The MSBA prides itself on being the voice of attorneys across the state, representing lawyers in a broad range of practice areas, experience levels, and demographics. For more than a century, the MSBA has represented the interest of its members in a variety of public platforms. While the MSBA regularly advocates on behalf of Maryland lawyers, it rarely takes positions in active controversies. It did so in 2021, however, by filing amicus curiae briefs in Chavis v. Blibaum Associates, P.A., and Delegall et al. v. Nagle & Zaller, P.C., et al., cases considered by the Court of Appeals of Maryland. The MSBA took this extraordinary action, not to advocate for either side, but to fight to protect core tenets of the attorney-client relationship.
Chavis v. Blibaum Associates, P.A.
The MSBA filed the first amicus curiae brief, in Chavis, on January 8, 2021.1 The facts of Chavis are not in dispute: a law firm representing a commercial landlord filed breach of contract claims against multiple tenants due to their failure to pay rent owed pursuant to residential leases. In each case, the law firm obtained judgments against the tenants, and the court ordered that the landlord could recover post-judgment interest at the “legal rate.” The tenants failed to pay the judgments, and the law firm filed requests for writs of garnishment, seeking a 10% post-judgment rate of interest.
The tenants then filed lawsuits against the law firm, asserting that by employing a 10% interest rate, the firm violated the Maryland Consumer Protection Act (MCPA) and the Maryland Consumer Debt Collection Act (MCDCA). The tenants argued that § 11-107 of Md. Code Ann., Courts & Judicial Proceedings Article, limits the post-judgment rate of interest on judgments arising out of breach of contract actions involving residential lease agreements to 6%. However, the issue of whether § 11-107 allowed for the 6% or 10% interest rate was unsettled at the time the tenants’ lawsuits were filed due to the ambiguous language of the statute. The Maryland Court of Appeals ultimately ruled in favor of the tenants on the issue of the applicable interest rate, finding that the 6% limit applied.
The bigger issue that loomed, though, was whether the law firm could be held liable for violations of the MCPA and MCDCA. The MCDCA provides that “[i]n collecting or attempting to collect an alleged debt a collector may not . . . [c]laim, attempt, or threaten to enforce a right with the knowledge that the right does not exist[.]” Md. Code Ann., Commercial Law § 14-202(8). Despite the ambiguities of § 11-107, the tenants asked the court to sanction the law firm for taking the position that the 10% interest rate was proper under the statute.
In other words, what began as a dispute over the interpretation of statutory provisions morphed into an action that threatened to allow attorneys to be punished for arduously advocating on behalf of their clients. The tenants’ claims were dismissed by two circuit courts, and the circuit court rulings were affirmed by the Court of Special Appeals. The tenants then successfully filed a petition for writ of certiorari to the Court of Appeals, asking the Court to find that the use of wage garnishment to collect excess post-judgment interest and post-judgment filing fees constitutes a violation of the MCDCA. The MSBA filed an amicus brief, asking the Court to affirm the lower court’s contrary rulings.
The brief filed by the MSBA stressed that a “claim, attempt, or threat to enforce a right” is actionable under the MCDCA only if made “with the knowledge that the right does not exist.” Md. Code Ann., Commercial Law § 14-202(8). Further, the brief argued that even assuming that the MCDCA allows a debtor to challenge the amount of interest sought by a creditor—as opposed to that creditor’s right to seek any interest—the law on the proper rate of interest was sufficiently unsettled that a federal court certified the question to the Court of Maryland Appeals in three related cases. If a federal district judge found the law so unclear that it deemed it necessary to certify the question, the law firm clearly could not have been asserting a right that it knew did not exist. In sum, the brief explained that if advocating for a client on an unsettled area of the law could expose an attorney to liability, it would create an unsustainable conflict between an attorney’s professional obligation to advocate zealously on behalf of a client and the fear of potential liability under the MCDCA.
After reviewing the issue on appeal in Chavis, the MSBA felt that it owed a duty to its members and to all attorneys in Maryland to protect them from liability when advising their clients on courses of action they might take. The MSBA was particularly concerned that a reversal could chill the ability of attorneys to advise their clients on areas of the law that were unclear, unsettled, or otherwise not well-defined. It is important to note that the MSBA took no opinion on the merits of the underlying case; rather, the brief was submitted to protect the ability of attorneys to argue on behalf of their clients and to fulfill their professional responsibilities without fearing liability.
Delegall et al. v. Nagle & Zaller, P.C., et al.,
The MSBA filed its second amicus curiae brief, in Delegall et al. v. Nagle & Zaller, P.C., et al., on October 27, 20212. Again, the MSBA felt that it was necessary to take this uncharacteristic step to encourage the Court of Appeals to uphold the principles that are at the core of the attorney-client relationship regardless of the practice area or the party that the attorney represents.
The factual and procedural history of Delegall is extensive and convoluted. At inception, a homeowners’ association retained Nagle & Zaller to assist in the recovery of condominium assessments that Delegall failed to pay. Nagle & Zaller contacted Delegall and offered a pre-suit settlement which included Delegall’s execution of a promissory note to avoid a lawsuit to recover the unpaid condominium assessments. Delegall executed the note, which included a confessed judgment provision. He defaulted on payment, after which Nagle & Zaller filed a complaint for confession of judgment on behalf of its client, and judgment was thereafter entered.
Delegall and another party subsequently filed a putative class action lawsuit in the U.S. District Court for the District of Maryland against Nagle & Zaller and other parties, asserting numerous statutory, tort, and breach of contract claims. After multiple amendments, Delegall asserted a claim against Nagle & Zaller for violation of the Maryland Consumer Loan Law (the MCLL). Essentially, Delegall alleges that Nagle & Zaller is a lender under MCLL but failed to acquire a license as required to make loans or advance credit of $25,000. Delegall further asserted that the confessed judgment note was subject to the requirements of the MCLL. The federal court certified the question of whether a law firm is “engaged in the business of making loans” and is considered a “lender” under the MCLL to the Court of Appeals of Maryland.
The MSBA filed an amicus brief, asking the Court to find that law firms who pursue debts on behalf of their clients are not lenders and are not subject to the requirements of the MCLL. In it, the MSBA asserted Delegall’s interpretation of the MCLL to apply to lawyers who represent creditors and their law firms was without basis. The MCLL stems from a 1912 Act where the General Assembly sought to protect consumers against usury by requiring licensing of “petty loan brokers,” capping fees, and mandating the disclosure of loan terms to the borrower. See Price v. Murdy, 462 Md. 145, 149 (2018) (answering a certified question on whether the MCLL’s Licens ing Provision is a statutory specialty under the Courts & Judicial Proceedings Article).
Contrary to Delegall’s assertions, the MSBA argued that the General Assembly did not enact the MCLL to protect consumers from the type of transactions at issue here—a lawyer drafting a settlement agreement with a payment plan and promissory note provisions. The MSBA noted that many attorneys will advise a client in connection with the settlement of a case, controversy, or claim at some point during their career. Indeed, Maryland attorneys for both creditors and debtors regularly draft settlement agreements, many of which include payment plans in the form of promissory notes to allow the debtor to pay the settlement amount over time. If the Court were to adopt Delegall’s broad interpretation of the MCLL, every Maryland lawyer who structures payment of a resolved claim on behalf of a client would be a “lender” to the opposing party and would carry the obligations that come with the position, which would place Maryland attorneys in an untenable position in which they would owe duties to both their clients and the opposing party. It would significantly limit attorneys in the representation of creditors, as drafting settlement and compromise papers for a creditor-client could expose the attorney to the risk of liability to the opposing party, the debtor.
Further, the brief stated that from a practical standpoint, the implications of being deemed a lender under the MCLL would dissuade lawyers from advising clients to settle a wide variety of contract-based claims that have a value of less than $25,000 and may discourage parties from settling or resolving small claims, resulting in increased caseloads in the courts and higher costs for litigants.
For the aforementioned reasons, the MSBA submitted that the certified question should be answered “no,” and the Court should find that attorneys who negotiate and draft settlement agreements and repayment plans are not “lenders” within the meaning of the MCLL.