Maryland court of appeals: Law firm’s collection activities do not qualify for “professional services” exemption

Courts State Issues Debt Collection Consumer Protection

On January 28, the Court of Appeals of Maryland held that not all services provided by a law firm or a lawyer fall within the “professional services” exemption under the Maryland Consumer Protection Act (CPA). In this case, a homeowners association (HOA) retained a law firm to collect delinquent HOA assessments, fines, penalties, and attorney’s fees. After nine years of collection efforts, the plaintiff homeowners filed a lawsuit against the HOA, alleging the debt collection practices violated the CPA and the Maryland Consumer Debt Collection Act (MCDCA). The HOA then filed a third-party complaint against the law firm for indemnification. The circuit court granted the HOA summary judgment on the CPA claim, stating that the CPA specifically exempts lawyers from liability, and as such, the HOA could not be vicariously liable for the law firm’s actions. The court also ruled against the plaintiffs’ MCDCA claim. The Court of Special Appeals, however, held that the circuit court erred in ruling that the law firm’s “professional services” exemption shielded the HOA from either direct or vicarious liability for deceptive trade practices, reversed and remanded the circuit court’s MCDCA ruling, and reinstated the HOA’s third-party complaint against the law firm pursuant to an indemnification clause contained within professional services agreement.

The Court of Appeals granted a writ of certiorari to consider whether all services provided by a law firm fall within the CPA’s “professional services” exemption, and whether this exemption extends to an HOA facing liability arising from the law firm’s debt collection conduct. The Court of Appeals concluded that a law firm’s conduct is not covered by the exemption if (i) the law firm’s services “could be provided by any licensed debt collection agency” regardless of whether the agency is affiliated with a law firm or a lawyer; or (ii) the alleged conduct violates the MCDCA. “[A] license to practice law is not a license to engage in deceptive or unfair debt collection activities with impunity,” the Court of Appeals wrote. The Court of Appeals also addressed the question of whether the exemption also applies to the law firm’s client, and concluded that the “the plain language of the exemption does not apply to vicarious liability claims against a lawyer’s client” and that expanding the interpretation of the exemption to cover additional classes of individuals “is contrary to the purpose and intent of the CPA.”