Can a lawyer who bought an escrow company bring deed-of-trust foreclosures for that company's clients, and is a release-of-conflict form enough to cure the conflict?

Plain-English summary

A lawyer who had purchased an escrow company asked about bringing deed-of-trust foreclosures on behalf of the company's clients, and about a release-of-conflict form the lawyer proposed the purchaser sign. On the specific facts of the current request, where the escrow company is merely acting as an independent third party to collect interest payments on the account, the committee was of the opinion that while it might hypothetically be possible to do the transaction as described without violating conflict-of-interest rules, it is an area fraught with difficulty.

In particular, the committee noted that the lawyer's release form is deficient because it does not comply with the requirements of RPC 1.7(b), and felt that it should include the opportunity to consult with independent counsel.

As to future transactions, because of the many implications and hypothetical situations that would clearly create conflicts of interest, the committee was of the opinion that it could not render any opinion that such transactions would be proper.

Currency note

This opinion was issued in 1993, before the Washington State Bar Association's adoption of the 2006 revisions to the Rules of Professional Conduct. Subsequent rule amendments or later opinions may have changed the analysis. Treat this page as historical context, not current guidance. Verify against current rules before relying on any specific rule, deadline, or requirement mentioned here.

Common questions

Q: Can a lawyer who owns an escrow company foreclose for that company's clients?

A: On the specific facts (the company merely collecting interest payments as an independent third party), the committee said it might hypothetically be possible without violating the conflict rules, but called it an area fraught with difficulty.

Q: Was the proposed release-of-conflict form sufficient?

A: No. The committee said the release form is deficient because it does not comply with RPC 1.7(b), and felt it should include the opportunity to consult independent counsel.

Q: Did the committee bless this kind of transaction generally?

A: No. As to future transactions, it said it could not render any opinion that such transactions would be proper, given the many situations that would clearly create conflicts.

Background and rules framework

The opinion applied RPC 1.7(b) (corresponding to ABA Model Rule 1.7), which permits a representation despite a conflicting interest only with the client's informed consent and where the lawyer reasonably believes the representation will not be adversely affected. The committee found the proposed release form fell short of those requirements, in part because it did not offer the opportunity to consult independent counsel, and it declined to approve such transactions in the general case.

Citations and references

Rules of Professional Conduct:

• ABA Model Rule 1.7 (conflict of interest; current clients; informed consent); Washington RPC 1.7(b)

See also

• WA Ethics Op. 1540: Conflict Waiver Must Be Written
• WA Ethics Op. 1541: Taking On a Client Adverse to a Current Client

Source

• Landing page: https://ao.wsba.org/print.aspx?ID=624

Original opinion text

Reproduced from the official source for research purposes. The linked source is authoritative.

Advisory Opinion: 1543
Year Issued: 1993
RPC(s): RPC 1.7(b)
Subject: Conflict of interest; lawyer who purchased escrow company bringing foreclosure proceedings on behalf of escrow company's clients

The Committee reviewed your inquiry concerning deed of trust foreclosures brought on behalf of clients of an escrow company which you have purchased, and a release of conflict form which you have proposed be signed by the purchaser. On the specific facts of the current request that you initiate a deed of trust foreclosure, in which the escrow company is merely acting as an independent third party to collect interest payments on the account, the Committee was of the opinion that while it might hypothetically be possible to do the transaction as described without violating conflict of interest rules, it is an area fraught with difficulty. In particular, the Committee noted that your "release form" is deficient, as it does not comply with the requirements of RPC 1.7(b) and felt that it should include the opportunity to consult with independent counsel. Furthermore, as to future transactions, because of the many implications and many hypothetical situations which would clearly create conflicts of interest, the Committee was of the opinion that it could not render any opinion that such transactions would be proper.