It is no big secret that Pennsylvania is not regarded as being an especially landlord-friendly state. I have represented many out-of-state clients either directly or through their counsel, and many are surprised to learn of the law and procedures in our state. In May of 2017 an important case was decided by the Pennsylvania Superior Court regarding representation of entities in civil court proceedings, thus including landlord-tenant cases, and investors will now have another issue to deal with when attempting to evict a tenant.
The facts of the case relative to its holdings are quite simple. David Nicholson was the sole member of an LLC, and he filed a civil complaint against two individuals at the magistrate level. The magistrate decided in favor of the defendants, and Mr. Nicholson appealed on behalf of the LLC. He first filed the appeal itself, and then he filed the complaint, both pro se. The defendants hired counsel and filed preliminary objections (objections filed before the case proceeds or an answer is filed by the defendants) claiming that the appeal filed by Mr. Nicholson on behalf of the LLC should be stricken and the complaint dismissed because Mr. Nicholson was not an attorney and therefore the court did not have jurisdiction over his pro se filings. It should be noted that Mr. Nicholson did eventually hire an attorney who re-filed the complaint, after the preliminary objections were filed. Following a hearing on the preliminary objections, the court struck Mr. Nicholson’s appeal and dismissed his complaint. He then appealed to the Superior Court.
The Superior Court affirmed the ruling of the trial court. The Superior Court held that the long-standing rule that corporations can only appear before Pennsylvania courts through an attorney also applies to LLCs, even single-member LLCs. The Superior Court reasoned that an LLC is a separate and distinct entity from its members, and ownership in an LLC is akin to an interest in the stock of a corporation, and that the advantages that the LLC structure provides to its members (non-liability of the LLCs debts and obligations, etc.) are similar to that of a corporation. These advantages come with certain burdens, including the need to hire counsel to sue or defend in court.
Because Mr. Nicholson was not a licensed attorney, he was effectively engaging in the unauthorized practice of law by representing the LLC, which is a separate and distinct legal entity. The Superior Court thus affirmed the decision of the trial court, and Mr. Nicholson’s appeal was stricken and his case was dismissed. The other issue in the case dealt with the re-filed complaint by Mr. Nicholson’s attorney, but the court ruled that the plaintiff had not perfected the appeal timely and the trial court ruling was upheld on this issue as well.
The “take home” from this case is obvious. Any court filings after the magistrate level must be done by a licensed attorney for essentially all entities. The Superior Court did make a distinction for limited partnerships where the general partner is an individual, as that general partner is liable on behalf of the limited partnership. It is not often that we see a structure set up where the general partner is an individual, so that should not affect many litigants.
Many investor clients who have been handling their own civil cases will certainly be aggravated by this holding. The other question this presents is what happens with property management companies who represent their clients in the court of common pleas. For many years I watched property management clients send their employees to arbitration hearings to represent the property owners, only hiring me for the particularly difficult cases. This was allowed, though I always believed that it was inappropriate and involved the unauthorized practice of law. While to my knowledge the courts and specifically the arbitration division have been cracking down on this more as of late, I believe this new court ruling will cause them to fully implement the prohibition of non-attorneys representing property owners beyond the magistrate level. If a single member of an LLC cannot represent his or her entity because he or she is not an attorney, how can they allow another non-attorney to come and represent the entity? Even if the property owner is an individual as opposed to an entity, I don’t believe they will allow property managers to represent them any longer.