The Trusted Adviser
July 2011 | Volume 4 • Number 5

Of Note


Unauthorized Practice of Law

The Real Estate Bar Assn for Massachusetts, Inc v National Real Estate Information Services, 459 Mass 512, 2011 WL 1520142 (Mass, 2011).

Facts:In November 2006, the Real Estate Bar Association for Massachusetts (REBA) initiated a lawsuit in Massachusetts state court against National Real Estate Information Services (NREIS), a real estate settlement services provider, seeking declaratory and injunctive relief. REBA alleged that NREIS&€™ business constituted unauthorized practice of law in violation of Massachusetts General Laws Chapter 221, Sections 46 and following. NREIS&€™ activities as described by the Supreme Court of Massachusetts included contracting for title examination searches, obtaining third-party reports relating to property, contracting with a third party to draft deeds, drafting settlement statements, arranging for attorneys to attend closings, transmitting and reviewing closing documents, ensuring the recording of documents, and disbursing settlement funds. REBA argued that in the context of the conveyance of property these activities constituted the practice of law and were unlawful if not &€œperformed, supervised, or overseen by an attorney."

NREIS removed the case to federal court on diversity grounds, and made a counterclaim against REBA, arguing that REBA&€™s lawsuit violated the dormant commerce clause. The district court granted summary judgment in favor of NREIS, holding that its practices were not unauthorized practice of law and that REBA&€™s lawsuit violated the dormant commerce clause. The court ordered REBA to pay $904,076.14 for attorneys&€™ fees. REBA appealed and the court of appeals vacated the lower court&€™s judgment, reversed the award based on the counterclaim, and certified two questions to the Massachusetts state court to clarify matters of state law. First, the court of appeals asked, "Whether NREIS' activities, either in whole or in part&€¦ constitute the unauthorized practice of law." In addition, it asked if the specific practice of contracting attorneys to attend closing was a violation of state law.

Holding:The court answered a "probable no" to the first question and determined that it could not answer the second, but did issue advice on the subject.

First, the court said that NREIS' activities could not be looked at as a whole to determine whether they constituted unauthorized practice of law, and had to be looked at individually. Ordering title examinations, contracting a third party to draft a deed, preparing standardized settlement statements such as the HUD-1 and HUD-1A, and the issuance of title insurance are not unauthorized practice of law. The actual drafting of a deed is a practice of law, but the court found nothing in the record to show that NREIS had done this. The court held that "disbursing mortgage funds does not in and of itself qualify as the practice of law" but did raise the possibility that NREIS may have violated the Massachusetts "good funds statute" depending on the order of when it disbursed funds. The court found that there was no evidence in the record sufficient to determine if NREIS' activities were unlawful.

As to the second question certified by the federal court, the state court maintained that there was not enough information in the record to reach a conclusion. The court did however give advice on the role attorneys should play in real estate conveyances. It instructed that an attorney should have a "meaningful role" in the transaction&€”at closing and in rendering a legal opinion about the marketability of title. REBA alleged that the attorneys NREIS contracted with did little more than hand over legal documents and witness signatures at closing. The Supreme Court of Massachusetts warned that an attorney must be more involved than that, but concluded that there was no evidence in the record about how NREIS' attorneys acted during the conveyances.










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[Last update: 6-28-11]