COA: Greenwood law firm didn’t commit fraud, but disciplinary grievances dismissed too quickly

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A Greenwood law firm did not commit fraud when an unlicensed representative consulted with an Indianapolis woman for legal services, the Indiana Court of Appeals has ruled. However, the appellate panel opined that disciplinary grievances filed as a result of the alleged fraud were dismissed too quickly.

On Tuesday, the COA affirmed the Johnson Circuit Court’s decision in Trina M. Spainhower v. Smart & Kessler, LLC (f/k/a Smart Kessler & Lowe, LLC), Smart Kessler Lowe (a/k/a Smart & Kessler), John M. Smart, III, Douglas W. Kessler, and Brian K. Lowe, 20A-SC-1629.

In late 2013, Trina Spainhower called the firm “seeking … legal representation for a domestic matter” and a receptionist told her “they had an attorney on staff.”  The initial consultation required a $100 fee, which Spainhower paid, and the firm issued her a receipt “[f]or Matt Boehning consultation.”

Spainhower met with Boehning for the initial consultation, but about one year later she dismissed the law firm because her case “was not moving forward at all.” Thereafter, she learned “pretty randomly” that Boehning was not actually licensed to practice law.

In 2016, Spainhower contacted the firm about Boehning and spoke with Douglas Kessler. Kessler informed her that the law firm had learned around the summer of 2015 that Boehning had passed the bar exam in 2013 but had not completed “certain course requirements” from law school, so the law firm had terminated him.

Spainhower then wrote a letter stating that the firm had “failed in its due diligence” and sought a refund of $6,640 paid by her mother, as well as a refund of the $100 initial consultation fee. Kessler responded to Spainhower’s letter by stating there would be no refund unless she hired another attorney and executed a release of any and all claims against the firm.

In November 2019, Spainhower initiated a small claims proceeding, arguing at a hearing that she had “… paid the fee for a service I didn’t receive.” But the law firm argued that Spainhower’s fraud claim was instead a claim for legal malpractice that was barred by the two-year statute of limitations, and that the six-year statute of limitations for fraud claims was not applicable.

The trial court sided with the firm, denying Spainhower’s claim on two grounds: that her fraud claim was instead a claim for legal malpractice and, as such, was not timely filed, and that she had failed to meet her burden of proof to show fraud.

While the COA agreed with the trial court that fraud didn’t take place, Judge Edward Najam Jr. wrote Tuesday that the trial court erred in not making the six-year statute of limitations applicable.

The appellate court found that Spainhower’s claim was not a claim for legal malpractice because the misrepresentation occurred before she met with Boehning and did not occur within an attorney-client relationship.

“The primary and essential factual predicate for a legal malpractice claim is an attorney-client relationship,” Najam wrote. “Thus, we question the premise that a potential client can even establish an attorney-client relationship with an individual engaged in the unauthorized practice of law. But we need not decide that precise question because, here, the fraud alleged in Spainhower’s claim occurred before an attorney-client relationship could have been established with the firm.”

The COA also found that there was no evidence that the firm “had actual knowledge that Boehning was not licensed to practice law when it held Boehning out as an attorney and a member of the firm.”

“This case illustrates the perils of proceeding pro se. Spainhower did not allege constructive fraud, and it would be inappropriate for this Court to decide this appeal under that theory,” Najam wrote. “… (W)e hold that Spainhower stated a claim for actual fraud, which was not barred by the statute of limitations, but that the small claims court did not err when it concluded that she had failed to meet her burden of proof on that claim. Therefore, we affirm the judgment.”

Spainhower’s experience also prompted her to file grievances against the firm’s partners with the Indiana Supreme Court Disciplinary Commission, which dismissed two of the grievances within three days of receipt. The third was dismissed four days after receipt, each because the commission “determined that [they did] not raise a substantial question of misconduct.”

The COA expressed displeasure with that outcome in the Tuesday opinion.

“Here, the firm enabled a non-lawyer to engage in the unauthorized practice of law, which was a breach of its obligations under the Rules of Professional Conduct and Rules for Admission and Discipline. As the Rules of Professional Conduct recognize, ‘[t]he legal profession is largely self-governing,'” Najam wrote. “… Thus, a law firm has an affirmative duty to make certain that its members held out to the public as lawyers are, in fact, licensed to practice law and in good standing. It is not too much to expect such due diligence.

“Given these obligations, we think the Commission was too quick to dismiss Spainhower’s grievances without a further inquiry.”

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