Professional Services And Debt Collection

The Maryland Court of Appeals has resolved a liability issue for debt-collecting lawyers

we hold that when a lawyer is engaged in debt collection activities, not all of the lawyer’s services fall within the “professional services” exemption of the CPA. Specifically, we hold that where the lawyer is engaged in debt collection activities that could be performed by any licensed debt collection agency not affiliated with a lawyer or a law firm, or where the lawyer’s conduct would be prohibited by the Maryland Consumer Debt Collection Act, such conduct or services are not “professional services” for which the CPA exemption applies. We further hold that where the professional services exemption does, in fact, apply to the lawyers’ “professional services,” the statutory exemption does not flow to the client. Accordingly, we affirm the judgment of the Court of Special Appeals.

The story

This case arises out of a private cause of action brought by David and Tammy Mills against their homeowners association, Galyn Manor Homeowners Association, Inc., (“Galyn Manor”) alleging in part, violations of the CPA and MCDCA in connection with Galyn Manor’s attempt to collect delinquent homeowners association (“HOA”) assessments, fines, penalties and attorney’s fees over the course of nine years. Galyn Manor retained the law firm of Andrews & Lawrence Professional Services, LLC (“Andrews”) to undertake debt collection activities for delinquent HOA assessment accounts.

Andrews, on behalf of Galyn Manor, employed a variety of means to collect the debts allegedly owed by the Millses, including obtaining two judgments, four liens, an injunction, and garnishment of the Millses’ bank account. The Millses alleged that although they made payments, and attempted settle their account, Andrews’s collection practices left them in a never-ending debt spiral.

In 2016, the Millses filed suit against Galyn Manor challenging its debt collection practices under the CPA and MCDCA. Galyn Manor filed a third-party complaint against Andrews for indemnification.

After recounting the payment and collection history

After enduring nearly ten years of collection efforts against them with no apparent end in sight, the Millses commenced this suit in the Circuit Court for Frederick County in April 2016.

Judge Watts concurred

I join the majority opinion in its entirety. As to the holding that, under Maryland agency law, the attorney-client relationship is a principal-agent relationship under which vicarious liability claims may be brought against the principal, I agree with Judge Adkins’s concurrence that clients should be liable for the conduct of their attorneys that violates the Consumer Protection Act (CPA) only where the clients are aware or have knowledge of the actions taken by the attorney that constitute the violation. Under traditional agency principles, the principal’s right to control the agent may not necessarily include or require that the principal have actual knowledge of the agent’s specific conduct. The traditional principal-agent relationship depends on: the agent’s ability to alter legal relations of the principal; the agent’s duty to act primarily for the benefit of the principal; and the principal’s right to control the agent. Green v. H & R Block, Inc., 355 Md. 488, 503, 735 A.2d 1039, 1048 (1999). Where a lawyer is entitled to the professional services exemption under the CPA, a lawyer is necessarily engaging in activities that exceed mere debt collection activities, i.e., rendering legal services. I agree with Judge Adkins that, to hold the client vicariously liable, we must ensure that the client is aware or has knowledge of the lawyer’s activities.

Judge Getty dissented

Respectfully, I dissent.

Under a plain meaning analysis of the “professional services” exemption of the Maryland Consumer Protection Act (“CPA”), I would hold that the debt collection actions in this case are professional services provided by attorneys and are exempt from this statute. In their search for legislative intent, the Majority finds a symbiotic relationship between the CPA, the Maryland Consumer Debt Collection Act (“MCDCA”), and Maryland Collection Agency and Licensing Act (“MCALA”)—such a relationship does not exist in the language of the CPA. Further, in relying on Scull v. Groover, Christie & Merritt, P.C., the Majority overlooks the differences between the professional services of attorneys and the professional services of medical professionals. 435 Md. 112 (2013).

Judge Adkins

Most respectfully, I dissent and concur. I differ from both of my colleagues in this important case but cherry-pick from the best of each of their excellent opinions. I agree with Judge Getty that, using a plain meaning analysis of the “professional services” exemption of the CPA, when attorneys undertake to perform collection services for a client, like other professional legal services, the CPA “does not apply.” CL § 13-104(1). Unlike Scull, this case does not involve professionals collecting their own fees from their clients, which we held to be “entrepreneurial aspects of a medical practice.” I also agree with Judge Getty’s explanation that neither the MCDCA nor the MCALA can properly be relied upon to undermine the clear language of § 13-104.

Judge Booth says that a client who hires an attorney to be his agent can, under certain circumstances, be liable for the attorney’s actions that constitute violations of the CPA, applying agency principles recognized in Maryland cases. Her logic on that point is persuasive. But I urge that trial judges act with caution in determining the scope of authority and instructing juries about the same. Clients should be liable for acts of their attorneys that violate the CPA only when they show some awareness of the actions the attorney will take or mechanisms the attorney uses that constitute those violations.

Oral argument is linked here. (Mike Frisch)