The MSBA’s members come from every segment of society, every jurisdiction, and virtually every practice area. For more than a century, the MSBA has represented their interests. While the MSBA regularly advocates on behalf of Maryland lawyers, it only rarely takes positions in active controversies.
It did so on October 27, 2021, by filing an amicus curiae brief in Delegall et al. v. Nagle & Zaller, P.C., et al., a matter currently pending before the Court of Appeals of Maryland. The MSBA took this extraordinary measure 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 United States 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 $25,000.00. 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 its brief, 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 Licensing Provision is a statutory specialty under the Courts and 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 said 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.