Lawyer bushwhacked by state ‘maintain-a-place’ requirement
Ouch! I don’t know many lawyers who can afford a $50,000 annual hit in the pocketbook.
Unfortunately, that’s exactly what happened to Philip Kleinsmith when Utah’s legislators chose a protectionist path in the handling of foreclosures.
Kleinsmith is a Colorado attorney who specializes in nonjudicial foreclosures. He’s worked hard to build a national practice, admitted to the bar in 26 states.
According to court documents, Kleinsmith at one time earned more than $50,000 annually from Utah alone, serving as a trustee in trust-deed foreclosures.
That ended in 2001, when the Utah Legislature passed a law requiring licensed Utah attorneys to reside in the state in order to qualify as trustees.
Tough guy that he is, Kleinsmith sued and had the residency requirement declared unconstitutional under the Privileges and Immunities Clause.
Not to be outdone, Utah’s legislators amended the statute to require that attorney trustees either reside in Utah or maintain “a bona fide office in the state.”
So Kleinsmith trod once more up the courthouse steps and had a federal judge declare that the new law violated the Commerce Clause.
But those wily coyotes in the Utah statehouse had one more trick up their sleeves. The state now requires out-of-state attorneys who wish to act as foreclosure trustees to maintain a “place” within the state where they can go over stuff with “interested parties.”
The state did give guys like Kleinsmith a break. Apparently you don’t need to “maintain” an open bar and buffet lunch at these meeting places.
As Kleinsmith pointed out in his third and (apparently) final constitutional challenge, the maintain-a-place requirement would appear to be an unnecessary burden because he is completely able to prepare and file foreclosure documents, and supervise foreclosure sales, all without being personally present in the state of Utah.
Unfortunately, there’s no happy ending to this tale.
On Monday, the 10th Circuit just may have finally put the kibosh on Kleinsmith’s days as a foreclosure trustee in Utah.
The court rejected his claim that the maintain-a-place requirement unconstitutionally discriminates against out-of-state attorneys.
“Making it easier for Utahns to meet with trustees, who play a pivotal role in nonjudicial foreclosures, is a legitimate state interest,” the court explained. “And Utah’s legislature could rationally have concluded that this interest would be served by requiring attorney-trustees to maintain a place within Utah for meeting with trustors and other interested persons.” (Kleinsmith v. Shurtleff)
— Pat Murphy
patrick.murphy@lawyersusaonline.com
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