Opinion 43 To Affect Out Of State Attorneys Seeking To Appear In Alternative Dispute Proceedings (ADR) In New Jersey

Wednesday, August 1, 2007 - 01:00

The New Jersey Committee on the Unauthorized Practice of Law ("Committee") recently revisited whether non-New Jersey licensed attorneys can appear in Alternative Dispute Resolution ("ADR") proceedings in New Jersey. In Opinion 43, the Committee ruled that out of state attorneys who seek to practice in ADR proceedings - both arbitrations and mediations - in New Jersey must be in compliance with New Jersey Rule of Professional Conduct ("RPC") 5.5. Additionally, the Committee determined that out of state attorneys in compliance with RPC 5.5 may collect fees for participation in arbitrations and mediations in New Jersey. Finally, the Committee "recommended" that ADR providers, such as the American Arbitration Association ("AAA") "require" as part of their initial filing process that out of state attorneys submit proof of their compliance with RPC 5.5 in connection with their representation.

A. Background

The question of whether out of state attorneys could participate in arbitration and mediation proceedings in New Jersey was first addressed by the Committee in 1994. In Opinion 28, the Committee considered whether an out of state attorney could appear before a panel of the AAA in New Jersey in the same capacity as any duly admitted New Jersey attorney to "present evidence and argue questions of substantive law ..." Based on its review of the AAA rules and other precedent, the Committee ruled that an out of state attorney could participate in an ADR matter in New Jersey.

Central to the Committee's conclusions in Opinion 28 was the decision in Williamson v. Quinn Constr. Corp., 537 F.Supp. 613 (S.D.N.Y. 1982). In Williamson, a New Jersey law firm which had participated in an arbitration proceeding in New York on behalf of a client, sued to collect its unpaid fee.

Defendant argued in response that plaintiff law firm was not entitled to relief as the attorney "who performed the bulk of the services was not admitted to practice in [New York], and [plaintiff firm] likewise [was] not authorized to practice in this State." Id. at 616. The trial court found this argument completely unavailing and held plaintiff could properly sue for and was entitled to collect its fees. The court first noted that an "arbitration tribunal is not a court of record; its rules of evidence and procedures differ from those of courts of record; its fact finding process is not equivalent to judicial fact finding; it has no provision for the admission pro hac vice of local or out of state attorneys." Id. Finding no New York or New Jersey cases on point, the Court turned to other authorities which had addressed the issue, and determined that the weight of opinion was clearly in plaintiff's favor. In particular, the Court relied upon a 1966 decision of the Second Circuit ( Spanos v. Skouras Theatres Corp., 364 F. 2d 161) which ruled that an out of state attorney could recover for legal services provided to a client in federal court in New York, despite the fact that the lawyer had not been admitted pro hac vice. Additionally, the District Court in Williamson looked to a 1975 report of the Association of the Bar of the City of New York which said that "representation of a party in an arbitration proceeding by a non-lawyer or a lawyer from another jurisdiction is not the unauthorized practice of law." Id.

In addition to Williamson, the authors of Opinion 28 looked to Rule 22 of the AAA Commercial Arbitration Rules which allows a party to be represented in an arbitration proceeding by counsel "or other authorized representative" - including a non-lawyer. The committee also found persuasive a 1986 opinion of the Virginia Committee on Legal Ethics and the Unauthorized Practice of Law which concluded that non-Virginia attorneys would not be engaging in the unauthorized practice of law by "present[ing] evidence and [arguing] matters of law before an arbitration panel in Virginia." Finally, the Committee took into account a 1991 report of the Committee on Professional Ethics of the Association of the Bar of the City of New York (which revisited the 1975 decision of the same Committee relied upon by the Court in Williamson) which reached the same conclusion of its Virginia counterpart.

Ultimately, the Committee found that "an out-of-state attorney's representation of a party in an arbitration proceeding conducted under the auspices of the AAA in New Jersey "does not constitute the unauthorized practice of law."

Ten years later - in 2004 - the RPC's were amended to address the issue of multi-jurisdictional practice. Under RPC 5.5(b), a lawyer not admitted in New Jersey can practice law in this state only if the lawyer is admitted pro hac vice and is associated with local counsel, the lawyer is an in-house attorney in compliance with Court Rule 1:27-2, or the lawyer meets one of the following circumstances:


the lawyer is involved in a transaction which originates in, or is otherwise related to, a jurisdiction in which the lawyer is admitted;


the lawyer engages in representation of a party in an ADR proceeding and the dispute originates in or is otherwise related to the jurisdiction in which the lawyer is admitted;


the lawyer engages in discovery or similar conduct in New Jersey in a proceeding in a jurisdiction in which the lawyer is admitted to practice; or


the lawyer's practice is on behalf of an existing client of the jurisdiction in which the lawyer is admitted, provided that practice in New Jersey is occasional and is undertaken only when the prejudice to the client would be substantial if the lawyer is not involved in the case.

Lawyers meeting any of these criteria then must satisfy RPC 5.5(c) which requires that the attorney be licensed and in good standing in all jurisdictions in which admitted, be subject to the RPC's as well as the disciplinary authority of New Jersey Supreme Court, consent to the appointment of the Clerk of the Supreme Court of New Jersey for service or process, not hold herself/himself out to be admitted in New Jersey, maintain a bona fide office in New Jersey, or use the office of local counsel as a bona fide office, and annually pay the required fees and registration costs assessed to New Jersey attorneys. It was with this backdrop that the Committee decided to revisit Opinion 28.

B. Requirements For Practice

The Committee started its analysis by summarizing Opinion 28 and then reviewing the amendments to RPC 5.5. The Committee concluded that all the criteria in RPC 5.5 must be met by attorneys seeking to practice in an ADR proceeding in New Jersey. The Committee held that the most important of these requirements is that the Clerk of the Supreme Court be authorized to accept service of process on the attorney's behalf and that the attorney comply with New Jersey's rules regarding registration and fees.

The Committee went on to consider two additional issues: whether a lawyer admitted in another state may participate in a mediation in New Jersey, and whether out of state attorneys may be compensated for their services in an arbitration or mediation proceeding in New Jersey. Without any analysis or commentary whatsoever, the Committee found that mediation "is akin to arbitration" and such required out of state attorneys participating in mediation in New Jersey to likewise satisfy the requirements of RPC 5.5. The Committee answered the last question in the affirmative - allowing out of state attorneys in compliance with RPC 5.5 to be compensated for their services in connection with arbitration and mediation matters. The Committee noted that, in addition to the requirements of Opinion 43, Opinion 28 as well as RPC 5.5, attorneys looking to be compensated must also follow any applicable New Jersey statutes and rules of court concerning the recovery of attorneys fees.

At the end of its opinion, the Committee indicated its belief that compliance would be difficult to monitor. Accordingly, the Committee "recommended" that AAA and other arbitration and mediation providers "require, as part of [their] initial filing process," the submission of proof of compliance with RPC 5.5, particularly the requirement of "registration with the Clerk" and the payment of the required fees.

C. Conclusions And Ramifications

Although Opinion 43 is short in overall length, the importance and the impact of this Opinion cannot be underestimated. Before Opinion 43 was promulgated, most attorneys gave little thought to whether they would be allowed to participate in an ADR proceeding in another state - most taking it for granted that they were permitted to do so without meeting any formal requirements. Obviously, Opinion 43 changes that way of thinking with respect to New Jersey ADR proceedings. Opinion 43 not only imposes obligations on out of state lawyers, but also on New Jersey attorneys serving as local counsel in arbitration or mediation matters - local counsel now needs to make sure that their out of state colleagues have properly met all the requirements of RPC 5.5.

The ramifications of Opinion 43 with respect to providers of ADR services is unclear. The first question is what if any procedures providers must put in place to ensure compliance with RPC 5.5 given the Opinion's use of the term "recommends," rather than "requires." To avoid the issue, ADR providers in New Jersey may want to put steps in place to ensure compliance, or at least make sure that they notify counsel of Opinion 43 and the requirements of the RPC's. Questions also arise as to what a provider should do where an attorney has failed or refused to comply. These issues are of particular importance to ADR providers such as the CPR International Institute for Conflict Prevention and Resolution which provide minimal case administration.

Finally, the Opinion places difficult burdens on neutrals themselves. Requiring or even suggesting compliance with Opinion 43 to an out of state counsel at the start of the proceedings seems to suggest a lack of neutrality, and hence may prevent the creation of trust crucial to the neutral's role. As with the providers, neutrals are faced with the question of how to implement such requirements and what to do in the face of a failure or refusal to comply. Finally, neutrals, who are themselves attorneys, may be concerned that working with an out of state attorney who is not in compliance may actually be assisting in the unauthorized practice of law, and hence face personal liability.

These questions and others will likely be the subject of further opinions and possibly case law. Until further guidance is received, however, Opinion 43 must be carefully considered and applied by all in the ADR community and by all litigators who regularly appear before ADR providers.

David G. Tomeo is a Member of the Lowenstein Sandler Litigation Department and focuses on insurance coverage disputes, telecommunications law, franchise practice matters and public contracting litigation. Mr. Tomeo is included on the roster of Superior Court of New Jersy approved mediators, and frequently appears before the AAA, and other ADR providers. Mr. Tomeo is a member of the Chartered Institute of Arbitrators, and is included on the Mediators' Roster of the CPR International Institute for Conflict Prevention and Resolution and serves as the Lowenstein Sandler liaison to CPR.

Please email the author at dtomeo@lowenstein.com with questions about this article.