Title: In Re Opinion No. 24

State: new-jersey

Issuer: New Jersey Supreme Court

Document:

128 N.J. 114 (1992) 607 A.2d 962 IN RE OPINION NO. 24 OF THE COMMITTEE ON THE UNAUTHORIZED PRACTICE OF LAW. The Supreme Court of New Jersey. Argued February 4, 1992. Decided May 14, 1992. *115 Robert I. Ansell argued the cause for appellants Independent Paralegals and/or Legal Assistants Doing Business in the State of New Jersey (Ansell, Zaro, Bennett & Kenney, attorneys; Robert I. Ansell and Brian E. Ansell, of counsel and on the brief). Nancy Kaplen Miller, Deputy Attorney General, argued the cause for respondent Committee on the Unauthorized Practice of Law (Robert J. Del Tufo, Attorney General of New Jersey, attorney; Mary C. Jacobson, Deputy Attorney General, of counsel). *116 Francis J. Gilbertson submitted a brief on behalf of amici curiae National Association of Legal Assistants, Inc. and the Legal Assistants Association of New Jersey (an affiliate of National Association of Legal Assistants, Inc.) (Keith, Winters & Wenning, attorneys; Francis J. Gilbertson and Lawrence R. Jones, on the brief). John J. Markwardt submitted a brief on behalf of amici curiae The National Federation of Paralegal Associations, Inc., and the American Association for Paralegal Education (Markwardt & Katkocin, attorneys; Ronald M. Katkocin, on the brief). The opinion of the Court was delivered by GARIBALDI, J. The New Jersey Supreme Court Committee on the Unauthorized Practice of Law (the "Committee") concluded in Advisory Opinion No. 24, 126 N.J.L.J. 1306, 1338 (1990), that "paralegals functioning outside of the supervision of an attorney-employer are engaged in the unauthorized practice of law." Petitioners are several independent paralegals whom attorneys do not employ but retain on a temporary basis. They ask the Court to disapprove the Advisory Opinion. Like paralegals employed by attorneys, independent paralegals retained by attorneys do not offer their services directly to the public. Nonetheless, the Committee determined that independent paralegals are engaged in the unauthorized practice of law because they are performing legal services without adequate attorney supervision. We agree with the Committee that the resolution of the issue turns on whether independent paralegals are adequately supervised by attorneys. We disagree with the Committee, however, that the evidence supports a categorical ban on all independent paralegals in New Jersey. The Committee received inquiries from various sources regarding whether independent paralegals were engaged in the *117 unauthorized practice of law. Pursuant to its advisory-opinion powers under Rule 1:22-2, the Committee solicited written comments and information from interested persons and organizations. In response, the Committee received thirty-seven letters from a wide variety of sources. Additionally, the State Bar Association's Subcommittee on Legal Assistants ("Legal Assistant Subcommittee"), the National Association of Legal Assistants ("NALA"), and the National Federation of Paralegal Associates ("NFPA") provided the Committee with information on regulation, education, certification, and the ethical responsibilities of paralegals. The Committee characterized the information that it received in two ways: first, the material expressed positive views on the value of the work performed by paralegals; second, all of the materials expressly or implicitly recognized that the work of paralegals must be performed under attorney supervision. None distinguished between paralegals employed by law firms and those functioning as independent contractors offering services to attorneys. Several recurring themes played throughout the submissions: After receiving those submissions, the Committee held a hearing at which four independent paralegals, three employed paralegals, and three attorneys testified. All the independent *118 paralegals testifying before the Committee were well qualified. One independent paralegal noted that as an NALA member she is bound by both the ABA Model Code of Professional Responsibility and the ABA Model Rules of Professional Conduct. The independent paralegals stated that although they had worked with many attorneys during their careers, they had worked solely for those attorneys and only under their direct supervision. The independent paralegals gave several reasons for being retained by attorneys. First, attorneys may be understaffed at any time and may need to devote additional resources to one case. Second, attorneys may need paralegal assistance but be unable to afford a full-time paralegal. Third, attorneys may hire independent paralegals who have expertise in a given field. Client contact varied for each independent paralegal. Some see the attorney's client in the attorney's office, while others meet outside of the office. One paralegal testified that she carefully ensures that clients understand that she is not an attorney and that she cannot, as a paralegal, answer legal questions. The independent paralegals correspond with clients on behalf of attorneys, using the attorney's or law firm's letterhead, which is usually kept in the paralegal's office. Although the paralegals noted that the attorneys generally receive copies of any correspondence, one paralegal testified that she did not provide copies of all correspondence to the attorneys. Another paralegal stated that some attorneys authorized her to send out letters without their prior review. All the paralegals pointed out that they use computer technology, which facilitates rapid transmission of letters and other written material to their supervising attorneys to review, correct, and return. Three paralegals who were full-time employees of law firms also testified before the Committee. Each paralegal represented a paralegal organization, such as NFPA or NALA. They explained that many independent paralegals are members of *119 those organizations and that both organizations have developed guidelines and standards for their paralegal members. In addition, NALA conducts a certification examination that takes over two days and requires extensive knowledge of a variety of legal matters. All three employed paralegals expressed support for independent paralegals who work under the direct supervision of an attorney and who do not provide services directly to the public. Two attorneys appeared before the Committee. One testified that as long as attorneys supervise independent paralegals, that those paralegals do not work full-time for one attorney or firm does not matter. The second attorney, a sole practitioner, testified that independent paralegals provide many benefits to both small firms and the general public alike. The Committee, he suggested, should focus on others, known as "legal technicians" or "forms practitioners," who offer their services directly to the public, rather than on independent paralegals who do not offer their services directly to the public but who are retained by attorneys. After the hearing, the Committee issued Advisory Opinion No. 24, 26 N.J.L.J. 1306 (1990), in which it compared the amount of supervision attorneys exercise over employed paralegals and retained paralegals. It concluded that attorneys do not adequately supervise retained paralegals. Id. at 1338. The Committee linked the absence of adequate attorney supervision to several different factors. First, the Committee raised the concern that attorneys retaining independent paralegals do not carefully select those with sufficient training and experience because the short-term working relationship does not allow the attorney enough time to discover their levels of expertise. Id. at 1337. In contrast, the Committee presumed that employed paralegals undergo an interview process with an attorney, and the attorney's ongoing *120 relationship with those paralegals allows him or her to determine whether they are qualified for the job. Ibid. Second, the Committee believed that attorneys are unable to undertake reasonable efforts to insure that the conduct of independent paralegals is compatible with the attorney's professional obligations pursuant to Rule 5.3 of the Model Rules of Professional Conduct ("RPC 5.3"). Ibid. The Committee reasoned that an attorney who hires an independent paralegal could not satisfy RPC 5.3(c)(3), which requires an attorney to make "reasonable investigations" into a paralegal's misconduct. Ibid. That conclusion was based on the Committee's perception that the relationship between an attorney and an independent paralegal is more distant than the one between an attorney and a full-time employed paralegal. Ibid. Third, the Committee maintained that the relationship between attorneys and independent paralegals would cause significant conflicts of interest because the independent paralegal could work for numerous law firms and the attorney might not be able to monitor any conflict that might arise. Id. at 1338. Fourth, the Committee concluded that attorneys not sufficiently skilled in a particular area of the law who charge a fee for the work done by the paralegal violate attorney-ethics considerations by assisting in the unauthorized practice of law. Ibid.; see also RPC 5.5(b) (a lawyer shall not assist a person who is not a member of the bar in the performance of activity that constitutes the unauthorized practice of law). The Committee observed that attorneys cannot supervise an independent paralegal who is working in a field that is unfamiliar to the attorney. Op. No. 24, supra, 126 N.J.L.J. at 1338. It suggested as an alternative that sole practitioners could seek assistance in substantive legal matters from specialist attorneys or law firms rather than from independent paralegals. Ibid. Fifth, and finally, the Committee was troubled by correspondence and communication between attorneys and independent paralegals. The Committee was distressed to learn that paralegals *121 had sent out letters on firm stationary without prior review by the attorney, creating potential for misunderstanding by the general public. Ibid. The Committee summarized its findings as follows: Based on those findings, the Committee concluded that attorneys are currently unable to supervise adequately the performance of independent paralegals, and that by performing legal services without such adequate supervision those paralegals are engaging in the unauthorized practice of law. Ibid. We granted petitioners' request for review, ___ N.J. ___ (1991), and the Chairperson of the Committee granted their motion to stay the enforcement of Opinion No. 24. No satisfactory, all-inclusive definition of what constitutes the practice of law has ever been devised. None will be attempted here. That has been left, and wisely so, to the courts when parties present them with concrete factual situations. See Milton Lasher, The Unauthorized Practice of Law, 72 N.J.L.J. 341 (1949) ("What is now considered the practice of law is something which may be described more readily than defined."). Essentially, the Court decides what constitutes the practice of law on a case-by-case basis. See, e.g., New Jersey State Bar Ass'n v. New Jersey Ass'n of Realtor Bds., 93 N.J. 470, 461 A.2d 1112 (1983) (permitting real-estate brokers to prepare certain residential-sales and lease agreements, subject to right of attorney review); In re Education Law Center, 86 N.J. 124, 429 A.2d 1051 (1981) (exempting non-profit corporations from practice-of-law violations); Auerbacher v. Wood, 142 N.J. Eq. 484, 59 A.2d 863 (E. & A. 1948) (holding that services of industrial-relations consultant do not constitute practice of law). The difficulties presented by our undefined conception of the legal practice are reflected in this Court's review of decisions of the Committee on the Unauthorized Practice of Law. For example, in In re Application of the New Jersey Society of Certified Public Accountants, 102 N.J. 231, 507 A.2d 711 (1986), (hereinafter Application of CPAs), the Court stated: The Court in Application of CPAs reviewed the Committee's Opinion No. 10, 95 N.J.L.J. 1209 (1972), which held that a non-lawyer's preparation of an inheritance-tax return for another person constituted the unauthorized practice of law. The Court disagreed, and emphasized that "in cases involving an overlap of professional discipline we must try to avoid arbitrary classifications *123 and instead focus on the public's realistic need for protection and regulation." Application of CPAs, supra, 102 N.J. at 237, 507 A.2d 711. Applying that standard, the Court modified Opinion No. 10 to permit CPAs to prepare inheritance-tax returns subject to the condition that the accountant notify the client that an attorney's review of the return would be helpful because of the legal issues surrounding its preparation. Id. at 241-42, 507 A.2d 711. There is no question that paralegals' work constitutes the practice of law. N.J.S.A. 2A:170-78 and 79 deem unauthorized the practice of law by a nonlawyer and make such practice a disorderly-persons offense. However, N.J.S.A. 2A:170-81(f) excepts paralegals from being penalized for engaging in tasks that constitute legal practice if their supervising attorney assumes direct responsibility for the work that the paralegals perform. N.J.S.A. 2A:170-81(f) states: Consequently, paralegals who are supervised by attorneys do not engage in the unauthorized practice of law. Availability of legal services to the public at an affordable cost is a goal to which the Court is committed. The use of paralegals represents a means of achieving that goal while maintaining the quality of legal services. Paralegals enable attorneys to render legal services more economically and efficiently. During the last twenty years the employment of paralegals has greatly expanded, and within the last ten years the number of independent paralegals has increased. Independent paralegals work either at a "paralegal firm" or freelance. Most are employed by sole practitioners or smaller *124 firms who cannot afford the services of a full-time paralegal. Like large law firms, small firms find that using paralegals helps them provide effective and economical services to their clients. Requiring paralegals to be full-time employees of law firms would thus deny attorneys not associated with large law firms the very valuable services of paralegals. The United States Supreme Court, in upholding an award of legal fees based on the market value of paralegal services, stated that the use of paralegal services whenever possible "encourages cost-effective legal services * * * by reducing the spiralling cost of * * * litigation." Missouri v. Jenkins, 491 U.S. 274, 288, 109 S. Ct. 2463, 2471, 105 L. Ed. 2d 229, 243 (1989) (quoting Cameo Convalescent Center, Inc. v. Senn, 738 F.2d 836, 846 (7th Cir.1984), cert. denied, 469 U.S. 1106, 105 S. Ct. 780, 83 L. Ed. 2d 775 (1985)). The Court further noted: New Jersey's Advisory Committee on Professional Ethics also has recognized the value of paralegals to the legal profession: *125 The New Jersey State Bar Association also specifically recognizes the important role of the paralegal. On September 15, 1989, its Board of Trustees voted to allow associate membership for paralegals and legal assistants. We also note that the American Bar Association ("ABA") has long given latitude to attorneys to employ non-lawyers for a variety of tasks. For example, Ethical Consideration 3-6 of the ABA Model Code of Professional Responsibility provides as follows: The ABA has further stated, in Formal Opinion 316, that "we do not limit the kind of assistance that a lawyer can acquire in any way to persons who are admitted to the Bar, so long as the non-lawyers do not do things that lawyers may not do or do the things that [only] lawyers[] may do." (emphasis added). No judicial, legislative, or other rule-making body excludes independent paralegals from its definition of a paralegal. For example, the ABA defines a paralegal as follows: The ABA definition expands the role of a legal assistant to include independent paralegals, recognizing that attorneys can and do retain the services of legal assistants who work outside the law office. New Jersey's ethics Rules also recognize independent paralegals. This Court has adopted the ABA's Model Rules of Professional Conduct to govern the conduct of New Jersey *126 State Bar members. R. 1:14 (adopting the ABA Model Rules "as amended and supplemented by the Supreme Court"). The central provision governing the attorney's use of lay employees is RPC 5.3: The emphasized language indicates that RPC 5.3 applies to independent retained paralegals and not just to employed paralegals. Moreover, the comment following RPC 5.3 does not distinguish between employees and independent contractors, stating as follows: Finally, Rule 4:42-9(b) implicitly recognizes that attorneys use paralegals by permitting awards of counsel fees to include costs of paraprofessional services. That Rule's definition of "legal assistant" is almost identical to that of the ABA's. The Rule, however, requires only that the paralegal operate under the direction and supervision of the attorney. It does not distinguish between an employed or retained paralegal. Under both federal law and New Jersey law, and under both the ABA and New Jersey ethics Rules, attorneys may delegate legal tasks to paralegals if they maintain direct relationships with their clients, supervise the paralegal's work and remain responsible for the work product. Neither case law nor statutes distinguish paralegals employed by an attorney or law firm from independent paralegals retained by an attorney or a law firm. Nor do we. Rather, the important inquiry is whether the paralegal, whether employed or retained, is working directly for the attorney, under that attorney's supervision. Safeguards against the unauthorized practice of law exist through that supervision. Realistically, a paralegal can engage in the unauthorized practice of law whether he or she is an independent paralegal or employed in a law firm. Likewise, regardless of the paralegal's status, an attorney who does not properly supervise a paralegal is in violation of the ethical Rules. Although fulfilling the ethical requirements of RPC 5.3 is primarily the attorney's obligation and responsibility, a paralegal is not relieved from an independent obligation to refrain from illegal conduct and to work directly under the supervision of the attorney. A paralegal who recognizes that the attorney is not directly supervising his or her work or that such supervision is illusory because the attorney knows nothing about the field in which the paralegal is working must understand that he or she is engaged in the unauthorized practice of law. In such a situation an independent paralegal must withdraw from representation of the client. The key is supervision, and that supervision must occur regardless of whether the paralegal is employed by the attorney or retained by the attorney. We were impressed by the professionalism of the paralegals who testified before the Committee. They all understood the need for direct attorney supervision and were sensitive to potential conflict-of-interest problems. Additionally, they all *128 recognized that as the paralegal profession continues to grow, the need to define clearly the limits of the profession's responsibilities increases. Those who testified voiced many of the same concerns expressed by the Committee. Indeed, Opinion No. 24 crystallized issues that both the legal profession and paralegals recognize should be addressed. The Committee enumerated five factors that are of vital importance to the profession and that confront every paralegal and every prospective employer: Following the introduction of RPC 5.3, the Practicing Law Institute correctly noted: Although we agree that those concerns must be addressed, we emphasize that they apply equally to employed paralegals and to independent paralegals. Although the ABA requires that paralegals be qualified through work, education, or training, the State currently requires neither certification nor licensure for paralegals. No regulatory body exists to prevent unqualified persons from working as paralegals. However, the same is true with regard to employed paralegals. No rule requires that either employed paralegals or independent paralegals belong to any paraprofessional organization. Thus, only those paralegals who are members of such organizations are subject to regulation. Again, the problem is not with independent paralegals but with the absence of any binding regulations or guidelines. The same holds true with regard to ethical issues. As with other laypersons, paralegals are not subject to any ethics rules governing the practice of law. The ethical prohibitions against paralegals, RPC 5.3, therefore focus on the attorney's conduct. However, the language of RPC 5.3 applies to attorneys who both employ and retain paralegals. Underlying many of the Committee's concerns is its belief that the attorney will not be able to comply with RPC 5.3 due to the lack of physical proximity to the retained paralegal. That "physical distance" led the Committee to conclude that for an attorney to maintain direct supervisory authority over an independent paralegal who often will not work in the same office as the attorney is too difficult. We recognize that distance between the independent paralegal and the attorney may create less opportunity for efficient, significant, rigorous supervision. Nonetheless, the site at which the paralegal performs services should not be the determinative factor. In large law firms that have satellite offices, *130 an employed paralegal frequently has less face-to-face contact with the supervising attorney than would a retained paralegal. Moreover, in this age of rapidly-expanding instant communications (including fax tele-transmissions, word processing, computer networks, cellular telephone service and other computer-modem communications), out-of-office paralegals can communicate frequently with their supervising attorneys. Indeed, as technology progresses, there will be more communication between employers and employees located at different sites, even different states. That arrangement will be helpful to both the paralegal and the attorney. Parents and disabled people, particularly, may prefer to work from their homes. Sole practitioners and small law firms will be able to obtain the services of paralegals otherwise available only to large firms. Moreover, nothing in the record before the Committee suggested that attorneys have found it difficult to supervise independent paralegals. Indeed, the paralegals testified that the use of word processing made an attorney's quick review of their work possible. Most of the independent contractors who testified worked under the supervision of attorneys with whom they had regular communication. Although a paralegal's unsupervised work does constitute the unauthorized practice of law, that issue is not unique to independent paralegals. Rather, we emphasize again, it is the lack of educational and regulatory standards to govern their practice that is at the heart of the problem. Regulation may also solve another ethical problem conflicts of interest. We agree with the Committee's observation that *131 However, the paralegals who testified were aware of potential conflict situations. An independent paralegal explained that she keeps accurate records on each attorney's clients: Moreover, in Opinion No. 647 the Advisory Committee on Professional Ethics recognized that paralegals are extremely aware of the potential ethical dilemmas of the legal profession: Nonetheless, we recognize that because independent paralegals are retained by different firms and lawyers, a potential conflict exists. For example, the Advisory Committee on Professional Ethics has noted that "[h]iring a paralegal formerly employed by a firm with which the prospective employer presently is involved in adversarial matters would clearly be improper." In re Opinion No. 546 of the Advisory Committee on Ethics, 114 N.J.L.J. 496 (1984). Opinion No. 546 is extremely brief, however, and does not detail the circumstances under which such employment would be improper. The ABA, however, has also considered whether an employing firm can be disqualified by a change in employment of a non-lawyer employee, specifically a paralegal, in Informal Ethics Opinion 88-1526 (June 22, 1988). The ABA determined that such firms can be disqualified unless they thoroughly screen the paralegal and ensure that the paralegal reveals no information relating to the representation of the client at the former firm to any person in the employing firm. The ABA also noted its concern that paralegals could potentially lose the ability to earn a livelihood if they were prevented from working for different law firms: We again conclude that regulations and guidelines can be drafted to address adequately the conflict-of-interest problem. For example, as urged by paralegal associations, there could be a requirement that paralegals must keep records of each case, listing the names of the parties and all counsel. Before undertaking new employment, paralegals would check the list. Likewise, attorneys should require the paralegals to furnish them with such a list. The attorney could thus examine whether such matters would conflict with the attorney's representation of a client before retaining that paralegal. Regulation can also remedy any problems resulting from the attendant problem of paralegals sending correspondence directly to clients without the attorney's review and approval. Although we have not incorporated use of paralegals into New Jersey Court Rules, the Advisory Committee on Professional Ethics has considered the practice of paralegals on four prior occasions, most recently in Opinion No. 647, 126 N.J.L.J. 1525 (1990). In that opinion the Advisory Committee on Professional Ethics held that paralegals working under the direct supervision of an attorney may carry business cards so long as the name of the attorney or firm appears on the card and the card is authorized by the attorney or law firm. Other states, bar associations, and paralegal organizations have also begun to regulate paralegals and attorneys' use of them. A significant number of state courts have incorporated into their court rules or ethics opinions rules for the use of legal assistants. Kentucky has promulgated a Paralegal Code *133 of Ethics, which sets forth certain exclusions to the unauthorized practice of law: Several states' bar associations have also promulgated guidelines to regulate the paralegal profession. For example, the Colorado Bar Association has issued a set of guidelines under which a lawyer may permit a paralegal to assist in all aspects of the lawyer's representation of a client, provided that: The guidelines also provide: The Colorado Bar Association has also promulgated a set of ethical requirements for the attorney who hires paralegals: The Michigan, Missouri, and New York Bar Associations have adopted similar requirements. Additionally, two of the largest paralegal associations have proposed standards for paralegals. NALA has developed an examination procedure for certifying paralegals and has developed ethics guidelines for their work, and NFPA has developed a detailed list of "Paralegal Responsibilities" and maintains a repository of the latest state-by-state statutory and case developments regulating the use of paralegals. Regulation and guidelines represent the proper course of action to address the problems that the work practices of all paralegals may create. Although the paralegal is directly accountable for engaging in the unauthorized practice of law *135 and also has an obligation to avoid conduct that otherwise violates the Rules of Professional Conduct, the attorney is ultimately accountable. Therefore, with great care, the attorney should ensure that the legal assistant is informed of and abides by the provisions of the Rules of Professional Conduct. Although an attorney must directly supervise a paralegal, no rational basis exists for the disparate way in which the Committee's opinion treats employed and independent paralegals. The testimony overwhelmingly indicates that the independent paralegals were subject to direct supervision by attorneys and were sensitive to potential conflicts of interest. We conclude that given the appropriate instructions and supervision, paralegals, whether as employees or independent contractors, are valuable and necessary members of an attorney's team in the effective and efficient practice of law. Subsequent to the issuance of the Committee's decision, the State Bar Association forwarded a resolution to this Court requesting the establishment of a standing committee on paralegal education and regulation. We agree that such a committee is necessary, and will shortly establish it to study the practice of paralegals and make recommendations. The committee may consider guidelines from other states, bar associations, and paralegal associations in formulating regulations for New Jersey paralegals. Any such regulations or guidelines should encourage the use of paralegals while providing both attorneys and paralegals with a set of principles that together with the Rules of Professional Conduct can guide their practices. The guidelines drafted will not be static but subject to modification as new issues arise. We modify Opinion No. 24 in accordance with this opinion. For modification Chief Justice WILENTZ and Justices CLIFFORD, HANDLER, POLLOCK, GARIBALDI and STEIN 6. Opposed None.