MARYLAND STATE BAR ASSOCIATION, INC.
COMMITTEE ON ETHICS
ETHICS DOCKET NO. 2003-07
May an attorney licensed in Maryland conduct, in Maryland, a real estate settlement on Delaware property?
You have asked if an attorney, licensed to practice in Maryland, may conduct a real estate settlement in Maryland for real property located within the State of Delaware. You have advised us that you have been a member of the Maryland Bar since 1992 and have concentrated your practice on real estate matters. On occasion, you have been asked by Maryland residents, owning beach property in Delaware, to handle title work or settlements for them in connection with sales or refinancings. You have advised us that you possess a valid State of Maryland title insurance license and also a valid State of Delaware title insurance license. You have advised us that you consistently have rejected inquiries about performing such work due to an opinion of the Delaware Bar and its Board on Unauthorized Practice, the latter of which has opined that conducting a real estate settlement involving Delaware real property is the practice of law in the State of Delaware and that only a member of the Delaware Bar may perform such work. We also understand, based on your inquiry, that the Delaware Bar takes the position that it has jurisdiction over settlements involving Delaware property, regardless of the residency of the homeowners or the state in which the settlement occurs. You understand, therefore, that the Delaware Bar is of the view that a Maryland resident, owning real property in Delaware, must retain the services of a Delaware lawyer to handle a refinancing or other real estate transaction involving Delaware real property because the act of conducting such transaction, if performed by someone other than a member of the Delaware bar, is the unauthorized practice of law.
You have also advised us that a significant majority of the real estate settlements conducted in the State of Maryland are conducted by non-lawyers, although the State of Maryland does have legislation, passed in 1996, which provides that all real estate settlements in which a title policy is issued must be conducted by a licensed Maryland title insurance agent. You have advised us that you understand that the act of conducting a real estate settlement in the State of Maryland is not considered to be the practice of law, and also that there are Delaware lawyers and other non-attorney professionals from the State of Delaware, who possess Maryland title insurance licenses and conduct real estate settlements involving Maryland beach property irrespective of the residence of the homeowner or concern about where the actual settlement takes place. You have drawn our attention to this apparent inequity that disadvantages Maryland real estate lawyers and holders of valid Delaware title insurance licenses as compared to corresponding professionals in the State of Delaware.
The specific question you have asked us is the following: “At this time I am requesting the opinion of the Committee on Ethics as to whether a member of the Maryland Bar can conduct a real estate settlement on Delaware real property, assuming the Maryland Bar member possesses a valid State of Delaware title insurance license, and assuming the settlement is physically conducted within the State of Maryland?”
In response to your inquiry, we must say, at the outset, that it is not the province of this Committee to determine what is and what is not the practice of law in the State of Maryland. The responsibility for making that determination rests with the Maryland Court of Appeals. It also, perhaps quite obviously, not the province of this Committee to determine what constitutes the practice of law in the State of Delaware. In your inquiry letter to us, you have provided reference to an opinion of the Delaware Board on Unauthorized Practice which you have cited as standing for the premise that the Delaware Bar considers the act of conducting a real estate settlement involving Delaware real property as the practice of law in the State of Delaware, which can only be performed by a member of the Delaware Bar. Your inquiry does not reveal to us if that opinion rest upon any authority from a Delaware court. Although we have not performed exhaustive research on the matter, we draw your attention to the decision of the Delaware Supreme Court in In The Matter of: Mid-Atlantic Settlement Services, Inc., et al, 755 A.2d 389, 2000 Del. Lexis 243 (2000), which appears consistent with the view of the Delaware Board on Unauthorized Practice. On the basis of your inquiry and these authorities, we will presume, for purposes of our response, that you are correct in your characterization of the position of the Delaware Bar and that the Delaware Bar and its enforcement authority, as well as the Court of Delaware, take the position that conducting real estate settlements involving properties in Delaware constitutes the practice of law in that State which can only be performed by Delaware lawyers.
With the foregoing background, it is the view of this Committee, for the reasons explained below, that you would be ill advised to conduct a settlement in the State of Maryland whether for Maryland residents or for the residents of any other state, with respect to real property in the State of Delaware.
Rule 5.5 of the Maryland Rules of Professional Conduct specifically states as follows:
Rule 5.5. Unauthorized practice of law.
A lawyer shall not:
(a) practice law in a jurisdiction where doing so violates the regulation of
the legal profession in that jurisdiction; or
(b) assist a person who is not a member of the bat in the performance of activity that constitutes the unauthorized practice of law.
The comments under this Rule make clear that “the definition of the practice of law is established by law and varies from one jurisdiction to another…”
Rule 8.4 of the Maryland Rules of Professional Conduct provides that it is professional misconduct for a lawyer to “(a) violate or attempt to violate the Rules of Professional Conduct, knowingly assist or induce another to do so, or do so through the acts of another.” Furthermore, Rule 8.5 of the Maryland Rules of Professional Conduct specifically provides that a lawyer admitted to practice before the Maryland Court of Appeals “is subject to the disciplinary authority of this State for a violation of these Rules in this or any other jurisdiction.”
If we assume as accurate your understanding of what constitutes the practice of law as defined under Delaware law, it is the opinion of this Committee that a Maryland lawyer who conducts a settlement involving real property in the State of Delaware, knowing that that act constitutes the unauthorized practice in the State of Delaware, would be deemed to violate Rule 5.5 and Rule 8.4 of our Rules of Professional Conduct and, therefore, subject himself or herself to the disciplinary authority of the Court of Appeals under Rule 8.5. He or she also may subject himself or herself to discipline by Delaware Bar authorities should they be deemed to have jurisdiction to reach such acts.
We recognize the frustration which underlies your inquiry. We also note that your inquiry points out a deficiency in the existing Rule of Professional Conduct – namely how to address conflicts of law issues and questions where a lawyer may be subject to discipline in more than one state. Our current Rule 8.5 does not address that issue specifically. Please be advised however, that amendments to the Rules of Professional Conduct are currently being considered by a Committee appointed by the Court of Appeals in light of the changes proposed to the ABA Model Rules of Professional Conduct. There is a comprehensive revision of Rule 8.5 which is being considered and a draft of that proposed Amended Rule is attached for your review. If this Rule ultimately is adopted by the Maryland Court of Appeals, following from appropriate interested parties, it will provide greater guidance as to what happens in the event of a conflict between the choice of law relative to the disciplinary authority of different states affected by a multi-state transaction.
On a final note, before receiving your inquiry, this Committee has never previously been asked to opine precisely on the issue you raised. We do draw to your attention, however, several of our prior ethics opinions that we thought might be helpful for you to review. In particular, in Ethics Docket 98-17, we addressed the inquiry of a member of the District of Columbia bar and the Pennsylvania bar who proposed to perform estate title settlements in Silver Spring, Maryland and held himself out, on his business card, as being a “settlement attorney”. This Committee opined that the lawyer in that instance could not hold himself out as being a settlement lawyer because he was not a lawyer authorized to practice in the State of Maryland. You may also want to examine Ethics Docket 97-10, in which we addressed an inquiry of a Maryland lawyer, who inquired about some form of arrangement or association with an out of state title and escrow company which was conducting real estate settlements and issuing title insurance in the State of Maryland.
Rule 8.5. Disciplinary Authority: Choice of Law
- A lawyer admitted by the Court of Appeals to practice in this State is subject to the disciplinary authority of this State for a violation of these rules in this or any other jurisdiction.
- a) Disciplinary Authority. A lawyer not admitted by the Court of Appeals to practice in this State is subject to the disciplinary authority of this State for conduct that constitutes a violation, regardless of these Rules and that: where the lawyer’s authority of this State if the lawyer provides or offers to provide any legal services in this State. A lawyer may be subject to the disciplinary authority of both this State and another jurisdiction for the same conduct.
- involves the practice of law in this State by that lawyer, or
- involves that lawyer holding himself or herself out as practicing law in this State, or
- involves the practice of law in this State by another lawyer over whom that lawyer has the obligation of supervision or control.
Comment
(b) Choice of Law. In any exercise of the disciplinary authority of this State, the rule of professional conduct to be applied shall be as follows
(1) for conduct in connection with a matter pending before a tribunal, the rules of the jurisdiction in which the tribunal sits, unless the rules of the tribunal provide otherwise; and
(2) for any other conduct, the rules of the jurisdiction in which the lawyer’s conduct occurred, or, if the predominant effect of the conduct is in a different jurisdiction, the rules of that jurisdiction shall be applied to the conduct. A lawyer shall not be subject to discipline if the lawyer’s conduct conforms to the rules of a jurisdiction in which the lawyer reasonably believes the predominant effect of the lawyer’s conduct will occur.
COMMENT
[1] Disciplinary authority. – It is longstanding law that the conduct of a lawyer admitted to practice in this State is subject to the disciplinary authority of this State Extension of the disciplinary authority of this State to other lawyers who provide or offer to provide legal services in this State is for the protection of the citizens of this State. Reciprocal enforcement of a jurisdiction’s disciplinary findings and sanctions will further advance the purposes of this Rule. A lawyer who is subject to the disciplinary authority of this State under Rule 8.5(a) appoints an official to be designated by this Court to receive service of process in this State.
[2] Choice of Law. – A lawyer may be potentially subject to more than one set of rules of professional conduct which impose different obligations. The lawyer may be licensed to practice in more than one jurisdiction with differing rules, or may be admitted to practice before a particular court with rules that differ from those of the jurisdiction or jurisdictions in which the lawyer is licensed to practice. Additionally, the lawyer’s conduct may involve significant contacts with more than one jurisdiction.
[3] Paragraph (b) seeks to resolve such potential conflicts. Its premise is that minimizing conflicts between rules, as well as uncertainty about which rules are applicable, is in the best interest of both clients and the profession (as well as the bodies having authority to regulate the profession). Accordingly, it takes the approach of (i) providing that any particular conduct of a lawyer shall be subject to only one set of rules of professional conduct, (ii) making the determination of which set of rules applies to particular conduct as straightforward as possible, consistent with recognition of appropriate regulatory interests of relevant jurisdictions, and (iii) providing protection from discipline for lawyers who act reasonably in the face of uncertainty.
[4] Paragraph (b)(1) provides that as to a lawyer’s conduct relating to a proceeding pending before a tribunal, the lawyer shall be subject only to the rules of professional conduct of that tribunal. As to all other conduct, including conduct in anticipation of a proceeding not yet pending before a tribunal, paragraph (b)(2) provides that a lawyer shall be subject to the rules of the jurisdiction in which the lawyer’s conduct occurred, or, if the predominant effect of the conduct is in another jurisdiction, the rules of that jurisdiction shall be applied to the conduct. In the case of conduct in anticipation of a proceeding that is likely to be before a tribunal, the predominant effect of such conduct could be where the conduct occurred, where the tribunal sits or in another jurisdiction.
[5] When a lawyer’s conduct involves significant contacts with more than one jurisdiction, it may not be clear whether the predominant effect of the lawyer’s conduct will occur in a jurisdiction other than the one in which the conduct occurred. So long as the lawyer’s conduct conforms to the rules of a jurisdiction in which the lawyer reasonably believes the predominant effect will occur, the lawyer shall not be subject to discipline under this Rule.
[6] If two admitting jurisdictions were to proceed against a lawyer for the same conduct, they should, applying this Rule, identify the same governing ethics rules. They should take all appropriate steps to see that they do apply the same rule to the same conduct, and in all events avoid proceeding against a lawyer on the basis of two inconsistent rules.
[7] The choice of law provision applies to lawyers engaged in transnational practice, unless international law, treaties or other agreements between competent regulatory authorities in the affected jurisdiction provide otherwise.