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While tort reform legislation pulsing through the Texas Legislature makes some plaintiffs’ lawyers feel as if they have huge targets painted on their backs, they aren’t the only attorneys lawmakers are taking a shot at. Other bills pending in the Legislature could break the near monopoly some lawyers have on collecting tax debts for local governments. Two bills, H.B. 1951 and S.B. 1267, would allow nonlawyers to perform the lucrative delinquent tax collection function by permitting taxing agencies to contract with “an attorney or other person.” Those bills should make for an interesting fight as several firms — including Linebarger, Goggin, Blair & Sampson and Perdue Brandon Fielder Collins & Mott — have at least six lobbyists who are working to make sure the bill doesn’t pass, say three attorneys involved in the debate. “As far as I can tell, it’s the only type of collection business that is restricted only to lawyers,” says Terral Smith, a partner in the Austin office of Locke Liddell & Sapp who is one of the few lobbyists pushing for the bill’s passage. Smith, a lobbyist for RE Robert, a Virginia-based collection agency that wants to break into the Texas tax collection market, alleges that a handful of Texas firms handle about 75 percent of delinquent tax collection duties for local governmental entities, such as school districts. “They would argue they do a great job and a monopoly is good,” Smith says of firms such as Linebarger Goggin — one of the largest tax collection law firms in Texas that is fighting the bill. “It [the legislation] will bring some competition and that’s got to be good.” But Dale Linebarger, a partner in Linebarger Goggin, says there’s plenty of competition in delinquent tax collection among about 40 law firms in Texas. Allowing nonlawyers to perform tax collection duties in Texas isn’t in the public’s best interest, he says. “The belief we have is that every step of the way involves some aspect of a legal question that affects a taxpayer,” Linebarger says of delinquent tax collection. His firm hired two lobbyists to fight the bill, he says. Allowing nonlawyers to collect taxes would be a disaster, Linebarger says. “It would be like giving a private security agency the same power as the city of Houston Police Department.” While efforts to weaken the hold firms have on tax collection failed in past legislative sessions, legislators and lobbyists may be particularly amped up over the issue because of the indictment of Juan Pena. Pena, a former partner in Linebarger Goggin, was indicted last year for allegedly conspiring to bribe two San Antonio city councilmen for a city collection contract. Pena has pleaded not guilty to the charges and denies the allegations. “I think what we need to do is to open up the process so we don’t run the risk of having situations like the one that did take place in San Antonio,” says Rep. Fred Hill, R-Richardson, the sponsor of the House bill. “I just think it’s very important that the Legislature not give exclusive responsibility for such an important task just to lawyers,” Hill says. “When we passed this [law], it was the Lawyer Employment Act, and it has negative repercussions for the Legislature, and it reflects badly on the Legislature.” H.B. 1951 and S.B. 1267 are pending in committees. NO BIG WHOOP? Linebarger says it’s unfortunate that some proponents of the bill are using Pena’s troubles as a way to advance their case. “The rumor that I’ve heard is there’s been a piling on effect by some of our competitors who can’t compete in the marketplace so they try to smear us with the problems of our former partner,” Linebarger says. “But in my opinion, they can’t compete in the marketplace so they try to do it in the back halls of the Legislature.” Sen. Bill Ratliff, R-Mount Pleasant, who’s sponsoring the bill in the Senate, says he doesn’t plan to mention Pena’s name as part of the debate. “I don’t consider this aimed at any particular person or agency group or firms,” Ratliff says. “I’m just a big advocate of local government and local control. And I don’t see any reason for the state to dictate any method of collection.” Randall “Buck” Wood, a partner in Austin’s Ray, Wood & Bonilla, a law firm that does some delinquent tax collection business, says he’s not opposed to competition from nonlawyers. But Wood has a problem with a provision in Hill’s bill that allows the taxing agency to tack an additional 20 percent to the delinquent tax bill to help pay for the collection fees. He says that puts nonlawyer tax collectors at an advantage. Nonlawyer collection agencies “want to be able to kick back fees to the taxing entity. Lawyers can’t do that,” Wood says. “We can’t split fees with our clients. But they are looking for an advantage. As a matter of policy, you don’t want to get in a war over kickbacks.” Even if the bill passes, several attorneys familiar with the delinquent tax collection process doubt that nonlawyers will be successful in collecting taxes — they can’t go to court and enforce a tax lien on a delinquent taxpayer. “Let’s say that the nonlawyer gets hired to do debt collection. They send some demand letters. By the time you get a demand letter, [the tax debt is] in pretty bad shape,” says Leland De La Garza, a partner in De La Garza & Wallace and chairman of the Dallas Unauthorized Practice of Law Subcommittee. De La Garza says he is not speaking for his UPLC subcommittee. In De La Garza’s opinion, all the nonlawyer has the authority to do is write a few letters. “And then they turn it over to a lawyer. That’s all it can be.” But Jim Collins, a partner in Perdue Brandon, believes that nonlawyers violate the unauthorized practice of law statute by attempting to collect delinquent taxes, even in the early stages of that process. “There isn’t a breaking point where you leave the letter writing and dunning process and begin the practice of law. It’s the practice of law all of the way through,” Collins says. “We have to make an immediate determination of which accounts are in bankruptcy, and when bankruptcy stays affect us. The courts have found that reading those bankruptcy documents is the practice of law.” Jim Jackson, a Dallas County commissioner, says when taxing entities choose their collectors, they’re likely to look at who will be the most effective, regardless of whether they hold law degrees. Dallas uses Linebarger Goggin, and has had no problems, he says. “I don’t think it would make any difference to us,” Jackson says. “I think it would matter who would do the best job.”

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