1 KEVIN SINGER SUPERIOR COURT RECEIVER/REFEREE

2 RECEIVERSHIP SPECIALISTS 795 Folsom Street, 1st Floor

3 San Francisco, California 94107 Telephone: (415) 848-2984

4 Fax: (415) 848-2301 E-mail: Kevin@ReceivershipSpecialists.com

5 Property Address:

6 4655-4677 Meade Street Richmond, CA 94804

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SUPERIOR'COURT OF THE STATE OF CALIFORNIA

COUNTY OF CONTRA COSTA I

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CERF SPVI, LLC, a Delaware limited liability) company, )

Plaintiff,

v.

) ) ) ) )

CHEROKEE SThIBON VENTURE I, LLC; a ) Delaware limited liability company, PIONEER HI-BRED INTERNATIONAL, ) INC., an Iowa corporation, LUMIPHORE ) INC., a Delaware corporation, GERONOV A ) RESEARCH, Inc., a Nevada corporation, ) NANOASIS TECHNOLOGIES, INC., a ) California corporation, CHEMORAGA, INC., ) a California corporation and DOES 1-50, inclusive, )

Defendants. ) ) ) )

---------------------------- )

CASE NO: C12-00284

NOTICE OF MOTION AND MOTION FOR ORDER AUTHORIZING RECEIVER TO RETAIN LEGAL COUNSEL; MEMORANDUM OF POINTS AND AUTHORITIES AND DECLARATION OF KEVIN SINGER IN SUPPORT THEREOF.

=: ld,, Dept.: 31 Wk Judge: Hon. Laurel S. Brady

Martinez Superior Court 725 Court Street Martinez, CA 94553

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TO: THE PLANTIFFS, DEFENDANT AND THEIR RESPECTIVE ATTORNEYS OF

RECORD:

PLEASE TAKE NOTICE THAT on 2012 at the hour of

4 or as soon thereafter as the matter can be heard in Department 31, at the

5 Martinez Superior Courthouse at 725 Court Street, Martinez, CA 94553, Superior Court

6 Receiver, Kevin Singer, will and does hereby move the Court to grant his NOTICE OF

7 MOTION AND MOTION FOR ORDER AUTHORIZING RECEIVER TO RETAIN LEGAL

8 COUNSEL; MEMORANDUM OF POINTS AND AUTHORITIES AND DECLARATION

9 OF KEVIN SINGER IN SUPPORT THEREOF. This Motion is based on this Notice of

10 Motion, Memorandum of Points and Authorities, Declaration of Kevin Singer, pleadings,

11 records and files in this action, and oral and documentary evidence as may be presented at the

12 hearing on this Motion.

13 DATED: September 10, 2012

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By: Kevin Singer Superior Court &

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1 INTRODUCTION

2 1. Through a stipulation amongst CERF SPVI, LLC, a Delaware limited liability 3 company ("Plaintiff"), and CHEROKE SIMEON VENTURE I, LLC ("Defendant"),

4 collectively (''the Parties"), the Court granted an Order Appointing Receiver Ex Parte and

5 Temporary Restraining Order In Aid of Receiver ("Court Order") which was entered on July

6 12, 2012 and attached hereto as "Exhibit 1." The appointed Superior Court Receiver, Kevin 7 Singer's ("Receiver") Oath was filed on approximately July 12, 2012, by Plaintiff's Counsel 8 and management of the Property was transitioned to him on August 15\ 2012. This was an 9 agreed upon transition date by the Parties.

10 2. The collateral for Plaintiff's Deed of Trust is a commercial and industrial building 11 located at 46554677 Meade Street, Richmond, CA 94894 (the "Property"). The Property is

12 commonly referred to as Campus Bay. The Property has a long history of chemical 13 manufactures using the site. In 1997, an environmental cleanup was initiated under the

14 oversight of the San Francisco Bay Regional Water Quality Control Board. Attached as

15 "Exhibit 2," is information summarizing the environmental issues surrounding the Property.

16 3. One of Receiver's primary duties is to lease or release the Property or any

1 7 portion of it on terms acceptable to Plaintiff. Any lease contract entered into will require

18 disclosers regarding the environmental issues.

19 4. On August 8, 2012 and August 9, 2012, the Receiver had a disagreement with 20 Defendant's legal counsel over the ability of Defendant to collect past due rents from the

21 tenants. Defendant's legal counsel was properly representing her client, respectful to the

22 Receiver, and came to an amicable resolution with the Receiver regarding the collection of past

23 due rent, but there remains a disagreement in between the Receiver and Defendant's legal

24 counsel the interpretation of the Court Order.

25 5. Although the Receiver has the ability to write basic pleadings and file papers with

26 the Court, he is not an attorney. The Receiver is also not an expert in legal environmental

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u disclosures that will need to be provided to tenants. The Receiver also seeks help from time to

time in interpreting the Court's Order and working with the Parties' legal counsels.

POINTS AND AUTHORITIES IN SUPPORT OF RECEIVER RETAINING COUNSEL

California Rules of Court 3.1180. Employment of attorney

A receiver must not employ an attorney without the approval of the court. The

application for approval to employ an attorney must be in writing and must state:

(1) The necessity for the employment;

(2) The name of the attorney whom the receiver proposes to employ; and

(3) That the attorney is not the attorney for, associated with, nor employed by an

attorney for any party.

The Court Order instructs the Receiver as follows (See "Exhibit 1"):

8a.) Receiver shall have the power to take any and all lawful actions necessary to

preserve, protect, maintain, and operate the Property .......... ;

8e.) Receiver is authorized to employ and compensate professionals, including

property managers, accountants, and other persons and professionals as Receiver

deems appropriate to effectuate the operation of the Property and to preserve and

protect the Property;

12) Receiver, or any party to this action, may from time to time, make application to

this Court for further orders instructing Receiver.

THE RECEIVER'S REQUEST TO RETAIN LEGAL COUNSEL

The Receiver needs to retain legal counsel for the limited purpose of advising the

Receivership Estate on the proper way to disclose environmental issues to new tenants to limit

the liability of the Receivership Estate. The legal counsel retained by Receiver can also advise

the Receivership Estate on interpretation of the Court Order when the Parties are in

disagreement as to its interpretation.

The Receiver would like to retain Mia Blackler ("Ms. Blackler") and Manuel

Fishman ("Mr. Fishman") of Buchalter Nemer. Ms. Blackler is an expert in receivership law Page 4

RECEIVER'S MOTION TO RETAIN LEGAL COUNSEL

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and Mr. Fishman is an expert in commercial lease contracts and environmental issues. Their

billing rates are $440 for Ms. Blackler and $495 per hour for Mr. Fishman and they utilize the

assistance of associates whose billing rates are $300 to $350 per hour. Attached as "Exhibit

3," are their bios.

WHEREFORE, The Receiver requests that the Court grant the following:

1. The Superior Court Receiver, Kevin Singer, is authorized to retain Mia Blackler and

Manuel Fishman to advise him on any lease negotiations, disclosure issues related to the le.ase

negotiations and/or contracts, and guidance on interpretation of the Court Order.

2. For such other relief as the Court may deem just and appropriate.

DATED: September 10, 2012

Respectfully submitted,

By: ks Kevin Singer Superior Co

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u '.,__; 1 DECLARATION OF KEVIN SINGER

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I, KEVIN SINGER declare and state as follows:

I am a Superior Court Referee and Referee and have acted in that capacity in over 143

cases over the last eleven years. I am the President of Receivership Specialists, which

specializes in Receivership and Referee appointments. If called upon to testify, I could and

would competently do so as to the matters hereinafter set forth based on firsthand knowledge.

I submit this Declaration in support of the accompanying NOTICE OF MOTION AND

MOTION FOR ORDER AUTHORIZING RECEIVER TO RETAIN LEGAL COUNSEL;

MEMORANDUM OF POINTS AND AUTHORITIES AND DECLARATION OF KEVIN

SINGER IN SUPPORT THEREOF;

Through a stipulation amongst CERF SPVI, LLC, a Delaware limited liability company

("Plaintiff'), and CHEROKE SIMEON VENTURE I, LLC ("Defendant"), collectively (''the

Parties"), the Court granted an Order Appointing Receiver Ex Parte and Temporary

Restraining Order In Aid of Receiver ("Court Order") which was entered on July 12, 2012. In

the Court Order, I was appointed Superior Court Receiver. The parties agreed that the property

located at 4655-4677 Meade Street, Richmond, CA 94894 (the "Property") was to be

transitioned to my control on August 1, 2012.

2. The Property serves as collateral for Plaintiff's Deed of Trust and is a commercial

and industrial building commonly referred to as Campus Bay. The Property has a long history

of chemical manufactures using the site. In 1997, an environmental cleanup was initiated under

the oversight of the San Francisco Bay Regional Water Quality Control Board.

3. One of my primary responsibilities is to lease or release the Property or any portion

of it on terms acceptable to Plaintiff. Any lease contract I have entered into will require

disclosers regarding the environmental issues.

4. On August 8, 2012 and August 9, 2012, I had a disagreement with Defendant's

legal counsel over the ability of Defendant to collect past due rents from the tenants at the

Property. Defendant's legal counsel was properly representing her client, respectful to me, and

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Dena M. Cruz (CA State Bar No. 121508) 1 Richard Mooney (CA State Bar No. 176486) 2 Leena Rege (CA.State Bar No. 236827)

DRY.AN CA vE, LLP 3 560 Mission Street, 25th Floor

San Francisco, CA. 94105 4 Telephone: (415)268;,2000. 5 Facsimile: (415) 2681999

6 Attomeys for Plaintiff

7 CERF SPVI, LLC

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SUPERIOR COURT OF CALIFORNIA COUNTY OF CONTRA COSTA

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CERF SPVI, LLC a Delaware limited liability company

Plaintiff, v.

CHEROKEE SIMEON VENTURE I, LLC; a Delaware limited liability company, PIONEER ID-BRED INTERNATIONAL, INC., an Iowa corporation, LUMIPHORE INC., a Delaware corporation, OERONOVA RESEARCH, Inc., a Nevada corporation, NANOASIS TECHNOLOGIBS, INC., a California corporation, CHBMORAGA, INC., a California corporation and DOES 1-50, inclusive,

Defendants.

CASE NO.: CIV C12-00284

1. [PldJl"tJili!D] ORDER APPOINTING RECEIVER EX PARTE

2. (PD] TEMPORARY TRAINING ORDER IN AID OF

RECEIVER

(Ex Parte Application, Stipulation to Entry of Order Appointing a Receiver and Preliminary Injunction, Declaration of Edward Elanjian, Declaration of Kevin Singer, Declaration of Dena M. Cruz, and Oath of Receiver filed concurrently herewith)

Date: July 12, 2012 Time: 1 :30 p.m. Dept.: 60

[PROPOSBPJ ORDER Al':POIN'l'ING RBCBIVBREX PARTE AND TRO CERF SPVI, LLC va. Cherokee Simeon Venture I, LLC.

Contra Costa SUperior Case No. Cl2-00284 #80494 vt sar

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1 The motion of Plaintiff CERF SPV I, LLC ("Plaintiff'), for an ex parte order appointlng a

2 receiver and for the issuance of a Preliminary Injunction came on for hearing in Department 60 of

3 this Court on July 12, 2012 at 1 :30 p.m .. Plaintiff appeared by and through its counsel, Dena M.

4 Cruz; defendant Cherokee Simeon Venture I, LLC (''CSV'') appeared by and through its counsel,

5 Larisa A. Meisenheimer.

6 Having read and considered the moving papers, pleadings, and evidence in this matter;

7 having heard argument of counsel; and being apprised of the premises; it appearing to the Court that:

8 A. On or about September 6, 2007, Continental Environmental Redevelopment Financial,

9 LLC (''CERF'') entered into a Loan and Security Agreement (the "2007 Loan

10 Agreement") and certain related documents, agreements and ins1nments, as lender, with

11 CSV, as borrower, to fund, amongst other things, a portion of the cost to remediate

12 certain real property located in Contra Costa County, CA, commonly known as Campus

13 Bay ("Campus Bay'').

14 B. Plaintiff is the holder of a promissory note dated September 6, 2007, executed by CSV as

15 borrower (the ''Note").

16 C. The Note is secured by a deed of 1rust of even date (the ''Deed of Trust'') executed by

17 CSV in favor of CERF, which Note and Deed of Trust were assigned to Plaintiff on or

18 about September 6, 2007. A copy of the Deed of Trust is attached to the Declaration of

19 EdwardElanjian (''ElanjianDecl.") as ExhibitB.

20 D. The Deed of Trust is a lien on the title to Campus Bay (the "Property''). A copy of the

21 Deed of Trust, which contains a legal description of the Property is attached to the

22 Elanjian Deel. as Exhibit B.

23 E. The Deed of Trust contains a provision whereby all the rents, issues, and profits of the

24 Property are assigned as additional security on the Note and;

25 F. The 2007 Loan Agreement and the Deed of Trust contain certain provisions in which

26 CSV consented to the appointment of a receiver for the Property in the event of default

27 under the Borrowing Agreements; and,

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#80494 vl saf

1 [PROPOSED] ORDER. AP:POINTING RECEIVER BX PARTE AND TRO

CERF SPVI, LLC vs. Cherokee Simeon Venture I, LLC. Contra Costa Superior Case No. Cl2-00284

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l G. Plaintiff alleges in the Complaint filed in this action Defendant CSV has defaulted on 2 its obligations mderthe 2007 Loan Agreement, Note and Deed of Trust (hereinafter, 3 collectively the 'Borrowing Agreements") in that CSV (i) failed to pay the outstanding 4 principal balance ofth.e loan, all accrued and unpaid interest thereon, and all other sums

5 owing to Plaintiff pursuant to the terms of the Borrowing Agreements which were due

6 and payable on or before September 6, 2010; (ii) failed to pay when due and payable 7 property taxes assessed against the Property; and, (iii) fiiiled to pay premiums for 8 insurance required mder the terms of the Borrowing Agreements;

9 H. Without admitting to or agreeing with Plaintiff's allegations, CSV stipulated on July 11,

10 2012, to the appointment of a receiver and a preliminary injunction. 11

12 TIIEREFORE, IT IS HEREBY ORDERED 1HAT: 13 ORDER APPOINTING RECEIVER

14 1. The Court grants Plaintiff's motion for the appointment of a receiver and appoints Kevin

15 Singer as receiver (the "Receiver''}, such appointment to be effective on the filing of Receiver's oath 16 of office. Purswmt to the terms of the Deed of Trust, the Receiver does not need to file an

17 undertaldng or bond.

18 2.

19 3.

Receiver is appointed by this Court to take possession of the Property.

CSV shall surrender possession of the Property to Receiver as of August 1, 2012 (the 20 "Effective Date"), and shall deliver to Receiver all keys, all books and records related to the 21 ownership and maintenance of the Property, checkbooks, ledgers, accomits payable and accounts 22 receivable records, leases, rent rolls, insurance policies and certificates (except as specified in

23 Paragraph 18), executory contracts, plans, specifications and drawings, and all other documents

24 whatsoever related to the ownership and maintenance of the Property (collectively "Books and 25 Records''). Receiver shall take possession and control of all Books and Records, except that 26 Receiver may, in his discretion, choose to leave whatever portions of the Books and Records he 27 decides appropriate in the possession of the. persons possessing the same, provided that Receiver 28 shall have immediate access to these items. Receiver shall retain possession of the Property until the

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#80494 vl saf

[PROPOSED] ORDER APPOlNTJNG RECEIVBREX PARTE AND TRO CERF SP'YI, LLC vs. Cherokee Simeon Venture I, UC.

Contra Costa Superior Case No. C12-00284

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1 earlier of further order of the Court or nonjudicial foreclosure of the Property by Plaintiff and/or its

2 assigns.

3 4. As of the Effective Date, Receiver shall (i) receive and take charge of the Property and all

4 personal property, assets, all rents due and hereinafter due, notes, receivables, actions and choses in

5 action; and, (ii) collect all outstanding accounts, receivables, leases, rents, actions and choses in 6 action, or other evidence of indebtedness and, if need be, bring suit to recover the same in his own

7 name ..

8 5. As of the Effective Date, the tenants in possession of the Property or such other persons as

9 may be in possession there6f, be and they are hereby directed to (i) attom to Receiver, and until the

10 further order of the Court; (ii) to pay over to Receiver, or its duly designated agent, all rents of the 11 Propez:ty now due and unpaid or hereafter to become due. CSV is hereby enjoined and restrained 12 from collecting the rents of the Property as of the Effective Date; and that all tenants of the Property

13 . and other persons liable for the rents be and they hereby are enjoined and restrained from paying any

14 rent for the Property to CSV, or its managing agent, its officers, directors, employees, agents, or

15 attomeys.

16 6. If CSV should receive any rents or revenues from the Property, on or after Receiver takes

17 possession of the Property, CSV is restrained and enjoined until further order of this Court from

18 disposing of silch rents, issues, profits, and revenues of the Property in any manner, other than by

19 turning over such rents, issues, profits, and revenues to Receiver until further order of this Court;

20 7. Receiver shall be paid fees calculated on an hourly basis, at rates previously provided to

21 Plaintiff, for services performed as receiver for the Property pursuant to invoices Submitted to 22 Plaintiff describing in detail the services perfonned and the hours worked, to be paid as a priority

23 from the rents and revenues of the Property, or otherwise paid by Lender; provided, however, in no

24 event shall Receiver's hourly fee exceed$ 250.00 per hour and $150 per hour for Receiver's support

25 staff;

26 8. Receiver shall be authorized and empowered to, and when required by this Order must, do

27 the following:

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#80494Yl Hf

3 [PROPOSED] ORDER APPOINTING RECEIVER EX PAR'IE AND TRO

CERF SPVI, LLC vs. Cherokee Simeon Venture I, LLC. Contra Costa Superior Case No. Cl2-00284

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S The power to possess, 6 manage and operate the Property shall include the power to assume or reject executory contracts, 7 including leases. Except as stated in Paragraph 18 of this Order. the power to possess, manage, and

8 operate shall also include the right to exclude from the Property anyone, including CSV and any

9 persons claiming under or through CSV, who are not in possession of the Property under valid lease 1 O or rental agreements or acting pursuant to an order or authority granted by the Department of Toxic

11 Substances Control ("DTSC'') or other government agency. Receiver shall not be responsible for the 12 operations or management of any busess operated wi1hin the Property, nor, is Receiver required to 13 assure that any required licenses and per.mi.ta applicable to any business currently conducted at or 14 within the Property conform to Califomia state law.

15 (b) Rents and profits: Receiver shall have the right and power to take possession 16 and control of any rents, profits, or income whatsoever generated by the Property ("Rents") after the

17 Effective Date, including any pre-paid Rents and profits, Rents and profits due and owing, and any 18 Rents and profits which become due and owing thereafter on the Effective Date, whether held by

19 CSV, its property managers, tenants, or any other third party. Receiver shall deposit all funds 20 received in an FDIC insured deposit account ("Receivership Account,,). Receiver may receive and 21 endorse checks constituting income from the Property.

22 (c) Management of the Property's Revenues: Receiver shall man.age the daily 23 operations of the Property and collect and hold all Rents, profits and other revenues generated by the 24 use and occupancy of the Property in the Receivership Account for which the authorized signatory

25 shall be Receiver and, at Receiver's option, designated agents ofReceiver. Receiver shall pay the

26 noimal, ordinary, and necessary operating expenses of the Property from the rents and other

27 revenues collected from the Property, subject to the limitations set forth in paragraph numbered 8G) 28 below; otherwise, such costs shall be paid by Plaintiff following Receiver's delivery to Plaintiff of

#804!>4 vl 1sf

4 [PROPOSED] ORDBR. APPOINTING RECEIVER EX PAR.TB ANDTRO

CERF SPYJ, LLC vs. Cherokee Simeon Venture 1, LLC. Contra Costa Superior Case No. Cl2-00284

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1 invoices describing such expenses in detail. All Rents, profits and revenue generated by the use and 2 occupancy of the Property shall be applied first to the payment of Operating Expenses. Operating 3 Expenses shall include, without limitation, insurance, maintenance and repairs, utilities, payroll, 4 administration, refunds of security deposits, real property taxes, and assessments. Operating 5 Expenses shall not include, and Receiver shall not pay without further order of this Court or 6 Plaintiff's written consent: (i) any alleged obligations owed to CSV, its agents, assigns, or to any 7 entity, person, partnership or cotporation owned, in whole or in part, by, related to, or otherwise 8 affiliated with CSV, or (ii) any obligations or payments owed, or claimed to be owed, to any junior 9 lien holder. All Rents, profits and revenue generated by the use and occupancy of the Property shall

10 then be applied to other fees, costs or expenses associated with the Property, as permitted by the

11 tenns of this Order.

12 ( d) Protection of the Prqpert;y and Insurance: Receiver shall have the power to, 13 and is ordered to, protect the Receivership Estate. "Receivership Estate" shall mean the Property, 14 Rents and profits, and other income derived from the Property and assets from any destruction, or 15 waste. Receiver shall determine upon taking possession of the Receivership Estate whether or not 16 there ls sufficient insurance coverage to protect Plaintiff's security interest in the Property. If

17 necessary, Receiver shall attempt to procure sufficient insurance coverage as soon as practicable, 18 provided that the Receivership Estate's funds and required insurance are available. Receiver may 19 maintain existing insurance policies (except the PLL Insurance Policy referenced in Paragraph 17(b) 20 below) and pay any premiums due from available funds of the Receivership Estate. Receiver shall 21 not be persomtlly liable for any insurance claims arising before or after the appointment of a receiver

22 and procuremcmt of sufficient insurance. If insurance is not currently in place and cannot be 23 obtained by Receiver, the Court shall be notified within 30 days from the date of this Order. 24 (e) :iiiillia:eampell$ate 25

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1 (f) Receiver's Initial Accounting: Within 30 days after the date Receiver's 2 undertaking and Oa1h are filed, Receiver shall file in this action a detailed inventory of all property

3 of the Receivership Estate. Receiver shall also file a supplemental inventory thereof; if necessary.

4 (g) Periodic Accounting: Receiver shall provide periodic statements of account

5 that include a summary of the ootivities of Receiver and any property manager, a schedule of

. 6 receipts and disbursements, a summary of Receiver and its professional' s interim fees and expenses, 7 and other such information as the Court may direct. Receiver sba11 file said accounting with. the 8 Court and shall serve upon Plaintiff's counsel and CSV' s counsel a copy of said accounting.

9 Receiver shall file a final report within 30 days after the termination of the receivership. . 1 o (b.) . Authorized Disbursements and Actions. Receiver shall be authorized, in the

11 exercise of Receiver's business judgment, to do, without limitation, the following:

12 (i) Collect past due Rents and profits from tenants or former tenants of the 13 Property, and collect Rents and profits while this Order is in effect; 14

15 to P1aintiff;

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18 to the Property.

(ii) Lease or r&-lease the Property or any portion of it on terms acceptable

(iii) Evict tenants;

(iv) As set forth in paragraph 8( c) above, pay Operating Expenses related

19 (v) Incm and pay such other expenses as are reasonably necessary for

20 Receiver to perform his duties;

21 (vi) Retain, in Receiver's discretion, a working capital fund in an amount

22 sufficient for payment of Receivership expenses;

23 (vii) Investigate and evaluate the financial condition and history of the 24 Property in order to determine their value and expenses, provided that such investigation does not 25 substantially increase the costs of the receivership over the compensation provided to Receiver

26 herein without Plaintiff's consent or further order of this Comt;

27 (viii) Investigate and evaluate the Property for the presence of any readily 28 apparent dangerous conditions, hazardous waste, substances or chemicals that is not the subject of

#80494 vl saf

6 [PROPOSED] ORDER APPOINTING R,BCBIVBREXPARTE ANDTRO

CERFSP"YI, UC vs. Cherokee Simeon Venture[, UC. Contra Costa Superior Case No. Cl2M00284

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1 the JUly 20, 2011 Revised Draft Feasibility Stady and Remedial Action Plan for Lots 1,2, and 3,

2 Campus Bay, Richmond, California ("Draft FSRAP'') or any revision or amendment to same;

3 (ix) Subjeotto the terms of this Order, pay any necessary maintenance 4 required for health and safety reasons, property management fees, including :reimbursement for costs 5 on a monthly basis from the assets now held, or which may be received by, t1re Receivership Estate,

6 subject to.the final review of this Court; 7 (x) Upon request of Pl Receiver shall tum over to Plaintiff, to be 8 applied toward the indebtedness, any lease proceeds net of (i) Receiver fees and expenses, (ii)

9 Operating Expenses, and (iii) Receiver's working capital fund;

10 (xi) Upon Plaintiff's consent, provide for the payment of all capital 11 improvements to the Property required to bring the Property to good condition and allow the lease of

12 the Property or any portion of the Property. ReCeiver shall first make any emergency capital 13 improvements or repairs which are necessary, in Receiver's business judgment, to protect persons 14 and the Property from serious bodily harm or damage. Receiver shall promptly notify Plaintiff and 1 S CSV of the need, if any, for any emergency capital improvements; 16 (xii) Contest or protest taxes or assessments with respect to the Property;

17 and,

18 {) Use any federal taxpayer identification numbers relating to the 19 Property for any lawful purpose.

20 (i) General Receivership Powers. In addition to all of the powers set forth above, 21 and subject to any limitations contained in this Order, Receiver is hereby vested with all of the 22 general powers of receivers in cases of this kind, subject to the direction of this Court. 23 (j) Limitations on Receiver's Authority: Except as provided for above, the 24 Receiver shall not, absent the consent of Plaintiff or further order of this Court: 25 (i) Obtain loans, secured or unsecured, on behalf of the Receivership

26 Estate or encumber the Receivership Estate. Notwithstanding this restriction on loans, and as more

27 particularly set forth in paragraph 13 below, Receiver may request loans from Plaintiff at Plaintiff's

28 option and/or election to make any of the repairs and perform any maintenance determined by

#80494 vl saf

7 [PROPOSBDJ ORDER APPOINTING RBCBIVBR.BX PARTE AND TRO

CERF SPT'l, LLC vs. Cheroke.e Stmeon Venture I, LLC. Contra Costa Superior case No. Cl200284

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1 Receiver in his business judgment to be necessary to keep the Property in good condition, and any

2 emergency capital improvements or repairs as allowed above. Any and all loans Receiver obtains

3 from Pl pursuant to this paragraph, shall be: (i) deemed obligatory advances on the 4 indebtedness; (ii) added to the balance due; and (iii) secured by the operative Deed of Trust. 5 (ii) Without the written consent of CSV and Plaintiff, or order of this

6 Court, execute any documents that (i) result in a subdivision of the Property, or (ii) that result in a lot

7 line adjus1m.ent of any portion of the Property;

8 (iii) Without the written consent of CSV and Plaintiff, or order of this 9 Court, sell any portion of the Property.

1 O 9. Receiver shall have no responsibility for filing future federal and state income tax retums 11 (''Tax Retum'') or for dissolution of CSV. The responsibility for such filings lie exclusively with

12 csv. 13 10. Receiver's fees and expenses will be paid monthly from available funds of the Receivership 14 Estate upon ten (10) days notice to the parties. If no written specific objection is provided to 15 Receiver on all fees and expenses submitted; Receiver may pay its invoice and professional fees and

16 expenses owed from available Receivership Estate funds. If an objection is received within the ten

17 day period, Receiver must respond within a reasonable time to the parties with an acceptable 18 explanation. If an agreement cannot be reached, a noticed motion on shortened time will be filed 19 with the Court for approval of the fees and expenses in dispute.

20 11. Any security or other deposits which tenants have paid to CSV, or its agents, over which 21 Receiver has no control, shall be obligations of CSV and may not be refunded by Receiver without

22 an order of this Court or approval of Plaintiff. Any other security or other deposits which tenants 23 have paid or may pay to Receiver, if otherwise refundable under the terms of their leases or 24 agreements with Receiver1 shall be refundable by Receiver in accordance with the leases or 25 agreements.

26 12. .1.:: .. .:,,,,,,:,-:.,., ,,_.-'- ' . . miime!fi!:p]ftiontotbisealtti 27 f0f'OM.ets"'llel.Vtfff0'1f: 28

#804'4 vl aaf

8 [PROPOSED] ORDER APPOINTING RECEIVER EX PARTBANDTRO

CERF SPVJ, LLC vs. Cherokee Simeon Venture I, UC. Contra Costa Superior Case No. C12-00284

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I 13. Receiver is authorized to borrow from Plaintiff such funds as are necessary to perform bis

2 duties as set forth in tbis Order. No obligation on the part of Plaintiff to advance or loan funds to the

3 Receiver shall arise prior to the Receiver's preparation of a budget for management and operation of

4 . the Property, and the approval of said budget by Plaintiff. In any event, Plaintiff shall have no

5 obligation to advance or loan funds to the Receivership Estate except in its sole and absolute

6 discretion. In consideration for any such advance or loan, Receiver is authorized to and sh.all issue

7 to Plaintiff certificates of indebtedness ("Receiver's Certificates"), as evidence of receivership

8 indebtedness for any such advances made by Plaintiff pursuant to this Order. All Receiver's

9 Certificates shall be executed and delivered to Plaintiff by Receiver as a condition to funding, and

10 shall be numbered in sequential order for redemption purposes. All indebtedness represented by a

11 Receiver's Certi.fi.cate(s) shall be and constitute a lien and charge upon all assets of the Receivership

12 Estate, and with. respect to such assets and estate.

13 14. In the event that the title to a specific prQPerty and the personal property hereby entrusted to

14 Receiver is transferred by reason of a judicial foreclosure sale or nonjudicial trustee's sale conducted

15 pursuant to the tenns of the Deed of Trust sued upon in this action, Receiver shall immediately "turn

16 over possession and control of the applicable property, together with the Books and Records, and all

17 personal property associated therewith to the new owner upon presentation to Receiver of a certified

18 copy of the deed evidencing such transfer, or upon Order of this Court made upon an ex parte

19 application, which may be presented without Receiver's or counsel's personal appearance.

20 15. Plaintiff and Receiver shall cooperate with CSV and Zen.eca, Inc., to effectuate the remedial

21 aotions described in paragraph 18.

22 PRELIMlNARY INJUNCTION

23 16. IT IS FURTHER ORDERED that CSV, along with any of its trustees, property managers,

24 co-trustees, partners, employees, agents,' representatives, contractors and any other person or entity

25 under their control \'Related Parties") are hereby enjoined and restrained from:

26

27

(a) Committing or permitting waste of the Property;

(b) Removing. transferring or otherwise disposing of the Property or any of its

28 :fixtures and/or incorporated materials; 9

[PROPOSED] ORDER APPOINTING RBCBIVBR BX PAR.TB AND TRO CERF SPY.I, LLC w. Cherokee Stmeon Venture I, LLC.

Contta Costa Superior Case No. Cl2-00284 i#80494vl sat'

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( c) Demandmg, collectin& diverting or receiving any Rents of the Property;

( d) Transferring, moving, selling, leasing or otherwise disposing of any of the

3 personal property and/or improvements located in or around the Property; and,

4 (e) In any way interfering with the discharge of the Receiver's duties. 5 17. In addition, CSV and Related Parties shall be obligated to do, and shall be restrained from

6 doing, the following:

7

8

9

10

11

(f) Turnover of Books. and Records: Prior to the Effective Date, CSV shall tum

over complete copies of the Books and Records, as defined herein, to Receiver. CSV shall deliver

originals of the Books and Records to Receiver if so requested by the Receiver. CSV shall assist

Receiver in obtaining complete copies of the same in the event the Books and Records are held by

persons or entities other than CSV. CSV shall promptly, upon request by Receiver, furnish to

12 Receiver copies of such other financial infonnation or backup documentation relating to those Books

13 and Records.

14 (g) Turnover of Insurance Information: CSV shall promptly provide Receiver 15 with the property insurance policies and policy information for the Property. CSV shall make

16 certain that Receiver is named as an additional insured on all applicable policies for the period that

17 Receiver shall be in possession of the Property, except for the Pollution Legal Liability Select Clean-

18 Up Cost Cap Insurance, Policy No. 195 8035 ("PLL Policy") issued by American Intematlonal

19 Specialty Lines Insurance Company, on which the Receiver shall not be named as an additional

20 insured ..

21 18. CSV and Related Parties shall be enjoined and restrained from transfening, appropriating,

22 selling, leasing or otherwise disposing of any of the personal property, fixtures and/or improvements

23 located in and around the properties. In addition, CSV and Related Parties are enjoined and

24 restrained from creating any dangerous conditions on the Property and from interfering with the

25 necessary activities of Receiver.

26 Notwithstanding the foregoing, CSV and/or Zeneca, Inc., shall have the right upon

27 reasonable written notice to Receiver and Plaintiff, to enter upon the Property to ex.amine, test and 28 inspect the environmental condition of the Property and to perform any and all acts related to the

#180494 vi sat

10 [PROPOSED] 0'.IIDBR. APPOINTING RECBIVBR.EXPARTEAND TRO

CERF SP"Pl, LLC vs. Cherokee Simeon Venture I, LLC. Contra Costa Superior Case No. Cl2..00284

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1 Environmental Indemnity Agreement executed by CSV in favor of CERF, dated September 6, 2007

2 (''BIA"), related to any agreement or mandate from any governmental entity or official, including but 3 not limited to, implementing any remedies set forth in a Final Remedial Action Plan for Lots 1,2 and

4 3, Campus Bay, Richmond, California" ("FSRAP"), or related to other remediation activities

5 approved by or required by any governmental official or entity. As between CSV and the Plaint:ttI:

6 all terms and provisions contained in the EIA shall remain in place, including CSV's responsibility

7 for any damages to the Property as a result any investigatio testing or remedial WQrk it performs on

8 the Property.

9 In the event CSV is unable to provide Receiver with evidence of insurance required by this

10 Order, Receiver,, in its sole discretio may, as set forth in paragraph 8(d) above, elect to acquire the

11 insurance and allow investigation and/or remediation to occur.

12 19. CSV and Related Parties shall be restrained and enjoined from transferring or

13 assigning, or encumbering atiy interest in the Property without further order of this Court. In

14 addition, CSV and Related Parties shall be restrained and enjoined from committing or pennitting

15 any waste on the Property or any part thereof: or suffedng or committing or permitting any act on

16 the Property or any part thereof in violation of law or removing or transferring or otherwise

17 disposing of any of the equipmeJrt or fixtures presently on the Receivership Estate or any part

18 thereof; until :further Otder of this Court.

19 20. Plaintiff is not required to file a preUminary injunction bond specified in California Civil

20 Procedure section 529.

21 PROVISIONS UPON FORECLOSURE OR TERMINATION OF RECEIVERSHIP

22 IT IS FURTHER ORDERED that:

23 21. In the event that any or all of the Property is sold in a non-judicial or judicial foreclosure

24 proceeding, and the receivership remains in effect. funds previously paid to and held by Receiver I

25 .shall continue to be held by Receiver until Receivers final account and report (the "Final Report") is 26 approved by the Court. After Court approval of the Final Report and payment of all Court approved

27 Receivership Estate expenses, Plaintiff shall receive net proceeds in accordance with the operative

loan documents attached to and referenced in the Verified Complaint in this matter. 28

11 [PROPOSED] ORDER APPOINTING RECEIVER EX PARTE AND TR.O

CERF SPY!, LLC vs. Cherokee Simeon Venture I, LLC. Contra Costa Superior Cue No. Cl2-00284

#80494 vl saf

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. 1 22. In the event that the obligations owing to Plamtiff m:e not fully satisfied by the proceeds of

2 such sale, or in the event that this action is dismissed or the receivership is terminated for any reason

3 whatsoever. Receiver, upon Court approval ofR.eceiver's Final Report and payment of all Receivership

4 Estate expenses, shall be authorized to release, within two (2) business days of Receiver's receipt of a

5 'Written request by Plaintiff, all net funds under Receiver's control to Plaintiff to be applied toward any

6 obligations CSV may owe pursuant to the loan documents set forth in tb.e Complaint. In the event that

7 this receivership is terminated and.no foreclosure sale of the Properties has occurred or the loan has

8 been fully satisfied by the proceeds of a judicial or non-judicial foreclosure sale of the Property or

9 otherwise, all funds under Receiver's control shall be disbursed pursuant to the Court's instructions

10 upon termination of the receivership.

11 23. Promptly upon the satisfaction of the entire indebtedness to Plaintiff pursuant to the loan

12 documents and any obligations incurred by or to Receiver, Plaintiff and Receiver shall cooperate to

13 promptly prepare and obtain Court approval of a Final Report and an order discharging Receiver and

14 exonerating its bond.

15 24. Receiver shall remain an agent of this Court until: (i) the Property and all security is sold at a

16 foreclosure sale, whether judicial or non-judicial, relating to the Note or Deed of Trust and all debt

17 under the Note is fully paid; (ii) Plaintiff consents to the termination of the Receivership; and (ill)

18 the Court issues an order approving the Receiver's Final Report, discharging the Receiver and

19 exonerating its bond, thereby, terminating the Receivership.

20

21 IT IS SO ORDERED.

22

23 DATED:

24

25

26

27

28

1#80494 vl aaf

JUL 1 2 201Z JUDITH A. SANDERS

Judge of the Superior Court

'fro T@

12 [PROPOSED] ORDER APPOINTING RBCEIVBRBXPARTE AND TR.O

CERF SPT'I, LLC vs. Cherokee Simeon Venture I, LLC. Contra Costa Superior Case No. C12-00284

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UNAUTHORIZED PRACTICE OF LAW

MANUAL FOR PROSECUTORS

LOS ANGELES COUNTY

OFFICE OF THE DISTRICT ATTORNEY

Steve Cooley District Attorney

County of Los Angeles

Thomas A. Papageorge Head Deputy District Attorney Consumer Protection Division

Kathleen J. Tuttle

Deputy District Attorney

Karen Nobumoto Deputy District Attorney

February 2004 Edited for Public Release

2

Access to an attorney to protect your rights is important in the American legal system. Unfortunately, some con artists undermine this vital key to justice by falsely claiming they are entitled to practice law. They often take large payments under false pretenses and harm the legal rights of their victims.

Such unauthorized practice of law (UPL) is a serious problem in Southern California. The crime hits immigrant communities especially hard as new arrivals to the United States seek to clarify their immigration status. Anyone, however, can be a victim. UPL occurs in all legal fields, including family law, personal injury, bankruptcy, and criminal law. As District Attorney, I am committed to combating this form of fraud. Working with the State Bar of California and various bar associations, the District Attorneys Office has launched a broad-scale effort to identify and prosecute these crimes. The District Attorneys Office has initiated numerous investigations and prosecutions against these unscrupulous con artists and is leading statewide efforts to enhance laws dealing with UPL. I gratefully acknowledge the work of the many other agencies and community bar associations which are active partners in addressing the problem of unauthorized practice of law. This version of the UPL manual has been prepared to assist those other offices and community groups which are active in this effort. Working together, we can protect the public from these fraudulent practices and promote the American ideal of justice for all. Steve Cooley District Attorney

PREFACE TO

THE PUBLIC EDITION

3

TABLE OF CONTENTS

This version of the Manual is for public use. It is a redacted version of the full-length Manual and includes only Chapters II and IV.

II. The Problem of Unauthorized Practice of Law in California p. 4 IV. Statutes Applicable to Unauthorized Practice of Law p. 14

4

Introduction The unauthorized practice of law is not a new phenomenon. Californias modern efforts to regulate law practice and discourage unqualified practitioners trace back to 1927 and before. But the UPL problem of today has taken on troubling new dimensions, as both Los Angeles and California as a whole struggle with the challenges and opportunities of unprecedented cultural diversity and social change. Disturbing new forms of UPL-related fraud are now commonplace, and the volume and intensity of complaints increase steadily. From unscrupulous consultants who prey on newcomers to America with promises of special influence at INS, to insurance salespersons masquerading as experienced estate planners, to disbarred attorneys, and those without any legal training at all, earning six figure incomes for unqualified workthe integrity of our system of access to justice is increasingly at risk. It is of vital concern to consumers, honest law practitioners, and the justice system as a whole that we identify these problems and implement new and better strategies to protect the public and our institutions. A. Historical Background of the UPL Issue 1. Regulating the Practice of Law in California Although California has governed law practice since its statehood, the modern era of attorney licensure and regulation began in 1927, with the passage of the State Bar Act,

Chapter II

THE PROBLEM OF UNAUTHORIZED PRACTICE OF

LAW IN CALIFORNIA

5

Californias first comprehensive effort to regulate the legal profession. The State Bar Act created the modern State Bar of California, with the California Supreme Court as the principal regulatory authority, and promulgated statutory standards for the practice of law, including the requirement of membership in the State Bar as the prerequisite for law practice in California. Business and Professions Code section 6125 codifies that requirement: No person shall practice law in California unless the person is an active member of the State Bar. (6125.) Regulation of attorneys and control over the practice of law are matters of great statewide importance. The profession and practice of the law . . . is . . . a matter of public interest and concern, not only from the viewpoint of its relation to the administration of civil and criminal law, but also from that of the contacts of its membership with the constituent membership of society at large, whose interest is to be safeguarded . . . the membership, character and conduct of those entering in and engaging in the legal profession have long been regarded as the proper subject of legislative regulation and control. State Bar of California v. Superior Court (1929) 207 Cal.323,331 (emphasis added); see also In re McKenna (1940) 16 Cal.2d 610. The State Bar Act represented a commitment to elevating and preserving the status of law practice as a learned profession imbued with special public responsibilities. The California Supreme Court has described this public policy: The right to practice law not only presupposes in its possessor integrity, legal standing and attainment, but also the exercise of a special privilege, highly personal and partaking of the nature of a public trust. It is manifest that the powers and privileges derived from it may not with propriety be delegated to or exercised by a nonlicensed person. McGregor v. State Bar (1944) 24 Cal.2d 283, 288 (emphasis added), citing Townsend v. State Bar (1930) 210 Cal.362, 364. UPL enforcement thus serves the policies of protecting potential clients and the integrity of the justice system. 2. Defining the Practice of Law: The Continuing Issue What constitutes the practice of law in California is an issue which is necessarily central to any discussion of enforcement of UPL laws. Neither the Business and Professions Code, nor any other California statute, comprehensively defines the practice of law for all purposes. Over the years this has raised questions about the precise parameters of the legal profession in California. But Californias Supreme Court and courts of appeals have knowingly crafted a broad definition of law practice suited to grow with the profession. The Supreme Court has described the evolution of this definition:

As early as 1922, before the passage of the modern State Bar Act, the Supreme Court adopted the definition of practice of law used in an Indiana

6

case: [A]s the term is generally understood, the practice of the law is the doing and performing services in a court of justice in any matter depending therein through its various stages and in conformity with the adopted rules of procedure. But in a larger sense it includes legal advice and counsel and the preparation of legal instruments and contracts by which legal rights are secured although such matter may or may not be depending in a court of law. (People v. Merchants Protective Corp. (1922) 189 Cal. 531,535, quoting Eley v. Miller (1893) 7 Ind. App. 529 [citations omitted].) The legislature adopted the State Bar Act in 1927 and used the term practice law without defining it. The conclusion is obvious and inescapable that in doing so it accepted both the definition already judicially supplied for the term and the declaration of the Supreme Court [in Merchants] that it had a sufficiently definite meaning to need no further definition. The definition quoted above from People v. Merchants Protective Corp. has been approved and accepted in subsequent California decisions [citations], and must be regarded as definitely establishing, for the jurisprudence of this state, the meaning of the term practice law.

Baron v. City of Los Angeles (1970) 2 Cal.3d 535, 542-543 (emphasis added), quoting People v. Ring (1937) 26 Cal.App.2d Supp. 768, 772; see Birbower, Montalban, Condo & Frank, P.C. v. Superior Court (1998) 17 Cal.4th 119, 127-128. Thus California today defines law practice as providing legal advice and legal instrument and contract preparation, whether or not these subjects were rendered in the course of litigation. Birbower, Montalban, Condo & Frank, P.C . v Superior Court., supra, at 128. Providing legal advice or service is a violation of the State Bar Act if done by an unlicensed person, even if the advice or service does not relate to any matter pending before a court. (Mickel v. Murphy (1957) 147 Cal.App.2d 718, 721.) This definition of law practice is broad and non-specific, but that policy choice is one which the California courts have made consciously. The California court of appeals has summarized the rationale for this broad approach as follows:

[A]ny definition of legal practice is, given the complexity and variability of the subject, incapable of universal application and can provide only a general guide to whether a particular act or activity is the practice of law. To restrict or limit its applicability to situations in the interest of specificity would also limit its applicability to situations in which the public requires protection.

7

People v. Landlords Professional Services (1989) 215 Cal.App.3d 1599, 1609. In sum, California uses a broad standard for defining law practice to maximize its ability to protect its citizens from wrongs arising from the practice or counterfeited practice of law. 3. The UPL Statute Today: Significant Changes The California statutes governing the unauthorized practice of law have changed significantly in the past two decades. Prior to 1988, the unauthorized practice of law whether by a layperson or an attorney having lost the privilege of practice was prosecutable exclusively as a misdemeanor. That year, the Legislature passed SB 1498 (Presley) in response to a growing problem of disbarred and suspended attorneys who continued to use their positions of trust and confidence to prey upon the public long after they had forfeited their right to practice. (Cal.Stats.1988, ch.1159.) SB 1498 added to section 6126 a new provision providing for alternate felony/misdemeanor prosecution of former attorneys engaged in UPL. All other UPL criminal violations continue as misdemeanors. Even after the 1988 amendments, section 6126 was troubled by several problems. As the statute was then worded, felony prosecution of a disbarred or suspended lawyer was not possible if the former attorney did not affirmatively advertise or hold himself out as entitled to practice law, even if the disbarred attorney continued to practice law actively. Non-lawyers who engaged in the practice of law were subject only to the statutes misdemeanor provision, which provided only the default six-month jail term of Penal Code section 19, and the numerous repeat offenders often faced little or no jail time as a practical matter. In addition, the statute was unclear as to the relevant time frame of licensure status for UPL purposes, raising the possibility that UPL activities could be unprosecutable if the defendant was licensed before or after the acts of unlicensed practice. In response to these concerns, Senate Bill 1459 (Romero), supported by a coalition including the State Bar, the Los Angeles District Attorneys Office, the California District Attorneys Association, the state Attorney General, and numerous community and bar organizations, was enacted by the state Legislature, effective January 1, 2003. (Cal.Stats.2002, ch 394.) Senate Bill 1459 made important improvements to Business and Professions Code 6126. The bill:

8

Doubled the maximum jail sentence for a misdemeanor UPL conviction of a non-attorney from six months to one year (6126(a)); Provided for a required county jail term of 90 days to one year for a second or subsequent UPL conviction, unless the interests of justice demand otherwise; and required that a court which deviates from this sentence must state its reasons on the record (6126(b)); Clarified that a person who is not a member of the California Bar, but is otherwise authorized to practice law in this state pursuant to court rule or statute (e.g., an out-of-state attorney appearing pro hac vice) is not engaged in the unauthorized practice of law (6126(a)); Clarified that whether an action constitutes UPL depends upon the suspects status when the disputed legal activity occurred, not his or her status before or after that time (6126(a)); and Eliminated a statutory loophole, thus permitting felony prosecution of disbarred or suspended attorneys engaging in UPL who continue to practice but arguably do not advertise or hold themselves out as entitled to practice law (either by disclosing to clients their changed licensure status or by remaining silent on the matter with continuing clients) (6126(b)). Section 6126, as amended effective Jan. 1, 2003, now provides as follows: 6126. Unlawful practice or advertising as crime

(a) Any person advertising or holding himself or herself out as practicing or entitled to practice law or otherwise practicing law who is not an active member of the State Bar, or otherwise authorized pursuant to statute or court rule to practice law in this State at the time of doing so, is guilty of a misdemeanor punishable by to one year in a county jail or by a fine of up to one thousand dollars ($1,000), or by both that fine and imprisonment. Upon a second or subsequent conviction, the person shall be confined in a county jail for not less than 90 days, except in an unusual case where the interests of justice would be served by imposition of a lesser sentence of less than 90 days for a second or subsequent conviction under this subdivision, the court shall state the reasons for its sentencing choice on the record. (b) Any person who has been involuntarily enrolled as an inactive member of the

9

State Bar, or has been suspended from membership from the State Bar, or has been disbarred, or has resigned from the State Bar with charges pending, and thereafter practices or attempts to practice law, advertises or holds himself or herself out as practicing or otherwise entitled to practice law, is guilty of a crime punishable by imprisonment in the state prison or county jail. However, any person who has been involuntarily enrolled as an inactive member of the State Bar pursuant to paragraph (1) of subdivision (e) of Section 6007 and who knowingly thereafter practices or attempts to practice law, or advertises or holds himself or herself out as practicing or otherwise entitled to practice law, is guilty of a crime punishable by imprisonment in the state prison or county jail. (c) The willful failure of a member of the State Bar, or one who has resigned or been disbarred, to comply with an order of the Supreme Court to comply with Rule 955, constitutes a crime punishable by imprisonment in the state prison or county jail. (d) The penalties provided in this section are cumulative to each other and to any other remedies or penalties provided by law.

B. The Unauthorized Law Practice Problem in California Today 1. The Challenge of Measuring the UPL Problem Prosecutors offices, consumer affairs agencies, and community bar associations report a growing volume of complaints of consumer fraud and abuse resulting from the unauthorized practice of law in such disparate fields as immigration law, bankruptcy, estate planning, landlord/tenant disputes, and criminal law. But assessing the rising tide of UPL complaints is a difficult task, made even more problematical by the fragmentary nature of available statistics. This difficulty of assessment is common to all forms of fraud. In measuring the full scope of the UPL problem, and based on the universal experience of federal and state consumer protection officials, our only certainty is that the problem is large and growingand appears to be under-reported even more chronically than other forms of fraud complaints. There are a number of reasons for the under-reporting of UPL-related matters. As with other forms of fraud, UPL fraud victims are often unaware they have been victimized, at least in the near term. It is usually not until long after they have parted with their money that victims

10

realize that the immigration assistance or bankruptcy stays or unlawful detainer papers they have bought dearly will not yield the results that were promised. Often, these victims are not sophisticated about the legal process and do not realize that the fault was that of the UPL suspect, and not their own. Also, UPL victims, like other fraud victims, are often ashamed or embarrassed about falling for illegal schemes (whether this embarrassment is justified or not), and as a result they are frequently reluctant to come forward to authorities. However, unlike many other fraud victims, UPL victims are often recently arrived or undocumented immigrants who are highly unwilling to identify themselves to law enforcement agencies. Even those who are here lawfully often face substantial language barriers in attempting to explain their victimization to authorities. Based on experiences with other governments, these victims are often distrustful of the government and the legal systema problem exacerbated by the very experiences they should complain of. Many users of marginal or unauthorized legal services are poor or modestly educated. These victims tend to be unaware of proper channels for crime complaints, and often cannot devote the time and resources needed to pursue these matters. Experienced consumer fraud prosecutors estimate that the ratio of actual violations to formal complaints filed with authorities in fraud cases ranges from 10-1 to 50-1, depending on the industry, the dollar value of harm, and the nature of the victim class. Poor and uneducated victims with uncertain immigration status, for example, would certainly be at the far end of this spectrum. Each written complaint from this source probably represents fifty or more violations. 2. Assessing the Scope of the Problem State Bar of California complaint data provide at least a partial picture of the extent of this problem and the types of UPL activities taking place. The bulk of State Bar complaints concern the conduct of active members of the Bar. The State Bar also receives complaints against non-lawyers for unauthorized practice of law, but this is not a basic function of the State Bar disciplinary systemthese complaints are not solicited and often cannot be investigated by the State Bar staff. Thus State Bar UPL complaints are necessarily only a fragment of the UPL universe. Even given this fragmentary nature, the pattern of UPL complaints received by the State Bar is revealing. Table 1 indicates the State Bar received 210 complaints involving non-attorney

11

UPL in 2001, and 25% more such complaints (262) just two years later. The most recent data from 2002-2003 indicate that a minimum of 250+ non-attorney UPL complaints per year are received by the State Bar intake center, notwithstanding that investigation of these complaints is not part of the core mission of the State Bar disciplinary system. Using a highly conservative 10-1 violations-to-complaints ratio, these data suggest thousands of non-attorney UPL violations occur each year. Table 1. Non-Attorney UPL Complaints Received by State Bar (2001-2003). Subject Area 20011 2002 2003 Immigration 83 109 General Civil 36 37 Family Law 9 8 Criminal Law 13 4 Personal Injury 8 13 Identity Theft 12 11 Bankruptcy 3 5 Collections 7 17 Probate 21 19 Other/Unidentified 52 39 TOTALS 210 244 262 State Bar complaints against disbarred/resigned and suspended attorneys indicate a similar pattern. Table 2 shows the State Bar received 215 complaints of UPL against former attorneys in 2001, but an average of 339 complaints in 2002 and 2003 (a 57% increase over 2001). Clients using apparently licensed attorneys are a class of consumers more likely to complain formally to the State Bar. However, these recent averages suggest thousands of actual violations in recent years, using minimum consumer fraud projection ratios.

1 State Bar data by complaint category is only available for 2002 and 2003.

12

Table 2. Former Attorney UPL Complaints to State Bar (2001-2003). Complaint Subject 2001 2002 2003 Disbarred/Resigned Attorneys 14 36 41 Suspended Attorneys 201 355 246 TOTALS 215 391 287 The pattern from existing consumer complaint data is fully supported by the continuing experiences reported in recent years by the community bar associations of Southern California, including the Mexican American Bar Association, the Southern California Chinese Lawyers Association, the Korean American Bar Association, the Asian Pacific American Legal Center, Public Counsel, and the Bet Tzedek Law Center. These organizations have reported to this Office that consumer complaints of UPL abuse and fraud have increased alarmingly in the communities these groups represent. In sum, complaint statistics and reports from a wide spectrum of community groups together indicate a clear pattern: the unauthorized practice of law is a serious and growing problem in California. 2. Continuing and New Patterns of UPL Activities Table 1 (above) illustrates the range of unauthorized law practice activities now occurring in California. The pattern of UPL problems consists of both traditional forms of UPL and new variations reaching into additional areas of legal service. The traditional forms of UPL continue to generate a significant portion of consumer complaints. The second highest total of specific State Bar complaints (more than of 20% of all complaints) consists of UPL allegations in the general civil area of practice, and many complaints fall into the unspecified/general practice category. Consumer organizations and prosecutors continue to field complaints of paralegals posing as attorneys and performing general functions in civil law practice (see, e.g., UPL complaint in People v. Hylland in chapter VII), as well as complaints of resigned attorneys simply continuing their previous general law practices (see, e.g., UPL complaint in People v. Schultz in chapter VII). However, the complaint information also indicates that UPL fraud and abuse is occurring with greater frequency in specialty areas of law practice reflecting the legal issues facing our community in the 21st century. Chapter V (Special Types of UPL Matters) provides details on

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these new and emerging aspects of the UPL problem, including: UPL and immigration fraud. As Los Angeles has become the nations immigration hub, the demand for legal services to assist new arrivals has made immigration UPL fraud the top source of non-attorney UPL complaints to the State Bar (at 31% of the 2002-2003 total). The wave of immigration fraud matters led this Office to coordinate the Los Angeles Immigration Fraud Task Force, a working group of more than 20 law enforcement agencies and community organizations, and that Task Force has successfully prosecuted more than 50 felony and misdemeanor matters in this field since 1998. Other new forms of UPL now occur with frequency in such fields of practice as: Estate planning and living trust counseling (see, e.g., People v. Fremont Life Ins. Co., (2002) 104 Cal. App. 4th 508); Bankruptcy counseling and petition preparation (see, e.g., In re Anderson (1987) 79 B.R. 482; In re Kaitangian (1998) 218 B.R. 102; In re Boettcher (2001) 262 B.R. 94); Landlord-tenant and housing issues (see, e.g., People v. Landlords Professional Services (1989) 215 Cal.App.3d 1599); and Identify theft and personal privacy (see People v. Morrison discussion in chapter V). (See generally chapter V.) Conclusion All relevant indicators confirm there has been a troubling increase in both the number and the types of unscrupulous UPL-related practices victimizing Californians just when they are most vulnerablewhen they need skilled professional assistance to protect their rights in an increasingly complex legal system. It is the conclusion of this Office that the appropriate response is a comprehensive and consistent effort to detect, punish, and prevent the unauthorized practice of law and related fraud and abuse, as these practices significantly harm consumers, honest competitors, and our system of justice.

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Chapter Outline Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A. Business and Professions Code section 6125 et seq.: Definition of UPL and Elements of the Crime . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1. UPL Statutory Scheme . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2. Definition of the Practice of Law . . . . . . . . . . . . . . . . . . . . . . . . . . . 3. Elements of the Offense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . B. Other Statutory Alternatives for Prosecuting UPL. . . . . . . . . . . . . . . . . 1. Grand Theft by False Pretenses (Pen. Code 484/487) . . . . . . . . . 2. Illegal Practice of Business (Bus. & Prof. Code 16240) . . . . . . . . 3. Immigration Consultants Act (Bus. & Prof. Code 22400 et seq.) . 4. False or Misleading Statements in an Immigration Matter (Penal Code 653.55) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5. False Advertising (Bus. & Prof. Code 17500) . . . . . . . . . . . . . . . 6. Unfair Competition (Bus. & Prof. Code 17200 et seq.) . . . . . . . . 7. State Bar Ethical Standards and Related Rules and Statutes . . . . . . Introduction Acts constituting the unauthorized practice of law may violate many different California statutes and ethics regulations. In assessing potential charges, the prosecutor should consider all alternatives, including criminal sanctions in the Business and Professions and Penal Codes, civil remedies in the Business and Professions Code and elsewhere, and potential referral for violations of State Bar ethical standards. UPL cases need not be complex, and often the basic

Chapter IV

STATUTES APPLICABLE TO UNAUTHORIZED PRACTICE

OF LAW

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UPL misdemeanor charge is all that is appropriate. However, sound charging decisions call for consideration of all relevant alternatives. In considering these alternative charges, the prosecutor should consult as needed with the special units in the District Attorneys Office which have relevant expertise: Justice System Integrity Division (213-974-3888) Felony charges against disbarred or resigned attorneys who continue to practice, or for attorney misconduct more generally; Consumer Protection Division (213-580-3273) Cases involving unfair and deceptive business practices, false advertising, and for information or assistance with civil enforcement tools; Major Fraud Division (213-580-3200) Cases involving complex and large-scale fraud offenses. These divisions stand ready to assist in case evaluation and application of the statutes referenced in this chapter. A note of caution is appropriate with regard to the broad concept of practice of law upon which the crime of UPL is dependent. Although this chapter summarizes the extensive case law guidance on this term, there is no state statute which comprehensively defines the practice of law. Most cases will involve clear facts of law practice, but prosecutors should be alert for issues arising in this regard.

A. Business and Professions Code section 6125 et seq.: Definition of UPL and Elements of the Crime

1. UPL Statutory Scheme The unauthorized practice of law is governed by Business and Professions Code sections 6125-6133. (All following references in this section are to the Business and Professions Code, unless otherwise specified.) The California Legislature enacted these provisions originally in 1927 as part of the State Bar Act which comprehensively regulated the practice of law in California. These provisions require licensure to practice law; punish unauthorized practice of law and related practices; and provide a wide range of potential civil remedies ancillary to an enforcement case.

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a. Licensure Required Section 6125 establishes the basic requirement of licensure to practice law: No person shall practice law in California unless the person is an active member of the State Bar. (6125.) The California requirement of licensure to practice law is a valid exercise of the states police power and serves the legitimate state interest of assuring the competency of those performing this service. (J.W. v. Superior Court (1993) 17 Cal.App.4th 958.). The licensure requirement does not violate First Amendment free speech rights (Howard v. Superior Court (1975) 52 Cal.App.3d 722), and has survived Equal Protection challenge (People v. Sipper (1943) 61 Cal.App.2d Supp. 844). b. Unauthorized Practice or Attempted Practice Prohibited Section 6126 is the basic charging statute for most UPL crimes. Section 6126(a) provides, in relevant part:

Any person advertising or holding himself or herself out as practicing or entitled to practice law or otherwise practicing law who is not an active member of the State Bar, or otherwise authorized . . . to practice law in this state at the time of doing so, is guilty of a misdemeanor . . . (6126(a).)

Misdemeanor violation of section 6126 is punishable by up to one year in county jail or a fine of up to $1000, or both. However, in a new provision sponsored by the State Bar and this Office, upon a second or subsequent conviction, the defendant shall be confined in a county jail for not less than 90 days, except in an usual case where the interests of justice would be served by a lesser sentence. If the court imposes the lesser sentence, it must state its reasons on the record. (6126(a).) A felony charge is available for any person who has been suspended from membership from the State Bar, or has been disbarred, or has resigned from the State Bar with charges pending, and thereafter practices or attempts to practice law , or advertises or holds himself or herself out as entitled to practice law. (See alternate felony/misdemeanor provision of 6126(b).) c. Other Sanctions for UPL-Related Offenses

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A felony may also be charged in a case of a willful failure of a State Bar member to comply with a Supreme Court order under Rule 955 regarding return of documents and legal fees, notice to clients and opposing counsel, and other matters. (6126(c).) And contempt of court sanctions are available where a person assumes to be an attorney without authority, or advertises or holds himself or herself out as entitled to practice law. (6127.) All penalties under section 6126 are cumulative to each other and any other remedies provided by law. (6126(d).) d. Other Remedies for UPL Violations In an important new development in UPL enforcement, legislation in 2001 (Stats.2001, c.304 (SB 1194)) added a new section 6126.5, which provides prosecutors a wide range of additional remedies and penalties available in any enforcement action brought in the name of the people of the State of California by the Attorney General, a district attorney, or a city attorney, acting as a public prosecutor. In UPL cases where victims purchased services or goods, or were otherwise harmed, the court is empowered to award as additional relief in the enforcement action:

(1) Actual damages. (2) Restitution of all amounts paid. (3) The amount of penalties and tax liabilities incurred in connection with the sale or transfer of assets to pay for any goods, services, or property. (4) Reasonable attorney's fees and costs expended to rectify errors made in the unlawful practice of law. (5) Prejudgment interest at the legal rate from the date of loss to the date of judgment. (6) Appropriate equitable relief, including the rescission of sales made in connection with a violation of law. (6126.5(a).)

The court is to award this relief directly to victims, or if direct restitution is impracticable, the court may distribute this relief as it chooses pursuant to its equitable powers. (6126.5(b).) Significantly, prosecutors may also recover reasonable attorney's fees and costs and, in the court's discretion, exemplary damages as provided in Section 3294 of the Civil Code (the provision governing such damages in California litigation). (6126.5(c).)

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Prosecutors should now actively consider these alternative remedies in UPL cases, in addition to traditional criminal fines and imprisonment. And these new remedies are expressly cumulative of each other and all other remedies and penalties provided by law. (6126.5(d).) 2. Definition of the Practice of Law a. Case Law Definition of Practice Law Successful UPL prosecution under section 6126 requires that the prosecutor prove the defendant sought to practice law," or advertised or held himself or herself out as entitled to practice law. (6126(a).) Neither the Business and Professions Code, nor any other California statute, comprehensively defines the practice of law. However, the California Supreme Court and courts of appeal have developed a definition of law practice within the meaning of the State Bar Act, and the Supreme Court has concluded that this case law definition serves the purpose of . . . definitively establishing, for the jurisprudence of this state, the meaning of the term practice law. (Birbower, Montalban, Condo & Frank, P.C. v. Superior Court (1998) 17 Cal.4th 119, 127-128.) The Supreme Court has determined that the term practice law as used in sections 6125 and 6126 means:

. . . the doing and performing services in a court of justice in any matter depending therein throughout the various stages and in conformity with the adopted rules of procedure. It includes legal advice and counsel and the preparation of legal instruments and contracts by which the legal rights are secured although such matter may or may not be depending in a court.

People v. Merchants Protective Corp. (1922) 189 Cal. 543, 535 (emphasis added), cited with approval in Birbower, Montalban, Condo & Frank, P.C. v. Superior Court (1998) 17 Cal.4th 119, 127-128. Law practice encompasses legal advice and legal instrument and contract preparation, whether or not these subjects were rendered in the course of litigation (Birbower, Montalban, Condo & Frank, P.C., supra, at 128), and the giving of legal advice on a matter not pending before a court is nonetheless a violation of section 6125 and 6126. (Mickel v. Murphy (1957) 147 Cal.App.2d 718, 721.)

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Thus the California Supreme Courts functional definition of law practice, as developed in Birbower and Merchants Protective Corp., supra, can be summarized as the giving of legal advice and counsel and the preparation of legal instruments affecting the clients legal rights. This definition, does not encompass all lawyers professional activities which could reasonably be included . . . however, the definition does delineate those services which only licensed attorneys can perform. Baron v. City of Los Angeles (1970) 2 Cal.3d 535, 542-543. See also State Bar of California v. Superior Court (1929) 207 Cal. 323, 331; People v. Ring (1937) 26 Cal.App.2d Supp. 768, 772-773. (See further discussion of definition of law practice and policies behind it in Ch. II (The UPL Problem in California).) Although the Business and Professions Code does not provide a comprehensive statutory definition of law practice for all purposes, other statutes in the Code provide additional guidance and may be useful to supplement the broad definition of Merchants and Birbower. Most directly applicable are the provisions of the Business and Professions Code governing the work of legal document preparers (sections 6400 et seq.). For the purposes of this regulatory scheme, section 6411(d) provides: The practice of law includes, but is not limited to, giving any kind of advice, explanation, opinion, or recommendation to a person about that person's possible legal rights, remedies, defenses, options, selection of forms or strategies. b. Examples of the Practice of Law California courts have found the practice of law in circumstances including the following: Providing legal advice and counsel for clients even when no matters were pending before a court (People v. Merchants Protective Corp. (1922) 189 Cal.531, 535; Simons v. Stevenson (2001) 88 Cal.App.4th 693); Preparing a trust deed (People v. Sipper (1943) 61 Cal.App.2d Supp. 844); Operating an eviction service by providing information to clients concerning eviction procedures (People v. Landlords Professional Services (1989) 215 Cal.App.3d 1599); Providing bankruptcy legal services (In re Anderson (1987) 79 B.R. 482, 485 (paralegal assisting with bankruptcies answered legal questions and assisted in legal decisions, all of which acts "require the exercise of legal judgement beyond the knowledge and capacity of the lay person"); In re Kaitangian (1998) 218 B.R. 102, 113 ("bankruptcy petition preparers are strictly limited to typing bankruptcy forms"); In re Boettcher (2001) 262 B.R. 94 (bankruptcy

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petition preparer selected appropriate form, later prepared by attorney, but actions still constituted UPL); Selection and preparation of marital dissolution documents, and providing counseling/ drafting services for the public concerning corporate formation, bankruptcy and real estate (State Bar Ethics Opinions 1983-7, 1983-12); Selling estate planning services (involving preparation of trusts and wills), and falsely representing that attorneys would oversee such services and prepare the documents (People v. Fremont Life Ins. Co., (2002) 104 Cal. App. 4th 508); Operating a phony legal aid business providing legal advice, violating both the State Bar Act and the unfair competition law (Brockey v. Moore (2002) 107 Cal. App.4th 86); Merely holding oneself out as a licensed attorney by a layman or suspended attorney, even if no actual legal services are rendered (Farnham v. State Bar (1976) 17 Cal.3d 605); A single act of law practice, even without allegation or proof of a pattern of conduct or a business practice (People v. Ring (1937) 26 Cal.App.2d Supp. 768); Providing legal advice or assistance from out-of-state to a California resident, using the telephone, fax, computer, or other new technologies (Simons v. Stevenson (2001) 88 Cal.App.4th 693). c. Examples of Activities Which Are Not the Practice of Law California courts have found no practice of law, within the meaning of sections 6125 and 6126, in the following circumstances: Self-representation, as law practice in this context means practice or assistance on behalf of others and does not affect a persons right to appear and conduct his or her own case (Gray v. Justice Court of Williams Judicial Township (1937) 18 Cal.App.2d 420); Giving a client a manual on the preparation of unlawful detainer cases, where defendant did not personally advise the client with regard to a specific case (People v. Landlords Professional Services (1989) 215 Cal.App.3d 1399, review denied);

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Tasks merely preparatory in nature performed by nonattorneys in a law firm supervised by an attorney (In re Carlos (Bkrtcy.C.D.Cal.1998) 227 B.R. 535); Negotiating a tax settlement with the federal government on behalf of a client, where the issue (whether reserves constituted taxable income) was within the normal purview of an accountant (Zelkin v. Caruso Discount Corp. (1960) 186 Cal.App.2d 802); The acts of a scrivener filling in the blanks on a form at the direction of a client (People v. Landlords Professional Services (1989) 215 Cal.App.3d 1599, 1608 (defendants who "made forms available for the client's use and filed and served those forms as directed by the client did not practice law); Mickel v. Murphy (1957) 147 Cal.App.2d 718; People v. Sipper (1943) 61 Cal.App.2d Supp. 844). 3. Elements of the Offense The elements of the offenses of unauthorized practice of law, as prohibited in section 6126, are as follows: a. Practicing law, or advertising or holding oneself out as practicing law, without authorization (Bus. & Prof. Code 6126(a), a misdemeanor) (1) A person practiced law, OR advertised or held himself or herself out as entitled to practice; AND (2) That person is not an active member of State Bar or otherwise entitled to practice law pursuant to statute or court rule. b. Practicing law while involuntarily enrolled as inactive member (Bus. & Prof. Code 6126(b), an alternate felony/misdemeanor) (1) A person practiced law or attempted to practice law, OR advertised or held

himself out as practicing or otherwise entitled to practice law; AND (2) That person was involuntarily enrolled as an inactive member of the State Bar.

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c. Practicing law, or advertising and holding oneself out as entitled to practice law, while disbarred/suspended/resigned with charges pending (Bus. & Prof. Code 6126(b), an alternate felony/misdemeanor) (1) A person practic