Real Estate Bar Ass'n for Mass., Inc. v. National Real Estate Information Services

• Court: U.S. District Court — District of Massachusetts
• Writing for the Court: Tauro
• Citation: Real Estate Bar Ass'n for Mass., Inc. v. National Real Estate Information Services, 609 F.Supp.2d 135 (D. Mass. 2009)
• Decision Date: 13 April 2009
• Docket Number: Civil Action No. 07-10224-JLT.
• Parties: The REAL ESTATE BAR ASSOCIATION FOR MASSACHUSETTS, INC., Plaintiff, v. NATIONAL REAL ESTATE INFORMATION SERVICES and National Real Estate Information Services, Inc., Defendants.

Page 135

609 F.Supp.2d 135

The REAL ESTATE BAR ASSOCIATION FOR MASSACHUSETTS, INC., Plaintiff, v. NATIONAL REAL ESTATE INFORMATION SERVICES and National Real Estate Information Services, Inc., Defendants.

Civil Action No. 07-10224-JLT.

United States District Court, D. Massachusetts.

April 13, 2009.

R. Bruce Allensworth, Ryan M. Tosi, K & L Gates LLP, Brian Marc Forbes, Irene C. Freidel, Kirkpatrick & Lockhart Preston Gates Ellis LLP, Douglas W. Salvesen, Yurko, Salvesen & Remz, P.C., Boston, MA, for Defendants.

Lawrence R. Kulig, Benjamin M. McGovern, Holland & Knight, LLP, Boston, MA, Gael Mahony, Holland & Knight, LLP, Providence, RI, for Plaintiff.

Michael DeMarco, Robert W. Sparkes, III, K & L Gates LLP, Michael D. Ricciuti, Kirkpatrick & Lockhart Preston Gates Ellis LLP, Boston, MA, for Counter Claimant.

Anthony B. Fioravanti, Yurko Salvesen & Remz, P.C., Boston, MA, for Counter Defendant.

Jessica G. Gray, Robert J. Muldoon, Jr. Sherin & Lodgen LLP, Boston, MA, Amicus.

MEMORANDUM

TAURO, District Judge.

I. Introduction

Plaintiff claims that real estate conveyancing and the issuance of title insurance constitute the practice of law in Massachusetts and that Defendants, nonlawyers who conduct such services, have engaged in the unauthorized practice of law. Plaintiff also claims that Defendants have engaged in the unauthorized practice of law by conducting so-called "notary closings." Defendants counterclaim that Plaintiffs interpretation of what constitutes the practice of law under the Massachusetts unauthorized practice of law statutes violates the Dormant Commerce Clause of the U.S. Constitution. Both Parties seek declaratory and injunctive relief. Presently at issue are Parties' cross-motions for summary judgment. For the following reasons, Defendants' Motion for Summary Judgment and Motion for Summary Judgment on Dormant Commerce Clause Counterclaim are ALLOWED, and Plaintiffs Motion for Summary Judgment is DENIED.

II. Background¹

Plaintiff The, Real Estate Bar Association for Massachusetts, Inc. ("REBA"), formerly known as the "Massachusetts Conveyancers Association, Inc.," is a bar association comprised of approximately 3,000 Massachusetts real estate attorneys. National Real Estate Information Services, Inc. is a Pennsylvania corporation and the general partner of National Real Estate Information Services, a Pennsylvania limited partnership (collectively "NREIS"). NREIS is a multistate real estate settlement services provider, or "vendor manager," and title insurance agency.²

As a vendor manager, NREIS provides services related to residential real estate transactions. NREIS's services include title examinations, settlement services, deed preparation, and disbursement of mortgage loan proceeds. NREIS obtains the relevant title search information from a third-party vendor, such as Connelly Title Services, Inc. For real estate purchases, NREIS hires North American Deed Company, Inc., located in Las Vegas, Nevada, to prepare the deed. NREIS then schedules the real estate closing with, and transmits the relevant closing documents to, a Massachusetts attorney. After the closing NREIS disburses the settlement funds, reviews the transaction documents to guarantee their proper completion, and ensures that the relevant documents are properly recorded. In addition to these activities, NREIS issues title insurance policies to lenders and property owners.

REBA brought this action on November 6, 2006 in the Superior Court, Suffolk County, and filed the Amended Complaint on February 2, 2007. REBA's claims seek (1) a declaratory judgment that NREIS's alleged "notary closings" constitute the unauthorized practice of law; (2) a declaratory judgment that NREIS's real estate conveyancing services constitute the unauthorized practice of law; and (3) a permanent injunction barring NREIS from engaging in the unauthorized practice of law.³ NREIS removed to this court and filed the Answer and Counterclaim on February 6, 2007. NREIS's Counterclaim seeks (1) a declaratory judgment that REBA's interpretation of what constitutes the practice of law under the Massachusetts unauthorized practice of law statutes violates the Dormant Commerce Clause; and (2) a permanent injunction barring REBA from enforcing on NREIS its interpretation of what constitutes the practice of law.⁴

On October 17, 2008, NREIS moved for summary judgment on all REBA's claims. On December 12, 2008, REBA also moved for summary judgment on all its claims. On February 6, 2009, NREIS moved for summary judgment on its Dormant Commerce Clause Counterclaim.

III. Discussion

At the core of REBA's claims is its argument that real estate conveyancing constitutes the practice of law in Massachusetts. This contention rests on the premise that real estate conveyancing is an "interconnected series of activities that must be performed in order to convey the various legal interests in the real estate."⁵ According to REBA, real estate conveyancing consists of a cohesive set of steps, each of which is inseparable from the other, that is necessary to effect a legal transfer of real estate. Broadly, these steps consist of the following: (1) examination of legal title; (2) resolution of any clouds on title; (3) the settlement, or "closing"; and (4) recordation of title documents and disbursement of mortgage proceeds.

REBA's initial step in a real estate conveyance is the title examination. This process generally begins at the registry of deeds, where the title searcher initiates the title examination by working backwards from the present owner's deed to a deed that is facially valid and at a statutorily prescribed starting point.⁶ Then, the title searcher "runs" the title forward from the starting point, examining every deed from every grantor in the chain of title and reviewing the title for any "clouds." The examination may also require review of off-record matters to determine the state of. title.

REBA's next step is the resolution of any clouds on title. Clouds on title are defects that originate from some claim or encumbrance.⁷ Because clouds on title can arise in numerous ways, the ways in which they can be cured are equally numerous. For example, if an outstanding mortgage encumbers title, the cure may be settlement of the mortgage. For other title defects, the cure may require the execution of documents. For more difficult title defects, the cure may require judicial intervention.

REBA's third step is the closing. Before the closing, all necessary documents must be drafted. In Massachusetts, these documents may include the application for the mortgage loan, the acceptance of the mortgage commitment, an agreement as to the adjustment of property taxes, an affidavit of owner occupancy, a notice of the lead paint law and a release of the lender from liability,⁸ a smoke detector certification agreement,⁹ a certificate regarding an approved carbon monoxide alarm,¹⁰ a certificate of nonforeign status,¹¹ an affidavit permitting the lender to obtain title insurance without exceptions for mechanics' liens and persons in possession, the truth-in-lending disclosure statement,¹² disclosure of the lender's intent with respect to the assignment of mortgage loan servicing,¹³ a notice of the three-day right to rescind for mortgage refinances,¹⁴ the promissory note, and the mortgage. An additional document related to the closing is the settlement statement, which accounts for the transaction proceeds. For federally regulated mortgage loans, a Uniform Settlement Statement must be completed.¹⁵ At the closing, the parties exchange and sign the necessary documents, and transfer the required consideration. For real estate purchases, a valid deed must be executed. After the parties have executed the necessary documents, the Uniform Settlement Statement must be executed.

REBA contends that NREIS's alleged practice of "notary closings" constitutes the unauthorized practice of law. According to REBA, a "notary closing" is a closing in which an attorney attends the settlement but

is not involved in the preparation or review of documents to be executed by the parties, the examination or review of title, the recording of documents or the disbursement of funds to pay off existing mortgages. The attorney has no role in the process of reviewing the title or clearing the title to the real estate being conveyed. He simply is there to witness the parties execute the necessary documents—much like a notary.¹⁶

REBA's final step is the recordation of title documents and disbursement of mortgage proceeds. Though execution and delivery of the deed suffices to transfer a legal property interest between the parties to a real estate transaction, the title documents must be recorded at the registry of deeds. These include the deed, mortgage, and any other necessary documents. Aside from the mortgage loan proceeds which are due to the mortgagor before the deed or mortgage may be recorded,¹⁷ the loan proceeds are then disbursed in accordance with the Uniform Settlement Statement.

In addition to its claims that the practice of law encompasses all the interconnected steps of a real estate conveyance and that "notary closings" constitute the unauthorized practice of law, REBA asserts that the issuance of title insurance must be performed or directed by lawyers.

A. Legal Standard for Summary Judgment

A court may grant summary judgment when the moving party has shown "that there is no genuine issue as to any material fact and that the moving party is entitled to judgment as a matter of law."¹⁸ The court must examine the facts in the light most favorable to the nonmoving party, resolving any reasonable inference in that party's favor.¹⁹ The opposing party has the burden of production to "set forth specific facts showing that there is a genuine issue for trial."²⁰ Neither party, however, "may rely on conclusory allegations or unsubstantiated denials, but must identify specific facts derived...