Smug Seller-Side Attorneys Are Getting Worse @VAStateCorpComm @VAHouse @VASenate @GlennYoungkin @WinsomeSears @OpenVaLaw #VABOI #BOI #insurance #Virginia #realestate #vasenate #VSB

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There’s a batch of attorneys that are always grandstanding or otherwise making things difficult just because they can. Here’s the latest tactic. They regularly accuse my non-attorney coworkers as practicing law without a license. This is otherwise known as the unauthorized practice of law, which has a hand abbreviation that I’ll use here: UPL.

First off, what’s UPL? Every state is different, yet there all the same, so I’ll give you Virginia’s definition care of the Rules of the Supreme Court of Virginia Part 6, § I(2):

A person or entity engages in the practice of law when representing to another, by words or conduct, that one is authorized to do any of the following:
A. Undertake for compensation, direct or indirect, to give advice or counsel to an entity or person in any matter involving the application of legal principles to facts.
B. Select, draft or complete legal documents or agreements which affect the legal rights of an entity or person.
C. Represent another entity or person before a tribunal.
D. Negotiate the legal rights or responsibilities on behalf of another entity or person. 

B is easy. If you aren’t dealing with legal documents in some way, you aren’t practicing law. C is also easy. If you aren’t communicating with a court on behalf of another person, you aren’t practicing law. D is also easy. If you aren’t negotiating on behalf of another person, then you aren’t practicing law.

A is where a lot of people get tripped up, so I want to repeat what I’ve said many times before so that these attorneys can’t pull this shit on you one day. Here’s a simple way of explaining this: If I tell you the speed limit is 55 miles per hour, I’m not practicing law. If I tell you you’re speeding, I’m practicing law. What’s the difference? The first statement is saying what the law is. “Thou shalt not drive faster than 55 miles per hour.” Non-attorneys can point out the law to you without engaging in UPL. The second statement, however, involves the “application of legal principles to facts.” That is, I’m taking your specific facts — the fact that you’re driving, let’s say, 65 miles per hour — and applying the law to those facts. Then I’m drawing a legal conclusion about your behavior. If a non-attorney does that, it’s UPL.

Put yet another way, telling you what the law is isn’t UPL, but telling you that you’re breaking the law can be UPL.

Here’s the latest bit of nonsense I’ve had to endure. My processor requested that the attorney underline or capitalize the last names of the parties on a deed. When the attorney tried to be difficult and refused for no good reason, she pointed out that, “the Clerk of the Court has the right to reject deeds if the last names of the parties aren’t either underlined or capitalized.” All she was doing was paraphrasing the law and making a request. She never made any statement saying anyone was going to jail or open to a lawsuit, so she wasn’t applying that law to any facts. A particular attorney called this UPL, claiming she was preparing, revising, or modifying legal documents even while admitting that her statement was merely a “request.” This was nothing more than a scare tactic to scare her into silence and stroke his own fragile ego.

As you can tell, I believe whole-heartedly that these attorneys aren’t getting tripped up. They, in fact, know better; they just know that non-attorneys don’t know better, so they’re abusing their position as attorneys by misleading people into thinking they’ve committed a fucking crime, then leveraging that lie for some personal benefit. These attorneys are garbage. The reason why we’re dealing with this — even over minor issues — is because of the broader issue I’ve already discussed herehere, and here. In short, the Virginia State Bar refuses to address the widespread and long-standing unethical and illegal behavior of attorneys in the Virginia real estate industry, and the legislature is too busy to do anything about it, so these attorneys effectively have immunity for their bad behavior. Despite no one willing to step forward and do the right thing, these attorneys still continue to scare title companies into allowing the malfeasance. What can you do if the relevant authorities don’t care? This is why people hate attorneys and why they absolutely should.

But not me. You should like me. I’m cool.

Rant over.

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It’s a real estate Christmas! #Christmas #RealEstate #holiday

Merry Christmas and happy holidays!

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Rob Bodine is a Virginia attorney focusing his practice on real estate and intellectual property law. He’s currently Virginia counsel with Cardinal Title Group. Rob is also a licensed title insurance agent in Virginia, Maryland, and the District of Columbia.

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Novak v. City of Parma #conlaw #SCOTUS #criminallaw #Novak #Parma

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Novak v. City of Parma could be a huge case if the United States Supreme Court (“SCOTUS”) agrees to hear it. The second issue before the Court is “Whether the Court should reconsider the doctrine of qualified immunity” (“QI”). For context, this is the case in which the Babylon Bee and the Onion filed amicus curiae briefs supporting Petitioner Novak. Anthony Novak was arrested by Ohio police for anonymously creating and maintaining a Facebook page that parodied the Parma, Ohio police force. The police opened a criminal investigation based on a statute worded so broadly that it allowed the prosecution to punish Novak because some confused citizens called the police station, and the police were bothered by having to answer those calls and surf the internet to see the page for themselves. These 11 phone calls via the non-emergency phone line were deemed “to disrupt, interrupt, or impair the functions of any police, fire, educational, commercial, or governmental operations.”

Seriously. That’s 100% true.

They continued their criminal investigation even after Novak took down the parody page only 12 hours after it was published. Thus, some of the “bother” the police department faced was self-inflicted. When Facebook turned over their records to the officers, they found the source. Novak was arrested, charged, and tried for a felony. This process involved four days in jail and the seizure of his phone and laptop. The grand jury indicted based on officer testimony later admitted to be false, but the trial jury acquitted Novak, who then brought a civil suit against the officers and the city for the frivolous case they brought against him. The governmental defendants moved for dismissal based on QI, which was (eventually) granted and then affirmed by the Sixth Circuit Court of Appeals essentially based on the fact that no prior cases had held Novak’s speech as protected. Thus, despite language acknowledging how clearly Novak’s speech was protected, the Sixth Circuit Court of Appeals itself refused to provide such a needed holding. Novak then filed this Petition for a Writ of Certiorari (i.e., a request for SCOTUS to hear the case).

“If the First Amendment means anything, it surely means that an individual can mock the government without fear of arrest.”

Petition, page 12.

SCOTUS has more or less upheld QI, but we have two new justices, Amy Coney Barrett and Kentaji Brown Jackson, both of whom give us reason to believe they may oppose (or at least limit) it. See, e.g., Rainsberger v. Benner and Patterson v. United States (the latter being more on point). Both justices have upheld QI, but these cases suggest a willingness to relax it, and both justices are no longer bound by a higher court to accept it. They now are the higher court.

That said, while this should be an easy case, it won’t be. First, those justices don’t provide a majority by themselves. At least one of Thomas, Alito, Gorsuch, Kavanaugh, and Roberts must also be swayed. None of those justices are hostile towards QI, but they don’t have to be. They simply have to be hostile towards QI in speech cases. There’s simply no excuse for today’s police officers and prosecutors not to know that speech is free, so they shouldn’t be permitted to bring frivolous cases based solely on parody. Regardless of how it goes, I hope the Court hears the case, because I’d like to know where they stand.

Due to disagreement among the federal appellate courts on whether probable cause exists based on speech, I may get my wish.

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Rob Bodine is a Virginia attorney focusing his practice on real estate and intellectual property law. He’s currently an attorney with Cardinal Title Group, a Virginia-based title insurance and settlement company. Rob is also a licensed title insurance agent in Washington, DC; Maryland; and Virginia.

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Excluding Lay Title Companies from the Seller Side of Real Estate Transactions in Virginia @VAStateCorpComm @VAHouse @VASenate @GlennYoungkin @WinsomeSears @OpenVaLaw #VABOI #BOI #insurance #Virginia #realestate #vasenate #VSB

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I’ve spent a lot of time arguing (read: complaining) about the resistance attorneys and lay title companies have given to the Virginia Bureau of Insurance’s (“BOI”) Letter 2022-01 demanding that they change their practices. Those arguments appear here, here, and here. The only update I’ll give you is that the Virginia legislature has remained silent because they have bigger fish to fry. As a result, the intent of § 55.1-1000, et seq. (i.e., to save consumers money by allowing lay settlement services to be performed by lay title companies instead of overpriced attorneys) goes unrealized. The Virginia State Bar (“VSB”) denied my request for a Legal Ethics Opinion with an email ignoring most of the points I made and mischaracterizing the ones I did make. In other words, rather than protecting the general public from unscrupulous attorneys trying to protect their wallets from laws that annoy then, the VSB is acting as an advocacy group for that very sort of attorney. Because our arguments with attorneys aren’t getting anywhere, and because the BOI letter doesn’t require us to police illegal or unethical behavior on the part of other entities, my employer has given up on billing for services they perform on behalf of the sellers and dropped their requirements. Except one.

Seller-Side Lay Title Companies

My employer refuses to place a lay title company on the settlement sheet and refuses to disburse funds to them for their services. If a seller wants someone to be paid, it must be an attorney’s office. The reason for this is that the BOI made it clear that the settlement agent is responsible for all settlement services performed even if outsourced to a seller representative. That’s not much of an issue with attorneys because the VSB continuously monitors them. If an attorney’s status is active, then they’re qualified to perform legal services. For lay title companies, the settlement agent would have to collect copies of their errors & omissions and fidelity insurance policies, verify the continued validity of their title insurance license, and verify that the company’s corporate charter hasn’t been revoked or suspended. That’s a lot of work considering how many title companies are in Virginia. We deal with many of them.

War Story #1

Is this policy unreasonable? Well, that can be answered by something that occurred just yesterday. One of our processors mistakenly placed the seller’s representative – a lay title company – on the settlement sheet. When she discovered the error, she informed them that they couldn’t be paid, and unsurprisingly they were upset. In order to avoid a fight, I asked the managing attorney if it would be okay to vet this particular title company and allow a direct payment to them. In the meantime, I asked the processor to get copies of the relevant insurance policies, and I went online to check on their status. Well, this company lost its charter on June 30, 2021. Their status was “Automatically Terminated – Annual Report and/or Fees,” all of which were due February 28, 2021. This lay title company has been doing business without a charter for over 1-1/2 years.

As I told another attorney today, other title companies may be willing to ignore their obligations under the law, but we won’t, and that means that dealing with lay title companies imposes far too great a burden on us. If that creates an accounting problem for law offices not wanting to have to receive all funds and then disburse them, that’s their problem, but more importantly, it’s their funeral. These attorneys know that eventually the legislature will get around to this issue, and on that day, the attorneys want to be able to claim, “No, we didn’t pay this seller-side title company for work they didn’t perform. That was the settlement agent that did that.” In other words, they know they’re wrong, but they want us to be blamed for it. This is also why none of these attorneys dare file complaints against us. Once they do, and the BOI or VSB is forced to deal with it, the attorneys themselves may be the ones facing sanctions. In any event, the jig will be up. It’ll be made crystal clear that their actions violate the relevant law, and they’ll have to stop.

EDIT: War Story #2

This just happened. An agent told us that a title company would represent the seller-side. Knowing they were going to be dealing with my employer, they said, “All we’re going to do is perform notarial services.” Well, that makes sense. We use outside notaries all the time. Why not allow the seller to pick their notary public? We requested their errors & omissions policy and proof of appointment as a notary. They wanted to charge $175, but that doesn’t work. The maximum a notary can charge for a single notarized signature under § 47.1-19 is $5. With only one seller signing, and with at most 15 documents requiring notarization, the most they could charge would be $75, which is less than half of what they want to charge. Obviously, this is a ploy to represent the seller side without having to admit they’re representing the seller side. These people have no respect for the law. While a settlement agent doesn’t have to police these matters, we sure will. Give these people an inch, and they take a parsec.

Even if you don’t have several attorneys employed by your firm, don’t be intimidated by these attorneys into taking actions that could come back to hurt you.

In any event, we won’t be involving lay title companies on the seller’s side.

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Another Update on “Split Settlements” in Virginia @VAStateCorpComm @VAHouse @VASenate @GlennYoungkin @WinsomeSears @OpenVaLaw #VABOI #BOI #insurance #Virginia #realestate #vasenate

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Today, I received another obnoxious email from a self-serving attorney, so here’s another post.

Repeating what I’ve previously written, the Virginia Bureau of Insurance (“BOI”) published Letter 2022-01 in February, 2022, stating that they interpreted Virginia Code § 55.1-900, et seq. and § 55.1-1000, et seq. to prohibit the long-standing practice of “split settlements.” The letter (of course) didn’t change the law, regulations, rules of legal ethics, or even the standard contracts used throughout Virginia. It’s purpose was to tell our industry that our practices must change because those long-standing practices are illegal. Because this would cost many attorneys money, they’ve resisted change, but that places law-abiding lay title companies and attorneys in a quandary. In order to comply with the BOI’s instructions, they must require change, but the arrogant, unethical attorneys — in particular, the ones from Central Virginia whose practices were the primary target of letter — refuse to do so.

The Law

In the interests of space, I’m not going to repeat my arguments from prior posts. I’m simply making my assertions, then linking to the prior posts if you want to understand why my assertions are clearly correct.

The Apple of Discord
More on Split Settlements

Today, I mention only information not previously discussed by me, and here’s a bit of that. The law I’ve cited was passed in 1997, acknowledging, as many states do, that pricey attorneys aren’t necessary to perform settlement services that don’t constitute the practice of law. That’s actually a fair number of services, most of which are listed in § 55.1-1000 (“Escrow, closing, or settlement services”) and defined by law as lay title services. Thus, the law was designed to save consumers money. This is no surprise to anyone in the industry. I’d say the fees for my employer are on the high end for lay title companies, and they still fall as much as $600 below what attorneys charge for the same services. As I’ve shown, many attorneys are charging in clear excess of $1,000 for services, most of which they don’t even perform, but in any event are not permitted to perform without the settlement agent’s permission.

Try to tell an attorney what to do. Go ahead. I dare you.

As an aside, the 1997 laws rendered many legal ethics opinions (“LEOs“) largely moot, and to the extent that these LEOs are still viable, they very much cut against the arguments made by seller-side attorneys. Their arguments continue to be embarrassingly bad, thus solidifying my assertion that they know they’re wrong and are grasping at whatever straws they can to justify their behavior because there’s nothing anyone will do about it.

What’s New?

Unfortunately, not much is new, but no news is still news, as it speaks volumes as to how certain regulatory agencies think. First off, a reminder. I’ve spoken with the offices of my state Senator and Delegate. While I’ve kept them in the loop, I’ve heard nothing back from them since our Zoom call. This is understandable, as the legislature has much bigger fish to fry and tend to rely on the Executive Branch’s regulatory agencies to handle the day to day of enforcing the law. Therein lies the rub. The regulatory agencies aren’t doing anything.

Request for an LEO

After receiving no help from the Bureau of Insurance despite their authority to suspend the title insurance licenses of these attorneys, my next regulatory target was the Virginia State Bar (“VSB“). In early July, I drafted a comprehensive request for an LEO with a fact pattern that covered all the ethics violations attorneys have been committing throughout Virginia. Remember, these practices have been the industry standard despite the 1997 law, and started long before BOI Letter 2022-01 put these attorneys in a tailspin, so this is no small matter. Ethics counsel informed me that they had received multiple calls and emails from these settlement attorneys defending their positions. Counsel had a completely skewed view of the facts and law, which I assume means that these attorneys were lying to them. I set counsel straight providing citations to support all of my assertions. They were impressed but said they needed to get back to me after suggesting edits. (My request was, as you might expect, quite wordy. There’s a lot of unethical behavior to address.)

And now that brings me to today’s concern. Counsel has refused to respond to my further attempts to contact them. They’ve simply cut me off. I was warned that my request might be refused because of the Committee’s desire to “stay out of it,” but didn’t want to believe that. The Committee isn’t protecting the public from unscrupulous attorneys, but their silence instead protects those attorneys’ wallets.

The VSB won’t provide a general statement telling attorneys that certain behavior is (or isn’t) violating the law and rules of ethics; the BOI won’t supplement its statement to clarify that certain behavior is (or isn’t) violating the law; and the legislature is too busy dealing with the fallout of Dobbs (among other politically hot issues) to deal with something about which the average voter doesn’t care. The only option I have to fix the long-standing and widespread wrongs of these attorneys is to start filing complaints against them with both the BOI and the VSB. I even warned the VSB I was going to start doing that. Complaints can’t be ignored, but they can be dismissed as baseless even if they aren’t. If the VSB stood by the attorneys despite how clearly wrong they were, then I could go to the legislature and say, “This is what self-regulation looks like. It’s a scam designed to fool you into believing the VSB’s Ethics Committee is there to protect the public.”

In other words, the only choice I have on the table is to commit professional suicide. (I’ve arguably already professionally maimed myself.) The VSB has likely ignored me because they believe I won’t do that. Maybe I won’t, but if I don’t, it won’t be my loss; it’ll be yours. This will be yet another one of those hidden things (e.g., the monopoly on glasses) that harms everyone, but because too few people know the true source of the harm, or even that they’re being harmed in the first place(!), nothing ever gets fixed.

Think about that.

If you want this change to occur, please retweet my tweet. Your retweets will each tag the relevant authorities that should give me an audience.

Otherwise, nothing changes, and the public will continue to suffer.

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More on “Split Settlements” in Virginia @VAStateCorpComm @VAHouse @VASenate @GlennYoungkin @WinsomeSears @OpenVaLaw #VABOI #BOI #insurance #Virginia #realestate #vasenate

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As I previously discussed, the Virginia Bureau of Insurance (“BOI”) published a letter in February, 2022, stating that they interpreted Virginia Code § 55.1-900, et seq. and § 55.1-1000, et seq. to prohibit the long-standing practice of “split settlements.” The letter (of course) didn’t change the law, regulations, rules of legal ethics, or even the standard contracts used throughout Virginia. It’s purpose was to tell our industry that our practices must change because those long-standing practices are illegal. Because this would cost many attorneys money, they’ve resisted change, but that places law-abiding lay title companies and attorneys in a quandary. In order to comply with the BOI’s instructions, they must require change, but the arrogant, unethical attorneys — in particular, the ones from Central Virginia whose practices were the primary target of letter — refuse to do so.

The Simple Calculus

Consider the following authorities that govern these matters expressed as simply and directly as possible.

“[I]t is ultimately the settlement agent, as identified by the buyer, who must perform all of the settlement services prescribed by the Code.”

BOI letter, Item II.

“’Escrow, closing, or settlement services’ means the administrative and clerical services required to carry out the terms of contracts affecting real estate. These services include . . . receiving and issuing receipts for money received from the parties, ordering . . . payoffs, ordering . . . inspections, preparing settlement statements or closing disclosures, determining that all closing documents conform to the parties’ contract requirements, setting the closing appointment, following up with the parties to ensure that the transaction progresses to closing, ascertaining that the lenders’ instructions have been satisfied, conducting a closing conference at which the documents are executed, receiving and disbursing funds, completing form documents and instruments selected by and in accordance with instructions of the parties to the transaction, handling or arranging for the recording of documents, sending recorded documents to the lender, sending the recorded deed and the title policy to the buyer, and reporting federal income tax information for the real estate sale to the Internal Revenue Service.”

VA Code § 55.1-1000, (edited to remove those services that are not at least in part performed for the benefit of the seller).

“[T]hat portion of the Settlement Agent’s fee billed to Seller . . . and any other proper charge assessed to Seller will be paid by Seller.”

Northern Virginia Association of Realtors Regional Sales Contract, paragraph 22.

So, let’s sum up what these three quotes provide. To start, the Settlement Agent has complete control over all closing services, which means they perform and charge for them, or allow them to be performed by another qualified entity (title company or attorney) as directed by the Settlement Agent. Even if directing another to perform, the Settlement Agent must still verify that the other qualified entity did a competent job, because the Settlement Agent will be held responsible for the errors of that other entity. While it’s well-understood that any entity providing professional services is entitled to charge for those services, the standard contracts used throughout Virginia nevertheless expressly provide that the seller should pay seller fees to the Settlement Agent (albeit some more vaguely than others). How could an attorney well-versed in the law make a good faith argument against the authority of the Settlement Agent?

They can’t.

Any such argument must be in bad faith. The BOI’s interpretation is crystal clear and in a completely accurate interpretation of the law, and the contracts reflect that. There’s simply no support for the contrary argument, and citizens, but especially attorneys, should know that they may not pick and choose which laws they want to follow. A couple weeks ago, I spoke to the offices of some legislators, after which I emailed them a more detailed argument than you’ll read here. Attorneys are intimidating Settlement Agents (i.e., lay title companies and other attorneys), threatening complaints if the Settlement Agent includes fees for their own services on the final settlement sheet. They advance twelve strawman arguments devoid of any logic to justify their behavior, and employ several underhanded tactics, exposing the attorneys’ true motives. These attorneys don’t care about the law, regulations, rules of legal ethics, or even their own clients’ wishes, but instead care only about their wallets and egos.

A Dangerous Culture

These attorneys are leading the charge towards establishing a culture of noncompliance with the law. My employer (a title company) lost at least two transactions because the seller’s real estate agent knew we would be charging the seller a fee. This demonstrates that their attempt to control our fees cannot be separated from unlawfully influencing the choice of settlement agent.

A purchaser or borrower in a transaction related to real estate in the Commonwealth shall have the right to select the settlement agent to provide escrow, closing, or settlement services in connection with the transaction. The seller in such a transaction may not require the use of a particular settlement agent as a condition of the sale of the property.

§ 55.1-1006 (emphasis added)

Of course, this is a problem that predates the BOI’s letter. I received an email only two hours before publishing this post in which a real estate agent threatened not to have her clients sign a contract if we weren’t willing to hold an escrow of their FIRPTA funds. To repeat, a seller may not refuse to sell their property based on who the buyer chooses as the settlement agent. These real estate agents are sometimes ignorant as to the gravity of their words — they aren’t attorneys — and that makes them quite impressionable to videos like this one in which a title insurance agency provides instruction on how to vet the settlement agent in violation of § 55.1-1006.

To avoid the argument, some attorneys are withholding information in order to prevent the Settlement Agent from performing the work. Consider the following:

“Seller will sign such . . . documents as may be required by the . . . Settlement Agent, and . . . authorizes Settlement Agent to obtain pay-off or assumption information from any existing lenders.”

Northern Virginia Association of Realtors Regional Sales Contract, paragraph 20.

How can an attorney, in good faith, argue that the Settlement Agent has no authority to order the payoffs? You know the answer.

The result is a culture of attorneys, title companies, and real estate agents all continuing to act without respect for the law or their clients own directions, and relying on “everybody’s doing it” to justify their illegal activity.

Dealing with the Legislature

I’ve proposed several edits to the existing laws, most of which shouldn’t be necessary but will be helpful in making it all the more difficult for these attorneys to avoid sanctions if they continue to disregard legislative intent. However, my claims also establish one important point addressed by my most important proposed edits: The statute demands that the seller not in any way influence the buyer’s choice of the Settlement Agent, but objecting (without authority) to the Settlement Agent’s fees necessarily exerts such forbidden influence on that choice. The two can’t be separated. The relevant section forbidding such influence is § 55.1-1006, which was recently amended. Here is the section with my proposed changes appearing as underlined text:

Choice of settlement agent. A purchaser or borrower in a transaction related to real estate in the Commonwealth shall have the right to select the settlement agent to provide and charge fees for escrow, closing, or settlement services in connection with the transaction. The settlement agent may, at its sole discretion, contract with other entities permitted by law to perform escrow, closing, or settlement services at the direction of the settlement agent. The seller in such a transaction may not require the use of a particular settlement agent as a condition of the sale of the property, nor may the seller by contract avoid payment to the settlement agent for such services performed by the settlement agent on behalf of the seller. Nothing in this chapter shall prohibit a seller from retaining an attorney licensed pursuant to Chapter 39 (§ 54.1-3900 et seq.) of Title 54.1 to represent his interests and provide legal advice pertaining to escrow, closing, or settlement services. Such representation may include deed preparation, fee negotiation with entities other than the settlement agent, and review of applicable documents and advising the seller on any legal matters related to the settlement or closing process. Fees charged for such legal services would be in addition to fees charged by the settlement agent and must be paid by the seller.

§ 55.1-1006

An analogous change would need to be made to § 55.1-1007 in order to completely close this loophole. I’ve also made additional proposals expressly including attorneys as subject to sanctions for violations of the code and expressly acknowledging that the Settlement Agent chooses whether or not to delegate performance of closing services to other entities. In truth none of these should be necessary. Their purpose is to prevent attorneys from manipulating the statutory text so as to deny the necessary effects of their disruptive behavior. Attorneys shouldn’t be doing that to save a revenue stream to which they were never entitled in the first place.

All that said, it’s possible that the legislature wants to change the law and allow for multiple settlement agents. Maybe they want to do away with lay title companies altogether. All of that is their prerogative. However, if they still intend for their to be only one Settlement Agent, then they need to amend the relevant laws as I’ve requested. Either way, it should trouble everyone in the Commonwealth — politicians, regulators, and consumers — that attorneys are showing such brazen disrespect for the rule of law. Even if they change the law, where’s the guarantee that these attorneys will follow it if they don’t like it even as rewritten? There needs to be greater deterrence.

If you want this change to occur, please retweet my tweet. Your retweets will each tag the relevant authorities that need to give me an audience.

There are bigger fish to fry, but this is still an important issue.

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The Apple of Discord: The BOI’s Letter of February 4, 2022 @VAStateCorpComm #VABOI #BOI #insurance #Virginia #realestate

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The Virginia Bureau of Insurance (“BOI”) recently published a letter that’s turned the real estate industry upside down. In short, they suddenly published an opinion stating that they interpreted Virginia Code § 55.1-900, et seq. as prohibiting the long-standing practice of “split settlements.” Well, sort of (q.v.). There’s been a lot of commentary on the subject that I won’t rehash here. Instead, I’ll do three things: 1) point you to the letter; 2) point you to the FAQ that followed; and 3) tell you that I have a firm opinion on how the letter, FAQ, and Virginia law should be interpreted.

That said, there are many in the industry that disagree with my interpretations. This is problematic. The real estate industry is filled with attorneys whose job description can be described as little more than, “Find ambiguities and exploit them to benefit your client.” That’s what we do, and we’re usually better at it than the average person. While I believe that many people are intentionally misconstruing the letter and FAQ simply to protect their seller-side-only settlement revenue streams (e.g., those that, as recently as 2 minutes before my scheduling of this post, knowingly misapply Legal Ethics Opinion 1346, et al. to settlement companies), some of the disagreement is honest and reasonable. Because we’re all bound by the requirements of our insurance licenses and, in some cases, law licenses, to get this right, that’s going to result in angry, threatening phone calls and emails, then ethical complaints to the BOI and Virginia State Bar (“VSB”), and finally actual lawsuits. I’ve experienced the first part of that already and have been threatened with the second. I’ve also been threatened by attorneys stating that they’ll advise their clients not to show up for closing. This means that consumers will also be made to suffer, and they may soon also be threatening lawsuits. Clearly, time is of the essence, and the BOI knows that.

I Can Also Write Letters

On March 7, 2022, I sent an email to the email address to which the letter directed us for questions and comments. For the record, it’s resa@scc.virginia.gov. Please make a note of that. In the fashion typical of an attorney, my email was well-organized, provided context for my concerns, and then asked five pointed questions. The response I received from Chuck Myers (Supervisor of the RESA Investigations Section for the Virginia Bureau of Insurance) merely regurgitated the vague language of the BOI letter and FAQ and flat out ignored my questions. I wrote a return message, some of which I reproduce here.

Is there any way I can get direct answers to the questions I asked? They represent common sources of tension between title companies springing directly from ambiguities present in the BOI letter of 2/4/2022. [Settlement Company] has gone so far to publish a letter instructing TSAs what they’re permitted to charge even in situations where MBH isn’t the TSA and therefore has no defined place in the transaction. For a settlement company that is NOT the TSA to be attempting to dictate terms like that seems ridiculous . . . . The industry needs clarification as to the consequences of the BOI’s interpretation of RESA. Here are the questions once again.

The questions were as follows:

  1. In of the Virginia Code § 55.1-900, et seq., does the Seller (or any agent of the Seller) have the right to dictate the amount of the processing fee charged by the Settlement Agent to the Seller?
  2. Is a $425 processing fee charged by the Settlement Agent to the Seller per se unreasonable even if the Seller’s side of the settlement is outsourced to another settlement company chosen by the Seller?
  3. Does the answer to the second question depend on the specific facts of each case, and therefore require the Settlement Agent to vary its fee depending on exactly which services are performed on behalf of the Seller?
  4. If the answer to the third question is that the Settlement Agent must tailor its fees to the specific facts of each case, is a $425 processing fee is per se unreasonable if it includes performance of the Seller’s side of the settlement?
  5. In light of Virginia Code § 55.1-900(9), is the Settlement Agent permitted to compel the Seller to allow the Settlement Agent to perform the Seller’s side of the settlement?

For the record, NVAR’s Regional Sales Contract, which governs the majority of residential closings I see, also leads to my interpretation, but I can’t ask the BOI to interpret a contract. See paragraphs 4 (“Settlement”) and either 22 or 23 (“Fees”).

I have yet to receive a response — not even one saying that he can’t answer my questions — and considering how quickly I received his first response, I think it’s safe to say that I won’t be receiving one, the nuisance that I am.

Nobody Wants a War

Here’s the thing: I’m not concerned whether the BOI makes a statement agreeing or disagreeing with me. What concerns me is that they’re refusing to make any subsequent statements at all even in response to specific issues carrying widespread disagreement in the industry. If licensed professionals have an honest belief that the “other side” is violating the law, the rules of ethics, or the terms of the clients’ contract, those professionals are ethically and legally bound to issue the aforementioned threats. We’re just doing our jobs. This isn’t our fault.

The BOI has acted as Eris, the Greek goddess of discord. Eris threw an apple between the divine guests at a wedding. It was inscribed with the words “for the most beautiful,” or “to the fairest,” with the resulting squabble among Aphrodite, Athena, and Hera eventually ballooning into the Trojan War. Much like the uncaring gods, the BOI has now stepped back as if to say, “Not our problem.” If they’re simply dragging their feet, that’s no better. They know what they’ve caused and have had plenty of time to form their opinion. Expressing that opinion in an email or letter, or simply updating their FAQ, is a relatively quick part of that process. Failure to do so is irresponsible, unprofessional, and a violation of whatever oath, formal or otherwise, the higher ups have taken as public servants.

That horse is filled with attorneys. It’s frightening.

A Solution

If my underlying premise about industry tension is correct — and I don’t see how it couldn’t be — then my questions are your questions as well. So, flood the email address with those same questions so that they’ll be defined as “frequently asked.” If your interpretation of the BOI’s letter and FAQ differs from mine, and you feel you need to phrase these questions to cater to your interpretation, even better. Show Mr. Myers and the BOI that there is genuine disagreement and tension in the industry. We’re all trying to minimize our risk, and we need more clarity to do so.

Get your act together, BOI, and return stability to our industry. My phone won’t stop ringing.

Follow me on Twitter @PropertyAtty
Follow the BOI @VAStateCorpComm

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Cleveland Guardians Facing Lawsuit over Name Change @Indians #Cleveland #Guardians #MLB #trademark

Blog posts cannot substitute for legal advice. If the topics discussed in this post are relevant to a real case you have, please consult an attorney.

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A roller derby team has sued the team formerly known as the Cleveland Indians.

You may have heard that the Cleveland Indians are no more. The Major League Baseball team’s name has been changed to the Cleveland Guardians, though not on Twitter (what choice do they have?). Unfortunately, there already is a Cleveland Guardians team in Cleveland. They’re a roller derby team (yeah, they own the website address), and they claim to have a trademark in the name, prompting them to sue the baseball team. The roller derby team is also claiming that the baseball team attempted to buy out their rights to the name with an insulting offer. If true, this means that the baseball team was aware of the roller derby team’s superior rights to the trademark. That’s not a good look, but you can always put a spin on that sort of thing.

I’m using legalese to avoid making affirmative claims without the facts, but for what it’s worth, the roller derby team applied for federal a trademark claiming first use in commerce as far back as 2014. Though they applied in July (four days after the baseball team’s two trademark applications), they registered their business in 2017, which is strong evidence that at least have local rights within the state of Ohio, or at least the Cleveland metropolitan area. As of this writing, the business is still active.

They may have “common law trademark” rights outside Ohio (rights acquired not through registration, but through mere use since their founding in 2013) based on playing teams throughout the Midwest, but that would have to be proven. Either way, if they win in Ohio, the baseball team would have to operate in Ohio with a different name than elsewhere throughout the country. In other words, the baseball team needs those local rights.

Fortunately for the baseball team, money prevails, and they have plenty. Fortunately for the roller derby team, it seems like they’re headed for a not-so-insulting payout. It’s possible everyone wins here, though in an unseemly way.

Welcome to litigation!

Follow me on Twitter @PropertyAtty
Follow the Cleveland Guardians @Indians (What? Still?)

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The Washington Football Team’s Trademark @KevinSheehanDC #WFT #NFL #trademark

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This morning, I sent a tweet to our best sports talk guy in the DC area, Kevin Sheehan. He was confused as to why the Washington Football Team hadn’t yet secured a new team name. His conclusion is likely sound: Daniel Snyder’s arrogance put the team in a position where they were running around like chickens with their heads cut off. That’s not exactly how Kevin said it, but that’s how I interpreted it, and in any event, that’s how I see it.

I tweeted to him (above) from my sports-based Twitter account about one of his misunderstandings, referencing the Anticybersquatting Consumer Protection Act, but his response on air also wasn’t quite right (close though). I thought I’d provide some more context, though to keep this short, I’m leaving out a ton of material.

Intent to Use or Actual Use

Among many other requirements, to receive a trademark, you must swear under oath that you are using the mark in commerce or intend to do so soon. Moreover, you must specify the industry of use. In other words, my trademark application for EasySoft software is separate from my application for EasySoft tissue paper because they’re different industries (“classes” in trademark lingo). This will be important shortly.

Toeppen and the ACPA

Before businesses really understood the internet, Dennis Toeppen registered a lot of domain names through Network Solutions based on those businesses’ trademarks (e.g., camdenyards.com, yankeestadium.com, frenchopen.com). He registered Panavision.com in 1995. Eventually, Panavision tried to do the same and learned of Toeppen’s registration. They demanded he hand over the domain, which Toeppen said he’d do for $13,000. (If my memory serves me, he originally requested less, but raised his demand twice each time Panavision caved in. He wanted them to accept the demand at the moment he made it.) When they refused to pay, Toeppen responded by registering Panaflex.com, which is another of Panavision’s trademarks.

Funny story: At the time, if you went to the Panavision.com website, you’d see a live feed of an ordinary intersection on the streets of Pana, Illinois.

Panavision sued for trademark dilution and ultimately won in the appellate court in 1998. Following the Toeppen case, Congress passed a federal law, Anticybersquatting Consumer Protection Act, providing a civil “cause of action” for such cases (1999).

Cybersquatters

All of this should leave you scratching your heads, thinking, “How have these cybersquatters secured trademarks for Freedom Fighters, Redtails, War Hogs, Warriors, etc. and not have had them cancelled?” Simply put, no one’s tried to cancel them. The US Patent and Trademark Office doesn’t have “trademark police” collecting evidence of fraudulent applications.

Note: “Fraud before the PTO” is a term of art referring to filing an application knowing that its contents are false. That application is sworn under oath.

At the time of registration, the trademark examiner had no reason to believe that the application was fraudulent, so the only way to invalidate the trademark is for someone to come along an file for a cancellation of that mark (an “opposition”). In short, this is nothing more than a headache for the Washington Football Team. They should have little to no problem invalidating those marks considering how deep their pockets are. For most of us, the time and expense is a genuine hurdle, which is why people still get away with it today.

Speaking of which . . . .

Washington Football Team

The team’s application for “Washington Football Team” was denied. I may have misheard Kevin, but it appeared that he thought this was the same issue. It wasn’t. There was no existing registration for that mark, so cybersquatting is irrelevant. It was denied because it was “too generic” for trademark eligibility, which means no one may register that mark. I don’t consider this a controversial position for the USPTO to take, and the only mistake the team made was wasting their time and money on the application. However, again, they have deep pockets, so why not?

What does “too generic” mean? For an explanation, please visit my post on the distinctiveness of trademarks.

I hope that helps.

Follow me on Twitter @PropertyAtty
Follow Kevin Sheehan @KevinSheehanDC

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Filed under Intellectual Property Law, Internet, Sports, Trademark Law

Prince William County Courthouse Shutdown #Virginia #inauguration

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The Chief Justice of the Prince William County (Virginia) Court issued an order yesterday (1/14/2021). It reads in pertinent part:

Upon credible evidence of a threat to the safety and security of the Courthouse and those within the Courthouse, the Chief Judge declares a judicial emergency . . . thereby closing the Prince William County Courthouse on Tuesday, January 19, 2021, and Wednesday, January 20, 2021.”

The order itself can be found here but will eventually be taken down: https://www.pwcgov.org/government/courts/circuit/Pages/Circuit-Court-Calendar.aspx.

We knew they’d be closed on Monday for of Martin Luther King’s birthday, but they won’t be reopening until Thursday due to security concerns related to the inauguration on Wednesday. I expect other courts to follow in their footsteps if they haven’t already. I’ll keep an eye out for those orders.

EDIT: The Fairfax County Courthouse is also closed on Monday and Wednesday, but as of the moment, it’s open on Tuesday. https://www.fairfaxcounty.gov/coronavirus-covid-19-updates-mlk-day-and-inauguration-2021-holiday-schedule. The same is true for the Alexandria City Courthouse. https://www.alexandriava.gov/Courts.

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