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Case No. S03U1451 IN…
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Case No. S03U1451
IN THE SUPREME COURT OF GEORGIA
ON REVIEW OF UPL ADVISORY OPINION No. 2003-2
BRIEF AMICI CURIAE OF THE UNITED STATES OF AMERICA
AND THE FEDERAL TRADE COMMISSION
WILLIAM E. KOVACIC R. HEWITT PATE
General Counsel Assistant Attorney General
MAUREEN K. OHLHAUSEN JAMES M. GRIFFIN
Assistant Director Deputy Assistant Attorney General
Office of Policy Planning Georgia State Bar No. 311150
ROBERT B. NICHOLSON
JOHN P. FONTE
JESSICA N. BUTLER-ARKOW
DAVID E. BLAKE-THOMAS
Attorneys
Federal Trade Commission U.S. Department of Justice
600 Pennsylvania Avenue, N.W. 601 D Street, N.W.
Washington, D.C. 20580 Washington, D.C. 20530
(202) 326-2481 (202) 514-2435
TABLE OF CONTENTS
Page
INTRODUCTION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
STATEMENT OF INTEREST . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
STATEMENT OF FACTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
ARGUMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
THE PUBLIC INTEREST WILL BE BEST SERVED BY PERMITTING
COMPETITION BETWEEN LAY SETTLEMENT SERVICES AND
ATTORNEYS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
A. This Court Has The Authority To Determine Whether Lay
Settlement Services Should Be Permitted In The Public Interest . . . . . 5
B. UPL 2003-2 Would Likely Hurt The Public By Causing Prices
To Rise . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
C. UPL 2003-2 Does Not Establish Any Actual Harm To Consumers
From Lay Closings Nor Address Concerns About Consumer
Protection . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
D. Less Restrictive Measures Can Protect Georgia Consumers . . . . . . . . 22
Conclusion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
Certificate of Service . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
i
TABLE OF AUTHORITIES
Cases: Page
Conway-Bogue Realty Inv. Co. v. Denver Bar Ass'n, 312 P.2d 998 (Colo.
1957) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
Eckles v. Atlanta Technology Group, Inc., 267 Ga. 801, 485 S.E.2d 22 (1997) 5, 8
FTC v. Superior Court Trial Lawyers Ass'n, 493 U.S. 411 (1990) . . . . . . . . . . . . 8
First Bank & Trust Co. v. Zagoria, 250 Ga. 844, 302 S.E.2d 674 (1983) . . . . . . . 5
Frazee v. Citizens Fidelity Bank & Trust Co., 393 S.W.2d 778 (Ky. 1964) . . . . . 6
Georgia Bar Ass'n v. Lawyers Title Ins. Corp., 222 Ga. 657, 151 S.E.2d 718
(1966) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Goldfarb v. Virginia State Bar, 421 U.S. 773 (1975) . . . . . . . . . . . . . . . . . . . . . . . 8
Huber v. State, 234 Ga. 357, 216 S.E.2d 73 (1975) . . . . . . . . . . . . . . . . . . . . . . . . 5
In re Opinion No. 26 of the Committee on the Unauthorized Practice of Law,
654 A.2d 1344 (N.J. 1995) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . passim
Lowe v. Presley, 86 Ga. App. 328, 71 S.E.2d 730 (1952) . . . . . . . . . . . . . . . . . . . 5
Lowell Bar Ass'n v. Loeb, 52 N.E.2d 27 (Mass. 1943) . . . . . . . . . . . . . . . . . . . . . . 6
National Soc'y of Prof'l Eng'rs v. United States, 435 U.S. 679 (1978) . . . . . . . . . 8
Perkins v. CTX Mortgage Co., 969 P.2d 93 (Wash. 1999) . . . . . . . . . . . . . 7, 13, 15
State Bar of New Mexico v. Guardian Abstract & Title Co., 575 P.2d 943
(N.M. 1978) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7, 13, 15
ii
Cases: Page
Turner v. Kentucky Bar Ass'n, 980 S.W.2d 560 (Ky. 1998) . . . . . . . . . . . . . . . . 23
Statutes and Rules:
Ga. L. 1931, p. 191 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Va. Code Ann. §§ 6.1-2.19-6.1-2.29 (Michie 1997) . . . . . . . . . . . . . . . . . . 9, 10, 23
Ga. Bar Rule 14-2.1(a) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Miscellaneous:
Media General, Residential Real Estate Closing Cost Survey, September 1996 11
Michael Braunstein, Structural Change and Inter-Professional Competition
Advantage: An Example Drawn From Residential Real Estate Conveyancing,
62 Mo. L. Rev. 241 (1997) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9, 16, 19
Joyce Palomar, The War Between Attorneys and Lay Conveyancers-Empirical
Evidence Says "Cease Fire," 31 Conn. L. Rev. 423 (1999) . . . . . . . . . . 16, 19, 20
iii
INTRODUCTION
The State Bar of Georgia asks the Court to approve its Standing Committee
on the Unlicensed Practice of Law ("Committee") Advisory Opinion No. UPL
2003-2 ("UPL 2003-2"), which declares that non-lawyers who perform real estate
closings are engaged in the unlicensed practice of law. The United States and the
Federal Trade Commission jointly ask the Court to reject that opinion.
STATEMENT OF INTEREST
Through enforcement of the federal antitrust laws, the Antitrust Division of
the United States Department of Justice and the Federal Trade Commission
("FTC") work to promote free and unfettered competition in all sectors of the
United States economy to bring consumers goods and services at lower prices and
of higher quality. They also promote competition by filing comments with
government bodies that have regulatory powers, and earlier this year, the Antitrust
Division and the FTC submitted a joint Competition Advocacy Letter to the
Committee urging it not to adopt UPL 2003-2.
STATEMENT OF FACTS
On November 12, 2002, attorney W. Ryan Frier ("Petitioner") sent a letter
to the Committee asking whether the preparation and execution of a deed of
conveyance is "the unauthorized practice of law if someone other than a licensed
1
attorney in the state of Georgia prepares or facilitates the execution of said
deed(s)." Exh. B at 2.1 In his subsequent written comments to the Committee,
Petitioner explained that "[a]s a real estate closing attorney . . . I am the lenders
(sic) attorney. I do not represent the interest of the borrower, seller or real estate
agent." Exh. C at 3 (emphasis original). Nonetheless, he asserted that one of the
"important[]" functions that he performs at closings is to "explain . . . loan
documents in a way that is clearly understood by the lender's customer to reduce
and/or eliminate a borrower's uncertainty." Id. at 4; accord Exh. G at 1, Exh. K,
Exh. M at 1, Exh. O at 7, Exh. Q at 2, Exh. S ("The practice of law is about
counseling and advice").
Witnesses at the hearing affirmed that closing attorneys represent only the
lender (Tr. 26, 53, 63, 90, 95), and because they owe no duty to the buyers and
sellers they "cannot get involved in the individual representations" of these
consumers. Tr. 95. Nevertheless, both lawyer witnesses (Tr. 11-14, 21-22, 82-86,
91-92, 100) and Committee members (Tr. 17-18, 19, 30, 34-46, 66-67, 73, 88, 94,
100-01) suggested that consumers will not be adequately protected unless a
licensed Georgia attorney closes these real estate transactions. These concerns,
1
"Tr." refers to the transcript of the Committee's March 21, 2003 hearing,
and "Exh." refers to the written comments filed with the Committee and lettered A
through Z during that hearing. See Tr. 6-8, 159.
2
however, were not supported by the record, which contains no demonstration that,
in either Georgia or elsewhere, consumers have been inadequately protected in lay
person real estate closings.
On April 22, 2003, the Committee issued UPL 2003-2 in which it concluded
that "the preparation of deeds of conveyance on behalf of another . . . by anyone
other than a duly licensed attorney constitutes the unlicensed practice of law."
UPL 2003-2, p. 2, lines 64-66.2 It further concluded that "those who conduct
witness only closings or otherwise facilitate the execution of deeds of conveyance
on behalf of others are engaged in the practice of law."3 UPL 2003-2, p. 3, lines
108-10. Finally, the Committee opined that "[r]efinance closings, second
mortgages, home equity loans, [and] construction loans" are "subject to the same
analysis" because, it believed, "the centerpiece of these transactions is the
conveyance of real property." UPL 2003-2, pp. 3-4, lines 136-40.
2
UPL 2003-2 is attached to the State Bar's brief as Exhibit A. Citations in
this brief to UPL 2003-2 will be "UPL 2003-2," and then the page and line
numbers of Exhibit A.
3
The Committee defined a "witness only closing" as a closing "in which an
individual presides over the execution of deeds of conveyance and other closing
documents, but purports to do so merely as a witness and notary, not as someone
who is practicing law." UPL 2003-2, p. 2, lines 75-78.
3
ARGUMENT
When it issued UPL 2003-2, the Committee declined to consider the
argument, made in several submissions (including those of the USDOJ and FTC),
that requiring the services of Georgia lawyers for real estate closings would
needlessly harm the public interest by increasing price and decreasing choice for
consumers.4 Indeed, the Committee correctly recognized that it was issuing "only
an interpretation of the law," and that, in so doing, it was limited to consideration
only of "`statute, court rule, and case law of the State of Georgia.'" UPL 2003-2,
p. 1, lines 5, 27-28 (quoting Ga. Bar Rule 14-2.1(a)). The Committee therefore
was unable to consider the key question of whether, assuming that the preparation
and execution of a deed of conveyance is the practice of law, it would nonetheless
serve the public interest if laypersons were permitted to engage in this activity in
Georgia. This Court, however, may and should consider this fundamental
question and recognize the larger public interest to be served. We respectfully
submit that, as other states have concluded, the answer to that question lies in the
balancing of the risks and benefits to consumers of allowing or disallowing lay
real estate closings. We further respectfully submit that that balancing weighs
heavily in favor of allowing laypersons to close real estate transactions in Georgia.
4
See Tr. 26-30; Exh. P, T.
4
THE PUBLIC INTEREST WILL BE BEST SERVED BY
PERMITTING COMPETITION BETWEEN LAY SETTLEMENT
SERVICES AND ATTORNEYS
A. This Court Has The Authority To Determine Whether Lay
Settlement Services Should Be Permitted In The Public Interest
"Only this Court has the inherent power to govern the practice of law in
Georgia;" thus "Ga.L. 1931, p. 191, as amended . . . `no longer controls the
practice of law in Georgia.'" Eckles v. Atlanta Technology Group, Inc., 267 Ga.
801, 804, 485 S.E.2d 22, 25 (1997) (quoting Huber v. State, 234 Ga. 357, 359, 216
S.E.2d 73, 75 (1975)). This exclusive power derives from the Court's
"constitutional function, to regulate the practice of law in Georgia." Huber, 234
Ga. at 360, 216 S.E.2d at 75; accord Eckles, 267 Ga. at 808, 485 S.E.2d at 28 ("It
is beyond dispute that the regulation of the practice of law in this state is a matter
exclusively within this Court's inherent power"). And the "foremost" goal in this
Court's regulation of the practice of law in Georgia is to insure "adherence to the
public interest." First Bank & Trust Co. v. Zagoria, 250 Ga. 844, 845, 302 S.E.2d
674, 675 (1983).
Thus, in Georgia, as in other states, the prohibition on the unlicensed
practice of law is designed to protect the public interest. Lowe v. Presley, 86 Ga.
App. 328, 331-32, 71 S.E.2d 730, 733 (1952); accord Frazee v. Citizens Fidelity
5
Bank & Trust Co., 393 S.W.2d 778, 782 (Ky. 1964) ("The basic consideration in
suits involving unauthorized practice of law is the public interest"); Lowell Bar
Ass'n v. Loeb, 52 N.E.2d 27, 31 (Mass. 1943) ("The justification for excluding
from the practice of law persons not admitted to the bar is to be found, not in the
protection of the bar from competition, but in the protection of the public").
But as the Supreme Court of New Jersey recently explained when it rejected
a proposed unauthorized practice of law opinion similar to UPL 2003-2,
determining the public interest involves far more than the technical analysis that
the Committee engaged in when it issued UPL 2003-2:
The question of what constitutes the unauthorized practice of
law involves more than an academic analysis of the function of
lawyers, more than a determination of what they are uniquely
qualified to do. It also involves a determination of whether non-
lawyers should be allowed, in the public interest, to engage in
activities that may constitute the practice of law.
* * *
We determine the ultimate touchstone the public interest
through the balancing of the factors involved in the case, namely, the
risks and benefits to the public of allowing or disallowing such
activities. In other words, like all of our powers, this power over the
practice of law must be exercised in the public interest; more
specifically, it is not a power given to us in order to protect lawyers,
but in order to protect the public, in this instance by preserving its
right to proceed without counsel.
In re Opinion No. 26 of the Committee on the Unauthorized Practice of Law, 654
6
A.2d 1344, 1345-46 (N.J. 1995) (emphasis added); see also id. at 1352 (ultimate
question is "whether the public interest is disserved by permitting such conduct.
The resolution of the question is determined by practical, not theoretical,
considerations");5 Perkins v. CTX Mortgage Co., 969 P.2d 93, 99 (Wash. 1999)
(resolution "depends on balancing the competing public interests of (1) protecting
the public from the harm of the lay exercise of legal discretion and (2) promoting
convenience and low cost"); State Bar of New Mexico v. Guardian Abstract &
Title Co., 575 P.2d 943, 948 (N.M. 1978) ("test must be applied in a common-
sense way [to avoid] impractical and technical restrictions which have no
reasonable justification"); cf., Georgia Bar Ass'n v. Lawyers Title Ins. Corp., 222
Ga. 657, 663-64, 151 S.E.2d 718, 723 (1966) (Duckworth, C.J., concurring).
In determining how best to protect the public interest in this proceeding,
therefore, this Court should balance the harm that would be caused by banning lay
real estate settlements against the harm that might be caused by allowing them. If
the Court finds that permitting lay people to prepare and facilitate the execution of
a deed of conveyance is in the public's interest, then the Court, in the exercise of
its exclusive supervisory authority over the practice of law in Georgia, should
5
Thus, the State Bar is mistaken that the New Jersey Supreme Court "simply
adopt[ed] the customary and traditional practice in the state." Br. 4-5.
7
reject UPL 2003-2. See Eckles, supra. As explained below, the requisite
balancing strongly supports rejecting UPL 2003-2.
B. UPL 2003-2 Would Likely Hurt The Public By Causing Prices
To Rise
Free and unfettered competition is the centerpiece of the American
economy. As the United States Supreme Court has observed, "ultimately,
competition will produce not only lower prices but also better goods and services.
`The heart of our national economic policy long has been faith in the value of
competition.'" National Soc'y of Prof'l Eng'rs v. United States, 435 U.S. 679, 695
(1978) (citation omitted); accord FTC v. Superior Court Trial Lawyers Ass'n, 493
U.S. 411, 423 (1990). Competition benefits not only consumers of traditional
manufacturing industries, but also consumers of services offered by the learned
professions. See Goldfarb v. Virginia State Bar, 421 U.S. 773, 787 (1975);
National Soc'y of Prof'l Eng'rs, 435 U.S. at 689.
When nonlawyers compete with lawyers to provide services that do not
require formal legal training,6 consumers may consider several relevant factors in
6
Although the State Bar assumes that real estate closings always "requir[e]
specialized legal skills and knowledge" (Br. 11), persuasive testimony to the
contrary was given at the hearing. See Tr. 28, 152-53, 158-59; Exh. E at 1-2
(describing "the increasingly typical residential `closing mill'" that exists in
Georgia legal practice); Exh. I ("as a practical matter, the preparation of almost all
conveyancing instruments is done by non lawyers"). That testimony is
8
selecting a service provider, including cost, convenience, and the degree of
assurance that the necessary documents and commitments are sufficient. Today, in
the majority of states, nonlawyers compete with lawyers to provide services
related to the preparation and execution of a deed, including the examination and
clearing of title, the answering of non-legal questions during the closing process,
witnessing the signatures at closing, and the disbursement of funds. See, e.g., Tr.
25, 130; In re Opinion No. 26, supra; Va. Code Ann. §§ 6.1-2.19 to 6.1-2.29
(Michie 1997); Michael Braunstein, Structural Change and Inter-Professional
Competition Advantage: An Example Drawn From Residential Real Estate
Conveyancing, 62 Mo. L. Rev. 241, 264-65 (1997).
UPL 2003-2, however, erects an insurmountable barrier against free
competition from lay settlement services, thereby depriving Georgia consumers of
the ability to choose to close real estate transactions without the services of an
attorney.7 In doing so, UPL 2003-2 likely will increase costs for consumers in
corroborated by the experience in the many states that permit lay closings. See
infra.
7
A closing attorney's compensation has two elements: a legal fee (Tr. 14,
98), and a commission from the title insurance company of as much as 80
percent of the title insurance premium as the insurance company's seller-agent.
Tr. 24, 98-99, 115, 119. Some title companies, however, "work for the title
insurance premium alone." Tr. 24-25, 27.
9
several ways. First, it will force Georgia consumers who would not otherwise pay
for the services of a lawyer at closing to do so. Hence, UPL 2003-2 will injure all
consumers who might prefer the combination of price, quality, and service that a
lay settlement service offers.8
For example, lay settlement services have operated in Virginia since 1981,
when the State rejected a proposed bar opinion declaring lay settlements to be the
unauthorized practice of law. In 1997, Virginia codified the right of consumers to
continue using lay settlement services by enacting the Consumer Real Estate
Protection Act, Va. Code Ann. §§ 6.1-2.19 to 6.1-2.29 (Michie 1997). Proponents
of that enactment pointed to survey evidence suggesting that lay closings in
Virginia were substantially less expensive than attorney closings:
Virginia Closing Costs
Median Average Average Including Title
Examination
Attorneys $350 $366 $451
Lay Services $200 $208 $272
8
Besides hurting consumers who are buying and selling homes and
commercial properties, UPL 2003-2 would also harm those obtaining home equity
loans or refinancing existing loans by preventing them from using the lender or
other layperson as their closing agent, even when no conveyance of property is
involved. Indeed, the final, albeit completely conclusory paragraph of UPL 2003-
2, appears to have been written with that goal in mind. See note 12, infra.
10
Media General, Residential Real Estate Closing Cost Survey, September 1996 at 5.
There is no reason to expect that Georgia's experience would not be similar. See
Tr. 24-25, 27, 33-34.
Second, the Opinion, by prohibiting competition from lay providers, will
likely increase the price of lawyers' settlement services, since the availability of
alternative, lower-cost lay services will no longer be a threat. Consequently, even
consumers who would otherwise choose an attorney over a lay agent will likely
pay higher prices. Experience in New Jersey supports this prospect. In 1995, after
a 16-day evidentiary hearing conducted by a special master, the New Jersey
Supreme Court found that real estate closing legal fees were much lower in
southern New Jersey, where lay settlements were commonplace, than in the
northern part of the State where lawyers conducted almost all settlements.9 This
was true whether or not the South Jersey transaction included a lawyer. South
Jersey buyers unrepresented by counsel paid no legal fees as part of closing costs,
while unrepresented sellers paid about $90; South Jersey buyers represented by
counsel throughout the entire transaction, including closing, paid on average $650,
9
In South Jersey, only about 40% of buyers and 35% of sellers were
represented by counsel at closing, while in North Jersey 99.5% of buyers and 86%
of sellers were represented by counsel. In re Opinion No. 26, 654 A.2d at 1349.
11
while sellers paid $350; North Jersey buyers represented by counsel paid on
average $1,000, and sellers $750. In re Opinion No. 26, 654 A.2d at 1349.
Third, a ban on the preparation of deeds and the facilitation of their
execution by anyone other than a licensed Georgia attorney could reduce
competition from out-of-state service providers. In the real estate mortgage
market, for example, lenders outside Georgia may compete by offering lower
interest rates or more attractive loan packages than similar in-state institutions.
These lenders may lack facilities in Georgia. They may hire out-of-state providers
to prepare deeds and may contract with Georgia lay providers to facilitate the
execution of those deeds.10 A ban on competition from anyone other than a
licensed Georgia attorney has the potential to impair this competition between
lenders.
Fourth, a ban on lay competition could hurt consumers by denying them the
right to choose a lay service provider that offers a combination of services or form
of service that better meets individual consumer needs. For example, some lay
closing services compete with attorneys on the basis of convenience to close loans
at nontraditional times (such as evenings or weekends) and locations (such as the
10
For example, an out-of-state lender could hire a Georgia non-lawyer to
examine title and clear the exceptions to that title.
12
consumer's home). Tr. 48-49. See Perkins 969 P.2d at 100 ("permitting mortgage
lenders to prepare loan documents in the way the CTX does relieves borrowers of
the cost and inconvenience of having attorneys prepare their loan documents");
Guardian Abstract & Title, 575 P.2d at 949 ("The uncontroverted evidence was
that using lawyers for this simple operation considerably slowed the loan closings
and cost the persons involved a great deal more money").
C. UPL 2003-2 Does Not Establish Any Actual Harm To Consumers
From Lay Closings Nor Address Concerns About Consumer
Protection
There are two additional flaws in UPL 2003-2. First, the opinion contains
no factual finding or assessment of how lay services would actually hurt Georgia
consumers, and there is no basis for predicting such harm here. Second, UPL
2003-2 fails in its ostensible purpose of protecting consumers who need legal
advice because it does not require that an attorney representing the consumer
actually be present at the closing.
1. As the State Bar recognizes, a ban on lay real estate closings will
eliminate "the potential for up front cost savings at closings." Br. 13. But because
the American economy rests on the value of free competition, a sweeping
restriction on competition such as that contained in UPL 2003-2 should be
justified by a credible showing of need for the restriction, and should be narrowly
13
drawn to minimize its anti-competitive impact. UPL 2003-2, as merely a technical
interpretation, does not contain such a showing of need for its near-complete
prohibition on lay closing service competition. Indeed, the record before the
Committee fails to demonstrate any substantial consumer harm caused by lay
closings. The record contains only attorneys' unsupported allegations that they
"will spend the next ten years cleaning up the mess left behind by the non-attorney
trying to do closings." Tr. 91; accord Exh. D (lay service providers' "documents
. . . are often shoddy; the title examinations on which they are based are often
poor"). The opinion, therefore, cites no statistics showing that lay settlements are
problematic.11
In fact, the testimony before the Committee was that states that permit lay
closings "have no higher loss ratios than does the state of Georgia. They have no
more defalcations than the state of Georgia." Tr. 27; accord Tr. 25 (in states
where lay closings are "almost exclusive": "The consumer's mortgages are
protected. The conveyance documents are proper. The mortgage instruments are
proper"); Tr. 139 (in other states, lay closings are "not a problem . . . . Title
companies are doing a good job").
11
While one comment (Exh. L) describes an unfortunate title mishap from a
lay closing, attorney closings in Georgia also result in title problems. See pp. 20-
21, infra.
14
This testimony is corroborated by both courts and commentators that have
concluded there is no significant risk of harm from non-attorney closings even
when title is being transferred. See Perkins 969 P.2d at 100 ("[T]he risk of public
harm is low. Indeed, the Perkinses have never alleged that their loan documents
were deficiently drafted or that their legal rights were prejudiced in the least"); In
re Opinion No. 26, 654 A.2d at 1346 ("The record fails to demonstrate that the
public interest has been disserved by the South Jersey practice [of closing without
counsel] over the many years it has been in existence"); id. at 1347 ("no proof of
actual damage resulting from the South Jersey practice"); Guardian Abstract &
Title, 575 P.2d at 945, 949 (in county where title companies handled
approximately 90 percent of real estate closings and had been performing service
for 20 years: "There was no convincing evidence that the massive changeover in
the performance of this service from attorneys to the title companies during the
past several years has been accompanied by any great loss, detriment or
inconvenience to the public"); Conway-Bogue Realty Inv. Co. v. Denver Bar
Ass'n, 312 P.2d 998, 1007 (Colo. 1957) ("[W]e must make note of the fact that the
record is devoid of evidence of any instance in which the public or any member
thereof, layman or lawyer has suffered injury by reason of the act of any of the
defendants sought to be enjoined"). We are aware of no case to the contrary.
15
Similarly, a recent study was conducted of five states that prohibit lay
closings and five states that permit them, with the specific "goal" of determining
"the threshold question . . . whether members of the public suffer actual harm
from lay provision of real estate settlement services." Joyce Palomar, The War
Between Attorneys and Lay ConveyancersEmpirical Evidence Says "Cease Fire,"
31 Conn. L. Rev. 423, 477 (1999) (emphasis added). That study found that "[t]he
only clear conclusion . . . is that the evidence does not substantiate the claim that
the public bears a sufficient risk from lay provision of real estate settlement
services to warrant blanket prohibition of those services under the auspices of
preventing the unauthorized practice of law." Id. at 520; accord Braunstein, 62
Mo. L. Rev. at 274-75 (discussing 1989 Ohio study "indicat[ing] that increased
lawyer involvement does not have a beneficial effect on outcomes of home
purchase transactions").
Consumers may, of course, think that the assistance of a licensed lawyer at
closing is desirable to answer legal questions, provide advice, negotiate disputes,
or offer various protections.12 It is unquestionably their right to hire a lawyer for
12
Not all closings involve an actual purchase and sale. A substantial number
involve home equity loans or the refinancing of existing loans where, because a
related transaction has already gone through the closing process, legal questions
and issues are less likely to arise. See Tr. 43. UPL 2003-2, however, treats these
transactions the same as the original purchase/sale, ostensibly because "the
16
these purposes. But as the New Jersey Supreme Court concluded, this is no reason
to eliminate lay closing services as an alternative for consumers. In re Opinion
No. 26, 654 A.2d at 1360. Rather, the choice of hiring a lawyer or a non-lawyer
should rest with the consumer.
2. Moreover, the overriding theme in both the supporting comments and
testimony was that attorney closings are required to protect the consumer buyer
and seller. See pp. 2-3, supra. Even if that had been proven, however, UPL 2003-
2 does not even guarantee consumers the type of lawyer protection it assumes that
they need. UPL 2003-2 does not require consumers to hire their own lawyers to
represent their interests. Rather, it requires only that some attorney close the loan.
See Exh. E at 2. And as the record makes clear, the usual practice in Georgia is
that an attorney representing the lender closes the loan. See p. 2, supra.
Petitioner himself explained that as the lender's attorney he "do[es] not represent
the interest of the borrower [or] seller." Exh. C at 3 (emphasis added). That
lender's closing attorney owes no duty to the buyer or seller and, therefore, could
not advise the consumer about whether a particular deed or loan term was in his or
her best interests. See, e.g., Tr. 95, 153; Exh. P at 3. Nor would his or her
centerpiece of these transactions is the conveyance of real property." UPL 2003-
2, p. 4, lines 138-40 (emphasis added). See note 8, supra.
17
presence likely give consumers the leverage or will to halt transactions that are not
in their best interests. Nonetheless, UPL 2003-2 forces that attorney on them.
The New Jersey Supreme Court noted the possible problems that could arise
if a lawyer conducting a closing offered legal advice to a participant he or she did
not represent:
We note that . . . where the attorneys [advising the
buyer or seller] are employed by the title company . . .
the basic evil is that the person performing the legal
service is in no sense doing it for the party, but rather in
the interest of the employer, the title company, neither of
them (the lawyer or the title company) representing the
party, be it seller, buyer or lender. . . . [Such] practice of
law would be unauthorized, impermissible, for it is only
an attorney retained by and actually representing the
client who is authorized to practice law on the clients
behalf. What is involved is not simply the license to
practice, but the professional duty of loyalty that is
included in the concept of permissible representation.
Depending on the circumstances, attorneys who act
purportedly on behalf of those they do not represent may
be engaged in the unauthorized practice of law, or
unethical professional conduct, or both.
In re Opinion No. 26, 654 A.3d at 1352 n.3 (emphasis original).13 Because only a
party's own lawyer is authorized to answer any legal questions that party might
have, a consumer who needs legal advice at closing must hire his or her own
13
The "evil" noted by the New Jersey Supreme Court would be the same
regardless of which interest the closing attorney represented.
18
lawyer, regardless of whether another party to the transaction is represented by a
lawyer. Thus, UPL 2003-2 completely fails to provide the consuming public the
protection upon which its draconian measure of complete elimination of lay
settlement services is based.
Moreover, even when an attorney conducts the closing, he or she cannot
change most of the terms of the standard deed and note forms at the consumer's
request, as a lawyer might change a contract in another setting. The record below
shows that almost all mortgages involve standardized deed and note forms
approved by Fannie Mae, Ginnie Mae, and Freddie Mac. These uniform forms are
required for reselling the mortgage in the secondary market; the consumer cannot
alter most of their terms, even on the advice of counsel. Tr. 28, 30-31 ("not one
person here will testify that [with] a Fannie Mae deed to secure debt, they will
have the authority to change it"); accord Palomar, 31 Conn. L. Rev. at 441-42 &
nn. 64-72; Braunstein, 62 Mo. L. Rev. at 244, 249-50 & nn. 14, 41-44.
3. Finally, the State Bar's assertions in this Court that it seeks "protection
not just to the parties involved in a particular real estate transaction, but to the
entire real estate process" (Br. 12), and that only "the legal profession" is capable
of providing that protection (Br. 15), are unpersuasive.
First, nowhere does the State Bar explain how "the entire real estate
19
process" differs from the sum of every "particular real estate transaction" and the
needs and interests of the parties especially the buyers' therein. Nor does the
State Bar explain what "the long-term risk to the entire conveyancing system" is
(Br. 13), or how lay closings produce such a risk. Compare Tr. 151-52. And
while the State Bar criticizes the many states that permit lay closings for
"ignor[ing] the systemic risk to real estate conveyancing and focus[ing] only on
the risk to specific consumers" (Br. 13-14), it identifies no state and we are not
aware of any where that "risk" has materialized.14
Second, although the State Bar asserts that only the legal profession is
capable of maintaining that integrity, including "the accuracy of the title records"
(Br. 12-13), the record proves the opposite. Thus, several lawyers, including two
former presidents of the Georgia Real Estate Closing Attorney Association
("GRECAA"), testified that in "one quarter to one-third of the closings" that they
do, they "are actually doing title cleanup." Tr. 20, 90 ("I spend more than half of
my time every day of the week clearing title problems"), accord Tr.156; Exh. J
14
For example, the Palomar study, supra, found no such state. And while
the State Bar argues that, in allowing lay preparation of closing documents in a
case decided in 1940, the Minnesota Supreme Court "never examined the systemic
problems such lay closings might cause" (Br. 13) (emphasis added), apparently
none occurred in the intervening 63 years.
20
("In the 26 years I have been in a real estate practice in Georgia, I am aware that
there has been a significant diminution in the quality of deeds and other
instruments I find recorded"). The "most common" problem is that the lender who
is paid off (e.g., the seller's mortgagee) fails to clear its lien on the property. Tr.
20-21, accord Tr. 156 (constitutes "85 percent of . . . title issues"). This occurs so
often, however, because "[t]he lawyer in Georgia who did that closing . . . was not
legally responsible for clearing that title." Tr. 21 (emphasis added); accord Tr.
156 ("the day of the closing is the last time the lawyer even looks at it"). Thus, the
State Bar is wrong that "lawyers have a personal stake in the real estate system in
its entirety." Br. 15. As one witness with 30 years of experience in Georgia real
estate transactions stated: "What that tells me is if all these attorneys are spending
so much of their time clearing title issues, these are title issues that were generated
by attorneys . . . . [I]n my 30 years of experience in Georgia . . . [e]very title issue I
have worked on clearing has been from a law firm." Tr. 149-50.
Third, the State Bar is wrong that "[a] failure by the lawyer anywhere in this
process may result in the lawyer's being disbarred." Br. 15. As noted above, a
former GRECAA president testified that the closing lawyer has no legal
responsibility for clearing a paid off lien. Tr. 21. Nor when the closing lawyer is
the lender's attorney does he or she have a legal responsibility to explain to the
21
buyer that a utility easement running under part of the house being purchased
could result in future demolition of that section of the house. Indeed, such advice
to the buyer might be contrary to the seller's interest. But if a buyer could not sell
in the future because of such an encumbered title, or if his or her house were
partially demolished because of such an easement, the record indicates that the
closing attorney would not be responsible, even though that attorney was forced
on the buyer in the name of maintaining "the integrity of the entire system of
conveyancing." Br. 15. See Tr. 151-52 (explaining "potential for a financial loss
by a purchaser, seller, or lender [even] if they close with a law firm").
Because UPL 2003-2 completely fails to provide consumers with any more
protection than they would receive if lay closings were permitted, but denies them
the benefits of lower prices and convenience, the public interest will best be
served by rejecting UPL 2003-2.
D. Less Restrictive Measures Can Protect Georgia Consumers
Affirming UPL 2003-2 will deny Georgia consumers the benefits of
competition from lay settlement providers. These costs should not be imposed
without a convincing showing that lay closings not only injure Georgia
consumers, but that less drastic measures cannot remedy any perceived problem.
In fact, if Georgia consumers need protection, it can be provided through measures
22
that restrain competition less than a complete ban on lay settlements. E.g., Tr.
120-21. For example, Virginia, confronted with similar issues in 1997, adopted
the Consumer Real Estate Protection Act, supra p. 10. This statute permits
consumers to choose lay settlement providers, which are now regulated by the
State. Hence, Virginia consumers continue to have the benefits of competition,
including lower-cost settlements.
Likewise, the New Jersey Supreme Court, in permitting lay settlements, has
required written notice to consumers informing the buyer and seller that neither
will receive any legal advice during the transaction unless they hire their own
attorney, identifying risks inherent with buying or selling real estate without a
lawyer's assistance, and notifying them that whether to hire a lawyer is totally
within their discretion. In re Opinion No. 26, 654 A.2d at 1361-64; cf. Turner v.
Kentucky Bar Ass'n, 980 S.W.2d 560, 563-64 (Ky. 1998) (establishing
"qualifications" under which non-lawyers may serve as workers' compensation
specialists). These measures permit consumers to make an informed choice about
whether to hire an attorney, further assuring that the public is not disserved by the
provision of lay closing services. See 654 A.2d at 1361.
23
CONCLUSION
Because banning lay real estate closings will prevent competition from
nonlawyers and thereby cause consumers' costs to increase, because there is no
demonstrated harm from permitting lay closings in Georgia, because UPL 2003-2
guarantees consumers no more protection than they would receive from lay
settlements, and because less drastic measures than totally banning lay settlements
are available if additional consumer protections are required, the Court should
reject UPL 2003-2.
Respectfully submitted,
WILLIAM E. KOVACIC R. HEWITT PATE
General Counsel Assistant Attorney General
MAUREEN K. OHLHAUSEN JAMES M. GRIFFIN
Assistant Director Deputy Assistant Attorney General
Office of Policy Planning Georgia State Bar No. 311150
ROBERT B. NICHOLSON
JOHN P. FONTE
JESSICA N. BUTLER-ARKOW
DAVID E. BLAKE-THOMAS
Attorneys
Federal Trade Commission U.S. Department of Justice
600 Pennsylvania Avenue, N.W. 601 D Street, N.W.
Washington, D.C. 20580 Washington, D.C. 20530
(202) 326-2481 (202) 514-2435
24
CERTIFICATE OF SERVICE
I do hereby certify that today, July 28, 2003, I served by Federal Express
overnight delivery, a true copy of the foregoing Brief Amici Curiae Of The United
States Of America And The Federal Trade Commission, on the Petitioner, the
State Bar of Georgia, and the Standing Committee on UPL of the State Bar of
Georgia, addressed as follows:
Robert E. McCormack
Deputy General Counsel
State Bar of Georgia
104 Marietta Street
Suite 100
Atlanta, GA 30303
Standing Committee on the
Unlicensed Practice of Law
State Bar of Georgia
104 Marietta Street
Suite 100
Atlanta, GA 30303
W. Ryan Frier
Frier & Oulsnam, P.C.
150 Roberson Mill Road
Suite 100
Milledgeville, GA 31061
James M. Griffin
U.S. Department of Justice
Georgia Bar No. 311150
(202) 514-3543
25