Opinion 2151

QUESTION
May limited practice officers, who are employed by a law firm within an escrow department, be signatories on accounts under RPC 1.15A(h)(9) for the purpose of signing escrow disbursement checks and wire authorizations when closing real estate transactions?

RULES, DEFINITIONS, AND HISTORY
Limited Practice Officers
A limited practice officer is a person certified as a closing officer under Rule 12 of the Admission to Practice Rules. A limited practice officer is certified by the Washington State Supreme Court. Since July 1, 2002, the Washington State Bar Association assumed responsibility for administering the Limited Practice Officer program. While certified as a limited practice officer, a person may select, prepare, and complete documents in a form previously approved by the Limited Practice Board for use in closing a loan, extension of credit, sale, or other transfer of real or personal property. Limited Practice Officers have their own Disciplinary Rules distinct and separate from the Rules of Professional Conduct governing lawyers in the State of Washington.
Escrow Account
As defined by Black`s Law Dictionary, an escrow account is a bank account generally held in the name of the depositor and an escrow agent which is returnable to the depositor or paid to a third person on the fulfillment of one or more escrow conditions. For example, funds for payment of real estate taxes are commonly paid into an escrow account of a bank-mortgagee by mortgagor.
Rules of Professional Conduct of the Washington State Bar
It is professional misconduct for a lawyer to, through the acts of another, violate the Rules of Professional Conduct. See RPC sec. 8.4(a). A lawyer must deposit and hold in a trust account funds, including escrow and other funds held by a lawyer incident to the closing of any real estate property. See RPC secs. 1.15A(a), (c)(1). Only a lawyer admitted to practice law may be an authorized signatory on trust accounts. See RPC sec. 1.15A(h)(9).
Informal Ethics Opinion #2053
In 2004, the RPC Committee opined that a lawyer may provide non-legal services in the course of a law practice. However, the provision of those services will still be subject to the requirements and obligations of the Rules of Professional Conduct. The facts of this case include planning by a lawyer to operate an escrow business as part of the performance of the lawyer`s professional duties.
Informal Ethics Opinion #2060
In 2004, it was opined that the RPCs do not apply to an escrow company per se but that the RPCs apply to lawyers licensed or admitted for any purpose to practice in the State of Washington. Thus, the conduct of a lawyer who is employed by both a licensed escrow company and who is also employed by a law firm is governed by the RPCs.
Formal Ethics Opinion #187
In 1990, the RPC Committee opined as follows:

The Rules of Professional Conduct apply to lawyers who are engaged in their professional responsibilities as lawyers. The scope of these activities is broad, and the Rules are intended to reach all aspects of a lawyer`s professional life. Accordingly, any lawyer who acts as an escrow agent in a real estate or personal property transaction in connection with the lawyer`s profession as a lawyer must comply with RPC 1.14. This is so whether or not the lawyer has registered as an escrow agent under The Escrow Agent Registration Act, Chapter 18.14 RCW, or has established an escrow company which has registered.

We recognize, however, that a lawyer may engage in businesses which are totally independent from and unrelated to a law practice. In such a business, the lawyer is not relying on his or her qualification to practice law either to bring in customers or to discharge the functions of the unrelated business. While various of the Rules of Professional Conduct may apply to unrelated businesses, such as, for example, RPC 8.4 (prohibiting certain kinds of conduct), we believe the escrow account rules of RPC 1.14 are not intended to apply to funds held by persons engaged in a business unrelated to a law practice merely because the person is also qualified to practice law. For example, a person qualified to practice law may have no law practice whatsoever, but may operate an escrow company which is registered under the Escrow Agent Registration Act and which has Limited Practice Officers qualified under Rule 12 of the Admission to Practice Rules to discharge the escrow functions. RPC 1.14 would not require use of an interest-bearing account in that case.

Similarly, a lawyer with a law practice may also engage in the business of acting as a registered escrow agent, and if there is a separation in fact between the two businesses, RPC 1.14 will not apply. The separation must be physical, financial, substantive and practical. For example, the law office and the escrow office must be physically distinct and separate. The businesses must be financially independent of each other. The escrow company cannot be a mere adjunct to the lawyer`s law practice, obtaining referrals from, or making referrals to, that law office. The escrow company may not represent to its customers and prospective customers in any way that they will receive the benefits of a lawyer`s expertise. A lawyer engaged in an escrow business complying with WAC 308-128E-011 may not hold himself or herself out to be a lawyer in connection with that business`s activities.

Where a lawyer is engaged in both a law practice and an escrow business but a true separation and independence of the two businesses is not maintained, then RPC 1.14 will apply to all of the lawyer`s trust accounts.