Although this may be a little late, a few weeks ago, "paralegal" firm X-Copper filed for bankruptcy. The official reason? They were unable to meet their current liability. The root of the problem? They were unable to secure licensing as a paralegal firm.

To combat the licensing issue, X-Copper attempted to work "under the supervision" of a lawyer, effectively using his or her license to circumvent paralegal licensing requirements. Despite having a legal mechanism in place, they were unable to stay afloat.

Based on some postings across the Internet and on several news articles, it seems to me that their problem stemmed from cash flow issues. New rules on paralegals prohibit them from using monies received until the work done on the matter has been billed. Since they had a motto of "we win or its free" (much like many other traffic ticket agents), the monies had to be held in trust pending resolution of the matter, which may be several months to several years. It may be that they were using monies received to cover immediate costs and expenses. If they did not win, then they would wait until money was available to send a refund out.

While I do see the licensing and rules as a slight hassle, I do not believe that it should be overly prejudicial to the firm to collect it's money later. The only problem is that there will be a period of several months where it has a negative cash flow since it will need to wait to collect the fees due to them. Given that X-Copper knew what to expect, they had about two years to prepare for the transition, but failed to make plans for that situation. Instead, David Matheson, co-owner of X-Copper, seemed more interested in spending his money on a 2007 Jaguar rather than on reinvesting on the business.

I'm not trying to put down paralegals in any way. I have referred out several matters to paralegals because it would be more cost-efficient for them to use paralegals rather than a lawyer. I've found paralegals to be a reasonable alternative for less severe matters, such as residential tenancies, small claims and traffic tickets. However, I believe that X-Copper's venture into more severe matters such as impaired driving is dangerous. Impaired driving and related offences are Criminal Code offences, meaning that they carry a criminal record. Judges will typically warn those accused of the crime that they are not using a lawyer. For a little bit more money, many capable lawyers will take on such a matter.

So don't feel too sorry for X-Copper or it's founders. There was a better way, but everybody involved chose not to do it.

        

 

What did you think of this article?

Liked
Disliked
No Opinion