A New Jersey Supreme Court committee on Wednesday gave its nod, in limited circumstances, to foreign lawyers carrying on real-estate transactions here without local counsel.
The ruling, Opinion 49 of the Committee on the Unauthorized Practice of Law [see full text of opinion] interpreted a recently revised provision of the Rules of Professional Conduct governing multijurisdictional practice.
For an out-of-state lawyer to be allowed to represent an out-of-state buyer contracting for a purchase of N.J. commercial real estate, the practice must be “occasional” and the transaction must arise from the lawyer’s pre-existing representation of the client outside New Jersey, interruption of which would be harmful to the client.
The lawyer must also register with the state Supreme Court as a multijurisdictional practitioner and pay all applicable fees.
UPLC Committee Chairman Charles Lizza says the real estate transaction that sparked Opinion 49 is “fairly common” and the opinion should be “very helpful” to those in similar situations.
The committee addressed a frequent inquiry concerning RPC 5.5(b)(3), which permits an out-of-state lawyer to engage in the practice of New Jersey law in certain circumstances.
The rule permits out-of-state lawyers to practice in New Jersey “provided all criteria in the pertinent ‘safe harbor’ subparagraph are met,” the panel said.
A lawyer who satisfies that rule may represent the client in negotiating the transaction’s terms, and in preparing the contract and related documents, the committee said, noting that those functions all involve the practice of law.
It added that the attorney also must register with the Supreme Court clerk and pay annual assessments to the disciplinary system, the Lawyers’ Fund for Client Protection and the Lawyers Assistance Program.
Subparagraph (v) of the rule allows the out-of-state lawyer to handle a matter that arises directly out of his or her representation “of an existing client in a jurisdiction in which the lawyer is admitted to practice, provided that such practice in this jurisdiction is occasional and is undertaken only when the lawyer’s disengagement would result in substantial inefficiency, impracticality or detriment to the client.”
The prospective transaction relates to the developer’s out-of-state business, the out-of-state lawyer is licensed in the jurisdiction where the business is located, and the relationship was pre-existing, the committee noted.
In addition, the “lawyer’s disengagement may result in ‘substantial inefficiency, impracticality or detriment’ to a sophisticated client in these circumstances,” the committee said.
As long as the practice is occasional, “these circumstances could satisfy the criteria of” subparagraph (v).
“Occasional” means “occurring infrequently or from time to time,” the panel said, adopting the Professional Responsibility Rules Committee’s definition. “If the out-of-state lawyer’s entry into New Jersey is recurring or frequent, then it does not qualify as ‘occasional’ under RPC 5.5(b)(3)(iv) or (v),” the panel added.
RPC 5.5(b)(3) — effective Jan. 1, 2004 — permits practice by out-of-state lawyers under other circumstances, though none was applicable in the case at hand, the committee said.
Subparagraph (i) permits the “negotiation of the terms of a contract” for a pre-existing client, but does not authorize preparation of the sales contract or other legal documents.
Subparagraphs (ii) and (iii) don’t apply because they relate to the lawyer’s participation in alternate dispute resolution or investigation, discovery and deposition.
Also inapplicable is subparagraph (iv), which permits an out-of-state lawyer to practice when he or she “associates in the matter with” a lawyer admitted in New Jersey who will be responsible for his or her conduct. The inquirer had no New Jersey local counsel.
That provision was amended, effective Sept. 4, to incorporate the term “occasional” as used in subparagraph (v). The amendment requires that the out-of-state lawyer’s practice in New Jersey is “occasional” and that he or she “designates and discloses to all parties in interest” the identity of the local attorney.
The committee requested the modifications after learning of a lawyer whose out-of-state firm began a practice of continuous representation of clients here after hiring a newly admitted New Jersey attorney to satisfy — in an illusory fashion — the association requirement without admission to the New Jersey bar.
Also in the opinion, the committee responded to “numerous” out-of-state lawyer inquiries through the attorney ethics research assistance hotline.
The committee noted that registration by virtue of any of the RPC 5.5(b)(3) subparagraphs does not permit an appearance in New Jersey court.
Only pro hac vice admission under Rule 1:21-2 permits an appearance, and it must be done along with local counsel. “These two paths to permitted practice in New Jersey are mutually exclusive,” the committee said.
Ethics authorities also have fielded inquiries asking whether lawyers with practices in neighboring states may engage in ongoing practice in New Jersey by bringing a New Jersey lawyer into the firm.
“Again, the answer is no. … The practice must be occasional,” the committee said.
Committee chairman Lizza, a partner at Saul Ewing in Newark, says, “This opinion reaffirms fundamental principles regarding the practice of law in New Jersey and provides much-needed clarification in the area of multijurisdictional and cross-border practice.”
He adds that “the exceptions are what they are — which is fairly narrow.” ■