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After 24 years of representing mostly low-income tenants in court cases against landlords, San Francisco’s nonprofit Tenderloin Housing Clinic has been declared unauthorized to practice law. In a unanimous ruling Tuesday, a three-justice panel of San Francisco’s 1st District Court of Appeal held that the THC — and any other nonprofit corporation — can’t provide legal services unless registered with the State Bar. “It is undisputed that THC is not registered with the State Bar,” Justice Laurence Kay wrote. “Accordingly, it is not authorized to practice law.” Justices Patricia Sepulveda and Maria Rivera concurred. It wasn’t clear Tuesday how many nonprofit groups could be affected, but Stephen Collier, staff attorney for the Tenderloin Housing Clinic Inc., predicted wide impact: One of the requirements for registration to practice law, he said, is that nonprofits’ boards be composed entirely of lawyers. But most, if not all, nonprofit boards, he added, include non-lawyer members of the communities they represent. The THC’s seven-member board, Collier noted, is made up of four lawyers, two neighborhood residents and a law student who works as a tenant organizer. “That’s the major problem we and other nonprofits will face,” he said. State Bar officials said Tuesday that the agency has no history of enforcing registration by nonprofit groups. In fact, only five nonprofits — Asian Law Caucus Inc., Community Law Center Inc., Collective Legal Services Inc.-Eviction Defense Center, Individual Rights Foundation Inc. and Levitt & Quinn Family Law Center Inc. — are currently registered. But State Bar spokesman E.J. Bernacki said Tuesday’s ruling could “serve as a red flag to legal services organizations that perhaps they need to figure out if they fall within the registration requirements.” Phyllis Culp, director of the State Bar’s Office of Certification, said that for-profit corporations are already notified about registration in their final fee statements, and the same might be necessary now for nonprofits. THC was incorporated in 1980 to assist low-income tenants in San Francisco’s rundown Tenderloin neighborhood, which is roughly bordered by Market Street, Nob Hill and Union Square. It employs four lawyers who are members of the State Bar, even though the agency itself isn’t registered. Roy Frye, a former client of the THC, sued the agency in 1998, objecting to about $1,400 in attorneys fees the organization retained after winning about $465,000 for him and 14 other tenants in a battle over defective conditions at a neighborhood hotel. THC collected $186,000 in fees in the case. Frye, who received about $11,500 from the suit, died in 2001, and was replaced by his son, Steven, as the plaintiff. In Tuesday’s ruling, the appeal court said that THC also didn’t meet the requirements of a “qualified legal services project” or a “qualified support center” because, at the time of its work for Frye, the organization entered into contingency fee contracts with clients and, therefore, didn’t provide free legal services. Neither does it qualify, as the National Association for the Advancement of Colored People does, as a legal service provider fighting discrimination. “THC has failed to establish that the litigation it pursues is a form of political expression,” Justice Kay wrote. “Moreover, registration with the State Bar presents no First Amendment concerns.” The court, however, agreed with the lower court’s decision to reject fraud charges against the THC, saying that Frye wasn’t actually harmed by the group’s representation. The panel remanded the case to trial court to determine whether the clinic or its individual attorneys should be allowed to retain the fees. Collier said THC no longer charges contingency fees, making that part of the court’s ruling moot. Andrew Zacks, head of the eight-lawyer firm that represented Frye, said the decision validates the argument his firm has made for years — that nonprofits engaging in contingency fee litigation are subject to the State Bar’s registration rules. “And there’s a good reason for that,” he said. “Attorneys and corporations engaging in the practice of law are subject to the rules of professional responsibility and ethical requirements. “If Mr. Collier has a problem with these requirements,” he added, “he needs to go to the Legislature or the State Bar to have the rules changed.” In the meantime, he said, THC and other nonprofits have to live with the rules as they are written. Zacks said the ruling has encouraged him to pursue two further unfair business practices claims against THC. Collier said THC will comply with the court’s registration requirement and doesn’t expect any break in the group’s legal representation. He also said THC will likely seek review by the California Supreme Court. If the ruling stands, Collier believes it will undermine THC’s mission. “It does mean that we will have less input at the governance level from the communities which we serve,” he said. “Almost all foundations want that.” The ruling is Frye v. Tenderloin Housing Clinic Inc., 04 C.D.O.S. 6750.

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