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96 N.J.L.J. 234
February 22, 1973
ADVISORY COMMITTEE ON PROFESSIONAL ETHICS
Appointed by the New Jersey Supreme Court
OPINION 250
Conflict of Interest
Associates of Professional
Corporations Before State Agencies
Where one Shareholder is Legislator
The following inquiry has been submitted to this Committee:
May fee shareholders or employees of a
professional corporation for the practice of
law in which a shareholder-employee, who owns
less than 10% of the stock, and is a member of
the General Assembly of the State of New
Jersey, represent, appear for, or negotiate on
behalf of clients before agencies of the State
of New Jersey?
In 1970, a firm of attorneys became a professional corporation
pursuant to N.J.S. 14A:17-1, et seq. In November 1972, a
stockholder of this corporation, who holds less than 10% of the
stock, was elected as a member of the New Jersey General Assembly.
In June 1971, the New Jersey Conflicts of Interest Law (N.J.S.A.
52:13D-12 et seq.) was enacted, taking effect January 11, 1972. By
the terms of this law, no member of the Legislature nor any
partnership, firm or corporation in which he has an interest, nor
any partner, officer, or employee of any such partnership, firm or
corporation, may represent, appear for, or negotiate on behalf of
any person (other than the State) before agencies of the State of
New Jersey. N.J.S.A. 52:13D-16b. The law defines "an interest" in
a corporation to mean the ownership or control of more than logo of
the stock of the corporation. N.J.S.A. 52:13D-13g.
The question presented is whether the Conflicts of Interest
Law specifically exempts from its coverage all fellow shareholders
and employees of the professional corporation where a
shareholder-legislator owns less than 10% of the stock in the
professional corporation.
The Professional Corporation Act was enacted primarily to
permit attorneys and other professional people to secure the
benefits under the Internal Revenue Act which were denied to
attorneys and other professionals as individual practitioners.
Under the corporate umbrella an attorney may become part of a
retirement program, secure a pension and enjoy the benefits of a
profit-sharing plan. He can avail himself of these tax-sheltered
retirement plans.
However, by incorporating, attorneys do not in anyway diminish
their obligations to fully comply with the Standards of Ethics
adopted by our Supreme Court and applicable to all members of the
bar. See the American Bar Association, Code of Professional
Responsibility, reprinted in V Martindale-Hubbell Law Directory
(1973 ed., at pages lC et seq).
EC 8-8 of the Code of Professional Responsibility provides as
follows:
Lawyers often serve as legislators or as
holders of other public offices. This is
highly desirable, as lawyers are uniquely
qualified to make significant contributions to
the improvement of the legal system. A lawyer
who is a public officer, whether full or
part-time, should not engage in activities in
which his personal or professional interests
are or foreseeably may be in conflict with his
official duties.
It is our opinion that where reference is made in the
conflicts of Interest Law to corporations, it does not apply to
professional corporations of attorneys. A holder of stock in a
professional corporation for the practice of law is analogous to an
interest in a law partnership. Thus all the Standards of Ethics
would apply and would supersede any provisions of the Conflicts of
Interest Law relating to corporations.
New Jersey Supreme Court Rule 1:21-lA(a)(2) provides:
(2) The professional corporation shall
comply with and be subject to all
rules governing the practice of law
by attorneys and it shall do nothing
which, if done by an individual
attorney would violate the standards
of professional conduct applicable
to attorneys licensed to practice
law in this State. Any violation of
this rule by the professional
corporation shall be grounds for the
Supreme Court to terminate or
suspend the professional
corporation's right to practice law
or otherwise to discipline it.
Thus an attorney holding public office and is partners should
avoid all conduct we might lead laymen to conclude that an attorney
or his partners are utilizing a public position to further personal
interests. A.B.A. Comm. on Professional Ethics and Grievances,
Opinion 192 (1939). We therefore conclude that it would be improper
for fellow shareholders in a professional corporation for the
practice of law to appear on behalf of clients before agencies of
the State when a shareholder or shareholder employee is a
legislator.
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