FTC and Department of Justice Comments to Hon. Helene E. Weinstein Regarding New York A.B. A05596 to Establish that Certain Services Related to Real Estate Transactions May be Provided Only by Attorneys

UNITED STATES OF AMERICA
FEDERAL	TRADECOMMISSION 	DEPARTMENT	OF JUSTICE
Washington, DC 20580 	Washington, DC 20530
June 21,2006
By email andfirst class mail
Assemblywoman Helene E. Weinstein
Chair, Committee on Judiciary
New York State Assembly
3520 Nostrand Avenue
Brooklyn, NY 11229
Re: 	Assemblv Bill A05596
Dear Assemblywoman Weinstein:
Pursuant to our conversations with Committee on Judiciary ("the Committee") staff, we
are pleased to provide our comments on Assembly Bill A05596 ("A05596" or "the bill" or "the
proposed legislation") which would establish that certain services related to real estate
transactions may be provided only by attorneys.
The Justice Department and the Federal Trade Commission ("FTC") believe that non-
attorneys should be permitted to compete with attorneys except where specialized legal
knowledge and training is demonstrably necessary to protect the interests of consumers.
Competition leads to lower prices, better products and services, and enhanced consumer choice.
We are concerned that the proposed legislation, which would prevent non-attorneys from
competing with attorneys in situations where there is no clear showing that non-attorney service
providers have caused consumer harm, is not in the best interests of consumers. We recommend
that the Committee reject the bill so as to preserve attorneylnon-attorney competition.
The Interest and Experience of the U.S. Department
of Justice and the Federal Trade Commission
The Justice Department and the FTC are entrusted with enforcing the federal antitrust
laws. We work to promote free and unfettered competition in all sectors of the American

economy. The United States Supreme Court has observed that "ultimately competition will
produce not only lower prices, but also better goods and services. 'The heart of our national
economic policy long has been faith in the value of competition.'"' 	Like all consumers,
consumers of professional services benefit from competition? and if competition to provide such
services is restrained, consumers may be forced to pay increased prices or accept services of
lower quality.
The Justice Department and the FTC are concerned about increasing efforts across the
country to prevent non-attorneys from competing with attorneys through the adoption of
excessively broad unauthorized practice of law restrictions by state courts and legislatures. In
addressing these concerns, the Justice Department and the FTC encourage competition through
advocacy letters and amicus curiae briefs filed with state supreme courts. Through these letters
and filings, the Justice Department and the FTC have urged several states, the American Bar
Association, and many state bar associations to reject or narrow such restrictions on competition
between attorneys and non-attorneys.3 Separately, the Justice Department has obtained
injunctions prohibiting bar associations from unreasonably restraining competition by non-
' Nat'l Soc'y of Prof 1 Eng'rs v. United States, 435 U.S. 679, 695 (1978) (quoting Standard Oil Co. v. FTC,
340 U.S. 231,248 (1951)); accord FTC v. Superior C o u ~	Trial Lawyers Ass'n, 493 U.S. 41 1,423 (1990).
See, e.g., Prof 1 Eng'rs, 435 U.S. at 689; Goldfarb v. Virginia State Bar, 421 U.S. 773,787 (1975); see
also United States v. Am. Bar Ass'n, 934 F. Supp. 435 (D.D.C. 1996), modified, 135 F. Supp. 2d 28 (D.D.C. 2001).
See letter from the Justice Department and the FTC to Executive Director of the Kansas Bar Ass'n (Feb. 4,
2005); letter from the Justice Department and the FTC to Task Force to Define the Practice of Law in Massachusetts,
Massachusetts Bar Ass'n ( Dec. 16,2004); letter from the Justice Department and the FTC to Unauthorized Practice
of Law Committee, Indiana State Bar Ass'n (Oct. 1,2003); letter from the Justice Department and the FTC to
Standing Committee on the Unlicensed Practice of Law, State Bar of Georgia (Mar. 20,2003); letters from the
Justice Department to Speaker of the Rhode Island House of Representatives and to the President of the Rhode
Island Senate, et al. (June 30,2003 and Mar. 28,2003); letter from the Justice Department and the FTC to Task
Force on the Model Definition of the Practice of Law, American Bar Ass'n (Dec. 20,2002); letter from the Justice
Department and the FTC to Speaker of the Rhode Island House of Representatives, et al. (Mar. 29,2002); letter
from the Justice Department and the FTC to President of the North Carolina State Bar (July 11,2002); letter from
the Justice Department and the FTC to Ethics Committee of the North Carolina State Bar (Dec. 14,2001); letter
from the Justice Department to Board of Governors of the Kentucky Bar Ass'n (June 10, 1999 and Sept. 10, 1997);
letter from the Justice Department and the FTC to Supreme Court of Virginia (Jan. 3, 1997); letter from the Justice
Department and the FTC to Virginia State Bar (Sept. 20, 1996). Brief Amicus Curiae of the United States of
America and the FTC in Lorrie McMahon v. Advanced Title Servs. Co. of W. Va.,No. 31706 (filed May 25,2004).
available at htt~://www.usdoi.gov/atr/cases/f203700/203790.htm;	Brief Amicus Curiae of the United States of
America and the FTC in On Review of ULP Advisory Opinion 2003-2 (filed July 28,2003), available at
httv://www.usdoi.~ov/atr/cases/f201100/201197.htm;	Brief Amicus Curiae of the United States of America in
Support of Movants Kentucky Land Title Ass'n et al. in Ky. Land Title Ass'n v. Ky. Bar Ass'n, No. 2000-SC-
000207-KB (Ky., filed Feb. 29,2000). available at http://www.usdoj.gov/atr/cases/f4400/449l.htm. 	The letters to
the American Bar Association, Indiana, Rhode Island, Massachusetts, North Carolina, Georgia, Kansas, and Virginia
may be found on the Department of Justice's website, http://www.usdoi.gov/atr/~ublic/comments/comments.htm.

attorneys in violation of the antitrust laws.4 These comments are part of our ongoing efforts in
this area.
The Provosed Legislation
Section 484 of Article 15 of New York's Judiciary Law states that certain activities,
including "preparing deeds, mortgages, assignments, discharges, leases or any other instruments
affecting real estate," may only be performed by attorneys.' The proposed legislation would add
a new section, 484-A, which would define the following tasks as "the historic and essential
elements of the practice of relevant real estate law in the state:"
conducting title searches;
preparing title abstracts;
reading or rendering opinions on real estate titles and the insurability of said titles;
preparing or issuing title insurance reports or commitments;
clearing title exceptions;
marking up title insurance reports or commitments;
collecting title insurance premiums; and
issuing title insurance policies on behalf of title insurance companies.6
While proposed Section 484-A does not expressly bar non-attorneys from providing these
services, defining such services as "the historic and essential elements of the practice o f . . . law"
will have the same practical effect.
The proposed legislation would also expand the list of activities that only an attorney may
provide to include certain activities that presently can be conducted in New York by non-
attorneys. Specifically, the proposed legislation would prohibit anyone other than an attorney
from:
In United States v. Allen County Bar Ass'n, the Justice Department sued and obtained a judgment against
a bar association that had restrained title insurance companies from competing in the business of certifying title. The
bar association had adopted a resolution requiring lawyers' examinations of title abstracts and had induced banks and
others to require the lawyers' examinations of their real estate transactions. Civ. No. F-79-0042 (N.D. Ind. 1980). In
United States v. N.Y. County Lawyers Ass'n, the Justice Department obtained a court order prohibiting a county bar
association from restricting the trust and estate services that corporate fiduciaries could provide in competition with
lawyers. No. 8 0 Civ. 6129 (S.D.N.Y. 1981). See also United States v. County Bar Ass'n, No. 80-1 12-S (M.D. Ala.
1980). In addition, the Justice Department has obtained injunctions against other anticompetitive restrictions in
professional associations' ethical codes and against other anticompetitive activities by associations of lawyers. See,
e.g., United States v. Am. Bar Ass'n, 934 Supp. 435; Prof 1 Eng 'rs, 435 U.S 679; United States v. Am. Inst. of
Architects, 1990-2 Trade Cas. (CCH) ¶ 69,256 (D.D.C. 1990); United States v. Soc'y of Authors' Reps., 1982-83
Trade Cas. (CCH) ¶ 65,210 (S.D.N.Y. 1982).
'N.Y. Jud. L. Art. 15 3 484 (McKinney's 2006).

giving advice or negotiating the terms and conditions for the sale of real property;
preparing contracts or agreements for the sale of real property;
rendering opinions on the legal status of or requirements to clear real estate titles;
and
preparing or receiving compensation for passing upon the regularity and legality
of legal documents or instrument^.^
The proposed legislation would further modify Article 15 by amending Section 495.
Subsection 5 of Section 495 currently allows corporations and voluntary associations
(collectively, "companies") to examine and insure titles to real property, and to prepare deeds,
mortgages, assignments, discharges, leases or any other instruments affecting real property
"insofar as such instruments are necessary to the examination and insuring of titles, and
necessary or incidental to loans made by any such corporation or ass~ciation."~	A05596 would
bar non-attorneys employed by such companies from performing such work.9 It also would bar
these companies from representing anyone in a real estate or mortgage closing, or any other legal
transaction or activity where A05596 bars non-attorney service providers.1°
Restrictions on AttorneyINon-Attorney Competition Should Be Examined
to Determine Whether They Are in the Public Interest
The Justice Department and the FTC recognize that there are services requiring the
knowledge and skill of a person trained in the law that should be provided only by attorneys.
However, we also believe that consumers benefit from attorneylnon-attorney competition in the
provision of many other services. Allowing non-attorneys to compete in the provision of certain
types of services permits consumers to select from a broader range of options, considering for
themselves such factors as cost, convenience, and the degree of assurance that the necessary
documents and commitments are sufficient. As the United States Supreme Court stated:
The assumption that competition is the best method of allocating resources in a free
market recognizes that all elements of a bargain - quality, service, safety, and
Id.
N.Y. Jud. L. Art. 15 3 495.5 (McKinney's 2006).
A05596 3 3.
lo Id.

durability - and not just the immediate cost, are favorably affected by the free
opportunity to select among alternative offers."
In general, competition policy calls for any restriction on competition to be justified by a
valid need for the restriction, such as the need to protect the public from harm, and for the
restriction to be narrowly drawn to minimize its anticompetitive impact.I2 The inquiry into the
public interest involves not only an assessment of the harm that consumers may suffer from
allowing non-attorneys to perform certain tasks, but also consideration of the benefits that accrue
to consumers when attorneys and non-attorneys compete.I3
The Proposed Legislation Would Likely Hurt New York
Consumers bv restrain in^ Competition Between Attornevs and Non-Attorneys
The Justice Department and the FTC believe that adopting the proposed legislation would
harm consumers and not serve the public interest. The legislation's restrictions on non-attorney
service providers will eliminate attorneylnon-attorney competition for many services where
competition likely benefits consumers. If the proposed legislation is adopted, New York
consumers likely will be disadvantaged in at least the following ways:
Prices that consumers vav to negotiate real estate transactions are likelv to
increase. The proposed legislation would force New Yorkers to retain an attorney
to obtain "advice or [to] negotiate the terms and conditions of and thereafter
prepare contracts or agreements for the sale of real property."'4 It would further
harm consumers by removing significantnon-attorney competition from the
marketplace with respect to the sale of real property. This would appear to be
contrary to the long history of real estate transactions in New York," and as
explained below would likely result in an increase in fees charged by attorneys for
real estate services.
l 1 Nat'lSocPyof Prof 1 Eng'rs v. United States, 435 U.S. 679,695 (1978) (emphasis added); accord, FTC
v. Superior Court Trial Lawyers Ass'n. 493 U.S. 41 1,423 (1990).
l 2 Cf: FTC.v. Ind. Fed'n of Dentists, 476 U.S. 447,459 (1986) ("Absent some countervailing
procompetitive virtue," an impediment to "the ordinary give and take of the market place . . .cannot be sustained
under the Rule of Reason.") (internal quotations and citations omitted).
l3 See Prof 1 Eng'rs, 435 U.S. at 689; Goldfarb v. Va. State Bar, 421 U.S. 773,787 (1975). See also In re
Opinion No. 26 of the Comm. on Unauthorized Practice of l a w , 654 A.2d 1344, 1345-46 (N.J. 1995) (lawyer/non-
lawyer competition benefits the public interest).
15 See, e.g., Duncan & Hill Realty, Inc. v. Dep't of State, 62 A.D.2d 690,696 (N.Y. App. Div., 1978)
(noting that "from time immemorial real estate brokers and agents have drafted 'simple' contracts between their
clients as part of their work").

Costs for Tasks Relating to Insurability of Title Are Likely to Increase. Section
495 of Article 15 currently appears to allow non-attorneys to perform such tasks
as title searches, the preparation of title abstracts, and other services related to the
insurability of titles.I6 The proposed legislation would require title companies to
hire attorneys to provide these service^,'^ and is thus likely to result in higher
prices.
Real estate closing costs are likely to increase. The proposed legislation would
bar non-attorneys from conducting closings. Subsection 5 of Section 495 would
prohibit corporations and voluntary associations that provide title services from
representing anyone "in a real estate or mortgage closing wherein none but
attorneys may act as set forth in [Article 15]."18 If a closing requires any of the
services that the legislation states must be provided by an attorney, a title
company may not represent a party at that closing, and the consumer or the title
company will be forced to hire an attorney. Thus, the effect of the bill will likely
be to increase the price of closing, particularly to those consumers who would
otherwise not choose to hire an attorney.19
Fees for legal representation relating to real estate transactions are likely to
increase. The availability of alternative, lower-cost lay services typically
constrains the fees that attorneys can charge.20The proposed legislation would
eliminate that constraint. All consumers, even those who ordinarily would choose
an attorney over a lay agent, may be forced to pay higher fees.
Fees charged for real estate services currentlv provided bv non-lawers are likely
to increase. 	By prohibiting the use of non-attorney title and closing services the
proposed legislation will likely reduce competition from mortgage lenders, title
l 6 N.Y. Jud. L. Art. 15 9 495.5 (McKinney7s2006).
l7 See A05596 9 3.
l 9 In 1997, Virginia passed a law upholding the right of consumers to continue using lay closing services.
Proponents of lay competition pointed to survey evidence suggesting that lay closings in Virginia cost on average
approximately $150 less than attorney closings. See Letters to the Virginia Supreme Court and Virginia State Bar,
supra n. 3.
20 See, e.g.,Countrywide Home Loans, Inc. v. Ky. Bar Ass 'n, 113 S.W.3d 105, 120 (Ky. 2003) ("before
title companies emerged on the scene, [the Kentucky Bar Association's] members' rates for such services were
significantly higher"). See also, In re Opinion No. 26 of the Comm. on Unauthorized Practice o f l a w , 654 A.2d
1344, 1349 (N.J. 1995) (Evidence gathered in that proceeding indicated that buyers and sellers in areas of New
Jersey where lay-assisted closings were prevalent paid on average $350 and $450 less for closings, respectively, than
buyers and sellers in parts of the state where lay-assisted closings were not prevalent.)

companies, title insurers and other service providers who may rely on alternative
service providers to conduct title searches, record deeds and financing, and
perform other services. These entities will be forced to hire attorneys to perform
such services and would likely need to raise the prices that they charge New
Yorkers to offset their higher costs.
There Is No Indication that the Proposed Restrictions
Are Needed to Prevent Significant Consumer Harm
The Committee should reject A05596 unless it is presented with strong factual evidence
demonstrating that New Yorkers are being harmed by the availability of real estate transaction
services performed by non-attorneys, and that such harm is not outweighed by the harm to
consumers of foreclosing competition. The Justice Department and the FTC are not aware of
evidence demonstrating that consumers have been harmed by non-attorneys giving advice or
negotiating terms and conditions for the sale of real property, preparing contracts or agreements
for such transactions, or conducting title searches -activities that are commonly provided by
non-attorneys in many state^.^' In the absence of such evidence, we believe that the proposed
legislation's expansion of the definition of the practice of law unnecessarily limits competition
between attorneys and non-attorneys, and will likely cause more harm to consumers than it may
prevent. It is thus not in the public interest.
Many of the services the proposed legislation would reserve for attorneys do not require
the special skills, training, and abilities of an attorney. For example, legal training is almost
certainly not required to collect title insurance premiums, issue title insurance policies on behalf
of title insurance companies, or issue title insurance reports. The Kansas Bar Association, to cite
one example, specifically exempted these services from the definition of the practice of law that
it proposed to the Kansas Supreme Court in 2005.22The proponents of A05596 have not
demonstrated that skilled non-attorneys cannot perform such tasks effectively.
Consumers likely face little risk of harm from non-attorney competition in many areas.
For example, studies of lay specialists who provide bankruptcy and administrative agency
2 1 The memorandum in support of the proposed legislation asserts that consumers have been harmed by
non-attorney real estate brokers and title insurance agents but provides no data showing that such harm occurs to a
meaningful extent. See Memorandum in Support of Legislation, at http://assembly.state.ny.us/leg/?bn=A05596.
Furthermore, the memorandum provides no evidence that whatever harm occurs outweighs the benefits consumers
derive from the existence of lay providers as an alternative to attorneys. Id.
22 The Justice Department and the FTC submitted comments to the Kansas Bar Association regarding its
proposed definition. See Letter from the Justice Department and the FTC to Executive Director of the Kansas Bar
Ass'n (Feb. 4,2005), available at http://www.usdoi.gov/atr/public/comments/comments.htm.

hearing representation found that they perform as well as or better than attorneys.23Another
study compared five states where lay providers examined title evidence, drafted instruments, and
facilitated the closing of real estate transactions with five states that prohibit lay provision of
these settlement services. The author found "[tlhe only clear conclusion" to be "that the
evidence does not substantiate the claim that the public bears a sufficient risk from lay provision
of real estate settlement services to warrant blanket prohibition of those services under the
auspices of preventing the unauthorized practice of law."24 Perhaps most significantly, a recent
survey found that complaints about the unauthorized practice of law in most states did not come
from consumers, the potential victims of such conduct, but from attorneys, who did not allege
any claims of specific injury.25 As the Restatement (Third) of Law Governing Lawyers has
explained:
Several jurisdictions recognize that many such [law-related]services can be provided
by nonlawyers without significant risk of incompetent service, that actual experience
in several states with extensive nonlawyer provision of traditional legal services
indicates no significant risk of harm to consumers of such services, that persons in
need of legal services may be significantly aided in obtaining assistance at a much
lower price than would be entailed by segregating out a portion of a transaction to be
handled by a lawyer for a fee, and that many persons can ill afford, and most persons
are at least inconvenienced by, the typically higher cost of lawyer services. In
addition, traditional common-law and statutory consumer-protectionmeasures offer
significant protection to consumers of such nonlawyer services.26
In short, the drafters of A05596 appear not to have made a substantive showing of need to
justify the extensive prohibitions of lay service competition that they have proposed. Absent
such a showing, restraining competition in a way that is likely to harm New Yorkers by raising
prices and eliminating their ability to choose among competing providers is unwarranted.
23 Deborah Rhode, Access to Justice: Connecting Prirlciples to Practice, 17 GEO.J. LEGALETHICS	369,
407-08 (2004). See also HERBERT	M. KRITZER, 	ADVOCACY:LAWYERS 	AT WORK50-5 1	LEGAL 	AND NON LAWYERS
(1998) (finding that in unemployment compensation appeals before the Wisconsin Labor and Industry Review
Commission, "[tlhe overall pattern does not show any clear differences between the success of lawyers and agents").
24 Joyce Palomar, The War Between Attorneys and Lay Conveyancers -Empirical Evidence Says "Cease
Fire! ",3 1 CONN.L. REV.423,520 (1999).
25 Rhode, supra n.22, at 407-08.
26 RESTATEMENT 	OF LAWGOVERNING 	5 4 cmt. c (2000).	(THIRD) 	LAWYERS

Conclusion
The assistance of an attorney during a real estate-related transaction may be desirable, and
consumers may decide to retain an attorney in certain situations. A consumer might choose to
hire an attorney to answer legal questions, perform title work, provide advice, or resolve disputes.
Consumers who hire attorneys may in fact get better service and representation than those who
do not. Nonetheless, the choice of hiring an attorney or a non-attorney should rest with the
consumer, particularly where there is no evidence that consumers are harmed by using non-
attorneys to provide certain types of real estate services.
The proposed legislation likely will unnecessarily and unreasonably reduce competition
between attorneys and non-attorneys for services related to real estate transactions. We urge the
Committee to reject it.
The Justice Department and the FTC thank you for this opportunity to present our views.
We would be pleased to address any questions or comments regarding this letter.
Sincerely yours, 	By direction of the
Federal Trade Commission,
V
Thomas 0 . Barnett 	Deborah Platt Majoras
Assistant Attorney General 	Chairman
Aaron Comenetz 	Maureen K. Ohlhausen
Trial Attorney 	Director
United States Department of Justice 	Office of Policy Planning
Antitrust Division