Beyers v. Richmond

OPINION

We determine whether the Unfair Trade Practices and Consumer Protection Law (UTPCPL), 73 P.S. §§ 201-1-209-6, applies to an attorney’s conduct in collecting and distributing settlement proceeds. The Superior Court held that the UTPCPL provides a cause of action against attorneys arising out of the disbursement of settlement funds. We hold the UTPCPL does not apply to attorney misconduct, and reverse the decision of the Superior Court.

FACTS

This case arises from the admitted conversion of funds by Donald Richmond, an associate of appellants’ Pennsylvania law firm, Forceno & Arangio, P.C. (the Firm), for which the Firm was held vicariously liable, and for the preparation of a settlement distribution sheet by the Firm which included deductions for unsubstantiated costs.

Appellee Janice Iannece Beyers and her companion, James Piccirilli, were injured in an automobile accident. They re-

*658tained the services of Donald Richmond and the Firm to represent them in their personal injury claim. Appellee agreed to settle the ease for $468,401.67. According to a fee agreement, appellee was to receive 42.5% of the settlement, or $205,495.72. The Firm received the settlement funds and Richmond converted $185,000 of the settlement. Richmond deposited $95,000 of the funds into court in Delaware County in connection with his personal divorce action. The remaining funds, held in escrow by appellants, were also deposited into court. Appellants prepared a distribution schedule, which provided: $68,481.91 for recovery of attorneys’ fees, $1,576.65 for unidentified costs, $6,480.59 for a “loan repayment” to an accountant, and $18,001.61 for medical bills. These amounts were deducted from appellee’s settlement. The court ordered appellants to pay appellee $110,904.96, based upon the distribution schedule.1

Appellee contended that the deductions reflected on the distribution schedule were improper. On January 29, 2002, appellee filed a complaint against appellants alleging 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.2

A bench trial was held on the sole issue of damages. On August 25, 2008,. the court found in favor of appellee as to all claims, except violation of the UTPCPL. The claims pursuant to the UTPCPL were held under advisement. The court rendered a preliminary verdict, in the amount of $110,198.24, which represented the recovery of attorneys’ fees in the amount of $68,481.91 and non-existent costs totaling *659$26,058.85, plus simple interest at the statutory rate of 6% per annum during the 2% years of non-payment in the amount of $15,607.48.3

On December 9, 2003, the Honorable Mark Bernstein found in favor of appellee on the UTPCPL claim, awarding her treble damages in the amount of $78,171.00.4 Appellee filed a motion for clarification of the December 9, 2003 order, contending that the entire verdict entered on August 25, 2003, $110,198.24, should be trebled. Appellee also requested 40% for attorneys’ fees on the trebled amount. On February 6, 2004, the court assessed damages in the amount of $467,637.20 on the UTPCPL claim.5 Post trial motions were filed, denied, and judgment was entered.

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. Further, the Superior Court held appellee established the essential elements of fraud, and that appellants’ malfeasance pertaining to the collection and management of the settlement funds, as well as the breach of their fiduciary responsibility to appellee, placed their actions within the scope of the UTPCPL.

DISCUSSION

This case presents a question of law, thus this Court’s standard of review is plenary. Norton v. Glenn, 580 Pa. 212, 860 A.2d 48, 52 (2004). Although we find the egregious conduct of appellants in this case to be reprehensible, we decline to hold that Pennsylvania’s UTPCPL applies to an attorney’s conduct in collecting and distributing settlement *660proceeds. Application of the XJTPCPL under these circumstances would encroach upon this Court’s exclusive power to regulate the practice of law in this Commonwealth. In re Larsen, 571 Pa. 457, 812 A.2d 640, 653 (Sp.Trib.2002).

a. Applicability of Consumer Protection Laws

Most states have enacted a consumer protection statute.6 The majority of jurisdictions that have addressed this issue have held that the regulation of attorneys does not fall within the ambit of consumer protection laws.7 A minority of juris*661dictions has carved out an exception for entrepreneurial aspects of the practice of law, such as advertising and debt collection, while recognizing that claims which allege negligence or legal malpractice are exempt from the consumer protection laws.8 Courts which strictly adhere to the separation of powers doctrine hold that consumer protection laws do not apply to attorneys.9 Other jurisdictions hold that the consumer protection statutes do not apply to the practice of law based upon the existence of regulatory boards,10 or explicit *662exemptions for attorneys within statutes.11 However, some jurisdictions have indicated implicitly that in certain circumstances a claim could be brought against an attorney under the consumer protection act,12 and still other jurisdictions have not decided the issue.13

b.- Pennsylvania’s UTPCPL

The pertinent section of the Pennsylvania statute provides:

(a) Any person who purchases or leases goods or services primarily for personal, family or household purposes and thereby suffers any ascertainable loss of money or property, real or personal, as a result of the use or employment by any person of a method, act or practice declared unlawful by section 8 of this act, may bring a private action to recover actual damages or one hundred dollars ($ 100), whichever is greater. The court may, in its *663discretion, award up to three times the actual damages sustained, but not less than one hundred dollars ($ 100), and may provide such additional relief as it deems necessary or proper. The court may award to the plaintiff, in addition to other relief provided in this section, costs and reasonable attorney fees.

73 P.S. § 201-9.2(a).

The applicability of this statute to the attorneys’ conduct in this case presents an issue of first impression in Pennsylvania. Although this Court has not addressed the issue of the applicability of the UTPCPL to attorney conduct, the Superior Court of Pennsylvania has held that the UTPCPL does not apply to treatment provided by another category of professionals: physicians. Foflygen v. R. Zemel, M.D., 420 Pa.Super. 18, 615 A.2d 1345 (1992), appeal denied, 535 Pa. 619, 629 A.2d 1380 (1993); Gatten v. Merzi, 397 Pa.Super. 148, 579 A.2d 974 (1990), appeal denied, 528 Pa. 611, 596 A.2d 157 (1991). In Gatten, the court held “[t]here is no indication that the [UTPCPL] was intended to create a cause of action for every statement made by a physician regarding a patient’s condition, the likelihood for success of a given procedure, or the recommended course of treatment.” Gatten, 579 A.2d at 976. The holding in Gatten was embraced by the court in Foflygen. Foflygen, 615 A.2d at 1354.

In Walter v. Magee-Womens Hosp., 876 A.2d 400, 407 (Pa.Super.2005), aff'd per curiam,, 588 Pa. 739, 906 A.2d 1194 (2006), the Superior Court held that the UTPCPL was not intended to apply to providers of medical services. Walter involved a proposed class action lawsuit filed for a group of women whose pap smear reports were processed bearing physicians’ names, although the reports were not reviewed by physicians. The proposed class was not certified and the appellate court determined, inter alia, that the processing of pap smear results did not trigger a claim under the UTPCPL. The Superior Court in Walter opined that “Pennsylvania courts have determined that the UTPCPL does not apply to providers of medical services.” Walter, 876 A.2d at 407.

*664According to the Act, unfair methods of competition and deceptive practices in the conduct of any trade or commerce are unlawful. 73 P.S. § 201-3. The phrase “trade or commerce” includes the sale of services. 73 P.S. § 201-2(3). Among the practices condemned by the Act are various misrepresentations as well as other fraudulent conduct that creates a likelihood of confusion or misunderstanding. 73 P.S. § 201-2(4). However, even though the Act does not exclude services performed by physicians, it is clear that the Act is intended to prohibit unlawful practices relating to trade or commerce and of the type associated with business enterprises. It equally is clear that the legislature did not intend the Act to apply to physicians rendering medical services.

Walter, 876 A.2d at 407-8, (quoting Gatten, supra at 976).

We are also persuaded by the reasoning in an unpublished, non-precedential decision from the federal District Court for the Eastern District of Pennsylvania in Jackson v. Ferrera, 2002 WL 32348328, 2002 U.S. Dist. Lexis 12731 (E.D.Pa.2002), where the District court addressed the applicability of the UTPCPL to attorney misconduct. In Jackson, an attorney was sued for violation of the UTPCPL. The court, noting that nearly all courts having considered the issue had rejected the notion that it applied to attorney conduct in the context of the practice of law, held that “[o]n this basis alone, Plaintiffs have failed to state a claim.” Id at *2, 2002 U.S. Dist. Lexis 12731 at *4.

But in Daniels v. Baritz, 2003 WL 21027238, 2003 U.S. Dist. Lexis 7707 (E.D.Pa.2003), the District Court distinguished Jackson. In Daniels, the defendant attorneys were debt collectors within the meaning of the Fair Debt Collection Practices Act (FDCPA), 15 U.S.C. § 1692, and the court held “[attorneys who regularly engage in debt collection practices, apart form their legal representation, are covered under the FDCPA.” Daniels, at *4, 2003 U.S. Dist. Lexis 7707 at *11-12 (emphasis supplied). The UTPCPL was interpreted to apply to debt collection as an act in trade or commerce. Id. at *5, 2003 U.S. Dist. Lexis 7707 at *14. Similarly, the Common*665wealth Court addressed applicability of the UTPCPL in the context of physicians’ fraudulent billing practices. In Commonwealth v. Cole, 709 A.2d 994, 997 (Pa.Commw.1998), appeal denied, 558 Pa. 611, 736 A.2d 606 (1999), the court held that a physician’s attempt to collect outstanding bills from patients after the statute of limitations had run was violative of the UTPCPL. Dr. Cole characterized his activities as debt collection and he was engaged in debt collection practices in violation of 37 Pa.Code §§ 303.3(3) and (18) (Debt Collection Regulations). These cases are distinguishable from the decisions involving professional misconduct by physicians

c. The Pennsylvania Supreme Court’s Authority 14

“The Supreme Court in this Commonwealth is empowered by the Pennsylvania Constitution to govern the conduct of attorneys practicing law within the Commonwealth.” Lloyd v. Fishinger, 529 Pa. 513, 605 A.2d 1193, 1196 (1992). This exclusive power is granted to this Court by Article V, Section 10(c) of the Pennsylvania Constitution which provides in pertinent part that “[t]he Supreme Court shall have the power to prescribe general rules governing practice, procedure and the conduct of all courts.... All laws shall be suspended to the extent that they are inconsistent with rules prescribed under these provisions.” Any legislative enactment encroaching upon this Court’s exclusive power to regulate attorney conduct would be unconstitutional. Lloyd, 605 A.2d at 1196. The legislature is precluded from “exercising powers entrusted to the judiciary.” Commonwealth v. Stern, 549 Pa. 505, 701 A.2d 568, 571 (1997) (citation omitted).15

*666Moreover, this Court’s exclusive authority in this area is founded on the separation of powers of our Commonwealth’s government. The separation of powers doctrine can be found in the constitutions of 1790, 1838, and 1873. Dawphin County Grand Jury Investigation Proceedings, 332 Pa. 342, 2 A.2d 804, 807 (1938). When the Pennsylvania Constitution was amended in 1968, the section which the court relied on for the separation of powers doctrine remained unchanged.16 Moreover, Article V § 10(a)17 and section 10(c)18 were added, *667giving this Court the exclusive constitutional authority to regulate the practice of law. In Commonwealth v. Sutley, 474 Pa. 256, 378 A.2d 780, 783 (1977), this Court opined that “[a]ny encroachment upon the judicial power by the legislature is offensive to the fundamental scheme of our government.” 19

Furthermore, Article V § 10(c) of the Constitution has been held to include the power of “the continuous monitoring of the practice of law.” Cantor v. Supreme Court of Pennsylvania, 353 F.Supp. 1307, 1316 n. 21 (E.D.Pa.1973), aff'd, 487 F.2d 1394 (3rd Cir.1973). “The Supreme Court has declared the meaning of Article V, Section 10(c) in its Rule of Disciplinary Enforcement No. 103.” Pennsylvania Public Utility Commission Bar Ass’n. v. Thornburgh, 62 Pa.Cmwlth. 88, 434 A.2d 1327, 1331 n. 6 (1981), aff'd, 498 Pa. 589, 450 A.2d 613 *668(1982). “The Supreme Court declares that it has inherent and exclusive power to supervise the conduct of attorneys who are its officers (which power is reasserted in Section 10(c) of Article V of the Constitution of Pennsylvania) and in furtherance thereof promulgates these rules which shall supersede all other court rules and statutes pertaining to disciplinary enforcement heretofore promulgated.” Id. at 1331 (citing Pa. R.D.E. 103) (emphasis added). The authority granted to the judiciary in Article V § 10(c) is exclusive, not concurrent. Lloyd, 605 A.2d at 1195.

“Pursuant to our constitutional authority, this Court adopted the Rules of Professional Conduct and the Rules of Disciplinary Enforcement, which govern the conduct and discipline of attorneys.” Commonwealth v. Stern, 549 Pa. 505, 701 A.2d 568, 571 (1997). In Stern, this Court held a statute that criminalized the conduct of an attorney for compensating a non-lawyer for client referrals was unconstitutional as violative of the separation of powers doctrine. Stern, 701 A.2d at 573. Pursuant to Pa.R.D.E. 103, “[t]he Supreme Court declares that it has inherent and exclusive power to supervise the conduct of attorneys who are its officers” and this Court is vested with “the inherent and exclusive power to govern the conduct of those privileged to practice law in this Commonwealth.” Wajert v. State Ethics Comm’n, 491 Pa. 255, 420 A.2d 439, 442 (1980). The General Assembly has no authority under the Pennsylvania Constitution to regulate the conduct of lawyers in the practice of law. Thus, we conclude that any application of the UTPCPL to the facts of this case would purport to regulate the conduct of attorneys and would be an impermissible encroachment upon the power of this Court.20

*669We hold Pennsylvania’s Rules of Professional Conduct and Rules of Disciplinary Enforcement exclusively address the conduct complained of in this case. Specifically, Pa.R.P.C. 1.5(c) provides that “[u]pon conclusion of a contingent fee matter, the lawyer shall provide the client with a written statement stating the outcome of the matter and, if there is a recovery, showing the remittance to the client and the method of its determination.” Pa.R.P.C. 1.15(b) provides that upon receiving funds or other property in which a client or third person has an interest, a lawyer shall promptly notify the client or third person. “Except as stated in this rule or otherwise permitted by law or by agreement with the client, a lawyer shall promptly deliver to the client or third person any funds or other property that the client or third person is entitled to receive and upon request by the client or third person, shall promptly render a full accounting regarding such property.” Pa.R.P.C. 8.4(b) provides that it is professional misconduct for a lawyer to “commit a criminal act that reflects *670adversely on the lawyer’s honesty, trustworthiness, or fitness as a lawyer in other respects.” Pa.R.P.C. 8.4(c) provides that it is professional misconduct for a lawyer to “engage in conduct involving dishonesty, fraud, deceit, or misrepresentation.”

In addition, this Court promulgated Rule 1.15 of the Pennsylvania Rules of Professional Conduct, which governs attorneys’ disposition of client funds, directs the safekeeping of a client’s property and authorized the creation of the Interest on Lawyers’ Trust Account Act. 62 P.S. § 4023. And Pa.R.D.E. 514 addresses the issue of reimbursable losses of money caused by the dishonest conduct of an attorney.21

*671These Rules, promulgated by this Court, provide the exclusive remedy for the attorney misconduct in this case. We hold appellants’ conduct in collecting and distributing settlement proceeds does not fall within the purview of the UTPCPL, but rather within this Court’s exclusive regulatory powers. Although we are extremely disturbed by the conduct of the appellants in this case, we cannot permit the trial court’s award in this case to stand.22 We reverse the order of the Superior Court.

Reversed. Jurisdiction relinquished.