Responding to State Professional Licensing Board Complaints

In South Carolina, the Department of Labor, Licensing & Regulation (“LLR”) is responsible for 42 different professions, including accountants, chiropractors, dentists, real estate appraisers, real estate brokers and agents, and veterinarians.  A complete list of the professionals licensed and regulated by the LLR in South Carolina can be found here:  www.llr.sc.gov/professions.aspx.  Each profession has its own provisions in the South Carolina Code of Laws and the South Carolina Code of Regulations; however, the complaint process and procedures are the same across the different professions and their governing Boards. A complaint, regardless of merit, will be investigated by the LLR.  On the front page of the LLR’s website is a link to file a complaint.  A client, opposing party, fellow professional, or any member of the public can file a complaint against a professional in South Carolina.  It is easy to do and does not cost the complainant any money, but it has potentially devastating impacts on the professional and his or her ability to practice in the State of South Carolina.

The Complaint Investigation Process

Once a complaint is filed, the investigator assigned by the LLR will contact the licensed professional to notify them of the complaint.  The investigator typically also attempts to discuss the complaint with the professional at that time or sets up a time in to discuss the complaint with the professional. In my experience, the LLR investigators are professional and pleasant, but it is important for respondents to understand that the investigator’s job is to determine whether there is merit to the complaint such that it should go before the Investigative Review Committee (“IRC”) for each particular licensing Board.  I am frequently contacted by clients who have already spoken to the LLR investigator, and I recommend that any professional notified of a LLR complaint contact your lawyer prior to speaking with the LLR investigator.  In addition to the interview process, professionals are given the opportunity to submit a written response to the complaint in addition to any supporting documents from their file.  Again, it is wise to engage a lawyer to assist with this process.  In addition, many professionals do not realize their professional malpractice insurance policies may have coverage for a Board licensing or disciplinary complaint.  Upon receipt of notice of the complaint, I recommend you immediately contact your insurance broker and/or professional liability insurer to determine if you have coverage.  Often, the coverage is separate from the malpractice coverage and provides a specific dollar amount for defense costs associated with the complaint.  The policies rarely cover any penalties associated with the complaint, but the defense cost coverage can be a significant help in opposing the complaint.  Professionals may have the ability to select their own counsel, or the insurance carrier will select counsel for them, however, most insurance companies will entertain a counsel request if you have a specific lawyer you would like to represent you.

Once the investigation is complete, the LLR investigator presents his or her findings to the IRC, which is a committee comprised of former Board members, other professionals in the field, and possibly non-professionals who advise the licensing board as to the complaint.  The IRC is advisory only and does not have the authority to act on behalf of the Board; however, in practice, the licensing boards often follow the recommendations of the IRC as to proceeding with complaints.  The IRC presents its findings and recommendation to the Board, and the Board will make a final decision whether to proceed with the complaint, dismiss the complaint, or issue a letter of caution.  If the Board decides to proceed with prosecuting the complaint, counsel for the LLR will take over and typically prepare a Consent Agreement.

Resolution Options Once the Board Decides to Pursue Complaint

The Consent Agreement involves the professional admitting to certain violations and a designated resolution.  I have also had clients who contact me after receiving a Consent Agreement, and even after having already agreed to a Consent Agreement.  It is important to understand that a Consent Agreement becomes public record, as it is posted on the LLR website.  If there was a violation and the professional is comfortable with the outcome, it may be that agreeing to the Consent Agreement is the best course of action.  However, it is important for professionals to understand there are other options. A second option is entering a Memorandum of Agreement (“MOA”) with the LLR.  The MOA involves admitting to certain facts related to the complaint, but enables the professional to present its position before the Board for a determination on the outcome.  This helps expedite the process and can result in potentially lesser penalties than those initially proposed in a Consent Agreement.  A final option for professionals is to proceed with a formal complaint.  Similar to a lawsuit, the LLR counsel will prepare and serve the formal complaint, and the professional must respond and defend its position.  If a resolution cannot be reached while the formal complaint is pending, the Board will schedule a contested hearing to consider the complaint.  Although a formal hearing lacks some of the formalities of court, it has similarities to trial in that the parties may present witnesses, lawyers can cross-examine the witnesses, and the Board serves as the “judge”.  The Board members will often ask questions of the professional, the lawyers, and the witnesses, and the parties may present evidence, including expert testimony.  At the end of the contested hearing, the Board meets in executive session to make its decision on the outcome.  Board decisions are appealable to the administrative law court.  The outcomes from complaints can involve public and private reprimands, fines, suspension of privileges, and even revocation of the professional’s license.

If you have received notice of a complaint and would like assistance, please contact Doug MacKelcan at dmackelcan@cskl.law or 843-266-8228.  Likewise, if you have any questions in general about LLR complaints, I will be happy to speak with you.

 

South Carolina Court of Appeals Affirms Dismissal of Legal Malpractice Case for Failure to Comply with the Statute of Limitations

The South Carolina Court of Appeals recently issued an Opinion in Personal Care, Inc. v. Jerry N. Theos, et al., affirming the Circuit Court’s dismissal of a legal malpractice case for failing to comply with the statute of limitations. The Court of Appeals considered two arguments by Appellants: (1) whether the Circuit Court erred in denying the Motion to Restore and (2) whether the Circuit Court erred in concluding the discovery rule, and not the date the underlying case was resolved, applied to determine the applicable statute of limitations.

Personal Care retained attorney Jerry Theos to investigate claims against a former employee. Personal Care directed Theos to send a letter to the former employee demanding she refrain from certain wrongful activity, including soliciting its clients. Theos also sent the letter, dated September 14, 2009, to a third-party medical services provider frequently employed for Personal Care’s business. Theos ultimately filed suit on behalf of Personal Care against the former employee. The former employee asserted a counterclaim for defamation stemming from the September 2009 letter.

On March 8, 2013, prior to resolution of Personal Care’s case against the former employee, Personal Care commenced a legal malpractice lawsuit against Theos (and others) for the handling of the underlying lawsuit. In the legal malpractice Complaint, Personal Care claimed Theos’ September 2009 letter exposed the company to liability and forced it to incur additional legal costs in defending the counterclaim, among other allegations of negligence. Theos filed an Answer generally denying the allegations and moved to dismiss the claims based on the expiration of the statute of limitations. Shortly thereafter, the parties executed a Consent Order pursuant to Rule 40(j) SCRCP, striking the case from the docket pending resolution of the underlying case between Personal Care and its former employee.

Rule 40(j), SCRCP provides for tolling of the statute of limitations if the claim is restored upon motion made within one year of the date stricken. Here, Personal Care did not move to restore the legal malpractice case until more than one year after the Order dismissing it pursuant to Rule 40(j). Respondents opposed the Motion to Restore, asserting the statute of limitations had run on the legal malpractice claims. The Court agreed, essentially holding that the case was dismissed, and therefore, Respondents could only raise this statute of limitations defense at this motion (as opposed to a motion for summary judgment).

In response, Appellants cited Stokes-Craven Holding Corp. v. Robinson, 416 SC 517, 787 S.E. 2d 485 (2016) to argue the statute of limitations did not begin to run until an “adverse verdict, judgment or a ruling” was entered against the client in the underlying lawsuit. In this case, the Court of Appeals disagreed and held Stokes-Craven did not eliminate the discovery rule in favor of a bright-line rule that all legal malpractice claims accrue on the date an adverse judgment is entered against the client. Rather, it found that Stokes-Craven dealt with the “particular scenario” in which a client’s injuries are predicated on an adverse judgment that is then appealed. Here, Personal Care’s cause of action for legal malpractice was predicated on the September 2009 letter, and therefore, Personal Care first suffered a financial injury when it was forced to spend additional funds and commit time and other resources to mitigate the damages caused as a direct and proximate result of Respondent’s errors.

While Stokes-Craven dealt a blow to the statutes of limitations defense available in legal malpractice cases in South Carolina, Personal Care has narrowed Stokes-Craven and reinforced the applicability of the discovery rule.

The entire Opinion can be found here.

 

5 Takeaways from CLM 2018 Annual Conference, March 14-16, 2018 in Houston, TX

I was fortunate to attend and speak on a panel at the CLM Annual Conference in Houston last week. I thought I would pass along a few takeaways from the professional liability sessions I attended.

  1. The increase in autonomy for “Physician Extenders” (CRNA, NP, PA, midwives) likely comes with increased liability risk to them. Analyzing contracts with the supervising physician, actual supervision of the physician extender, whether the extender’s liability insurance coverage matches the realities of their practice, and whether the extender will be held to the physician standard of care are all important considerations in advising and defending a physician extender.
  2. Lawyers must embrace Artificial Intelligence in analyzing cases and use it to their advantage. They must be prepared to discuss why the data is or is not accurate and how it can be applied to a specific case.
  3. Don’t forget about paper and unsaved emails in the “high-stakes” insurance broker case. The tendency may be to focus on ESI due to the vast amount of documentation in a multi-million dollar claim. But a hand-written note documenting a meeting or phone call, or an email that was not saved to the client file could be the key piece of evidence to support the broker’s position that a coverage was refused or a particular risk was discussed.
  4. High exposure does not necessarily translate to the existence of a special relationship with an insurance broker. Key factors to address in opposing a special relationship finding are:
    • Other brokers involved/seeking competing bids
    • Criticism or questioning of the broker by the client
    • The sophistication of the client and autonomy in decision-making
  5. Cyber-attacks and data breaches pose an increasing risk to professionals such as lawyers, accountants, insurance agents, and medical professionals, who possess a significant amount of potentially valuable data.
    • As the sophistication of the attacks has increased, so has the variety in available insurance coverages.
    • Make sure that your firm and your clients have adequate coverages to address the wide range of cyber risk to you and your clients.
    • The sooner you respond to a cyber-attack, the better, starting with reporting it to your insurance carrier who likely has the resources to assist with addressing the issue.

South Carolina Supreme Court holds Association Management Company Engaged in the Unauthorized Practice of Law

In its recent Opinion No. 27707, Rogers Townsend & Thomas, P.C. v. Peck, et al., Appellate Case No.: 2011-199626, the South Carolina Supreme Court found that Community Management Group (“CMG”), a management company for homeowners associations and condominium associations, engaged in the unauthorized practice of law when it (1) represented its association clients in Magistrate’s Court; (2) filed judgments in Circuit Court; (3) prepared and recorded liens to recover unpaid assessments and other charges; and (4) advertised that it could perform the services the Supreme Court now deems the practice of law.

CMG argued that the administrative order In re Unauthorized Practice of Law Rules Proposed by South Carolina Bar, 309 S.C. 304, 422 S.E.2nd 123 (1992), allowed a non-lawyer officer, agent, or employee to represent a business, and that it, as an agent of its association clients, could therefore represent them.  The Supreme Court disagreed and clarified In re Unauthorized Practice, finding that non-lawyer third-party entities or individuals, such as CMG, are not “agents” because they have no nexus or connection to the business arising out of its corporate structure.

CMG further argued that suing in Magistrate’s Court on behalf of associations to collect unpaid assessments was not the unauthorized practice of law because it did not require specialized legal skill or knowledge.  The Court disagreed.  Likewise, the Court found that filing judgments from Magistrate’s Court in Circuit Court constituted the unauthorized practice of law, as did preparing and recording liens and other legal instruments.  The Court chose not to rule on whether (1) interpreting covenants for homeowners; (2) addressing disputes between homeowners and associations; and (3) advising the associations on remedies to collect unpaid assessments constituted the unauthorized practice of law because petitioner did not include specific facts or details about CMG performing those services.

This Opinion offers some clarity on what can be a blurred line between performing legal and non-legal services on behalf of community associations.  As management companies continually offer and perform expanded services to community associations, they must remain diligent in considering the implications of their conduct.  Similarly, community associations and their lawyers must ensure legal tasks are appropriately assigned to, and performed by, lawyers.  The convenience or financial benefit of allowing a non-lawyer to address these tasks is outweighed by the risks it may be completed improperly, the Court could deem it the unauthorized practice of law, and it could lead to a criminal charge . The unauthorized practice of law in South Carolina is a felony requiring a fine of up to $5,000 or imprisonment for up to 5 years, or both, once the Supreme Court has deemed the charged activity is the practice of law.