(This syllabus is not part of the opinion of the Court. It has been prepared by the Office of the Clerk for the
convenience of the reader. It has been neither reviewed nor approved by the Supreme Court. Please note that, in
the interests of brevity, portions of any opinion may not have been summarized).
Argued May 4, 1999 -- Decided July 21, 1999
STEIN, J., writing for a unanimous Court.
The issue in this appeal is whether attorneys who are not admitted to practice law in New Jersey are
engaged in the unauthorized practice of law when they provide advice to New Jersey public entities in connection
with the issuance of state and municipal bonds. The question was presented to the Supreme Court Committee on the
Unauthorized Practice of Law (UPLC) in 1997 when the New Jersey State Bar Association (NJSBA) formally
requested an advisory opinion on the subject.
Historically, for most of this century bond counsel services were provided to New Jersey governmental
bodies by non-New Jersey law firms because of a lack of necessary expertise and experience on the part of local law
firms. During the past two decades, however, a substantial number of New Jersey firms have become qualified in
the field.
Governor Whitman appointed an Advisory Panel on Government Contracting Procedures (Advisory Panel)
in 1994 and directed the Advisory Panel, among other things, to reconsider the State's procedures when engaging in
the issuance of bonds. In its Report to the Governor several months later, the Advisory Panel commented on the
apparently unsettled state of the law on the propriety of out-of-state counsel handling New Jersey bond work and
noted that the Attorney General, a member of the Advisory Panel, intended to ask the UPLC for a ruling on the
issue. The Advisory Panel recommended that public New Jersey issuers give particular consideration to New Jersey
law firms.
In March 1995, the Attorney General promulgated written guidelines (Guidelines) for the selection of bond
counsel by the State and its agencies and authorities. The Guidelines required that, except for extraordinary
circumstances, only New Jersey firms be given “particular consideration” as bond counsel. Issuers were not barred
from retaining out-of-state firms, however. Against that background the NJSBA presented its inquiry to the UPLC.
The UPLC issued Opinion 33 in July 1998. The UPLC concluded that attorneys who are not licensed to
practice in New Jersey engage in the unauthorized practice of law when they advise New Jersey governmental
bodies in connection with the issuance of state and municipal bonds and that non-New Jersey attorneys practicing in
an out-of-state firm with a bona fide New Jersey office are included within the proscription. In reaching those
conclusions, the UPLC perceived New Jersey bond issues to have no non-New Jersey aspects, either legally or
factually, apart from federal tax law concerns. Because the question presented did not involve services performed by
non-lawyers but was a matter of whether out-of-state lawyers could perform certain services, the Committee found
inapplicable the “public interest” standard, by which an issue is analyzed to determine whether the public interest is
disserved by permitting the practice.
The Attorney General, on his own behalf and on behalf of the State Treasurer, filed with the Court a notice
of petition for review of Opinion 33 and sought as well a stay of the Opinion and a remand to the UPLC to
supplement the record. The Court granted the motion for stay pending appeal and the petition for review and held
the remand motion until disposition of the appeal.
HELD: Neither an out-of-state law firm directly retained by a New Jersey public issuer to serve as bond counsel in
respect of a bond issue that, because of its complexity, novelty, or innovativeness, requires the skill, experience, and
expertise of that firm nor an out-of-state firm retained by a New Jersey law firm to provide special assistance and
expertise in connection with a bond issue will be engaged in the unauthorized practice of law.
1. The Court has before it certain facts and legal positions not presented to the UPLC. Specifically, certifications by
high-level State officials detail difficult and complex bond-issue transactions for which those officials deemed it
necessary to retain out-of-state or multi-state law firms; the parties agree that certain bond issues involve complex
issues of federal law and implicate concerns that call for consideration of legal principles not limited to New Jersey
law; and counsel for the UPLC acknowledges that it would not be improper for New Jersey bond counsel to retain
out-of-state lawyers for consultation on matters relating to New Jersey bond issues. (pp. 10-13)
2. The Court has consistently considered the public interest in its analysis of questions of the unauthorized practice
of law, balancing the risks and benefits to the public when deciding whether a given activity should be authorized.
Services provided by bond counsel constitute the practice of law and in certain circumstances the public interest will
not be disserved by permitting out-of-state lawyers to perform such services. (pp. 16-27)
3. Provided New Jersey bond counsel retains responsibility for representation of the issuer, out-of-state firms or
lawyers unlicensed in New Jersey affiliated with multi-state firms with bona fide offices in New Jersey may perform
legal services related to New Jersey bond issues if engaged by New Jersey bond counsel to do so. (pp. 27-28)
4. The Attorney General's Guidelines provide that except in extraordinary circumstances the State and its agencies
and authorities will consider only firms with bona fide offices in New Jersey for selection as bond counsel. Some
bond issues may be so complex or novel or may present such untested legal theories or techniques that the public
interest may be served by permitting the direct retention by a New Jersey public entity of an exceptionally qualified
out-of-state firm. The Court anticipates that such retentions will be infrequent and that the issuer involved will be
prepared to justify such a retention. (pp. 28-31)
5. In deciding this issue, the Court stresses the following: (1) for nearly seventy-five years out-of-state firms
provided virtually all the public bond-counsel services in New Jersey; (2) only exceptionally qualified out-of-state
firms will provide the legal services and attorneys in multi-state firms with a New Jersey office will be fully
qualified and supervised; (3) public entity issuers generally are sophisticated and well-represented by local counsel;
and (4) bond counsel practice historically has not been characterized by frequent ethical infractions. (pp. 31-32)
Opinion 33 of the Committee on the Unauthorized Practice of Law is MODIFIED to conform to this
Opinion.
JUSTICES HANDLER, POLLOCK, O'HERN, GARIBALDI, and COLEMAN join in JUSTICE
STEIN's Opinion. CHIEF JUSTICE PORITZ did not participate.
SUPREME COURT OF NEW JERSEY
A-
76 September Term 1998
IN THE MATTER OF OPINION 33
OF THE COMMITTEE ON THE
UNAUTHORIZED PRACTICE OF LAW
Argued May 4, 1999 -- Decided July 21, 1999
On review of an opinion of the Committee on
the Unauthorized Practice of Law.
Joseph L. Yannotti, Assistant Attorney
General, argued the cause for appellants
Attorney General of New Jersey and James A.
DiEleuterio, Jr., State Treasurer (Peter
Verniero, Attorney General of New Jersey,
attorney; Clifford T. Rones, Deputy Attorney
General, on the briefs).
Elizabeth J. Sher argued the cause for
respondent, Supreme Court Committee on the
Unauthorized Practice of Law (Pitney, Hardin,
Kipp & Szuch, attorneys; Ms. Sher and Paul B.
Macchia, on the briefs).
Geoffrey C. Hazard, Jr., a member of the
Connecticut, California and Pennsylvania
bars, argued the cause for amicus curiae
National Association of Bond Lawyers (Michael
P. Ambrosio, attorney).
Joseph A. Bottitta and John L. Kraft argued
the cause for amicus curiae New Jersey State
Bar Association (Mr. Bottitta and Mr. Kraft,
attorneys; Raymond A. Noble, on the brief).
Steven D. Weinstein submitted a brief on
behalf of amicus curiae Blank Rome Comisky &
McCauley, LLP (Blank Rome Comisky & McCauley,
attorneys; Mr. Weinstein and Elizabeth S.
Washko, on the brief).
The opinion of the Court was delivered by
STEIN, J.
In Opinion No. 33 (Opinion 33) the Committee on the
Unauthorized Practice of Law (Committee) concluded that
"attorneys who are not admitted to practice law in New Jersey are
engaged in the unauthorized practice of law when they advise New
Jersey governmental bodies in connection with the issuance of
state and municipal bonds." We granted the Petition for Review
filed on behalf of the Attorney General and the State Treasurer.
We hold that the Committee's determination is overbroad and not
adequately reflective of the variety of factors that affect the
public interest in the regulation of bond counsel services.
Accordingly, we modify the Committee's Opinion 33.
The background events that led up to the issuance of Opinion
33,
153 N.J.L.J. 184,
7 N.J.L. 1584 (July 13, 1998), inform the
Court's disposition of this appeal. The unique aspect of this
controversy is historical: for most of this century bond counsel
services rendered to New Jersey public entities engaged in debt
issuance were performed exclusively by out-of-state law firms as
a matter of necessity. The New Jersey State Bar Association
(NJSBA), which initiated the request for the Committee's advisory
opinion, has acknowledged that the "use of foreign law firms and
lawyers unlicensed in New Jersey [to perform bond counsel
services] was a matter of necessity," observing that in the past
"New Jersey lawyers lacked the expertise and national recognition
to provide the legal services and render the legal opinions
required when the State and its agencies issued bonds."
Within the past two decades, a substantial number of New
Jersey law firms have developed the necessary expertise and
experience to perform bond counsel services for governmental
issuers. We note that The Bond Buyer's Municipal Marketplace
Directory, Fall 1998 edition, published by The Bond Buyer's
Municipal Marketplace Group (Bond Buyer's Directory or
Directory), lists fifty-five New Jersey law firms under the
heading of Municipal Bond Attorneys. The requirements for
inclusion in the list of municipal bond attorneys are that the
law firm, during the two-year period preceding publication,
"rendered a sole legal opinion in connection with the sale of
state and/or municipal bonds, or served as underwriter's counsel,
co-counsel or issuer's counsel for a municipal bond offering."
Accordingly, the list of qualified New Jersey municipal bond
attorneys undoubtedly reflects substantial variation in the
actual expertise and experience among the listed firms. In
addition, the Bond Buyers Directory includes a ranking of the top
one hundred municipal bond attorneys throughout the country based
on the principal amount of long-term issues (maturities of
thirteen months or longer) in which the firm was involved. The
top-rated firm on the list was involved in 379 bond issues
aggregating approximately $24,617,400,000 in principal amount.
Three New Jersey law firms were included in the top one hundred
firms, and the highest-ranked New Jersey law firm was involved in
nineteen bond issues aggregating approximately $1,189,500,000 in
principal amount. In addition, six New Jersey law firms were
included in the top 100 law firms handling short-term bond
issues. The information in the Bond Buyer's Directory suggests
that perhaps a group of approximately ten to twenty law firms
throughout the country continue to enjoy a significantly greater
national recognition for expertise and experience as bond
attorneys than that of any New Jersey law firm qualified to
perform bond counsel services. The Directory also indicates that
of the growing number of New Jersey law firms that have acquired
sufficient experience in bond counsel matters to warrant
inclusion in the Directory, some of the leading New Jersey law
firms appear to have made substantial progress toward achieving
broad recognition and stature for their work as bond counsel.
In the mid-1990's, the NJSBA became increasingly concerned
about the continued use of out-of-state bond counsel firms by New
Jersey public entities. In 1994, Governor Whitman appointed an
Advisory Panel on Government Contracting Procedures (Advisory
Panel) consisting of the Attorney General, the State Treasurer
and the Governor's Chief Counsel. The Governor directed the
Advisory Panel to reconsider the State's procedures when engaging
in the issuance of bonds as well as the mechanism for selecting
underwriters, bond counsel, and other professional advisors. In
May 1994, the NJSBA wrote to the Advisory Panel and recommended
that the Panel "act to end the retention of out-of-state lawyers
to serve as bond counsel to the State of New Jersey and the
various state agencies that issue bonds and other obligations."
In its Report to the Governor issued in July 1994, the Advisory
Panel addressed the issue of out-of-state bond counsel:
We note with concern the issue raised
with respect to the appointment of “out-of
state” firms for bond counsel services.
Questions were raised as to the legality or
propriety of “out-of-state” firms performing
legal services for the State. The Attorney
General indicates that a preliminary review
of the materials submitted in support of this
contention suggests that the law in this area
is unsettled. The Attorney General notes
that there is no formal opinion that is
directly on point in the State of New Jersey.
Therefore, the Attorney General has advised
that her office will seek a ruling from the
New Jersey Supreme Court Committee on the
Unauthorized Practice of Law in regard to
this issue and that she will prepare
submissions to aid the Supreme Court
Committee in its review. In any event, we
recommend that, in establishing policies and
procedures for the selection of bond counsel,
issuers provide particular consideration for
New Jersey law firms.
It is, therefore, the view of this Panel
that counsel be selected pursuant to an
established set of criteria that include
price as a factor.
In March 1995, the Attorney General promulgated written
guidelines for the selection of bond counsel, applicable to the
State and its agencies and authorities, that set forth criteria
to be used in the selection process including experience with
similar transactions, familiarity with relevant state laws,
proficiency with relevant federal securities and tax laws,
quality of past service, and anticipated fee. Guidelines of the
Attorney General for the Selection of Bond Counsel Under
Executive Order No. 26 (Guidelines). The Guidelines required
that, apart from extraordinary circumstances, only New Jersey law
firms be considered in the selection process:
In the selection of bond counsel each issuer
and the Attorney General will provide
particular consideration for New Jersey law
firms and minority-owned and women-owned law
firms. To this end, it is the policy of the
Attorney General that, except in
extraordinary circumstances, consideration
will be given only to those firms with a
“bona fide” office in New Jersey, as such
term is defined in R. 1:21-1(a). Each RFP
will solicit the following information:
1. The location of each office of the firm
noting the number of attorneys resident in
each office, whether they are partners or
associates and the areas of law they
practice; and
2. The participation of women and minorities in
the firm, including the number of women
partners and associates and minority partners
and associates.
However, although the Attorney General's Guidelines were
promulgated pursuant to Executive Order No. 26 issued in October
1994, that Executive Order required only that issuers give
"particular consideration" to New Jersey law firms, and did not
restrict issuers from retaining out-of-state law firms as bond
counsel.
Apparently dissatisfied with the response of the State to
their concerns about out-of-state bond counsel, the NJSBA in
February 1997 formally requested the Committee to render an
advisory opinion on the following question: Whether attorneys
who are not admitted to the Bar of New Jersey engage in the
unauthorized practice of law when they render legal services as
bond counsel to governmental units in New Jersey, including the
State of New Jersey? In July 1998, the Committee issued Opinion
33 in which it concluded that "attorneys who are not admitted to
practice law in New Jersey are engaged in the unauthorized
practice of law when they advise New Jersey governmental bodies
in connection with the issuance of state and municipal bonds."
In reaching that conclusion, the Committee emphasized that the
functions performed by bond counsel for New Jersey issuers
primarily involve New Jersey law and that currently no need
exists to permit out-of-state lawyers to perform bond-counsel
services in New Jersey:
These are not “multi-state transactions.”
There are no “inseparable” elements located
in different states. There are no “tangled
and interwoven elements” from different
jurisdictions. On the contrary, the New
Jersey bond issues are home-grown, Garden
State-only matters. These matters involve
only New Jersey -- New Jersey facts, New
Jersey governments, New Jersey bonds, New
Jersey law. The only non-New Jersey element
involved in bond practice is federal tax law.
Because New Jersey bond lawyers are equally
as skilled in federal tax law as foreign bond
counsel -- and federal tax law, by
definition, does not vary from state to state
-- there is no need for New Jersey to permit
the unauthorized practice of law by foreign
attorneys whose primary practice is outside
the State.
In addition, the Committee noted this Court's observation in
In re Opinion No. 26 of the Committee on the Unauthorized
Practice of Law,
139 N.J. 323, 340 (1995), that "the
determination of whether someone should be permitted to engage in
conduct that is arguably the practice of law is governed . . . by
asking whether the public interest is disserved by permitting
such conduct." The Committee concluded, however, that the
"public interest" standard is inapplicable to the performance of
bond counsel services in New Jersey by out-of-state law firms.
The Committee distinguished the materiality of the public
interest standard in In re Opinion 26, supra, noting that in that
proceeding the issue concerned a party's right to proceed without
any counsel, not with out-of-state counsel, and also that In re
Opinion 26 dealt with activities by lay persons that pertained to
the practice of law. Accordingly, the Committee declined to
apply the public interest standard to test the validity of its
conclusion in Opinion 33.
The Committee also addressed the question whether lawyers
unlicensed in New Jersey may perform bond counsel services while
employed by a multi-state firm with a New Jersey office:
Even where an out-of-state firm has opened a
New Jersey office, it is still the unauthorized
practice of law if the lawyers in that office
performing the legal services are not licensed in
the State of New Jersey. Opening an office in New
Jersey does not grant a license to practice law in
this State to the entire legal staff of the out
of-state law firm -- each attorney must be
individually licensed to practice law in New
Jersey.
During oral argument of this appeal, however, counsel for the
Committee acknowledged that out-of-state lawyers properly could
be engaged by New Jersey bond counsel to consult on matters
relating to New Jersey bond issues and could participate directly
in meetings within New Jersey attended by New Jersey counsel and
their clients. The Committee's counsel also acknowledged that
the Committee's characterization of New Jersey bond counsel
practice as involving "Garden State-only matters" was an
oversimplification, conceding that certain bond issues involve
complex issues of federal law and implicate concerns that require
consideration of legal principles not limited to New Jersey law.
The Attorney General, on his own behalf and on behalf of the
State Treasurer, filed a Notice of Petition for Review of Opinion
33 and moved to stay application of the Opinion and to remand the
matter to the Committee to supplement the record. The
application for a stay being unopposed, this Court stayed
application of Opinion 33 pending our final resolution of this
appeal. We also granted the Petition for Review, and granted the
National Association of Bond Lawyers (NABL) and the law firm of
Blank, Rome, Comiskey & McCauley leave to appear separately as
amicus curiae. We deferred disposition of the Attorney General's
remand motion pending our disposition of this appeal.
Before we address the legal principles that bear on our
resolution of this appeal, we take note of the supplemental
factual contentions included in certifications supporting the
Attorney General's motion for summary remand and in the briefs
filed by amici. The certification of James A. DiEleuterio, Jr.,
the State Treasurer, described two specific state bond issue
transactions of unusual complexity. The first was the $2.8
billion State Pension Funding Bonds, Series 1997A-1997C (the
"State Pension Bond Issue"), issued by the New Jersey Economic
Development Authority (EDA) to finance the unfunded, accrued
pension liability of the State's various retirement systems. The
Certification described the State Pension Bond Issue as the
largest bond issue ever offered by a state issuer and the first
such issue to be distributed worldwide and offered in "retail"
denominations of twenty-five dollars per bond. Because of the
size, novelty and complexity of the bond issue, State officials
retained two law firms, a New Jersey firm and a Philadelphia firm
with a New Jersey office. The lead attorney in the Philadelphia
firm who performed significant legal services concerning the
State Pension Bond Issue was not licensed in New Jersey. The
Treasurer's certification stated that "[o]ther firms with New
Jersey licensed counsel did have the requisite experience but
were disqualified based upon their representation of the State
Pension Bond underwriters in other bond transactions."
The Treasurer's Certification also referred to the “Swaption
Transaction” in process in August 1998, pursuant to which the
EDA, for a premium, would sell the future right to enter into a
"swap" agreement commencing June 2002 with respect to the
$375,000,
000 Series 1997C Pension Bonds. Because the Swaption
Transaction was difficult and complex and required familiarity
with the underlying pension bond issue, the State retained the
same two law firms that handled the State Pension Bond Issue to
serve as bond counsel for that transaction.
An additional certification in support of the motion for
remand was submitted by Caren S. Franzini, the Executive Director
of the EDA. Franzini described five discrete bond-issue
transactions in which the EDA was involved and for which bond
counsel selected by the EDA included multi-state firms with New
Jersey offices in which the lawyers assigned to the work included
lawyers unlicensed in New Jersey. The five bond-issue
transactions consisted of the following: the State Office
Building Transactions, designed to finance through bond issues
the cost of acquisition or rehabilitation of various state
properties; the Structured Financing Transactions, described as
"sophisticated leasing transactions [that] provide tax and
balance sheet advantages to the borrowers" and involve EDA bond
issues for the benefit of various entities; the MSNBC
Transaction, a novel structured financing transaction to finance
the acquisition of machinery and equipment by affiliates of NBC
and Microsoft; a financing transaction related to the MSNBC
Transaction in which the EDA will sell depreciation rights in the
purchased machinery and equipment; and the "Conduit" Bond Issue
Transactions, in which the EDA issues bonds and lends the
proceeds to a borrower who assumes all responsibility for debt
service. Concerning the Conduit Transactions, the EDA selected
two "pools" of law firms to serve as bond counsel, most of which
are New Jersey firms but some are multi-state firms in which
lawyers unlicensed in New Jersey may be assigned to perform some
of the required legal services. The Franzini Certification
asserts that the bond issues described therein, other than the
Conduit Bond Issues, involved questions of such difficulty and
complexity that the retention of multi-state firms, in which
lawyers unlicensed in New Jersey would participate in the
representation, was necessary and justified.
The amicus curiae brief of the National Association of Bond
Lawyers, as well as the oral argument presented on their behalf,
did not contest the premise that a non-New Jersey law firm could
not serve alone as bond counsel for a New Jersey governmental
issuer. However, the NABL urged that New Jersey bond counsel
should be permitted to engage attorneys unlicensed in New Jersey
in that firm or qualified out-of-state firms to provide expert
advice and services to the New Jersey bond counsel and the
governmental issuer, and that direct consultation with the
governmental issuer by such attorneys also should be permitted.
The NABL emphasized the growing complexity and multi-disciplinary
character of public finance law in support of its view that New
Jersey bond counsel should be permitted to consult with out-of
state lawyers:
Because the practice of public finance law is
multi-disciplinary, the participation of non
New Jersey Counsel in areas such as federal
securities law, federal tax law, federal
bankruptcy law, federal banking law, federal
environmental law, national and international
conventions, model documentation regarding
certain derivative financial products, and
state securities laws, when warranted and
when a New Jersey lawyer is involved in the
transaction, will result in the governmental
entity and the investors receiving the most
competent and comprehensive legal advice and,
therefore, will further the public interest.
Prohibiting a New Jersey lawyer or
governmental issuer from consulting and
conferring directly with non-New Jersey
Counsel serves no public interest and has
abundant potential for negative consequences.
. . . .
Furthermore, states, counties, cities
and other political subdivisions have become
increasingly sophisticated in the types of
bonds issued and in the security arrangements
or sources of payment for bonds.
Historically all bonds were issued with a
fixed, stated interest rate, and paid
interest on a specific periodic basis. Bonds
issued in today's more sophisticated market
often are issued with variable or floating
rates, with various interest rate methods of
interest rate determination, and with
provisions granting the purchaser the right
to tender bonds in certain instances.
Issuers have also added to the complexity by
issuing bonds secured not only by a pledge of
the issuer's general credit or taxing power,
or by traditional revenue sources such as
water and sewer system revenues, but also by
such items as pledges of special taxes or
assessments, golf course fees, passenger
facility charges at airports or stadium
receipts, or other similar receipts.
In a similar fashion, the nature of the
purchasers of bonds has changed as
well. . . . [M]any bonds are purchased today
by large institutional investors,
particularly mutual funds, that buy bonds
issued by issuers located in a number of
states. The market for bonds therefore is a
national market and has resulted in investors
becoming even more insistent on receiving an
opinion of knowledgeable and experienced Bond
Counsel. Access to Bond Counsel with
relevant expertise in specialized areas of
law is essential to assuring that prospective
issuers will have access to underwriters and
purchasers of their debt, many of whom may
have no connection to the state where the
issuer is located.
This Court's jurisprudence has adhered to a consistent
standard when determining whether a specific practice constitutes
the unauthorized practice of law. In In re Opinion 26, supra,
139 N.J. at 340, we described that standard in simple and
pragmatic terms:
Practically all of the cases in this
area are relatively recent. They
consistently reflect the conclusion that the
determination of whether someone should be
permitted to engage in conduct that is
arguably the practice of law is governed not
by attempting to apply some definition of
what constitutes that practice, but rather by
asking whether the public interest is
disserved by permitting such conduct. The
resolution of the question is determined by
practical, not theoretical, considerations;
the public interest is weighed by analyzing
the competing policies and interests that may
be involved in the case; the conduct, if
permitted, is often conditioned by
requirements designed to assure that the
public interest is indeed not disserved.
Our earliest precedents are faithful to that formulation.
In Auerbacher v. Wood,
142 N.J. Eq. 484 (E. & A. 1947), the Court
of Errors and Appeals determined that an individual participating
in the practice of consulting in industrial relations and
personnel management was not engaged in the unauthorized practice
of law, observing that "[w]hat constitutes the practice of law
does not lend itself to precise and all-inclusive definition."
Id. at 485. In drawing the line between permissible and
impermissible activities, the Court observed that
guidance is to be found in the consideration
that the licensing of law practitioners is
not designed to give rise to a professional
monopoly, but rather to serve the public
right to protection against unlearned and
unskilled advice and service in matters
relating to the science of the law.
[Id. at 486.]
Although reaching a different legal conclusion on the
central issue, this Court reiterated its adherence to the public
interest standard in New Jersey State Bar Ass'n v. Northern New
Jersey Mortgage Associates,
32 N.J. 430 (1960). In that appeal
the Court concluded that a title company that charged fees for
its services in preparing bonds, mortgages and affidavits of
title, and for preparing legal instruments necessary to remove or
cure title defects, was engaged in the unauthorized practice of
law. Justice Jacobs, writing for a unanimous Court, noted that
"the line between such activities and permissible business and
professional activities by non-lawyers is indistinct," id. at
437, and observed that "each individual set of circumstances must
be passed upon 'in a common-sense way which will protect
primarily the interest of the public and not hamper or burden
that interest with impractical and technical restrictions which
have no reasonable justification,'" ibid. (quoting Gardner v.
Conway,
48 N.W.2d 788, 797 (Minn. 1951)). The Court concluded
that by enjoining the questioned practices, "the public interest
will not be disserved but on the contrary will be significantly
advanced." Id. at 447.
We also applied the public interest standard in In re
Education Law Center, Inc.,
86 N.J. 124 (1981). Reversing the
Committee on the Unauthorized Practice of Law we held that,
despite the long-standing prohibition against the practice of law
by corporations, a non-profit corporation engaged in law practice
as a public interest law firm would not be engaged in the
unauthorized practice of law if it adhered to the conditions
imposed by the Court. Id. at 139. Those conditions were
intended to minimize the possibility of interference by non
lawyer members of the corporation's board of directors with the
provision of legal services by lawyers employed by the
corporation. Id. at 138-39. Noting the vital contributions to
the public interest that such law firms have made and will
continue to make, we stated that
[c]onsiderations of public policy thus lead
us to conclude that if other considerations
impel such entities to organize as non
profit corporations, it may be possible for
such corporations to practice law, provided
certain rigorous standards are met,
notwithstanding the general prohibition of R.
1:21-1(c).
A compelling illustration of the overriding influence of the
public interest in resolving unauthorized-practice-of-law issues
is provided by this Court's decision in New Jersey State Bar
Ass'n v. New Jersey Ass'n of Realtor Boards,
93 N.J. 470 (1983).
Approving a settlement between real estate brokers and the Bar
reached with the assistance of retired Supreme Court Justice Mark
A. Sullivan, Jr., sitting as the trial judge, we held that real
estate brokers may prepare contracts for the sale of residential
property provided that they contain a prominent notice to parties
of their right, through counsel, to cancel the contract within
three days. Justice Sullivan found the settlement to be
consistent with the public interest and, in affirming the
settlement, this Court concluded that the record supported the
trial court's determination that the settlement would "protect
the public interest." Id. at 473. The delicacy of the issue
thereby resolved was highlighted by the dissenting opinion that
observed: "The Court implicitly acknowledges that the realtors
will be practicing law, as well it must." Id. at 483 (Schreiber,
J., dissenting). But as the Court noted in In re Opinion 26,
supra, 139 N.J. at 349, commenting on our approval of the
settlement in New Jersey Ass'n of Realtor Boards:
The significance of the resolution of the
case lies not only in the reaffirmation of
the public interest standard, and its
achievement through the imposition of
conditions, but in the enormous practical
importance of the decision in terms of the
interest groups involved, the initial
adversarial contest that so clearly exposed
the issues, and ultimately the compelling
strength of the public interest standard not
simply in abstract terms, but in view of the
very large number of citizens affected.
More recently, in In re Application of the New Jersey
Society of Certified Public Accountants,
102 N.J. 231, 242-43
(1986), we modified Opinion No. 10 of the Committee on the
Unauthorized Practice of Law
to permit the preparation and filing of New
Jersey Inheritance Tax Returns by qualified
certified public accountants licensed in New
Jersey provided that the accountant notifies
the client in writing before work is
commenced that review of the return by a
qualified attorney may be desirable because
of the possible application of legal
principles to the preparation of the tax
return.
In reaching that conclusion, we emphasized that "in cases
involving an overlap of professional disciplines we must try to
avoid arbitrary classifications and focus instead on the public's
realistic need for protection and regulation." Id. at 237.
Finally, in In re Opinion No. 26, supra,
139 N.J. 323, this
Court concluded that the "South Jersey practice” of closing
residential real estate transactions without the presence of
counsel could continue and that brokers and title officials
participating in such transactions would not be engaged in the
unauthorized practice of law provided that the parties are
adequately informed of the true interests of the broker and title
company as well as the risks involved in proceeding without
counsel. In reaching that conclusion we acknowledged that "many
aspects of such transactions constitute the practice of law . . .
including some of the activities of these brokers and title
officers." Id. at 326. Nevertheless, in sustaining the South
Jersey practice we were guided by the traditional public interest
standard that has been the focus of our jurisprudence concerning
the unauthorized practice of law. As we explained:
The question before us is whether
brokers and title company officers, who
guide, control and handle all aspects of
residential real estate transactions where
neither seller nor buyer is represented by
counsel, are engaged in the unauthorized
practice of law. That many aspects of such
transactions constitute the practice of law
we have no doubt, including some of the
activities of these brokers and title
officers. Our power to prohibit those
activities is clear. We have concluded,
however, that the public interest does not
require such a prohibition. Sellers and
buyers, to the extent they are informed of
the true interests of the broker and title
officer, sometimes in conflict with their own
interests, and of the risks of not having
their own attorney, should be allowed to
proceed without counsel. The South Jersey
practice, for it is in that part of the state
where sellers and buyers are most often
unrepresented by counsel in residential real
estate transactions, may continue subject to
the conditions set forth in this opinion. By
virtue of this decision, those participating
in such transactions shall not be deemed
guilty of the unauthorized practice of law so
long as those conditions are met. Our
decision in all respects applies not only to
South Jersey, but to the entire state.
. . . .
The question of what constitutes the
unauthorized practice of law involves more
than an academic analysis of the function of
lawyers, more than a determination of what
they are uniquely qualified to do. It also
involves a determination of whether
non-lawyers should be allowed, in the public
interest, to engage in activities that may
constitute the practice of law. As noted
later, the conclusion in these cases that
parties need not retain counsel to perform
limited activities that constitute the
practice of law and that others may perform
them does not imply that the public interest
is thereby advanced, but rather that the
public interest does not require that those
parties be deprived of their right to proceed
without counsel. We reach that conclusion
today given the unusual history and
experience of the South Jersey practice as
developed in the record before us.
We determine the ultimate touchstone -
the public interest -- through the balancing
of the factors involved in the case, namely,
the risks and benefits to the public of
allowing or disallowing such activities. In
other words, like all of our powers, this
power over the practice of law must be
exercised in the public interest; more
specifically, it is not a power given to us
in order to protect lawyers, but in order to
protect the public, in this instance by
preserving its right to proceed without
counsel.
[139 N.J. at 326-27.]
Under our Constitution, this Court possesses the comprehensive power to regulate the practice of law, N.J. Const. art. VI, § 2, ¶ 3, including "the power to permit the practice of law and to prohibit its unauthorized practice," In re Opinion No. 26, supra, 139 N.J. at 326. Rule 1:21-1(a) provides that only attorneys admitted in New Jersey are authorized to practice law in this State:
[N]o person shall practice law in this State unless that person is an attorney holding a plenary license to practice in this State, has complied with the Rule 1:26 skills and methods course requirement in effect on the date of the attorney's admission, is in good standing, and maintains a bona fide office for the practice of law in this State regardless of where the attorney is domiciled.
In Opinion 33 the Committee characterized bond counsel as "lawyers engaged to provide an expert and objective legal opinion with respect to the validity of bonds and other subjects, particularly the tax treatment of interest on the bonds." Relying on a NABL publication entitled The Function and Professional Responsibilities of Bond Counsel (2d ed. 1995), the Committee summarized the primary functions performed by bond counsel:
(1) supervising the bond proceedings, including preparing documents and drafting or reviewing enabling legislation or constitutional amendments;
(2) preparing or reviewing the form of offering, disclosure, or continuing disclosure document to be distributed in connection with the bonds;
(3) assisting the issuer or others in obtaining approvals, rulings, permissions and exemptions from governmental authorities as deemed necessary by counsel;
(4) pursuing validation proceedings or test cases or participating in relevant litigation;
(5) preparing a mortgage, security agreement or other document related to the bonds; and
(6) rendering opinions on related matters such as:
a) federal and state securities laws;
b) eligibility of bonds for investment by regulated investors;
c) the status of the bonds and related obligations under creditors' rights laws; and
d) the validity and enforceability of security agreements, indentures and related documents.
Based on its description of the nature of bond counsel services, the Committee concluded that "[t]here is no doubt that the services provided by bond counsel constitute the 'practice of law' as defined by the prior opinions of this Committee and the courts of New Jersey." We are fully in accord with that conclusion.
The Committee next emphasized that New Jersey bond practice did not involve "multi-state transactions," nor did it implicate "tangled and interwoven elements" from different jurisdictions. The Committee observed that New Jersey bond issues "involve only New Jersey -- New Jersey facts, New Jersey governments, New Jersey bonds, New Jersey law. The only non-New Jersey element involved in bond practice is federal tax law." Observing that New Jersey bond lawyers are as skilled in federal tax matters as out-of-state lawyers, the Committee found no need to permit out of-state lawyers to participate in New Jersey bond issue matters. In reaching that conclusion, the Committee distinguished this Court's decisions in In re Estate of Waring, 47 N.J. 367, 375-78 (1996) (holding that New York law firm's participation with New Jersey counsel in estate matter did not constitute unauthorized practice of law where multi-state relationships and interest were involved), and Appel v. Reiner, 43 N.J. 313, 316-17 (1964) (holding New York attorney's services in obtaining extensions of credit and compromises of indebtedness in New Jersey not unauthorized practice of law where greater part of client's indebtedness was to New York firm and clients' obligations were intertwined and constituted inseparable unit).
Finally, the Committee declined to apply the traditional public interest test to the question of out-of-state lawyers participating in New Jersey bond issues, noting that the issue in In re Opinion No. 26, supra, concerned the right of the public to participate in residential real estate closings without a lawyer, an issue the Committee regarded as substantially distinguishable from the right of New Jersey public entities to engage in the sale of bond issues with representation by out-of-state counsel.
In resolving the issues presented by this appeal we emphasize that our holding and analysis are limited to the issue before us -- the propriety of attorneys unlicensed in New Jersey performing legal services in connection with bond issues by New Jersey public entities.
Contrary to the Committee's conclusion, our disposition of this appeal is dictated by the public interest standard that this Court historically and consistently has applied in resolving unauthorized-practice-of-law issues. Accordingly, our resolution is determined not by whether the performance of legal services by out-of-state lawyers on New Jersey bond issues constitutes the practice of law, "but rather by asking whether the public interest is disserved by permitting such conduct." In re Opinion No. 26, supra, 139 N.J. at 340. We are persuaded that in certain contexts the public interest will not be disserved by permitting out-of-state lawyers to perform such services.
One such context is the retention by New Jersey counsel, on its own initiative or at the request of the issuer, of an out-of state law firm to provide special assistance and expertise in connection with legal matters related to the bond issue. Although the need for the retention of out-of-state lawyers is sharply contested by counsel to the NJSBA, we are satisfied, based on examples both in the record and referred to at oral argument, that the potential benefit to New Jersey issuers and their counsel of the expertise and experience that out-of-state law firms might offer should not be lost because lawyers in those firms are unlicensed in New Jersey. Counsel for the Committee acknowledged at oral argument that Opinion 33 should not be read to preclude New Jersey law firms retained to represent public entities in bond issue matters from retaining out-of-state firms, if necessary, to provide through the New Jersey law firm specialized legal advice and services to the issuer, and that lawyers from such firms should be allowed to participate directly in conferences and discussions with the issuer in conjunction with New Jersey counsel. The NABL concurred, asserting that bond counsel licensed to practice in New Jersey should be permitted to engage the services of attorneys unlicensed in New Jersey in their own firm or qualified out-of-state firms to provide specialized advice and services through the New Jersey bond counsel to the governmental issuer. Both counsel to the Committee and the NABL acknowledged that the retention by New Jersey bond counsel of attorneys unlicensed in New Jersey or out of-state firms was conditioned on the recognition that New Jersey licensed bond counsel retained responsibility for representation of the issuer. We hold that out-of-state firms or lawyers unlicensed in New Jersey affiliated with multi-state firms that have bona fide offices in New Jersey may perform legal services related to New Jersey bond issues if engaged to do so by New Jersey bond counsel who retains overall responsibility for representation of the issuer.
As noted, supra at ___ (slip op. at 6), the Guidelines, applicable to the State and its agencies and authorities, provide that except in extraordinary circumstances only law firms with bona fide offices in New Jersey will be considered for selection as bond counsel. Before us the Attorney General contends that state issuers, as well as other New Jersey public entity bond issuers, should be permitted in special circumstances to retain directly out-of-state law firms to act as bond counsel where the law firm's special experience, qualifications and expertise justify that retention because of the unique characteristics of the proposed bond issue and the unavailability of equivalent experience, qualifications and expertise among New Jersey law firms. The Attorney General contends that in such special circumstances direct retention of an out-of-state law firm, rather than retention through New Jersey bond counsel, should be allowed in the public interest because direct retention is more efficient and less costly. The Attorney General asserts that in such unique circumstances the obligatory retention of New Jersey bond counsel as an intermediary to engage out-of-state counsel would be duplicative and would interpose an unnecessary barrier between the issuer and out-of-state bond counsel.
We agree with the Attorney General's premise that certain bond issues may be so complex, novel, or may sufficiently implicate untested legal theories and techniques that the retention by a New Jersey public entity of an exceptionally qualified out-of-state law firm may well serve the public interest. Anecdotally, the Court is aware of a proposal currently under consideration by some states and cities to securitize their share of the collective settlement with the tobacco industry by issuing bonds that are secured by the anticipated share of the settlement. See Daniel Kruger, N.Y.C. Coins Tobacco Issuer, The Bond Buyer, Mar. 9, 1999, at 1 (noting that New York City's securitization plan could set national standard for future asset-backed tobacco bonds). Without attempting to limit unduly the type of bond issue that might justify retention of an out-of-state law firm, that proposal may be illustrative of a novel bond issue financing that could justify an issuer's consideration of the direct retention of out of-state counsel if, in fact, available New Jersey counsel lacked the experience and qualifications to provide the required services. We anticipate that such retentions will be infrequent, and that when they occur the issuer will be prepared to justify the decision to retain directly out-of-state bond counsel. However, in view of our focus on the public interest, an out-of state law firm directly retained by a New Jersey public issuer to serve as bond counsel in respect of a bond issue that, because of its complexity, novelty or innovativeness, requires the special skill, experience and expertise of that firm will not be engaged in the unauthorized practice of law in New Jersey.
These two contexts -- the engagement by New Jersey bond counsel of unlicensed New Jersey lawyers in the same firm or of an out-of-state law firm to provide legal services to the issuer through the New Jersey bond counsel, and the direct retention by a New Jersey public issuer of an out-of-state law firm in the special circumstances described above -- are the most persuasive circumstances revealed by this record in which the public interest is better served by permitting the performance of legal services by lawyers who are not licensed in New Jersey. Apart from those special circumstances, we anticipate that as a result of this decision state, county, and municipal bond issuers ordinarily will retain as bond counsel only law firms with bona fide New Jersey law offices and that the required legal services will be performed primarily by lawyers licensed to practice in this State. Consistent with the Attorney General's guidelines, we also expect that the bond counsel selection process will be merit-based and not influenced by inappropriate considerations.
Our conclusion that in such special circumstances services by lawyers unlicensed in New Jersey should not be prohibited is influenced by several factors. We often have explained that the licensing of attorneys "is not designed to give rise to a professional monopoly, but rather to serve the public right to protection against unlearned and unskilled advice and service in matters relating to the science of the law." Auerbacher, supra, 142 N.J. Eq. at 486. Under the exceptions recognized in this opinion, the need for that protection is substantially diminished. Out-of-state law firms provided virtually all of the bond counsel services required by New Jersey public entities during the first three-quarters of this century, and we infer that in the limited circumstances in which out-of-state law firms will in the future be directly retained those firms will be exceptionally qualified to provide the required legal services. To the extent that multi-state law firms with New Jersey offices permit lawyers unlicensed in New Jersey to perform legal services on New Jersey bond issues under supervision of New Jersey attorneys, we similarly assume that those lawyers will be fully qualified and supervised. In addition, the protection of the public ordinarily afforded by licensure is of diminished significance because public entity issuers generally are sophisticated and well represented by local counsel. Although out-of-state law firms are not subject to this Court's disciplinary authority over attorneys, bond counsel practice historically has not been characterized by frequent disciplinary infractions. On balance, we are convinced that the interests ordinarily protected by licensure may in these instances yield to the supervening public interest furthered by our decision.
We accordingly modify Opinion 33 to conform to this opinion. In the event that time and experience demonstrate that the exceptions to the general rules concerning licensure that we have recognized should prove in practice to be too broad or too restrictive, the Court is available to revisit the issue.
JUSTICES HANDLER, POLLOCK, O'HERN, GARIBALDI, and COLEMAN join in JUSTICE STEIN's opinion. CHIEF JUSTICE PORITZ did not participate.
NO. A-76 SEPTEMBER TERM 1998
ON APPEAL FROM
ON CERTIFICATION TO
ON REVIEW OF AN OPINION OF THE COMMITTEE ON THE
UNAUTHORIZED PRACTICE OF LAW
IN THE MATTER OF OPINION 33
OF THE COMMITTEE ON THE
UNAUTHORIZED PRACTICE OF LAW
DECIDED July 21, 1999
Justice Handler PRESIDING
OPINION BY Justice Stein
CONCURRING OPINION BY
DISSENTING OPINION BY