276 P.3d 188
Kan.2012Background
- Stewart Title filed an interpleader to resolve who gets one-half of a 6% real estate commission from Lausier's home purchase.
- The listing broker, RAN, refused to split the 3% with McGrath, who acted as buyer's agent and is an attorney not licensed under KREBSLA.
- The district court granted summary judgment for RAN, holding nonlicensees cannot receive a commission under KREBSLA.
- McGrath argued an attorney exemption in K.S.A. 2011 Supp. 58-3037(c) allows him to share the commission if his activities are within the practice of law and part of attorney-client duties.
- The stipulation of facts described McGrath performing both legal services and brokerage-related activities to facilitate Lausier's purchase.
- The Kansas Supreme Court held the attorney exemption is not absolute and applies only to activities encompassed within and incidental to the practice of law in the attorney-client context.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Is fee-splitting with a nonlicensee absolutely prohibited? | RAN argues 58-3062(a)(10) and (c)(1) prohibit payment to nonlicensees. | McGrath contends 58-3037(c) exempts attorneys from the act. | Not absolute; exemption is limited to attorney duties within the practice of law. |
| Does the attorney exemption apply to McGrath's activities here? | RAN contends exemption does not apply to split of a brokerage fee. | McGrath argues he performed attorney services within a client relationship and thus is exempt. | Exemption applies only to attorney duties incidental to the practice of law within an attorney-client relationship. |
| Are McGrath's services primarily brokerage or primarily legal to warrant exemption? | Fee arose from procuring a buy-sell contract, a broker's duty; nonlicensee cannot be paid. | Some legal services were performed; exemption could apply if incidental to legal work. | McGrath's activities were primarily brokerage; any legal services were incidental and not enough for exemption. |
| Would allowing McGrath to share create conflicts with professional duties? | Payment raises conflict-of-interest concerns under KRPC 1.7 and 1.8 and ethics rules. | Public policy supports attorney participation when properly limited. | Conflict concerns support denying the exemption in this context. |
Key Cases Cited
- Burchfield v. Markham, 156 Tex. 329 (Tex. 1956) (fee-splitting prohibition with an attorney varies by statute text)
- In re Metcalf Assocs.-2000, 42 Kan. App. 2d 412 (Kan. App. 2009) (attorney exemption limited to attorney's duties under attorney-client relationship)
- Lambertz v. Builders, Inc., 183 Kan. 602 (Kan. 1958) (early exemption interpretation; not controlling for 58-3037(c))
- Roth v. New Jersey, 120 N.J. 665 (N.J. 1990) (attorney exemption analysis: brokerage services must be incidental to legal work)
- Sherman v. Bruton, 497 S.W.2d 316 (Tex. Civ. App. 1973) (finders and broker's duties; written contracts; importance of principal activity)
- Campbell-Leonard Realtors v. El Matador Apartment Co., 220 Kan. 659 (Kan. 1976) (efficient procuring cause test for earning a commission)