Department Financial Institutions Overreaches In Interpretation of MBPA

Department Financial Institutions Overreaches In Interpretation of MBPA

Staff of Exempt Attorneys Are Themselves Exempt From the MBPA.

The Department of Financial Institutions has recently and erroneously asserts that it has regulatory authority over employees of attorneys who are exempt from the MBPA if they themselves are not exempt attorneys. In a recent case, the Department asserted that a respondent was required to obtain and maintain an active mortgage loan originator license during the time he was employed by an attorney. The attorney had previously asserted the non-applicability of the Act based on his exempt status pursuant to RCW 19.146.020(1)(c), 31.04.224(2) and WAC 208-620-105(4). The attorney had employed the respondent as a paralegal for over six months prior to the charges.The plain meaning of the MBPA is that an attorney’s staff is also exempt, or a nonsensical interpretation will result. “If a statute’s meaning is plain on its face, then we must give effect to that plain meaning as an expression of legislative intent.” Nationscapital Mortg. Corp. v. State DFI, 133 Wn. App. 723, 736, 137 P.3d 78 (2006); accord State ex rel. Citizens Against Tolls v. Murphy, 151 Wn.2d 226, 242, 88 P.3d 375 (2004). Courts must avoid construing a statute in a manner that results in unlikely, absurd, or strained consequences. Nationscapital, 133 Wn. App. at 736 (citing with approval Glaubach v. Regence Blue Shield, 149 Wn.2d 827, 833, 74 P.3d 1155 (2003)). Instead, courts are to “favor an interpretation consistent with the spirit or purpose of the enactment over a literal reading that renders the statute ineffective.” Id. at 736.Staff of attorneys share the status of the attorney. The Department asserted that the respondent engaged in unlicensed activity of an MLO during the entire time he was employed by the exempt attorney. The attorney in question was licensed in the state of Washington, has asserted non-applicability based on RCW 19.146.020(c). The meaning of the relevant section of the MBPA is plain upon its face, necessarily exempting staff of attorneys. To hold that the staff of an exempt attorney is themselves not exempt, as the Department does, would lead to a ridiculous result, where attorneys could not utilize their own staff, ranging from paralegals to legal secretaries and other lay people, to assist them in their endeavors. Despite such a ridiculous result, the Department has refused to dismiss the charges.In other analogous situations the staff of attorneys are considered an extension of the attorney. For example, communications between an attorney and his support staff and vendors are protected as attorney work product. Insurance Company of North America v. Superior Court for the County of Los Angeles, 108 Cal. App. 3d 758, 771, 166 Cal.Rptr. 880 (1980) (a paralegal’s notes are not discoverable work product); Vasudevan Software, Inc. v. International Business Machines Corp., 2010 WL 3629830 *6 (N.D. Cal.). Communications by an attorney with their clients in the presence of support staff are also considered privileged when they are acting as agents of the attorney. City & County of San Francisco v. Superior Court in and for the City of San Francisco, et al., 37 Cal.2d 227, 237, 231 P.2d 26 (en banc, 1951)(“the privilege of confidence would be a vain one unless its exercise could thus be delegated. A communication, then, by any form of agency employed or set in motion by the client is within the privilege.”). In conclusion, the Department has interpreted the statutes it governs in a clearly erroneous way, should stop trying to grab power and come back to reality.Seth Rosenberg is managing member of The Rosenberg Law Group, PLLC.  Mr. Rosenberg and his team has defended numerous licensed individuals against charges from regulatory agencies, ranging from mortgage brokers, loan originators, tow truck drivers, massage therapists, to nurses and CNA’s.If you face charges from a state regulatory agency and need assistance managing the administrative hearing process, you can contact the Rosenberg Law Group seven days a week at info@rosenberglawgroup.net or (206) 407-3300.

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