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Attorney General goes after Distenfield venture in N.Y.

By   /   Friday, May 23rd, 2014  /   Comments Off

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The New York State Attorney General has sent a cease and desist letter to a legal documents business run by a member of Santa Barbara’s Distenfield family, alleging the firm is illegally practicing law in the Empire State.

The order is the first deep scrutiny of the newest document filing venture by a new generation of the family. Previously, South Coast residents Ira and Linda Distenfield built We The People into a 100-store, 30-state legal self-help franchise that collapsed amid a wave of litigation nearly a decade ago. On May 19, New York State officials sent a letter to the Watertown, New York, location of Legal Docs by Me, alleging the firm was illegally practicing law and threatening to commence proceedings against it.

“It is critical that New Yorkers receive strong legal advice from knowledgeable and qualified attorneys,” Attorney General Eric Schneiderman said in a press release. “My office will take whatever steps necessary to ensure that anyone practicing law in New York State is licensed to do so.” 

Derek Distenfield, Ira Distenfield’s son and the CEO of Legal Docs by Me, said that his business is a legitimate and less-costly alternative for filing documents and makes the legal system more accessible. 

“Legal Docs by Me exists because consumers allow us to. We are a veteran-owned, job-creating business that is proudly empowering thousands of working families by providing low-cost, fast and accurate document preparation services,” Derek Distenfield said in a statement to the Business Times. “We are disappointed that the Attorney General has chosen to defend the status quo at the expense of consumers.”

The New York Attorney General’s office sees it differently. It cites multiple lawsuits that alleged that We The People had crossed the line from filing documents to practicing law without a license, and that clients had been harmed by the firm’s mishandling of documents. 

We The People appeared to be riding high a decade ago when Dollar Financial Group offered $27 million to buy the company. Dollar Financial eventually cut its offer from $27 million to $12 million, but the Distenfields claim they saw little if any of that cash after lawsuits over the deal ended in a personal bankruptcy for Ira and Linda Distenfield in 2009.

Much has changed in the document-filing business since the Distenfields’ last venture. Massive online competitors have arisen. Glendale-based LegalZoom sold a chunk of its stock for $200 million to a European private equity firm in a deal that valued the document filing company at $425 million.

Meanwhile, the Distenfields have started several other ventures but have gravitated back to the legal documents business. “I’m not sure we ever left it. We did have a non-compete agreement. It expired, and we’re happy to fill a void that we think still exists,” Ira Distenfield told the Business Times.

After the We The People deal, the Distenfields bought into a company called PRstore. That company faced allegations from the California Department of Corporations that it misled investors about how much they could expect to earn from PRstore franchises. The Distenfields later resolved the complaint. Eventually the venture morphed into Marketing Express, or ME for short.

Ira and Linda filed for bankruptcy in 2009 after struggling with $5 million in liabilities, most of them related to debts from the legal fight over We The People. Ira Distenfield was sent to jail in Los Angeles County for contempt of court during one of the lawsuits involving an attorney who alleged that Ira Distenfield didn’t pay him.

Legal Docs by Me, the newest venture that was founded in 2012, has four locations: Santa Barbara and Camarillo in California, and Watertown and Syracuse in New York. 

Ira Distenfield said that he and his wife only have ownership in the Santa Barbara location and that each location is owned separately. 

“That’s an independently owned location. There’s no ownership by us whatsoever,” Ira Distenfield said of the Watertown location.

Secretary of State records in New York show a Legal Docs by Me of Watertown LLC, a New York entity with Derek Distenfield listed as its corporate contact. Legal Docs by Me of Syracuse LLC is registered in Delaware, where businesses are allowed to incorporate without revealing their owners.

In California, Legal Docs by Me Inc. is registered with a legal contact named George Sampanis, the owner of a construction company. It lists its corporate headquarters on State Street in Santa Barbara.

Ira Distenfield said that there were no trusts or other legal vehicles connecting his business in Santa Barbara to his son’s business in New York. He confirmed that his son was involved in We The People.

“After the company was sold back in 2005, Derek chose to walk across the street at that time and enlist in the Army. Now he is a captain in the U.S. Army. He completed three tours overseas” in Iraq and Afghanistan, Ira Distenfield said. “As he is transitioning out of the Army, what he chose to do was return to the family business started in 1989. He chose to open his first location in Watertown because he wanted to serve what he sees as an underserved market among military families. He wants to do it on his own, and I’m proud of him and applaud him.”

Ira Distenfield said his son followed the applicable rules in New York State for a document filing business by hiring a law firm to review and assent to the forms it uses. He said that Derek made only “one mistake — encroaching on the income of attorneys. Other than that, I think Derek has done a beautiful job covering the bases.”

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