Sharply Divided Supreme Court Declines to Establish a Bright-Line Rule on Non-Lawyers Representing Corporations in Administrative Actions

by Sedgwick LLP
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A non-lawyer with no apparent formal connection to a corporation is the sole representative of the corporation at an administrative proceeding. When the decision comes down, it’s never properly served on the corporation. Is the non-lawyer’s participation imputed to the corporation, meaning that the corporation had notice of the adminstrative proceeding and it’s now final and binding? Two weeks ago, a sharply divided Illinois Supreme Court held in Stone Street Partners, LLC v. The City of Chicago Department of Administrative Hearings that the answer was no. Our detailed report of the underlying facts and lower court rulings is here. Our report on the oral argument is here.

The plaintiff in Stone Street is the owner of property in the City of Chicago. In March 2009, the City recorded a judgment against the property for $1,050 in fines and costs for building code violations. The judgment had been entered ten years earlier.

Although much of the record from the 1999 action has been destroyed, what little remained failed to establish that anyone affiliated with the plaintiff had been contemporaneously notified of the matter. A “communication transmittal form” noting the purported building code violations listed the wrong property owner. The notices were mailed to an entirely different entity which was neither an agent or representative of the plaintiff. Copies were sent to “Stone Street Partners,” but the notices were sent to the wrong address and carried the wrong name.

Nevertheless, a non-lawyer entered a written appearance in the 1999 administrative proceeding. He left blank the section of the appearance form where he was asked to state under oath that he was the owner, lessee, attorney or authorized agent of the owner of the property. As best anyone could tell, the individual who appeared had no connection with the property or the owner – he was the private caretaker for one of the members of the plaintiff entity. However, because that member had diminished mental capacity due to a stroke, he could not have given the caretaker authority to represent the plaintiff.

After the plaintiff learned of the 1999 judgment in 2009, its counsel wrote to the City, demanding that the judgment be released and its title to the property be cleared. When that didn’t happen, the plaintiff sought relief with the Department of Administrative Hearings, asking that the judgment be set aside since the caretaker could not possibly have validly represented the corporation without being guilty of unauthorized practice of law. The Department denied the request, holding that it lacked jurisdiction to set aside the 1999 judgment. So the plaintiff filed a complaint for administrative relief, asking that the 1999 judgment be set aside. The City moved to dismiss. The court granted dismissal with respect to three claims, but affirmed the Department’s decision that it lacked jurisdiction over the 1999 judgment on the remaining claim. The Court of Appeal reversed in part, relying heavily on its view that the plaintiff could not have waived its objection to proper notice because the caretaker who appeared on its behalf was not a lawyer.

In an opinion for a narrow 4-3 majority by Chief Justice Karmeier, the Supreme Court affirmed. The majority agreed that the caretaker’s status was central to the question of whether the plaintiff could now challenge the 1999 judgment. Absent a holding that the caretaker’s presence was imputed to the plaintiff, there was no possible basis for concluding that the company had ever received notice. But that issue didn’t depend on whether or not the caretaker was a lawyer, since if he had no authority, either actual or potential, to represent the corporation, it didn’t matter whether or not he was an attorney. Where there’s no authority, even an attorney’s acts are a nullity against the party.

And in fact, there was no possible basis for finding that the caretaker had authority to appear. He didn’t own the subject property, he wasn’t the lessee, he wasn’t a lawyer, and he neither worked for nor represented the plaintiff company.   Finally, nothing the company had done or failed to do arguably gave him apparent authority to appear. Given that, the caretaker’s participation was not imputed to the corporation. Since the 1999 notice was neither served on the corporation’s registered agent nor sent to its principal place of business, the corporation was never served with the notice as a matter of law, and the Department failed to acquire personal jurisdiction over the plaintiff corporation. Since the 1999 judgment was void ab initio, it could be collaterally attacked at any time. Accordingly, the plaintiff was entitled to go forward with its claims to quiet title.

Justice Freeman dissented, joined by Justices Burke and Theis. According to the dissenters, the record was inadequate to conclusively establish that the plaintiff had never waived its jurisdictional challenge. The dissenters pointed out that there had been an additional hearing a month before the one where the caretaker appeared, and that the surviving order indicated that someone had appeared on the plaintiff’s behalf. The dissenters argued that there was no basis for concluding that no waiver of jurisdiction had happened at that hearing. Finally, the dissenters concluded that the Court should have addressed the unauthorized practice of law issue and held that appearing at an administrative hearing on behalf of a corporation did not constitute the practice of law.

Image courtesy of Flickr by Chris Brown (no changes).

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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