OHIO STATE BAR ASSOCIATION v. KLOSK Et Al.

[Until this opinion appears in the Ohio Official Reports advance sheets, it may be cited as Ohio

State Bar Assn. v. Klosk, Slip Opinion No. 2018-Ohio-4864.]

NOTICE

This slip opinion is subject to formal revision before it is published in an

advance sheet of the Ohio Official Reports. Readers are requested to

promptly notify the Reporter of Decisions, Supreme Court of Ohio, 65

South Front Street, Columbus, Ohio 43215, of any typographical or other

formal errors in the opinion, in order that corrections may be made before

the opinion is published.

SLIP OPINION NO. 2018-OHIO-4864

OHIO STATE BAR ASSOCIATION v. KLOSK ET AL.

[Until this opinion appears in the Ohio Official Reports advance sheets, it

may be cited as Ohio State Bar Assn. v. Klosk, Slip Opinion No.

2018-Ohio-4864.]

Unauthorized practice of law—Lawyer not licensed in Ohio held self and firm out

as representing Ohio debtor in correspondence with Ohio counsel for

creditor—Injunction issued and civil penalty imposed.

(No. 2018-0533—Submitted May 22, 2018—Decided December 11, 2018.)

ON FINAL REPORT by the Board on the Unauthorized Practice of Law

of the Supreme Court, No. UPL 13-09.

_______________________

Per Curiam.

{¶ 1} Relator, Ohio State Bar Association, charged respondents, Michael J.

Klosk, an attorney licensed to practice law in California, and Klosk Law Firm, Inc.,

a California law firm, with engaging in the unauthorized practice of law in Ohio.1

1

In his answer, Klosk admitted that he is also admitted to practice law in New Jersey and New York.

SUPREME COURT OF OHIO

Relator alleged that Klosk and his firm provided legal advice to an Ohio resident

and/or negotiated the resolution of an Ohio resident’s debt with a creditor’s counsel

who was also located in the state of Ohio.

{¶ 2} Finding that Klosk and his firm practiced law in violation of Ohio

licensure requirements, the Board on the Unauthorized Practice of Law

recommends that we enjoin them from committing further illegal acts and assess a

$2,000 civil penalty. We agree that Klosk and Klosk Law Firm, Inc., engaged in

the unauthorized practice of law in Ohio and that an injunction and $2,000 civil

penalty are warranted.

Procedural History

{¶ 3} Relator filed its complaint against Klosk and his firm on November 8,

2013. A three-member panel of the board was appointed to hear the matter. In

August 2014, the panel chairman granted respondents’ request for a delay in the

proceedings to obtain counsel, and the following month, Klosk, on behalf of himself

and his firm, filed a belated answer to relator’s complaint. In that answer, Klosk

admitted that he and his firm had committed some of the alleged conduct, but he

denied that their conduct constituted the unauthorized practice of law. However,

neither Klosk nor his firm responded to relator’s September 30, 2014 requests for

production of documents and answers to interrogatories or relator’s subsequent

requests for admissions. On December 16, 2015—nearly one year after the requests

for admissions were served upon respondents—the panel chairman granted

relator’s motion to deem them admitted.

{¶ 4} On May 5, 2017, a newly appointed panel chairman ordered the

parties to file dispositive motions within 30 days. Relator moved for summary

judgment on June 5, 2017. Neither of the respondents filed a response.

Standard of Review for Summary Judgment

{¶ 5} “Summary judgment may be granted when properly submitted

evidence, construed in favor of the nonmoving party, shows that the material facts

2

January Term, 2018

in the case are not in dispute and that the moving party is entitled to judgment as a

matter of law because reasonable minds can come to but one conclusion, and that

conclusion is adverse to the nonmoving party.” Ohio State Bar Assn. v. Heath, 123

Ohio St.3d 483, 2009-Ohio-5958, 918 N.E.2d 145, ¶ 9; see Civ.R. 56(C).

Improper Conduct

{¶ 6} Klosk has never been licensed to practice law in Ohio, and his firm is

not eligible to be licensed to practice law in this state. And they are deemed to have

admitted that no member of the firm is licensed to practice law in this state.

{¶ 7} Klosk and his firm provide counseling and assistance to individuals

regarding the reduction of consumer debt as part of their practice. Once retained,

they contact their clients’ creditors and attempt to negotiate a reduction of the

clients’ outstanding debts.

{¶ 8} In January 2010, a debtor who resided in Ohio executed a power of

attorney appointing Klosk and his firm as his “true and lawful attorney” for

purposes of communicating with the debtor’s creditors. In his answer to relator’s

complaint, Klosk admitted that in May 2010, he sent a letter to Ohio counsel for

CitiFinancial, on behalf of the Ohio debtor. In that letter, Klosk Law Firm, Inc.,

held itself out as the law firm representing the debtor and referred to the debtor as

the firm’s client. Klosk also admitted that he later sent the creditor’s counsel a copy

of the aforementioned power of attorney.

{¶ 9} Thus, it is undisputed that Klosk and Klosk Law Firm, Inc., contacted

Ohio counsel for CitiFinancial and indicated that they represented an Ohio resident

in debt negotiations without the benefit of any legal counsel licensed to practice in

Ohio.

{¶ 10} This court has original jurisdiction to define and regulate the practice

of law in Ohio. Article IV, Section 2(B)(1)(g), Ohio Constitution; Disciplinary

Counsel v. Casey, 138 Ohio St.3d 38, 2013-Ohio-5284, 3 N.E.3d 168. We regulate

who may practice law in Ohio in order to “protect the public against incompetence,

3

SUPREME COURT OF OHIO

divided loyalties, and other attendant evils that are often associated with unskilled

representation.” Cleveland Bar Assn. v. CompManagement, Inc., 104 Ohio St.3d

168, 2004-Ohio-6506, 818 N.E.2d 1181, ¶ 40.

{¶ 11} We have defined the unauthorized practice of law in Ohio to include

both the “rendering of legal services for another” and the “[h]olding out to the

public or otherwise representing oneself as authorized to practice law in Ohio” by

any person who is not admitted or otherwise certified to practice law in Ohio.

Gov.Bar R. VII(2)(A). Moreover, we have held that the unauthorized practice of

law also includes “representation by a nonattorney who advises, counsels, or

negotiates on behalf of an individual or business in the attempt to resolve a

collection claim between debtors and creditors.” Ohio State Bar Assn. v. Kolodner,

103 Ohio St.3d 504, 2004-Ohio-5581, 817 N.E.2d 25, ¶ 15, citing Cincinnati Bar

Assn. v. Cromwell, 82 Ohio St.3d 255, 256, 695 N.E.2d 243 (1998), and Cincinnati

Bar Assn. v. Telford, 85 Ohio St.3d 111, 707 N.E.2d 462 (1999). Therefore, an

individual who is not licensed to practice law in Ohio who negotiates legal claims

on behalf of Ohio residents or advises Ohio residents of their legal rights or the

terms and conditions of settlement is engaged in the unauthorized practice of law.

Disciplinary Counsel v. Brown, 121 Ohio St.3d 423, 2009-Ohio-1152, 905 N.E.2d

163. The fact that a respondent procured a power of attorney executed by his

customer is no defense to a charge of engaging in the unauthorized practice of law

in Ohio. See, e.g., Columbus Bar Assn. v. Am. Family Prepaid Legal Corp., 123

Ohio St.3d 353, 2009-Ohio-5336, 916 N.E.2d 784, ¶ 76; Telford at 113.

{¶ 12} Based on the facts in the record and the applicable law, there is no

doubt that Klosk and the Klosk Law Firm, Inc., engaged in the unauthorized

practice of law. They have conceded that neither Klosk nor the firm has ever been

admitted to the practice of law in Ohio and that no other member of the firm is so

admitted. Despite those facts, they represented an Ohio resident in debtor-creditor

negotiations with the creditor’s Ohio counsel. We therefore find that Klosk and the

4

January Term, 2018

Klosk Law Firm, Inc., engaged in the unauthorized practice of law as defined in

Gov.Bar R. VII(2)(A) and hold that summary judgment in relator’s favor is

appropriate.

An Injunction and Civil Penalty Are Warranted

{¶ 13} Having found that respondents engaged in the unauthorized practice

of law, we agree that an injunction should be issued to prohibit respondents from

engaging in further conduct that constitutes the unauthorized practice of law in

Ohio.

{¶ 14} Upon a finding that a person or company has engaged in the

unauthorized practice of law, Gov.Bar R. VII(8)(B) authorizes the board to

recommend and this court to impose a civil penalty in an amount up to $10,000 per

offense. The board considered the factors listed in Gov.Bar R. VII(8)(B) and UPL

Reg. 400(F) and found that several of those factors weigh against the imposition of

a civil penalty. Specifically, the board determined that this case involved a single

instance of the unauthorized practice of law and that the record did not identify any

harm incurred by the sole Ohio resident affected by that conduct. Moreover,

respondents’ answer stated that they have “accepted no clients of any nature in any

State after June, 2011, and virtually all activities any place have ceased.”

Nonetheless, the board recommends that we impose a civil penalty of $2,000,

noting that although the respondents ultimately filed an answer to the complaint in

this matter, they did nothing else to cooperate in this proceeding—they did not

respond to relator’s discovery requests, participate in any of the status conferences

following the submission of their answer, or respond to relator’s dispositive motion.

Indeed, once respondents filed their answer, they chose to ignore all subsequent

orders of the board—despite the fact that Klosk is a licensed attorney in at least one

other jurisdiction.

{¶ 15} On these facts, we agree that a civil penalty of $2,000 is appropriate.

Consistent with the board’s recommendation, however, we reject relator’s requests

5

SUPREME COURT OF OHIO

for (1) reimbursement of its costs and expenses in the prosecution of this matter in

the absence of the application and supporting documentation required by Gov.Bar

R. VII(9)(A), (2) the imposition of additional sanctions for respondents’ failure to

comply with discovery in this case, and (3) an order of restitution for “all injured

members of the public represented by respondents,” see Disciplinary Counsel v.

Hernandez, 142 Ohio St.3d 251, 2014-Ohio-5486, 29 N.E.3d 916, ¶ 24 (declining

to order restitution in an unauthorized-practice-of-law case and noting that victims

of the unauthorized practice of law may file a civil action for damages pursuant to

R.C. 4705.07(C)(2)).

{¶ 16} Accordingly, we enjoin Michael J. Klosk and the Klosk Law Firm,

Inc., from representing debtors in Ohio by advising or counseling them or by

negotiating resolution of debts with creditors or creditors’ counsel or otherwise

engaging in conduct that constitutes the unauthorized practice of law in Ohio. We

also impose against Klosk and the Klosk Law Firm, Inc., jointly and severally, a

$2,000 civil penalty. Costs are taxed to Klosk and the Klosk Law Firm, Inc., jointly

and severally.

Judgment Accordingly.

O’CONNOR, C.J., and O’DONNELL, KENNEDY, FRENCH, FISCHER, and

DEGENARO, JJ., concur.

DEWINE, J., concurs in judgment only.

_________________

Fanger & Associates, L.L.C., and Jeffrey J. Fanger; and Robin L. McGuire

Rose, Bar Counsel, for relator.

_________________

6