Legal Ethics - Roy M. Sobelson

• Publication year: 2004

Legal Ethicsby Roy M. Sobelson^*

I. Introduction

The biggest news in Georgia legal ethics this year actually made it into the general press¹ when the Georgia Supreme Court approved a bar committee opinion confirming that real estate closings remained the exclusive province of licensed Georgia lawyers.² With the Justice Department, the Federal Trade Commission, and consumer advocates all weighing in with contrary opinions,³ the court held firm against the inevitable, continuing criticism and cries of protectionism.⁴ Combined with the current debates over both multidisciplinary⁵ and multijurisdic-tional practices,⁶ it looks like the profession will continue to engage in heated debate in Georgia, if not worldwide,⁷ well into the foreseeable future. Meanwhile, the Georgia Supreme Court made several changes to our Rules of Professional Conduct⁸ along those lines, but all of them occurred just outside the operative dates of this survey, June 1, 2003 to May 31, 2004.⁹

As for news of interest almost exclusively for practicing attorneys, a local litigator created quite a stir when he repeatedly violated a court's motion in limine order and received no trial court sanction for his violations.¹⁰ Of more interest here, perhaps, is the surprising news that his conduct apparently contravenes no Georgia ethics rule. Whether the courts themselves can prevent such behavior or make it cost ineffective remains to be seen.

II. Advisory Opinions

A. Opinions Issued by the Supreme Court

Although several formal advisory opinions were issued this year, the supreme court entered the fray only once and approved a Formal Advisory Opinion Board opinion.¹¹ The supreme court agreed with the Standing Committee on the Unlicensed Practice of Law¹² ("Committee") that the preparation and execution of a deed of conveyance by someone other than a licensed Georgia attorney¹³ constitutes the unlicensed practice of law.¹⁴ The opinion should be no surprise, given the court's traditional insistence that the protection of the public is best served by prohibiting lay conveyancing¹⁵ or witness-only closings.¹⁶ In previous opinions¹⁷ the court made it clear that lawyers may not delegate responsibility for real estate closings to non-lawyers,¹⁸ and licensed Georgia lawyers must be physically present for the closings to be proper.¹⁹ While the court did not explicitly mention this idea,²⁰ the Committee concluded that "the execution of a deed of conveyance is so intimately interwoven with the other elements of the closing process so as to be inseparable from the closing .... It is one of the 'entire series of events through which the title to land is conveyed . . . .'"²¹ Thus, it looks like Georgia lawyers will continue their traditional control over all the critical elements of the real estate closing business.

The court looked to two sources as the basis for its opinion. First, the Georgia General Assembly established statutory policy that only attorneys are authorized to close real estate transactions.²² Second, because the court ultimately controls the practice of law, it must render its own judgment about how the judiciary can best serve the interests of the public. On that count, the court insisted that lawyers are both uniquely qualified for closings and may be held accountable for any professional performance failures under malpractice law and the attorney disciplinary system.²³ Three things are interesting about the court's judgment on this issue, quite apart from the statutory definition of the practice of law.

First, the court acknowledged that lay-closing advocates complain that this rule increases prices, even while it decreases consumer choices.²⁴ The court, however, made no attempt at all to address either of these complaints.²⁵ Second, the court offered no evidence, apocryphal or empiric, that lawyers are more competent than non-lawyers at performing these functions.²⁶ Not all lawyers are veteran practitioners in this area, and Georgia has no system for registering specialists in given legal areas whereby only they are allowed to practice in that field. Yet, the court's position is basically that any lawyer, with any experience base, is better suited for these tasks than any non-lawyer.²⁷ Given the wide variety of education, training, experiences, and practices in which lawyers engage, this simply cannot be true. In fact, the court noted that several states allow non-lawyer closings, and it offered not a single word to suggest why these states are incorrect or are suffering from the practice.²⁸

Third, although lawyers may be liable for malpractice or subject to discipline, Georgia lawyers are not required to hold malpractice insurance. For injured consumers, these remedies offer little consolation. While the disciplinary process is applicable only to lawyers,²⁹ one would be hard pressed to find many instances where lawyers are publicly reprimanded, suspended, or disbarred for deficient performance of real estate closings. Even if a lawyer is disciplined, it is entirely possible that it will be confidential, leaving the public at the mercy of incompetent and dishonest lawyers.

Advocates of limiting closings to lawyers argue that although disciplinary action is not common, it is still possible. In fact it is more possible in Georgia than in other jurisdictions. Rule 1.1 of the Model Rules of Professional Conduct³⁰ requires a lawyer to provide a client with competent representation, which includes the "legal knowledge, skill, thoroughness and preparation reasonably necessary for the representation."³¹ The comments acknowledge that competent representation can be provided "through the association of a lawyer of established competence in the field."³² The Georgia version of this rule places the ABA's nonbinding³³ commentary within the enforceable rule itself, stating: "A lawyer shall not handle a matter which the lawyer knows or should know to be beyond the lawyer's level of competence without associating another lawyer who the original lawyer reasonably believes to be competent to handle the matter in question."³⁴ By adopting a unique combination ofthe American Bar Association ("ABA") model rule and Georgia's old directory rule on competence,³⁵ the Georgia rule requires, rather than suggests, that inexperienced lawyers get help in handling cases out of their comfort zone.³⁶

In the end one should not lose sight of two facts about lawyers who perform real estate closings incompetently. First, the violation of a disciplinary rule does not in itself give rise to a cause of action for damages.³⁷ Second, even a successful disciplinary prosecution provides the injured consumer no damages, no reparations, and no real reme-dy.³⁸ In fact, prosecution may not even provide protection for future victims ofthe lawyer's malpractice because most discipline is private and unavailable to consumers who seek information from the Bar.³⁹ Adding insult to injury, the Clients' Security Fund's charge is limited to cases involving dishonest conduct and does not cover negligence.⁴⁰

The controversy regarding nonlawyers who conduct closings is unlikely to die down any time soon. The Bar has already issued notice ofanother proposed opinion, which concerns the propriety of a lawyer's use of a nonlawyer entity to conduct closings and place the proceeds in a non-IOLTA account.⁴¹ Once again, the Board opines that if lawyers are present at closings, the proceeds must go into their IOLTA accounts. However, if lawyers are not present, a non-lawyer's participation constitutes the unauthorized practice of law.⁴² The only remaining question is whether the supreme court will find it necessary to grant review of yet another opinion saying the same thing—real estate closings in Georgia are reserved for those with a Georgia license to practice law.

B. Opinions Issued by the Formal Advisory Opinion Board

The Formal Advisory Opinion Board ("Board")issued three opinions in this survey period, none of which was approved by the supreme court.⁴³ In Formal Advisory Opinion 03-1,⁴⁴ the Board addressed whether a Georgia attorney may contract for a non-refundable retainer. This is a critical question, not only because in criminal defense practice such fees are common,⁴⁵ but also because the supreme court has given confusing advice about retainers in the past. In Formal Advisory Opinion 91-2,⁴⁶ when asked whether a lawyer had to put a "retainer that represents payment of fees yet to be earned" in a trust account, the court⁴⁷ first declared that "one can reasonably take the position that 'retainers' and 'flat fees' may be placed in the general operating account . . . ."⁴⁸ This would suggest the fee was fully earned upon receipt and belonged only to the lawyer,⁴⁹ because any fees still belonging to the client, at least in part, should first be deposited in the lawyer's trust account.⁵⁰ Yet, the same opinion went on to say that because the lawyer is a fiduciary, he must still "return to the client any unearned portion of a fee."⁵¹ However, if the fee is fully earned upon receipt there would be nothing to refund, even if the client fired the lawyer immediately after paying him.⁵²

This opinion comes one step closer to approving non-refundable retainers by acknowledging two points.⁵³ First, the Board notes that "[s]ome services, for example, the . . . commitment to the client's case and acceptance of potential disqualification from other representa-tions,⁵⁴ are provided as soon as the contract is signed. The portion of the fee reasonably allocated to these services are, therefore, earned immediately."⁵⁵ Second, the opinion notes that a lawyer may "designate] by contract points in representation at which specific advance fees payments under a special retainer will have been earned . . . ."⁵⁶

However, the opinion left open the question of whether a fee contract is ever reasonable, and fully enforceable, if it designates the entirety of the retainer as earned immediately upon payment, and the client...