Preliminary Report And Recommendations
Allen A. Etish, Co-Chair
Marcia Kuttner Werner, Co-Chair
Ramon de la Cruz
Hon. Marie Garibaldi
John L. Kraft
James H. Landgraf
Cindy Nan Vogelman
June 25, 2001
The committee was appointed in July 2000 by NJSBA President Barry D. Epstein, following the appointment of a Commission on Multijurisdictional Practice (MJP) by the American Bar Association. The committee was asked to examine the major issues implicated by multijurisdictional, or cross-border law practice, and suggest an appropriate course of action to the NJSBA Board of Trustees. The committee was also asked to monitor developments within the ABA and other states, and to suggest ways to educate the bar and the courts about MJP and its impact.
To a large extent the current work of the committee has been dictated by the activity of the ABA’s Commission. The Commission has asked that comments and suggestions from bar associations be submitted by July 1 regarding a possible model rule, or other proposal that would define the limits of MJP. For this reason the committee is submitting to the Executive Committee proposed amendments to Model Rule 5.5 of the Rules of Professional Conduct. The current rule simply prohibits a lawyer from engaging in the unauthorized practice of law, or from helping others to do so.
The committee’s proposed amendments to Rule 5.5 (attached as Attachment A) are intended to expand the current rule to include "safe harbors" under which a lawyer may engage in certain specified activities which will not be deemed the unauthorized practice of law. The committee has attempted to tailor its amendments to achieve a difficult goal –--- allowing appropriate conduct for lawyers not admitted here while at the same time maintaining traditional bar admission and regulatory standards. A more detailed discussion of the amendments is set forth below. It is important to emphasize that this is a model rule proposed for adoption in all jurisdictions so that New Jersey lawyers would be subject to the same protections and prohibitions in foreign jurisdictions as would out-of-state lawyers coming here.
The committee stresses that this is a preliminary report that will be submitted to the ABA Commission on Multi-jurisdictional Practice. It will undoubtedly be subject to further review and revision following the publication and evaluation of the Commission’s report and the recommendations of other bar associations.
WHAT IS MJP AND WHY IS IT IMPORTANT?
Multijurisdictional practice is, quite simply, practice in jurisdictions other than where you are formally admitted. The topic is particularly important in New Jersey because of our location – lawyers from neighboring states frequently appear here, or handle matters related to New Jersey law, and many New Jersey lawyers do likewise in neighboring states.
The growing ease of interstate travel and communication, coupled with the fact that many law firms and corporations conduct business on a regional or national scale makes it essential that the NJSBA consider rules that better define and regulate cross-border practice. Currently, there is no uniformity in the way states address the activities of out-of-state lawyers. Regulation has developed by court rule, court opinions, statute, and ethics opinions. Lawyers have relied, for the most part, on custom to continue to engage in forms of cross-border practice.
However, concern has developed because some states have erected barriers to out-of-state lawyers and have even resorted to unauthorized practice prosecution. While we usually think of MJP in terms of problems that may be caused by lawyers coming into New Jersey, the issue works both ways. For instance, in 1998 a Burlington County lawyer was indicted in South Carolina for unauthorized practice after traveling there to counsel relatives of New Jersey clients regarding personal injury claims.
The national debate on MJP was touched off a few years ago by a decision of the California Supreme Court. A New York firm entered into a written fee agreement to represent a California corporation in an arbitration in that state. The corporation was a subsidiary of a New York client of the firm. Firm lawyers made three trips to California to advise the client, negotiate with the other party, and interview potential arbitrators. The matter settled, but the firm and the corporation had a falling out. The corporation sued for malpractice and the firm counter-claimed for its fee. The California Supreme Court denied the fee, finding that the firm had engaged in the unauthorized practice of law. Birbrower, Montalbano, Condon & Frank v. Superior Court, 949 P2d 1 (1998). The opinion set off alarm bells in law firms across the nation and became the focus of much attention within the organized bar.
The committee found that the most vexing issues to deal with are those related to the activity of transactional lawyers. Transactional lawyers often face difficult choices because they have no mechanism to obtain permission to practice temporarily in other states, such as pro hac vice admission. Nevertheless, transactional lawyers frequently represent clients in ways that involve contacts in other states. Because New Jersey has developed into a commercial center transactional practice issues are of particular concern.
Lawyers employed by corporations and government also face problems. They may be relocated to offices in states in which they are not admitted and their work will undoubtedly involve activity that falls within the definition of the practice of law. Are they engaged in the unauthorized practice of law? Some states, such as New Jersey, have met this concern by permitting in-house counsel to practice solely for their employers. However, even in New Jersey such requirements have never been codified in a rule, they are set forth only in Opinion 14 of the Supreme Court’s Unauthorized Practice of Law Committee.
Finally, even though trial lawyers can rely on a pro hac vice process for some protection, temporary admission is not available until a case if filed. What about pre-filing activity such as investigation, and discussions with clients, carriers, or potential adversaries? Just what can a lawyer do before suit is filed? As at least one New Jersey lawyer has found such activity can have disastrous consequences. Moreover, often there is no official mechanism for admission in an arbitration or mediation forum.
One of the first things the committee did was to survey New Jersey bar associations and sections within the NJSBA in order to gauge the extent of interest in the issue and to solicit comments and recommendations. A good number of responses were received and they are summarized in attachment B to this report.
Many associations and sections favor the development of a rule that would better define the unauthorized practice of law, and provide guidance and safe harbors for certain cross-border activities. There appears to be no support from the organized bar for radical alternatives, such as a national law license, or for the elimination or lowering of bar admission requirements. Only the Bergen County Bar Association favors the status quo; nevertheless, they submitted a detailed proposal for a model rule, part of which is incorporated into the committee’s proposed rule.
The committee was impressed by the response to the survey, the level of interest in the MJP issue, and the quality of the comments received.
In addition to the information gleaned from the survey, a number of MJP proposals have been considered by the committee. These alternatives have been submitted to the ABA Commission by bar groups and related organizations:
- Proposed model Rule 5.5 of the Rules of Professional Conduct authored by the ABA’s Ethics 2000 Commission. The rule provides four safe harbors for multi-jurisdictional practice:
a. where a lawyer is preparing for a proceeding in which pro hac vice admission is expected;
b. the so-called "transactional" exception where a lawyer acts on a matter "that arises out of or is otherwise reasonably related to the lawyer’s practice on behalf of a client" in the jurisdiction of admission;
c. the "in-house" exception where a lawyer is acting on behalf of an employer; and,
d. where a lawyer is "associated in a particular matter" with a lawyer admitted in the jurisdiction.
- The "driver’s license" rule proposed by the American Corporate Counsel Association that would establish a national compact on licensure that would function much like the current system of state driver’s licenses. Once obtaining a license to practice in one jurisdiction, a lawyer could practice in other states on a temporary basis, and be able to move permanently and be licensed in another state simply upon passing a character and fitness review.
- A two-tiered approach of the Association of Professional Responsibility Lawyers that would permit a) cross-border practice on a temporary basis on matters related to a lawyer’s practice in a state of admission, and b) a so-called "green card" approach to licensure that would permit a lawyer to open an office in a state where he or she is not admitted upon a showing of good standing, sponsorship by two lawyers in the state, and admission in some jurisdiction for at least three years.
- The ABA Real Property Section recommends that transactional activity be permitted so long as the client consents after have been informed of the risks involved, and that a lawyer be permitted to perform any services that could be rendered in the jurisdiction by a non-lawyer.
- The International Association of Defense Lawyers calls for a model pro hac vice rule that among other things permits pre-litigation "investigative or other activities".
- The American Law Institute suggests that lawyers be permitted to provide legal services "within a jurisdiction where the lawyer is not admitted to the extent that the lawyer’s activities arise out of or are otherwise reasonably related to the lawyer’s practice" in the jurisdiction of admission.
- The ABA Section of Business Law favors the "safe harbor" approach in model Rule 5.5 but suggests the rule clearly state that it applies to occasional forays into other states, and includes a provision permitting activity related to representing clients in ADR proceedings.
THE COMMITTEE’S RECOMMENDATIONS
The committee considers many of the above recommendations to be too radical in purpose and effect and not in the best interests of the New Jersey Bar or the clients it serves. This State has a legitimate interest in closely regulating admission to the bar and the activity of lawyers to ensure that consumers receive services from lawyers who are conversant with the law, rules and procedures of New Jersey practice and are readily available to clients and adversaries. Further, it is vitally important that bar admission policy foster the efficient administration of justice and contribute to the public’s confidence in the court system.
Approaches to MJP that eliminate or reduce substantially practice barriers will add to public suspicion about the competence and credibility of the bar and will hasten the profession into little more than a commercial guild devoid of respect for the core values that have long set lawyers apart.
Specifically, the committee recommends that the NJSBA oppose the "drivers license" proposal offered by the American Corporate Counsel Association, and the "green card" approach favored by the Association of Professional Responsibility Lawyers. Adoption of either on a national basis might enhance the short-term financial prospects of some lawyers but in the long term would have a devastating impact on the profession. The core activities of the bar – client protection funds, pro bono service, IOLTA, continuing education, the disciplinary and fee dispute system, referral services – would be weakened by a bar admission system that favors mobility over commitment and accountability. Moreover, how would clients be assured that malpractice insurance requirements are observed? The ideal of a "profession" would be lost amidst a scramble to chase clients across jurisdictional borders. Traditional notions of service to the courts and community would be an afterthought, as would participation in the organized bar. The bar, as an institution, would face the chilling prospect of withering away. And, what about the public we serve? Clients have come to expect stability and responsiveness from lawyers, attributes that may be lost during a move towards what would in effect be a national licensure system.
The committee therefore advocates the enactment of limited "safe harbors" within Rule 5.5. However, our rule is much more detailed, and stricter in application, than the rule proposed by the Ethics 2000 Commission, or the rule suggested by the ALI. In particular, the committee’s rule provides more detailed guidance in the area of transactional practice.
The committee is convinced that some rule is essential, so lawyers will be able to ascertain what cross-border activity may be permissible, and what may be questionable. The committee’s proposed rule is summarized as follows:
1. Pre- Litigation Activity (R. 5.5 (b)(1)
The committee agrees with the Ethics 2000 Commission proposal that no UPL violation would occur if a lawyer is admitted pro hac vice or "is preparing for a proceeding in which the lawyer reasonably expects to be authorized." However, the committee further suggests that lawyers engaged in such pre-litigation activity be required to associate with local counsel. Because pro hac vice admission cannot be obtained until litigation commences, it is important that non-licensed lawyers are "connected" to the jurisdiction through local counsel.
This rule amendment would provide a needed pre-litigation safe harbor for trial lawyers while at the same time providing protection of the interests of clients and the judiciary. It is essential that out-of-state counsel be able to take the steps necessary to prepare for litigation. It is also essential that they be accountable to clients, potential adversaries, and the courts. This would be facilitated through association with local counsel.
2. In-House Counsel (R. 5.5 (b)(2)(i)
The committee’s amendment strengthens the Ethics 2000 Commission’s proposed rule by making it clear that the lawyer/employee’s entire compensation must come from the employer and that the lawyer/employee cannot provide legal services to others. The committee’s amendments are intended to codify Opinion 14 of the New Jersey Supreme Court’s Unauthorized Practice of Law Committee. The NJ Corporate Counsel Association’s representative on the committee has endorsed the amendments.
3. Transactional Matters (R. 5.5(b)(2)(ii through v)
The committee’s proposed rule is more detailed than that proposed by the Ethics 2000 Commission. That rule states that a lawyer does not engage in the unauthorized practice of law when "the lawyer acts with respect to a matter that arises out of or is otherwise reasonably related to the lawyer’s practice on behalf of a client in a jurisdiction in which the lawyer is admitted to practice."
The committee believes the proposed rule is too open ended, and would permit a lawyer unlimited opportunity to practice in another jurisdiction. The term "reasonably related" is capable of many interpretations and may potentially be used by creative lawyers to justify inappropriate regular cross-border practice. Further, the rule does not provide enough guidance for lawyers in transactional practice.
The committee recommends that what is covered in one sentence by the Ethics 2000 Commission be broken down into four separate subparagraphs, as follows:
- Rule 5.5 (b)(2)(ii) would permit transactional negotiation, but would require that it be in furtherance of a lawyer’s representation of an existing client and that the transaction originates in or is related to the jurisdiction where the lawyer is admitted. Thus, a Wisconsin lawyer could come into New Jersey to negotiate the terms of the purchase of goods for a Wisconsin distributor.
- Rule 5.5(b)(2)(iii) would create a safe harbor for the representation of clients in ADR and other forms of non-judicial dispute resolution. The representation would have to be in furtherance of the lawyer’s representation of an existing client in a jurisdiction where the lawyer is admitted to practice. Further, the dispute would have to originate in or be related to the jurisdiction where the lawyer is admitted. For instance, a Wisconsin lawyer could participate in an arbitration in Atlantic City, where Wisconsin clients are parties to Wisconsin related contracts that specify a New Jersey venue.
- Rule 5.5(b)(2)(iv) permits movement across jurisdictional lines with respect to investigation, interviewing and deposing of witnesses in furtherance of a proceeding in the jurisdiction where the lawyer is admitted to practice. For instance, a Wisconsin lawyer could travel to New Jersey to interview potential witnesses for a trial scheduled in Milwaukee.
- Rule 5.5(b)(2)(v) intended as a "catch-all" safe harbor to cover circumstances that might arise apart from those covered in paragraphs (i) through (iv). This rule would create a safe harbor, again for the representation of an existing client and, most importantly, provided that the representation "is occasional and is undertaken only when the lawyer’s disengagement would result in substantial inefficiency, impracticality or detriment to the client".
The rule proposed by the committee is much more restrictive than the safe harbor proposed by the Ethics 2000 Commission. It requires that there be a client in the jurisdiction of admission, contains the "occasional" standard (see above), and permits practicality and client interests to help determine whether local counsel need be retained.
Thus, a Wisconsin lawyer, with particular expertise in cheese processing technology, may occasionally travel to New Jersey to negotiate or arbitrate a dispute between a New Jersey cheese processor and the New Jersey subsidiary of the Wisconsin client, provided that engaging New Jersey counsel would be impractical and to the detriment of the client.
The committee believes that the rule creates reasonable safe harbors that should be welcomed by the bar, and ensures against abuses that may result from the Ethics 2000 Commission’s more broadly worded rule.
4. Association with Local Counsel in Non-Litigated Matters (R. 5.5(b)(2)(vi)
Lawyers may often associate with out-of-state counsel in order to strengthen the representation provided in a local matter. Conversely, lawyers coming into a state often associate with local counsel to avoid unauthorized practice of law problems. The committee recognizes the need to protect such relationships. However, such relationships should not be pro forma. Therefore, the committee suggests a rule that permits association, but only on an occasional basis. Further, the committee’s rule requires specifically that local counsel assume overall responsibility for the representation.
5. Additional Factors (R. 5.5(c)
The committee also suggests that Rule 5.5 include additional provisions, as set forth in paragraph (c) of the proposed rule, designed to provide protection for clients and ensure the lawyer’s obligations to the state Supreme Court. For instance, a lawyer could not act in another jurisdiction unless he or she is in good standing in all jurisdictions of admission; agrees to be subject to the RPC’s and disciplinary authority of the highest court of the jurisdiction; consents to the appointment to the Clerk of the Court as agent for service of process; and does not hold himself or herself out as having been formally admitted in the jurisdiction.
The committee debated vigorously a suggestion that out-of-state lawyers be subject to some type of registration requirement, either with a court, or via a certification filed with all adversaries. Those in favor of registration argue that it would facilitate access to the lawyer if problems arose. The opposition contends that registration would be a meaningless exercise and would burden the courts and lawyers. The consensus view of the committee is that registration or certification is not an appropriate requirement at this time.
7. Related Issues: Full Faith and Credit, Pro Hac Vice Rule
The ABA Commission on MJP has indicated that it is considering issues beyond a safe harbor rule. One issue on the table is whether there should be a uniform requirement that states give full faith and credit to disciplinary decisions reached in other states. The committee favors instead a reciprocal discipline rule, such as is already in place in New Jersey and some other jurisdictions. Where a New Jersey lawyer has been subject to discipline in another state, the rule requires generally the imposition of identical discipline, but permits the lawyer to respond to the charges and leaves the final determination to the Supreme Court (See R. 1:20-14). We believe it appropriate that a state’s high court be the final arbiter, and not have it’s discretion eliminated.
The other issue taken up by the committee is the need for a uniform national pro hac vice rule. The committee does not believe that any change is necessary. Although pro hac vice requirements may differ slightly in neighboring jurisdictions, there appears to be no overriding need to replace the current system.
The committee recommends that this preliminary report be adopted by the Executive Committee and submitted by the NJSBA to the ABA’s Commission on MJP. The committee asks that it be permitted to continue to study MJP, monitor developments within the ABA, and stand ready to assist the Board in its further exploration of MJP and its impact on lawyers and citizens of New Jersey.
DRAFT – NJSBA Committee on Multijurisdictional Practice
RULE 5.5 UNAUTHORIZED PRACTICE OF LAW
(a) A lawyer shall not practice law in a jurisdiction where doing so violates the regulation of the legal profession in that jurisdiction.
(b) A lawyer admitted to practice in another jurisdiction, but not in this jurisdiction, does not engage in the unauthorized practice of law in this jurisdiction when the lawyer acts within one of the following "safeharbors":
(1) the lawyer is authorized to appear before a tribunal in this jurisdiction by law or order of the tribunal or is preparing for a proceeding in which the lawyer reasonably expects to be so authorized and is associated in that preparation with a lawyer admitted to practice in this jurisdiction; or
(2) other than making appearances before a tribunal with authority to admit the lawyer to practice pro hac vice:
(i) a lawyer who is an employee of the client acts on the client’s behalf or, in connection with the client’s matters, on behalf of the client’s other employees or its commonly owned organizational affiliates, provided the lawyer’s entire compensation comes from the employer and the lawyer does not provide to others, including other employees of the employer, legal services not directly related to the legal matters of the employer;
(ii) a lawyer engages in the negotiation of the terms of a transaction in furtherance of the lawyer’s representation on behalf of an existing client in a jurisdiction in which the lawyer is admitted to practice and the transaction originates in or is otherwise related to a jurisdiction in which the lawyer is admitted to practice;
(iii) a lawyer engages in representation of a party to a dispute by participating in an arbitration, mediation, or other alternative non-judicial dispute resolution proceeding, in furtherance of the lawyer’s representation on behalf of an existing client in a jurisdiction in which the lawyer is admitted to practice and the dispute originates in or is otherwise related to a jurisdiction in which the lawyer is admitted to practice;
(iv) a lawyer investigates, interviews witnesses or deposes witnesses in this jurisdiction for a proceeding pending or anticipated to be instituted in a jurisdiction in which the lawyer is admitted to practice;
(v) a lawyer practices in circumstances other than (i) through (iv) above, with respect to a matter where the practice activity arises directly out of the lawyer’s representation on behalf of an existing client in a jurisdiction in which the lawyer is admitted to practice, provided that such practice in this jurisdiction is occasional and is undertaken only when the lawyer’s disengagement would result in substantial inefficiency, impracticality or detriment to the client; or
(vi) a lawyer is associated on an occasional basis with a lawyer admitted to practice in this jurisdiction who is in compliance with court rules governing the practice of law and who assumes overall responsibility for representation of the client in this jurisdiction.
(c) A lawyer admitted to practice in another jurisdiction who acts in this jurisdiction pursuant to sub-paragraph (b)(2) above shall:
(i) be licensed and in good standing in the jurisdiction in which the lawyer permanently practices law or is domiciled, and not be subject to a current or pending license suspension or disbarment in any jurisdiction;
(ii) be subject to the Rules of Professional Conduct and the disciplinary authority of the Supreme Court of this jurisdiction;
(iii) consent to the appointment of the Clerk of the Supreme Court as agent upon whom service of process may be made for all actions against the lawyer or the lawyer’s firm that may arise out of the lawyer’s participation in legal matters in this jurisdiction; and
(iv) not hold himself or herself out as being admitted to practice in this jurisdiction.
(d) A lawyer shall not assist another person in the unauthorized practice of law.