Ethics Hotline & Opinions

Ethics Docket No. 1990-22

MARYLAND STATE BAR ASSOCIATION, INC.

COMMITTEE ON ETHICS

ETHICS DOCKET NO. 1990-22

Individual Attorneys in Firm Owning Stock in Title Company

 

In your inquiry, you request an opinion regarding the propriety of attorneys in your law firm owning a minority interest in a title company. The majority-owner of the title company would be an individual who is the sole shareholder of a mortgage banking company. You stated that your law firm represents the mortgage banking company, as well as its sole shareholder in an individual capacity. The title company would perform a full range of settlement services, including the issuance of title insurance and the preliminary preparation of closing documents. Further, the title company would retain attorneys associated with your firm who would in turn review closing documents and conduct settlement. All clients contact, however, would be conducted by non-lawyers employees of the title company.

The arrangement outlined in your letter is similar to the scenario addressed in Ethics Docket 82-14. In that opinion, a partnership between lawyers and "scientific professionals" for the purpose of selling advice to businessmen was proposed. The Committee opined that such an arrangement involved the impermissible joining of lawyers and non-lawyers in the practice of law. Id.

In the scenario presented by your inquiry, the non-lawyer title company employees would sell a package of services which would include the examination of documents and the provision of other services by attorneys. In effect, the title company would sell legal advice and services to be obtained from lawyers. As with the situation presented in Ethics Docket 82-18, such an arrangement would constitute the unauthorized practice of law by the non-lawyer title company employees. Therefore, any lawyers who participated in such an activity would be violating Rule 5.5, which provides in relevant part:

A lawyer shall not: . . .

(b) Assist a person who is not a member of the bar in the performance of activity that constitutes the unauthorized practice of law.

Moreover, if the attorneys owned a majority or all of the title company, the scenario outline in your letter would nonetheless present ethical problems. Whenever lawyers are engaged in second occupations, particularly when the second occupation is law-related, the specter of improper "feeding" is raised. Ethics Docket 88-84; Ethics Docket 86-23. In the arrangement you propose, the clients of the title company would be automatically referred to lawyers in your firm for legal advice, such as the review of documents and closing services. The lawyers thus would be engaged in the impermissible feeding of their legal practice.

References: Ethics Dockets 1982-14, 1986-23 and 1988-84

 

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