Panel calls for clear rules on technology-based practices

Law Society of Upper Canada hearing panel has partly vindicated a Markham, Ont., lawyer in what her counsel says was a test case on the rules surrounding high-volume, technologically based practices.

“Deanna Natale is just an incredibly respected and accomplished woman and an extraordinary lawyer,” says her counsel, William Trudell, following the hearing panel’s recent ruling in the long-running case.

The law society accused Natale of breaching the Rules of Professional Conduct by sending out demand letters and draft statements of claim as part of her debt-collection work on behalf of clients. It also accused her of failing to assume complete professional responsibility for her practice by not directly and effectively supervising staff delegated to collection activities.

Trudell says Natale was carrying the burden for the entire profession because the matter was really a test case on the larger issue of high-volume, technologically based practices. Ultimately, the hearing panel found the law society hadn’t proven the first allegation on a balance of probabilities. But it did find a breach on the issues related to supervision of staff. The hearing panel will consider a reprimand this week.

In its decision, the three-member panel chaired by Howard Goldblatt stressed that there is a role for the law society to play on this issue. At the root of the dispute was the structure of the practice, a one-lawyer office dealing with a high volume of files using computer-generated standardized letters and forms and an absence of individualized file review. Over the course of four years, the office issued 200,000 demand letters about possible actions with only one per cent of them or less actually pursued in court. Mark Silverthorn, a Kitchener, Ont., lawyer who had previously done collections work and now acts for consumers, went public with his concerns about Natale’s approach and complained to the law society about it a couple of years ago.

“Practice of this nature would have been unthinkable prior to the advent of technological advances. Yet this and other novel forms of ‘virtual law practice’ may become increasingly common in the future,” wrote Constance Backhouse on behalf of the panel.

The panel pointed out that there are no regulatory guidelines for lawyers who do collections work and no rules prohibiting sending demand letters or draft statements of claim. Although the law society had concerns over the size of the practice, its structure, and the difficulties of overseeing a high-volume business model, there was no suggestion at the hearing as to how many files a lawyer could take on.

“Indeed, neither party was able to offer assistance on the matters that formed the heart of the dispute,” wrote Backhouse. “The law society and the lawyer disagree on whether the nature of this newly structured law practice ran afoul of professional obligations, and the evidence put forth was insufficient for the panel to rule on one side or the other,” she added.

Instead of initiating an individual investigation and disciplinary hearing into the complaints Natale’s practice generated, the panel suggested a better response would have been to examine the systemic approach some law practices have adopted. The panel suggested the LSUC should take a thorough look at how it needs to change its “traditional regulation” in order to adapt to the new approaches while protecting the public.

And it went further by characterizing the disciplinary approach against Natale as unfair.

“These are matters that should be dealt with in the context of Convocation, setting regulatory guidelines after a widespread policy review, and not through professional disciplinary proceedings brought against an individual lawyer,” wrote Backhouse.

The panel “recommends strongly that the law society refer these and other matters relating to newly structured ways of delivering legal services to a committee that can obtain expert input, conduct policy analysis, and provide a comprehensive review,” she continued.

In finding that Natale had failed to directly and effectively supervise her staff, the panel concluded she had failed to assume complete responsibility for her office. “The evidence demonstrates that some of the non-lawyer staff members of the Natale law office were rude, misleading, harassing, and threatening in their efforts to follow up the claim letters,” wrote Backhouse.

“In some instances, the staff requested that the individuals they contacted provide documentation to prove that they were not indebted, when the lawyer herself was unable to provide for them any details of the alleged debt. In some instances, the staff followed up the claim letters erroneously, with individuals who were not the debtors — because they had already paid off the debt, because they had declared bankruptcy, and in some cases because they had simply been misidentified as the debtors when they had nothing to do with the case at all.”

Trudell says the panel was very critical of the approach against Natale and seemed to struggle with what to do. “It probably should have been done differently. I have never seen a case where someone had to go through what Deanna Natale had gone through. But she is strong, she is resolute, she is ethical, and she survived this. She was carrying a real load for the profession.”

Trudell says it’s now in the hands of the law society to examine the issue of high-volume law practices that rely on technology.

For its part, the law society says it’s aware of the panel’s reasons and is reviewing them.

“If it’s determined that rule, bylaw or policy amendments are required, we will refer these to appropriate committees of Convocation for consideration,” said Susan Tonkin, communications adviser for the law society.

As for Natale, Trudell says she no longer does debt-collection work and will accept the reprimand imposed by the panel and waive her appeal rights.

For more, see "Lawyer takes on colleague over collections practice," "Lawyers in trouble over draft claims fights back," and "Lawyer seeks stay over 'fundamental unfairness.'"

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