's equal protection rights.

The upshot of this ruling is that other out-of-state firms who prepare lien documents -- and perhaps other types of documents that were not at issue in this case -- may come under scrutiny from the State Bar.  At a minimum, out-of-state contractors and suppliers may be more likely to seek the assistance of a licensed North Carolina attorney with respect to preparing lien and bond claim documents, if for no other reason than that the national form preparation companies may feel compelled to avoid the risk of similar enforcement actions.

As an interesting comparison, I would recommend also reading the Business Court's opinion in the LegalZoom.com, inc. v. North Carolina State Bar case, which was entered in March of this year.  In that opinion, Judge Gale ruled against LegalZoom as to several of its defenses and counterclaims, but did not enter an injunction based on the motions for judgment on the pleadings.  More discovery is yet to come in that enforcement action.  

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    Safran Law Offices - Safran Law Blog - NC Business Court enjoins national lien filing firm for UPL
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    Safran Law Offices - Safran Law Blog - NC Business Court enjoins national lien filing firm for UPL
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    Safran Law Offices - Safran Law Blog - NC Business Court enjoins national lien filing firm for UPL
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    Response: Judge Ray Harding
    Safran Law Offices - Safran Law Blog - NC Business Court enjoins national lien filing firm for UPL
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    Response: Judge Ray Harding
    Safran Law Offices - Safran Law Blog - NC Business Court enjoins national lien filing firm for UPL
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    Response: Rashmi Patel DDS
    Safran Law Offices - Safran Law Blog - NC Business Court enjoins national lien filing firm for UPL
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