Francorp's One-Stop-Shop Program Scrutinized at ABA Forum
Ethical Issues Raised Regarding Franchise Consultants and Lawyers PHOENIX (Blue MauMau) - At the 30th American Bar Association Forum on Franchising last month, speakers Michael H. Seid, Michael H. Seid & Associates LLC, and Leonard D. Vines, Greensfelder, Hemker & Gale, P.C., discussed the respective roles of the franchise consultant and the franchise lawyer. As Mr. Seid opened the session he said, "We will be discussing the Francorp case. Their Forum Paper explains: "Perhaps the most significant case that faced the issue of the unauthorized practice of law by a franchise consultant is Francorp, Inc. v. Siebert."
Francorp's former president, Mark Siebert, who had started a competing business, brought a counter-claim against Francorp at one point during litigation, alleging that Francorp's preparation of franchise documents constituted the unlawful practice of law, which constituted an unfair trade practice under the Illinois Uniform Deceptive Trade Practices Act. The court determined, according to the Forum paper, that "one who reviews documents produced by a lawyer, critiques them, and advises another of their legal consequences is practicing law." The court continued, "[n]o matter how knowledgeable the lay person, or how inexperienced the lawyer, however, Illinois has rendered its judgment that certain tasks are to be performed only by licensed attorneys directly engaged by the client." The court made it clear that an in-house attorney can only perform legal services for their employer and not for his or her employer's clients.
But based on the findings that drafting the legal disclosure documents and executing registration certificates constitute the practice of law, and that the evidence suggested that Francorp was doing significant legal work with outside attorneys only on the cursory review of documents, the court refused summary judgment. The Forum paper explains that it was so because the precise division of responsibilities between Francorp and the independent counsel was unclear and very much in dispute.
Although no reported decision followed, Seid and Vines' Forum materials state that the ruling indicates that a consultant who creates legal documents, even through a licensed in-house attorney, would be treading on thin ice. But it continues, "The case did not address whether legal advice generally provided by consultants, as part of their services, would constitute an unauthorized practice of law by the consultant."
Francorp's Current Little Problem
When working with an "all-under-one-roof" consulting firm like Francorp, one insider states it is critical that the staff has the necessary experience and credentials. But according to reliable sources, Francorp is now operating with an inexperienced legal department, especially after the departure of several key consultants last summer and the release of the firm's most seasoned franchise attorney in recent weeks. But according to Francorp’s legal services website, the consulting firm continues its same practice in preparing disclosure documents for its clients through its in-house counsels, which are then submitted to their attorneys.
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