Jonak v. McDermott

Edward Jonak (defendant), a nonlawyer, owned Affordable Law Center (ALC) (defendant), which had several offices throughout Minnesota. ALC was not a law firm and employed no Minnesota-admitted lawyers. Nevertheless, Jonak advertised legal-aid services on the internet and in newspapers, and he maintained a phonebook listing under “Attorneys, Bankruptcy.” Several people (collectively, the debtors) hired ALC to provide bankruptcy services after seeing Jonak’s ads. Jonak had the debtors complete questionnaires prepared by a bankruptcy-petition processing center and then submitted the completed questionnaires to the processing center, which typed the necessary bankruptcy documents. During the debtors’ bankruptcy proceedings, concerns arose regarding Jonak’s and ALC’s interactions with the debtors. Among other things, the debtors said that Jonak had given them advice including which exemptions they could take, how they could keep their homes in bankruptcy, and how they could seek discharge of certain debts. Some debtors expressed confusion regarding whether ALC was a law firm and whether Jonak was a lawyer. Moreover, 15 of 18 debtors did not disclose Jonak’s role in preparing their petitions or fees paid to Jonak, even though this information was required by the Bankruptcy Code. The United States trustee (plaintiff) filed an adversary complaint against Jonak and Jonak-owned entities, alleging that Jonak had violated the Bankruptcy Code’s requirements for bankruptcy-petition preparers under 11 U.S.C. § 110 and the Bankruptcy Code’s requirements for debt-relief agencies under 11 U.S.C. §§ 526–528. The trustee sought injunctive relief and the imposition of statutory fines and penalties. The bankruptcy court granted summary judgment for the trustee and ordered the requested relief, finding that Jonak had violated § 110 by engaging in the unauthorized practice of law and furnishing legal advice to some debtors, among other things. The bankruptcy court also found that Jonak had violated §§ 526–528 by failing to make necessary disclosures to the debtors, by misrepresenting his services, and by fostering the filing of untrue or misleading bankruptcy forms. Jonak appealed.