Trimarche: The Price of Wilful Blindness

For an institution that prides itself on transparency, the State Bar of California sometimes seems to go out of its way to make things more opaque. State Bar Court Review Department decisions are important information. Before March, all Review Department decisions were published on the State Bar Court’s website, easily accessible and nicely categorized into published, publication pending, and non-published decisions. These old decisions are still there, but now there is a link to a list of new Review Department decisions with case numbers that require an expedition into the State Bar Court docket to locate and retrieve the decision. Not a lot of additional work, but enough to cause wonder about what was so difficult or expensive about the old system. But enough of my trivial nitpicking.

The first Review Department decision subject to this treasure hunt is In the Matter of Trimarche, and it is worth the effort. It is a public decision, therefore citeable, pending final action by the California Supreme Court, filed on March 17, 2025.

The respondent lawyer was an experienced environmental lawyer and commercial business litigator for approximately 25 years before embarking on a new venture in April 2015, ominously entitled the “Debt Relief Operation” in the opinion. The Debt Relief Operation had a number of moving parts. At the core was GST Factoring Inc., where Respondent was one of three principals, along with two non-lawyers. The second component was a group of lawyers referred to as the Debt Attorneys, two licensed in California, one in Arizona, and one in Florida. Operational services for the Debt Relief Operation were provided by an entity called Champions Marketing Solutions LLC. Finally, there were a number of debt counselling and debt relief companies, referred to as Affiliates.

GST recruited and contracted with the Affiliates, which were using nationwide telemarketing to solicit potential customers seeking to reduce their student loans. When Affiliates encountered individuals with private student loans, as opposed to federally guaranteed loans, the Affiliates informed them that the Debt Attorneys offered debt relief legal services and referred them to the Debt Attorneys. Trimarche helped edit the telephone scripts the Affiliates used to communicate with potential customers. CMS provided support staff services and acted as the customer service arm of the Debt Relief Operation, including maintaining client communications on behalf of the Debt Attorneys. GST-specifically, Trimarche-also recruited the Debt Attorneys, who generated income for the Debt Relief Operation by providing debt relief services, which were marketed as legal services, to the Affiliate-referred clients.’ Trimarche testified that securing a large number of clients would allow the Debt Attorneys to have greater leverage in negotiating with the lenders. GST entered into an Attorney Factoring Agreement with each Debt Attorney. GST agreed to purchase all accounts arising from providing “legal services to clients in matters relating to student debt elimination.” In effect, the monthly fees paid by the Debt Attorneys’ clients were collected by GST for distribution to the various entities in the Debt Relief Operation.

Trimarche, slip opinion at 3-4. The Debt Relief Operation was successful; from April 2015 to May 2020, GST collected from clients receiving debt relief services approximately $11.8 million in fees, of which Trimarche received around $1.5 million.

But, as you know by now, trouble ensued. It’s shape principally in the form of the Telemarketing Sales Rule (TSR), title 16 Code of Federal Regulations (C.F.R.) part 310, promulgated by the Federal Trade Commission in 2010, at the height of the Loan Mod Wars. The TSR was amended in September and October of 2010 to prohibit the telemarketing of debt relief services requiring an advance fee. The Debt Attorneys fee agreement (written by Trimarche) provided for a contingent fee of 40% of the debt payable in installments up front before any work was done. Trimarch testified at trial that he was not familiar with debt relief services before initiating the Debt Relief Operation, but that he researched the internet to learn about the student debt crisis, and he read various materials to determine strategies that could be useful for the Debt Attorneys in rendering their debt relief services. “Yet, for several years, Trimarche did not inquire about any rules that GST or the Debt Attorneys were obliged to follow when rendering nationwide debt relief services, even when concerns about the legality of the operation were repeatedly brought to his attention.” Trimarche, slip opinion at 7.

Trouble duly arrived in the form of a State Bar disciplinary prosecution of one of the debt attorneys and an action by the late Consumer Financial Protection Bureau, which began a notice of regulatory action and later a Federal Court action that was resolved with a stipulation in July 2020 that the Debt Relief Operation cease operating.

Some years later, the Office of Chief Trial Counsel (OCTC) filed charges against Trimarche in August 2023, alleging that he (1) violated Business and Professions Code section 6068(a) in violating the TSR; (2) violated section 6068(a) in assisting others in violating the TSR; (3) violating California Rule of Professional Conduct 8.4(a) by assisting the Debt Attorneys in violating California Rule 7.1 and 7.3, and violating California Rule 5.5(a) and 5.5(b)by assisting the Debt Attorneys in the the unauthorized practice of law; and, as you might expect, (4) moral turpitude in violation of section 6106, wrapping up all the previous charged misconduct with bright red bow.

Trimarche’s defense to count 1 and count 2 was that he was acting in good faith at most, and made a mistake of law in concluding the TSR was not applicable. “An attorney’s negligent, good faith mistake of law, even when it results in a violation of law, may be a defense to discipline under section 6068, subdivision (a). (See In the Matter of Respondent P (Review Dept. 1993) 2 Cal. State Bar Ct. Rptr. 622, 631-632.) In finding Trimarche culpable, the hearing judge rejected his defense that he held a reasonable, good-faith belief that GST’s Debt Relief Operation did not violate the TSR. Instead, she determined that he willfully blinded himself to the TSR’s potential application to GST’s activities, despite being generally aware that the rule existed.” Trimarche, slip opinion at page 12. The Review Dept. agreed. “These circumstances establish by clear and convincing evidence that from April 24, 2015, to at least September 24, 2019-over four years-Trimarche consciously avoided learning about the rule. (See In the Matter of Carver (Review Dept. 2016) 5 Cal. State Bar Ct. Rptr. 427, 433 [willful blindness is equivalent to actual knowledge].) Thus, his ignorance of the applicable law cannot constitute a reasonable, good faith belief. (In the Matter of McKiernan (Review Dept. 1995) 3 Cal. State Bar Ct. Rptr. 420, 427 [“it is [not] appropriate to reward respondent for his ignorance of his ethical responsibilities”].)

The unusual charging of Count 3 did lead to one small victory for Trimarche. The Review Dept., reversing the hearing judge, found that OCTC failed to provide adequate notice of its allegation that Rule 7.1 was violated by misleading marketing language. However, a second basis for a 7.1 violation was upheld – that the marketing materials failed to disclose how the fees would be divided among the different entities. The Review Dept. also reversed the hearing judge and found that Trimarch did assist the Debt Attorneys in providing services to clients where they were not licensed to practice. Trimarche’s defense that he relied on the Debt Attorneys to obtain their own counsel on the UPL issue was rejected as the same type of “wilful blindness” rejected as a defense to the violations of the TSR in Counts 1 and 2.

Ultimately, the Review Department upheld the hearing judge’s recommendation of one year actual suspension and two years probation with conditions, based on the finding that “Trimarche’s serious misconduct impacted 2,600 clients from across the nation and resulted in the collection of $11.8 million in illegal fees.”

While Trimarche will be ordered to pay a $2,500 sanction and the State Bar’s costs, restitution of some of the $1.5 million that Trimarche received was neither sought nor ordered.

So you could say that Trimarche paid a heavy price for his wilful blindness. On the other hand, his misconduct netted him $1.5 million that he did not have to give back. Cases like this often prompt us to ponder the question of “what was he thinking?” The prospect of a big payday can buy a lot of blindness, and once the cart is rolling downhill, it is hard to stop, especially when there are a few others in the cart with you. Lawyers can be clear-eyed about their client’s risks and astonishingly blind about their own. At the risk of tooting my own horn, and that of my fellow ethics lawyers, that is why we exist.