A Colorado District Court has overwhelmingly ruled in favor of attorneys Drew Moore, Lawrence Williamson, Jr., and their legal support services provider, Morgan Drexen.
A complaint was issued by the State of Colorado’s Attorney General’s office, arguing Morgan Drexen was subject to the state’s Uniform Debt-Management Services Act in its capacity as a legal support company.
In each of the issues filed in case 11CV7027, the District Court judge ruled in favor of Morgan Drexen.
The court stated the complaint issued by the Colorado Attorney General’s office “…misses the critical distinction that Morgan Drexen and other non-lawyer assistants are not mere ‘third parties,’ but rather are extensions of the attorneys and the services the attorneys offer.”
Furthermore, portions of the Colorado statute were deemed unconstitutional, with the judge ruling the AG’s argument that the area of debt law required the licensure under the Colorado Debt Management Services Act (DMSA), C.R.S 12-14.5-204-209 et seq, was “manifestly inconsistent with Colorado Case law.” – Source
The findings of the judge found that attorney Donald Drew Moore is an attorney who is licensed to practice
law in Colorado, and who has a principal office in Grand Junction, Colorado. Attorney Lawrence Williamson is an
attorney who is domiciled in Kansas and who practices law in Colorado as an out of state attorney.
Morgan Drexen asserts that it is not a provider of debt management services because it merely negotiates with creditors to settle debt on behalf of attorneys, rather than directly on behalf of debtors. Specifically, Morgan Drexen alleges that because the debtors in question are the attorneys’ clients, the attorneys are providing the debt management services on their clients’ behalf.
While the court decided Morgan Drexen was a provider of debt-management services of the original Debt Management Services Act they also found that since Morgan Drexen asserted it did not receive compensation from individual debtors but rather was paid by the debtors’ attorneys that it is exempt from DMSA regulation.
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The Colorado court concluded that the legal services provided by Morgan Drexen are within the attorney client
relationship between the attorneys and their clients.
The Court did also find areas of concern and warning for attorneys as well, “However, in this case while the
fee agreement includes a statement that Morgan Drexen will be providing “nonlegal services,” it does not clearly convey to prospective clients that the protections of the attorney client relationship would not extend to Morgan Drexen. To the contrary, the agreement explicitly states that Morgan Drexen will necessarily be privy to such confidential communications. Thus, it is foreseeable that client files in Morgan Drexen’s possession will contain confidential communications between the attorney and the client. Further, because of the nature of the assistance provided by Morgan Drexen on behalf of the attorneys’ clients and the relationship between attorneys and their non-lawyer assistants, the Court concludes that the services are sufficiently entwined to require attorneys to take responsibility to ensure that Morgan Drexen complies with the Rules of Professional Conduct, or potentially be subject to professional discipline.”
The Court further finds that portions of the DMSA as applied to non-employee non-lawyer assistants is inconsistent with the Colorado Rules of Professional Conduct and are therefore contrary to Colorado constitutional law.
The Colorado Court also found issues with sections of the Colorado Debt Management Services Act and a restriction or limitation of fees charged by attorneys for debt management services.
Interestingly, while the Court found that attorneys must represent the best interest of their clients and the “legal effects of entering into a settlement” the Court also said, “attorneys are charged with representing the best interest of their clients, and in some instances, continued payments to the creditor under the plan may not represent the client’s best interest.”
And apparently Colorado will now become fair game for every attorney licensed to practice law in any state. The Court stated, “In conclusion, because out of state attorneys, licensed and in good standing in other states, are explicitly permitted to practice law in Colorado without being licensed in Colorado,” – Source
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