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                                         7 N.J.L. 1584
                                        July 13, 1998

                                        153 N.J.L.J. 184

                                         July 13, 1998

COMMITTEE ON THE UNAUTHORIZED PRACTICE OF LAW

        

Appointed by the New Jersey Supreme Court


OPINION 33

Bond Counsel

    This Opinion addresses an inquiry from the New Jersey State Bar Association regarding foreign bond counsel practicing in New Jersey. The issue can be stated as follows: are attorneys who are not admitted to practice law in New Jersey engaging in the unauthorized practice of law when they advise New Jersey governmental bodies in connection with the issuance of state and municipal bonds?
    There 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. The ultimate responsibility of bond counsel in connection with the issuance of state or municipal bonds is the rendering of a legal opinion.
        [B]ond counsel are 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.

COMMITTEE ON PROFESSIONAL RESPONSIBILITY, NATIONAL ASS'N OF BOND LAWYERS, The Function and Professional Responsibilities of Bond Counsel 2 (2d ed. 1995) ("NABL Report"). The opinion usually addresses issues such as whether the bonds are valid and binding obligations, the source of payment or security and the effect of state and federal tax law on the interest paid on the bonds. NABL Report at 6. Bond counsel also frequently engage in other activities related to bond issues, such as:
        (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.

Id. at 4. Moreover, as alluded to above, "[i]n particular bond transactions, various issues may arise that require knowledge of other practice areas, such as corporate law, creditors' rights, real estate, and commercial law." Id. at 15.


    These activities are clearly the province of the lawyer and are the "practice of law." This Committee and the courts have consistently ruled that this is so.
        The preparation and drafting of legal documents, such as trust instruments, contracts, and corporate documents, for execution or use by others is the practice of law.

Opinion 22, 103 N.J.L.J. 246 (1979). The New Jersey Supreme Court has also left little doubt that the above-described activities constitute the practice of law. N.J. State Bar Ass'n v. N.J. Mortgage Assocs., 32 N.J. 430, 444 (1960) ("[t]he drawing of legal instruments . . . for others . . . is clearly within the traditional definition of the practice of law.") and Cape May County Bar Ass'n v. Ludlam, 45 N.J. 121, 124 (1965) (quoting N.J. State Bar Ass'n ). See also In re Application of New Jersey Soc'y of Certified Pub. Accountants, 102 N.J. 231, 233 (1986) (the practice of law is not confined to litigation, but often includes legal activities in non-litigious fields) and Stack v. P.G. Garage Inc., 7 N.J. 118, 120-21 (1951) ("The practice of law is not, therefore, necessarily limited to the conduct of cases in court but is engaged in whenever legal knowledge, training, skill, and ability are required.").
    Because the professional services of bond counsel constitute the "practice of law," the question then becomes: do these services constitute the unauthorized practice of law when they are provided to New Jersey clients by bond counsel who are not admitted to practice law in the State of New Jersey?
    New Jersey, like all other states, regulates the practice of law within its boundaries. In New Jersey, the responsibility for such regulation has been given to the State's Supreme Court. N.J. CONST., ART. IV, § 2, ¶ 3. New Jersey Court Rule 1:21-1(a) provides that only attorneys admitted in New Jersey may 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 R.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.

R.1:27 further specifies the requirements one must meet in order to obtain a license to practice law in New Jersey. These rules are not unlike those in any other state which are designed to protect the public against inexpert, unskilled legal advice. The interest protected by these rules is considered of such importance to this State that the Legislature has made the unauthorized practice of law in New Jersey a criminal offense. N.J.S.A. 2C:21-22(b).
    Prior opinions of this Committee and the courts make it clear that a foreign attorney cannot practice law within the State of New Jersey by virtue of the attorney's license to practice law in another state. In five of the six opinions issued by this Committee dealing with attorneys admitted to practice in another jurisdiction,See footnote 1 1 it has ruled that if such an attorney were to practice law in this state, without being admitted to the New Jersey bar -- even if that practice were in his or her area of specialization and even if said practice were transactional in nature -- such practice would constitute the unauthorized practice of law. Opinion 1, 91 N.J.L.J. 656 (1968) (an attorney who is a member of the bar of another state, but not the New Jersey bar, is guilty of the unauthorized practice of law if he or she represents a New Jersey resident in a New Jersey real estate transaction); Opinion 7, 94 N.J.L.J. 1077 (1971) (an attorney who is not a member of the New Jersey bar is guilty of the unauthorized practice of law even if the attorney limits his or her New Jersey practice to federal customs and tariff laws); Opinion 9, 95 N.J.L.J. 269 (1972) (a patent attorney who is not a member of the New Jersey bar is guilty of the unauthorized practice of law if he or she practices in New Jersey, unless specific permission is obtained from the United States District Court for the District of New Jersey); Opinion 17, 98 N.J.L.J. 568 (1975) (a member of the bar of a foreign state who is not a member of the New Jersey bar is guilty of the unauthorized practice of law if he or she draws a deed to convey New Jersey real estate); Opinion 27, 133 N.J.L.J. 652, 2 N.J.L. 324 (1993) (a foreign attorney who is not a member of the New Jersey bar is guilty of the unauthorized practice of law if he or she opens or otherwise establishes offices in New Jersey to represent clients before the Immigration and Naturalization Service in New Jersey).See footnote 2 2 In other words, this Committee has consistently denied foreign lawyers the right to practice their profession in New Jersey merely by virtue of their licensure in another state.See footnote 3 3
    The courts of New Jersey have similarly ruled that, under circumstances such as those surrounding bond counsel practice, only attorneys who have been admitted in New Jersey may practice in New Jersey. Appell v. Reiner, 43 N.J. 313 (1964). In Appell, the Supreme Court recognized the "generally controlling principle" in New Jersey that, absent exceptional or unusual circumstances, "legal services to be furnished to New Jersey residents relating to New Jersey matters may be furnished only by New Jersey counsel." Id. at 316. This principle is well-established at common law and is intended to assure to the public "a sufficient degree of competence, accessibility and accountability" from their attorneys. In re Kasson, 141, N.J. 83, 86 (1995) (quoting In re Sackman, 90 N.J. 521, 523 (1982).
    The circumstances surrounding bond counsel practice are not the "exceptional or unusual circumstances" contemplated by the Appell Court. In that case, the Court was envisioning "multi-state transactions" whose individual state elements were "inseparable" and involved "tangled and interwoven elements" from different jurisdictions that would make it more efficient and practical to have one counsel handle the entire matter, even if that counsel were not a member of the bar of every state involved in the transaction. Appell v. Reiner, supra, 43 N.J. at 316-17. See In re Estate of Waring, 47 N.J. 367, 375-78 (1966) (foreign attorney's participation with New Jersey counsel in estate matter did not constitute the unauthorized practice of law where multi-state relationships and interests were involved) and Rule 4:88-4 (permitting application for attorney's fees for foreign attorney's participation in probate matters made payable through its New Jersey counsel).
    That is the exact opposite of the circumstances surrounding New Jersey bond practice. 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. Moreover, New Jersey bond issues are not matters which foreign counsel handle because they are integrally related to one of their non-New Jersey matters, nor are they part and parcel of an interstate transaction. The clients are New Jersey governmental bodies issuing New Jersey bonds for New Jersey public purposes. There is no pragmatic or "efficient" reason why foreign counsel are or should be retained, such as because the bond is "intertwined" with a foreign matter being handled by a foreign lawyer. They are not performing a necessary task relating to matters for existing in-state clients. Thus, this Committee is of the view that the current practice of law by foreign bond counsel in New Jersey is prohibited by court rule, statute and a long and unbroken line of prior opinions by this Committee and the courts of this State.
    Most recently, the Supreme Court of New Jersey made it clear that the touchstone of any inquiry into the unauthorized practice of law is whether the practice serves the public interest. In re Opinion No. 26, supra, 139 N.J. 323. If it does, even the practice of law by those unauthorized to do so may be permitted (although it may be subject to certain limiting conditions). The types of factors to consider in the public interest test outlined by the Court are as follows:
     .     the real business with which the questioned practice is concerned
    .     the real impact of the questioned practice on the public
    .     the benefits of the practice to the public    
     .     the costs of the practice to the public
     .     the knowledge of the public of those costs and benefits
     .     the difference between the questioned practice and the accepted practice in terms of advantages and disadvantages to the public
     .     any conflicting interests of the practitioners
     .     the relationships between all involved
     .     remedies available to the public for any damages caused by the questioned practice
     .     consumer satisfaction with the questioned practice
     .     any active discouragement by those involved of the participation of proper legal counsel    
    
Id. at 330, 343.
    The "real business" in the present matter is the issuance of state and municipal bonds for New Jersey governmental bodies with the advice and counsel of attorneys who are not admitted to practice law in this State. The benefits of this practice to the public have not been systematically measured, but this Committee recognizes the fact that there are highly competent bond counsel located within the State of New Jersey, obviating any need to retain foreign bond counsel for their "greater" expertise. See Rocco Cammarere, Out-of-State Bond Counsel; Opposition Swells, 6 N.J.L. 489 (1977) ("Some lawyers say there is no good reason today to hire an outside firm, that there are ample veteran and knowledgeable bond attorneys practicing on the home turf."). Undoubtedly, the public has little or no knowledge of the costs and benefits of this questioned practice. Bond issues are handled by governmental bodies and few, if any, of the legal details of the bond work are scrutinized or understood by the public. Thus, the public's level of satisfaction or dissatisfaction with the practice is essentially meaningless. That is why our Supreme Court regulates and disciplines attorneys practicing in this State -- to provide the public with an informed watchdog. But foreign bond counsel are not members of our bar and are thus not subject to our disciplinary rules. Thus, the full panoply of disciplinary remedies available to the public in this State for any damages caused by the questioned practice are diminished.
    Regardless of the above analysis, however, this Committee believes that the application of the public interest test from In re Opinion 26, supra, 139 N.J. 323, is neither dispositive of nor applicable to the foreign bond counsel question. This is due to the fact that the present bond counsel inquiry is clearly distinguishable in two key respects from the situation presented by the "Southern Jersey real estate practice" discussed in Opinion 26.
    The first distinction involves the particular consumer's choice which is protected in In re Opinion 26. The decision in that case protects a party's right to choose to proceed with or without the aid of counsel, whereas the present bond counsel inquiry deals with a party's non-existent "right" to choose to proceed with a licensed New Jersey attorney or an unlicensed foreign attorney -- a choice not protected by any New Jersey legal authority. No New Jersey client has ever been given the option of hiring a Pennsylvania attorney to do a real estate closing. Indeed, the well-settled law is to the contrary. See State v. Kavanaugh, 52 N.J. 7, 18 (1968) (so long as the New Jersey Bar is willing to provide effective counsel, there is no constitutional right to select an attorney who is not a member of the Bar).
    The second distinction involves the activities which comprise the unauthorized practice of law. In re Opinion 26 dealt with certain laypersons performing "limited activities" pertaining to the practice of law, 139 N.J. at 327, whereas the present inquiry deals with out-of-state lawyers providing extensive and complex legal services. The Court made it very clear that its decision was limited to the facts of that case (which, unlike here, involved laypersons), and that particular "Southern Jersey" practice (which, unlike here, involved very limited legal activity which was then allowed only in conjunction with detailed warnings of risk).
    Thus, the consumers' choice protected by the Court on public interest grounds in In re Opinion 26 is not the choice presented here by out-of-state bond counsel. The "Southern Jersey practice" involved the right of the public when participating in a residential real estate transaction to choose whether it wanted to proceed either with a lawyer or without a lawyer. Indeed, the Supreme Court referred to the public's right "to choose to proceed without a lawyer" at least eleven times in In re Opinion 26, 139 N.J. at 326, 327, 328, 330, 354, 356. In contrast, the present inquiry involves the "right" of public entities to participate in the issuance and sale of multi-million dollar bond transactions with New Jersey bond counsel or with out-of-state bond counsel.
    Neither the Supreme Court nor this Committee has ever protected this "right." Rather, the Court protected the public's right to proceed pro se and provided the public with adequate protections when it chooses to do so. The Court does not say in In re Opinion 26 that real estate agents are acting as counsel -- rather, it notes that no one is functioning as counsel to the parties and that the parties have the right to choose to proceed in this fashion. The Court recognized that if a member of the public chooses to retain a lawyer, then that person cannot choose a lawyer from any jurisdiction which he or she desires.
        We do not adopt a rule...that so long as informed consent from the parties is obtained, any conduct that might otherwise constitute the unauthorized practice of law is permitted.

Id. at 356. The choice given to the public in In re Opinion 26 -- and supported by the entire body of "unauthorized practice" law -- is clear: a party can decline representation in certain limited transactions (as with the "South Jersey practice") or it can choose to be represented by an attorney admitted to practice in New Jersey. See Opinion 1, supra, 91 N.J.L.J. 656; Opinion 7, supra, 94 N.J.L.J. 1077; Opinion 9, supra, 95 N.J.L.J. 269; Opinion 17, supra, 98 N.J.L.J. 568, and Opinion 27, supra, 133 N.J.L.J. 652.
    As stated above, In re Opinion 26, supra, 139 N.J. 323, can be distinguished from the current bond counsel inquiry on the basis of the scope of the questioned legal activities being performed. The Court stated that its decision in that matter stood for the proposition that "parties need not retain counsel to perform limited activities that constitute the practice of law and that others may perform them." Id. at 327 (emphasis added). The practice of law by foreign bond counsel in New Jersey transactions can hardly be described as a "limited activity." Bond counsel are key figures in the bond-issuing process involving millions of dollars. In contrast, in a "South Jersey" residential real estate transaction, most of the attorney's functions are never performed -- and foreign counsel certainly do not step in and perform the work. Nor does this Committee believe that such conduct would be permissible, under In re Opinion 26 or any other authority.
    Other jurisdictions have concluded that, under most circumstances, unlicensed interstate practice can violate the prohibition against the unauthorized practice of law. In a recent decision, the California Supreme Court ruled that a New York law firm which represented a California client in California in a legal dispute governed by California law was engaging in the unauthorized practice of law. Birbrower, Montalbano, Condon & Frank v. Super. Ct. Of Santa Clara County, 949 P.2d 1 (Cal. 1998). In that case, the Court ruled that a New York law firm engaged in the unauthorized practice of law when its attorneys -- none of whom were admitted in California -- traveled to California to represent a California client in a dispute with another California company under California law.See footnote 4 4 The New York attorneys made preliminary arbitration arrangements in California and ultimately negotiated a settlement there. The Court denied the firm the right to collect any fee for the legal services it provided to its client in California. Significantly, the Court refused to carve out an exception to the rule for out-of-state attorneys because the statute did not recognize any such exception.
    The Supreme Court of North Dakota reached the same conclusion in 1986, prohibiting a Minnesota lawyer from collecting a fee from a long-term North Dakota client for tax advice he had been giving his client in North Dakota. Ranta v. McCarney, 391 N.W.2d 161 (N.D. 1986). Like California, the North Dakota Court also refused to carve out any exception to the statutory prohibition on the unauthorized practice of law. Id.
    New Jersey's court rules and statutes likewise do not carve out any exceptions -- for bond counsel or any other practitioner. R. 1:21-1(a); N.J.S.A. 2C:21-22.
Conclusion

    Based on all of the foregoing, it is the conclusion of this Committee that an attorney who is not admitted to practice law in New Jersey, but who is providing legal services to New Jersey governmental bodies in connection with the issuance of bonds is engaging in the unauthorized practice of law. It is the further opinion of this Committee that the public interest test outlined in In re Opinion 26, supra, 139 N.J. 323, does not operate to otherwise permit this practice despite its unauthorized nature.
    It should also be noted that it is no defense to a charge of unauthorized practice of law that all legal services are performed outside the boundaries of the State of New Jersey. Opinion 17, supra, 98 N.J.L.J. 368. The mere fact that bond counsel may not cross the New Jersey State border does not protect the attorney's New Jersey activities from constituting the unauthorized practice of law. For example, in Opinion 17, this Committee reviewed the practice of foreign attorneys preparing deeds to convey real estate in New Jersey. In that situation, the Committee stated:
    [T]he fact that the foreign attorney may never set foot within this jurisdiction is immaterial for the clear intent of his act in the preparation of a deed to convey real estate in New Jersey is to affect real property, the parties and their respective rights and duties as governed by the laws of the State of New Jersey.

Id. Similarly here, it is the intent of foreign bond counsel -- by preparing the documents needed for New Jersey governmental bodies to issue bonds -- to affect the financial obligations of these bodies, the residents of New Jersey who purchase those bonds, and their respective rights and duties as governed by the laws of the State of New Jersey. In the view of this Committee, whether they conduct such activity within the State or not has no bearing on whether the activity is or is not the unauthorized practice of law.

    This Committee has therefore determined that out-of-state bond counsel engage in the unauthorized practice of law where they have failed to fully and completely comply with all of the requirements set forth in R. 1:21-1(a). This includes both the need to be licensed in New Jersey as well as the need to be in compliance with the bona fide office rule. Tolchin v. Supreme Court of New Jersey, 111 F.3d 1099 (3d Cir.), cert. denied, 118 S. Ct. 435 (1997). Even if bond counsel is admitted to practice in New Jersey, any such counsel whose primary office is located out-of-state and who fails to maintain a bona fide office in New Jersey is in violation of R. 1:21-1(a) and may not practice law in this state. "All attorneys who wish to practice in New Jersey must have a bona fide office." Id. at 1107. This rule is intended to provide the public with convenient access to and responsiveness from their attorneys, as well as to prevent attorneys who practice primarily in other states -- and who therefore might not be familiar with current New Jersey laws and developments --from practicing in New Jersey. Id.
    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.

    In conclusion, we hereby determine 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.
* * *
    


Footnote: 11
In Opinion 28, 138 N.J.L.J. 1558, 3 N.J.L. 2459 (1994), the Committee permitted a foreign attorney to appear before a panel of the American Arbitration Association in New Jersey due to the contractual nature of the arbitration process and the particular rules of the AAA. But see Nat'l Rep. on Legal Ethics and Prof. Resp., Opinion No. 94-5 (III. July 1994) (an attorney licensed in another state cannot represent parties in an arbitration in a jurisdiction in which he or she is not admitted).

Footnote: 22
In fact, New Jersey has made the unauthorized practice of immigration law in New Jersey a criminal act. N.J.S.A. 2C:21-31.

Footnote: 33
In In re Opinion No. 26, 139 N.J. 323 (1995) the Supreme Court allowed lay persons working in and from New Jersey, to perform certain limited legal tasks; however, it did not open the doors for foreign attorneys to come into New Jersey to perform those same tasks.

Footnote: 44
Section 6125 of the California Business and Professions Code states: "No person shall practice law in California unless the person is an active member of the State Bar."


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