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Texas’ Unauthorized Practice of Law Committee, the group known for aggressively cracking down on self-help legal publishers and captive insurance law firms, did the unthinkable last week — they settled a declaratory judgment action. In an unusual turn of events, the normally unyielding UPLC agreed on April 15 to stop an investigation into the propriety of four independent companies that identify class action members and help them, for a fee, to file claims to collect from a nationwide settlement. “We sat down and had a good constructive meeting with the leadership of the UPLC,” says Peter Kennedy, the lawyer for the four claims companies and a partner in Austin, Texas’ George & Donaldson. Kennedy filed a declaratory judgment action against the UPLC in Austin state court in December to stop the investigation. “And this is the result of it,” Kennedy says of the settlement talks. Last year, the UPLC, which is an arm of the Texas Supreme Court, began investigating numerous companies that allegedly solicit business in Texas by offering to help potential class members file claims as part of a 1998 settlement in Naef, et al. v. Masonite Corp., et al. The UPLC alleged that the companies were violating � 38.123 of the Texas Penal Code; it prevents nonlawyers from entering “into any contract with another person to represent that person in personal injury or property damage matters on a contingent fee basis with an attempted assignment of a portion of the person’s cause of action.” Naef is an Alabama case filed against two companies, Masonite and International Paper, alleging they produced defective hardboard siding that was installed on homes and other structures between 1980 and 1998. The claims companies operating in Texas solicit business from owners of homes and large businesses that may not know their structures have hardboard siding. The companies also help potential class members measure the material and submit claims. As part of the settlement with the UPLC, the four claims companies agree to change the contracts they offer to potential class members by providing them with the following: � a right to rescind their contract for a minimum of three days after the customer’s signature, at no cost; � a mail-back form with which the customer can exercise that right of rescission or a provision accepting cancellation by phone during the rescission period; � a notice that the customer may be able to file a claim without the assistance of the claims companies printed in font size equal to or larger than the main text of the contractual provisions; and � that no up-front fee will be charged at the time of the formation of the contract. While the settlement only applies to four companies, UPLC chairman Rodney Gilstrap says he is not certain of the status of investigation against a dozen or so other claims companies. MEDIATING The UPLC is not known for settling its more ambitious undertakings. Its investigation into self-help legal publishers led to a federal judge enjoining the sale of legal self-help books and software in Texas until the Legislature amended the UPL statute to allow the sales in 1999. The UPLC also is litigating against several insurance companies over their use of so-called “captive firms” to defend policyholders against Texas suits. But this case was different, says Gilstrap, chairman of the state UPL committee and a partner in Marshall, Texas’ Smith & Gilstrap. “Generally our options from the UPLC committee is whether we stop something or it’s allowed to continue,” Gilstrap says. “But here they were allowed to continue, but in a modified way.” Gilstrap and Kennedy agreed that leaders from the State Bar of Texas — including Bar general counsel Shelby Rogers — who participated in the mediation were instrumental in helping the parties reach a resolution. Rogers did not return two calls seeking comment. Kennedy says he named the Bar as a defendant in his declaratory judgment action because the Bar sometimes represents the UPLC in litigation. “We were glad to be able to meet with the committee membership and explain our business practices,” says Kennedy, who represented legal self-help publisher Nolo Press in a battle with the UPLC in 1998. “And we’re pleased that they agree with us that what we do is not the unauthorized practice of law.”

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