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90 N.J.L.J. 480
July 20, 1967
ADVISORY COMMITTEE ON PROFESSIONAL ETHICS
Appointed by the New Jersey Supreme Court
OPINION 114
Manufacturers' Association Attorney
Representing Members
The inquirer is a member of the bar who is employed full-time
by a trade association organized as a New Jersey non-profit
corporation. The members of the corporation consist of
manufacturing establishments. The corporation is governed by an
elected board of directors. It operates entirely in the area of
industrial and personnel relations, supplying its members with
statistical data, advice and assistance. Its revenues are derived
entirely from membership dues, the amount of each member's dues
being determined according to a formula based upon size.
The attorney states that as the manager of this association,
he engages in no outside activity, legal or otherwise. He states
that the majority of his time is spent in supervising the
association staff, planning activities, writing bulletins for
distribution to members and conferring with members concerning
personnel and labor relations problems.
The inquirer states that occasionally (8 or 10 times per year)
he represents members in labor arbitration hearings, i.e., he
prepares and argues cases before an arbitrator and, with about the
same frequency, he represents member companies in representation
proceedings before the National Labor Relations Board.
In both the arbitration and National Labor Relations Board
work, the attorney works directly with a member company. The member
pays no fee or other extra amount to the association or to the
attorney for such service. The attorney receives no extra payment
from the association or anyone else by reason of his representing
a member company.
The question presented to us is:
Since the association is contemplating
charging a fee for the arbitration services
hereafter to be performed by the inquirer,
which fee the association would retain as part
of its general revenue and no part of which
would be paid directly or indirectly to the
inquirer for services rendered by him in these
arbitration proceedings, is there any
violation of Canon 35 or 47?
The inquirer cites Auerbacher v. Wood, 139 N.J. Eq. 599 (Ch.
1947), affirmed 142 N.J. Eq. 484 (E. & A. 1948). He states that in
that case the activities described were held not to constitute the
practice of law on the part of a non-lawyer because they were an
incident to his main calling and the court pointed out that the
National Labor Relations Board allowed non-lawyers to appear before
it. The inquirer argues that the mere fact that one is licensed to
practice law should not by itself bar him from engaging in all of
the activities in which a member of some other avocation or calling
might engage.
The Auerbacher case involved a layman. That was an action to
enjoin what complainants charged would be the unlawful practice of
law. The complainants were the Essex County Bar Association, a
committee of the State Bar Association and one Louis Auerbacher,
Jr., an attorney. No problem of ethics was presented. R. 1:26A of
the Supreme Court does not unauthorized the Advisory Committee on
Professional Ethics to deal with the unauthorized practice of law.
Our attention has also been called to A.B.A. Comm. on
Professional Ethics, Opinion 305 (1962). That opinion involved a
person who was qualified as both a lawyer and an accountant. It
held that a lawyer cannot free himself of the ethical restraints of
the profession in carrying out an activity which constitutes the
practice of law, merely by announcing that he is to be regarded as
a layman for that particular purpose. The opinion held that the
mere fact that he was licensed to practice law did not of itself
bar him from engaging in all the activities in which an accountant
may lawfully engage. The Committee reiterated other opinions in
which they held that a lawyer may "withdraw" from the active
practice of law and refrain from holding himself out as a lawyer.
The facts have no relation to the question presented in the present
inquiry.
Canons of Professional Ethics, Canon 35 is dispositive of the
inquiry made here. The second paragraph of the canon states:
A lawyer may accept employment from any
organization, such as an association, club or
trade organization, to render legal services
in any matter in which the organization, as an
entity, is interested, but this employment
should not include the rendering of legal
services to the members of such an
organization in respect to their individual
affairs.
A lawyer may accept employment from any organization to render
legal services in any matter in which the organization, as an
entity, is itself directly interested. In Drinker, Legal Ethics
162, (1953), we find:
...but this employment should not include
the rendering of legal services to the members
of such an organization in respect to their
individual affairs.
...the lawyer's relation to his client
should be personal, his responsibility to him
direct and not subject to the control or
exploitation of any lay intermediary
intervening between them. ... in addition to
interference with the lawyer's intimate
personal relation to his client, are the
tendency to commercialize the profession, and
promotion of the unauthorized practice of the
law on the part of the organization by
providing legal services and advice for its
employees and members.
The A.B.A. Committee in its Opinion 8 (1925) dealt with the
situation in which an automobile club charged its members yearly
dues for the privileges furnished them. In soliciting membership
from the public, it offered to furnish its members with certain
services of its "legal department" in connection with their
ownership and operation of automobiles. The legal department
consisted of certain attorneys who were engaged in general practice
and who devoted to this service only such of their time as was
necessary. The attorneys were paid a stipulated monthly amount. If
the matters on which the attorneys were consulted resulted in suit
or other legal proceedings, the attorneys were entitled to charge
their usual and customary fees. The Committee in that opinion
stated:
In furnishing these legal services to its members
and in charging them a membership fee which includes
payment for these services, the club, in effect, is
selling and exploiting the lawyer's professional services
to its own benefit or profit. That the benefit may be
indirect or the profit indefinite will not vary this
conclusion. The sale of an item is no less a sale because
the price paid for it or the consideration given is
lumped with other items so that it cannot be segregated.
Even if the club is not organized for profit the
conclusion is the same. In that case its owners (the
membership) may not receive any direct money benefit but
the club as an entity may profit from this particular
activity to the benefit of its other activities and the
membership thereby receive an indirect benefit or profit.
Neither are these conclusions varied by the conditions
under which the club employs these lawyers. Irrespective
of whether they give all or only a portion of their time
to the service furnished by the club, and of whether they
receive a salary, are paid a percentage, or are paid for
each separate item of work, the result is the same so
long as a lay agency pays a lawyer one amount for his
services and for those services charges a different
amount to the person to whom they are rendered.
Opinion 8, supra, was decided in 1925. In 1928, Canon 35 was
adopted and much of the language contained in Opinion 8was used.
The Committee on Professional Ethics of the Association of the
Bar of the City of New York in Opinion 714 (1948) has held that a
lawyer cannot accept employment by an "Association of Tenants,
Inc.," a membership corporation, to represent the individual
members in proceedings instituted by a landlord against them
without violating paragraph 2 of Canon 35. Similar rulings by the
City of New York Committee involved a hairdressers' membership
association to defend nuisance suits by clients (Opinion 730
(1949)); a nurses' association (Opinion 753 (1950)); and an
association of postal employees "all of one race" (Opinion 763
(1951)).
There is no prohibition against a lawyer accepting employment
from any organization to render legal services provided that the
legal services are rendered in matters in which the organization,
as an entity, is itself directly interested. The City of New York
Committee held in Opinions 731 and 920 that a lawyer may properly
represent and be compensated by an employer in getting his
employees exempt from the draft. Here, the organization as an
entity, was directly interested.
Drinker, supra, at 162, says:
The Canon does not preclude counsel for a
corporation or association from representing its
individual employees, patrons, stockholders or members or
groups of them provided such employment has not been the
result of improper solicitation, and provided such
relation is personal and direct and the service paid for
by the individual client or pro-rated among the group,
and not paid by the corporation or association.
Where, however, the corporation or association
employs and pays the lawyer to advise and represent its
employees, patrons, or members in respect to their
individual affairs, the prohibition of the Canon would
seem applicable, even though the lawyer's relation is
direct, although there is no conflict of interest between
the client and the organization, ... .
The facts presented to us indicate that the association, by
which the attorney is employed, is rendering legal services to the
members of its organization in respect to personal matters before
the National Labor Relations Board or in labor arbitration
hearings. This is in violation of Canon 35, irrespective of the
charging of a fee by the association.
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