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                                         96 N.J.L.J. 234
                                        February 22, 1973


Appointed by the New Jersey Supreme Court


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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