Opinion ID: 2391351
Heading Depth: 1
Heading Rank: 2

Heading: the controlling authorities

Text: The controlling authorities in the instant case are the 27th, 35th and 47th Canons of Professional Ethics and the unanimous opinion of this court of less than two years ago in In the Matter of L.R., an Attorney at Law, 7 N.J. 390 (1951). The Canons of Professional Ethics of the American Bar Association, with the exception of one amendment not pertinent here, were adopted by Rule 1:7-6; they shall govern the conduct of the judges and the members of the bar of this State. This rule is grounded not only on the rule-making power of the Supreme Court, but on its express jurisdiction over the discipline of members of the bar, N.J. Const., Art. VI, Sec. II, par. 3. The Canons of Professional Ethics undertake to codify in convenient form the traditions and practice that have been recognized over the centuries as part of the common law with respect to the lawyer's obligations to the courts and the administration of justice, to the public and his clients, and to his profession and his fellow practitioners. They are as obligatory on him as if cast in statutory form, as indeed they are in large part in many states. The three canons referred to relate in one aspect to the lawyer's duties to his profession and his fellow practitioners. If the practice of the law is to remain a profession and not to become a mere trade, it is quite as important that ethical practitioners be protected from unfair competition within the profession as from the unauthorized practice of the law outside the profession by laymen and corporations. But this is not the only aspect of these canons. Their enforcement is of concern not merely to the members of the profession. It is equally essential to the public. Our citizens have a right to expect from the members of a learned profession who are granted by the State the privilege to practice law that they in return for this privilege will live up to the standards long recognized at common law and in large part codified in the Canons of Professional Ethics. One has but to read the three canons above referred to to see how directly and immediately they apply to the facts of this case as summarized herein: 27. ADVERTISING, DIRECT OR INDIRECT. It is unprofessional to solicit professional employment by circulars, advertisements, through touters or by personal communications or interviews not warranted by personal relations. Indirect advertisements for professional employment such as furnishing or inspiring newspaper comments, or procuring his photograph to be published in connection with causes in which the lawyer has been or is engaged or concerning the manner of their conduct, the magnitude of the interest involved, the importance of the lawyer's position, and all other like self-laudation, offend the traditions and lower the tone of our profession and are reprehensible; but the customary use of simple professional cards is not improper.    35. INTERMEDIARIES. The professional services of a lawyer should not be controlled or exploited by any lay agency, personal or corporate, which intervenes between client and lawyer. A lawyer's responsibilities and qualifications are individual. He should avoid all relations which direct the performance of his duties by or in the interest of such intermediary. A lawyer's relation to his client should be personal, and the responsibility should be direct to the client.    47. AIDING THE UNAUTHORIZED PRACTICE OF LAW. No lawyer shall permit his professional services, or his name, to be used in aid of, or to make possible, the unauthorized practice of law by any lay agency, personal or corporate. Nor do we have to look far afield for a judicial application of these canons to the facts of the pending case, for in In re L.R. supra , we dealt with a similar situation, the chief differences being (1) that in that case the business was relatively small, (2) but there the unprofessional scheme was nipped in the bud, whereas here the business ran to more than a quarter of a billion dollars worth of loans since 1945, to quote one of the mortgage company's advertisements, and has been carried on for seven years, the last two years in the face of the decision of this court in In re L.R., and (3) that the methods of the respondents here were somewhat more subtle but no less effective in getting business than were those of L.R. In the earlier case the respondent operated a realty corporation under his family name. Agents of his corporation informed prospective customers that the corporation would obtain the desired mortgage, make the title search, prepare all the legal papers, and do everything necessary to close the transaction and that, the respondent being a lawyer himself, it was not necessary for the customer to engage his own lawyer, although he might do so if he desired. The respondent paid for complimentary press notices, featuring biographical sketches of himself and including his photograph, emphasizing the corporation's volume of business and growing staff, and broadcasting that the firm has a 1-package system which includes servicing a transaction from its inception to its closing. The corporation has its own legal department which processes and expedites every mortgage applied for through the office. We there held that: The practice which has been referred to as `a one-package system' is a system whereby commercial services, including a lawyer's fee, are rendered to a person for a single charge. This throws the practice of law into a commercial atmosphere which is wholly foreign to the concept of a correct practice and which has been soundly condemned. Stack v. P.G. Garage, Inc., 7 N.J. 118, [decided May 7, 1951]; In the Matter of A.B.C., an attorney and counselor at law [7 N.J. 388, decided June 4, 1951]. The similarity between the facts in the earlier case and the facts in the pending case is striking, except that the violations here proved are far more extensive in amount, in the length of time pursued and in subtlety than they were in the earlier case, and also in willfulness in flaunting the clearcut declarations of In re L.R. In the earlier case L.R. operated a realty corporation in his family name, while here a trade name totally unrelated to either party was purchased by the respondents from a brother of one of them. L.R. testified that he telephoned his complimentary press notices to the newspaper and did not concern himself with making any corrections thereof. Here the respondent Rothman either wrote the press notices or had them written for him by publicity men or public relations counsel and sent them to the newspaper, while the respondent Irving never disclaimed any of the benefits proceeding therefrom. Neither took any steps to curb the advertising or press notices or to renounce any statements contained therein. While L.R. advertised the unusual facilities of his title plant, quick service and a one-package deal, the mortgage company here even after the decision in In re L.R. continued to advertise the unusual facilities of its title plant and quick service under one friendly roof, its equivalent of L.R.'s one-package deal. As far as the customer was concerned, everything was being done for him by the mortgage company. He saw a mortgage company and a law firm whose physical set-up and work were so intertwined that it was impossible to separate them. Rothman himself could not satisfactorily explain the arrangement between the corporation and the law firm under the contract dated July 1, 1951, whereby the law firm agreed to provide legal closing services for all real estate and mortgage transactions negotiated by Northern New Jersey Mortgage Associates. Still further proof, if any be needed, of the fusion of the respondents' professional and corporate interests may be found in Irving's explanation of his rental agreement in the new building in Teaneck: Q. What is the gist of the agreement? A. Well, on what I can afford to pay on the income that I will derive. I haven't arrived at a common denominator yet. The two cases have these salient points in common: (1) The use of extensive, extravagant advertising by a corporation owned by lawyers to produce a large volume of law business which they would otherwise not have obtained, and (2) the carrying on of the work of the corporation and of the law business as a single interrelated unit. There is little difference between the advertising done in In re L.R. and here except that here the advertising was done on a much greater scale. The attorney in the earlier case frankly advertised his one-package deal. Here the respondents just as effectively advertised their one-package deal under one friendly roof through their salesmen and also through newspaper advertising, through their common telephone and their commingled law and mortgage office. A glance at a few newspaper advertisements and articles, all admittedly printed at the instigation of Rothman and without repudiation by Irving, reveals a continual program of publicity for the company's efficient and quick service in handling mortgage loans. In addition we find many laudatory articles concerning Rothman, in many of which his background as an attorney is mentioned. Such advertising continued, even after the complaint was filed by the Ethics and Grievance Committee. Thus on November 8, 1952, there appeared on the first page of the real estate and building section of the Bergen Evening Record a large article headlined Business Volume Hits New High, Sets Theme for Firm Expansion. This article gives a summary of a statement by Rothman to the effect that he attributes the mortgage company's success to the specialized service for builders and technical current knowledge to do the job correctly, as well as a complete technical requirement aspects of conventional and Governmental financing, including application procedure in accordance with Government regulation, preliminary requirements of local and Government authorities, and procedure to insure a fast and successful moving project. Such self-praise is, of course, a clear violation of Canon 27. The three pages of advertisements and articles in the Bergen Evening Record for December 6, 1952, are especially significant in view of the fact that at that time the charges here under review had been made by the Ethics and Grievance Committee for Bergen County and the hearings before it were under way. The articles are devoted largely to an enumeration of Rothman's accomplishments. The first page carries two photographs of the new office in Teaneck, New Jersey, one of the outside of the building and the other of the title and mortgage analysis department. There is also an advertisement for the company in which is a sketch of the new office building. It mentions the complete facilities of the company and further provides Time Saved ... Expense Avoided  Loans are expedited, and expense avoided, by our knowledge of the requirements of the various government loan agencies. There is a two-column spread giving a history of the firm with a biographical sketch of and a laudatory article on Rothman. The article states that Rothman is an attorney, a graduate of Columbia University and Newark Law School, and that: Unwilling to go back to his law practice when he was handed his service discharge, Rothman scanned the field for new opportunities. He finally chose the mortgage business, deciding that his legal background, plus a knowledge of the maze of new Government regulations for veterans and nonveterans fitted him for that field. The article further provides: Success and growth of the firm is attributed by Rothman to key personnel, availability of funds even during the most stringent periods, technical know-how, and competent service.    Another ambitious undertaking of the company has been its investments in the ability of a number of young energetic builders who had the experience to go along with their ambitions. The firm backed a number of these builders financially, Rothman said, and today several are included in the State's top echelon in the construction field. On the second page, headlined Rothman Sees His Dream Come True, appear several pictures of the new offices, as well as a photograph of Rothman. Another article on Rothman states: From Columbia Rothman went to New Jersey Law School, graduating in 1939 and passing his bar examination. Then after a brief period at practicing law, Rothman went into the service.    While in the service he decided to make a phase of the real estate business his career. He formed Northern New Jersey Mortgage Associates in November, 1945 after receiving his discharge from the service, and opened an office on Engle Street in Englewood. On the same page an advertisement states, among other things: Title and Analysis Depts. Providing a service that helps to assure quick action on loan applications. Title Dept. files contain thousands of detailed maps for quick reference. The third page has a picture of the new Modernization Loan Department of the Mortgage Company, another picture of Rothman, and a photograph of the Title Closing Room. There are also two more articles. One states: The youthful executive attributes the firm's success in this department to its specialized service for builders and technical knowledge to do the job correctly. The department offers builders such services as character-zoning, availability of land, information on price fields in varied types of construction for particular sections and areas, house designs best suited for sale and mortgage purposes, complete technical requirement aspects of conventional and Governmental financing, including application procedure in accordance with Government regulation, preliminary requirements of local and Government authorities, and procedure to insure a fast and successful moving project.    `We expect to continue to supply this fine service from our new building,' says Rothman, `with our entire organization ready to serve builders, brokers, and modernization dealers and contractors.' The other provides: The company's Title Departments are headed by Garrett Cooper of Clifton and Reginald Dugdale of Totowa. Cooper, who has been in the title business for 25 years, is title officer for used construction; while Dugdale is title officer for new construction. Both men have large staffs working in their departments. These advertisements and accompanying articles, after charges made and with hearing under way and pending, are patently inconsistent with the assertions of good faith and protestations of innocence made by the respondents. They did nothing that would interfere with their business enterprise and they obviously resolved all doubts in their own favor and against the Canons of Professional Ethics, notwithstanding the fact that they must have been conscious of their precarious position. Advertising by any professional man inevitably involves self-praise and puffing. If competitive advertising among lawyers were permitted, the conscientious, ethical practitioner would be inescapably at the mercy of the braggart. An advertisement of the Northern New Jersey Mortgage Associates of September 13, 1952, in the Bergen Evening Record graphically illustrates this evil. The article quotes Rothman: According to the mortgage firm's president, his firm has been able to close more than a quarter billion dollars worth of loans since 1945 when N.N.J.M.A. was first organized in Englewood. Now regarded as one of the major finance companies in the East the Englewood firm is continuing its ambitious program of expansion with construction of a 3-story building on Cedar Lane and Red Road, Teaneck.    It will have approximately 48 offices with facilities to employ more than 175 persons.  (Emphasis supplied) Again in the Bergen Evening Record for December 6, 1952, also while the hearings were pending, a press release appeared in a special box as follows: Firm's Success Story Revealed By its Figures Teaneck: Northern New Jersey Mortgage Associates, which celebrated its seventh anniversary last month, has financed over 20,000 new homes, multi-family dwellings, commercial and industrial units for a total of $250 million. The Company also financed over 12,000 existing homes for the same period with a total mortgage volume of $14 million. The advertisements in the various exhibits in the case are replete with similar statements of which the foregoing are merely samples. The publicity program of the respondents through direct advertisements and indirect advertisements thinly disguised as newspaper articles, the direct solicitation of business by salesmen in the field, and the commissions paid real estate brokers combine to produce a tremendous volume of professional legal employment that makes the more familiar offenses of ambulance chasing and the operating of collection agencies as a facade for obtaining law work look picayune and amateurish indeed. In defense it is urged that the advertising was designed solely to promote the business of the mortgage company and not to produce law business. It is the nature of a mortgage business that it inevitably produces law business on each mortgage transaction. That the volume of the law business was substantial is revealed in the number of employees of each; as we have seen, the law partnership had from 15 to 18 employees, while the corporation had from 12 to 20, all operating out of the same offices. There are other important points in which the respondents here went far beyond L.R. in violating Canons 35 and 47. L.R. billed for and was paid fees for his legal services. Here for a full year the mortgage company received the fees paid it by its customers and paid the law partnership a flat retainer in clear violation of both Canons 35 and 47. We shall have occasion to refer again to his practice later on in dealing with the specific defenses urged by the defendants. On the other hand, even though he did no legal work, throughout the entire period of the partnership, Rothman shared in the profits, obviously as a reward for turning over to the partnership the law business of the mortgage company. It is urged that in performing the legal work in connection with a mortgage loan the law firm was acting for the financial institutions, such as banks and insurance companies, rather than the mortgage company. This, however, is not so for Rothman makes much of the point that in many cases the mortgage company itself made the mortgage loan and later sold the mortgages to various financial institutions. But even where the mortgage was taken directly by a financial institution it was the mortgage company as broker that controlled where the legal business should go. It remains to consider the defenses urged by each of the respondents. The respondent Irving in his brief and in the oral argument in his behalf cited no authorities whatsoever but made four general arguments by way of defense or in mitigation of discipline, none of which has any validity. First, it was urged that Irving is in the same position as an attorney for a savings and loan association or of a bank or trust company in passing on a mortgage loan. But a savings and loan association is a mutual institution; it is not owned by its attorneys but by its stockholders. Nor is a bank or trust company in the usual case so owned by an attorney or group of attorneys; if it were, and if it were used as a mortgage company was used here and its business were commingled with that of the law office, its conduct would be equally offensive. But such a situation is impossible, not only with a bank or trust company, but also with a savings and loan association by reason of many factors, including the official supervision of its activities, which of course does not exist in the case of the defendants' mortgage company incorporated under the General Corporation Act. Second, it is argued that after the publication of In re L.R., a case originating in Englewood where the respondents had their law offices until recently, the respondents took legal advice of several lawyers and sought to conform to their opinions as to the meaning of In re L.R. The proofs on this point are not only fatally defective, but they throw grave doubt on the good faith of the respondents in presenting their defense. Not a single written opinion is produced from any member of the bar. Not a single lawyer was put on the stand to testify to the opinion he is alleged to have given to the respondents. There is no testimony as to what facts were related to each lawyer allegedly consulted on which he might base his opinion. There is no testimony as to what the opinion of each of these lawyers was or what changes he recommended to the respondents in their operation to conform to the decision in In re L.R. If such opinions were given at all, they were curbstone opinions and worth no more than such opinions traditionally are. All that the testimony with respect to such opinions serves to do is to reveal the doubts that were existing in the minds of the respondents as to the propriety of their scheme of operations. None of the attorneys who are alleged to have given advice to the respondents were called as witnesses by the respondents and their testimony in this respect is entirely without corroboration. In this view of the facts we are not required to pass on the question of the efficacy of the advice of counsel, save to remark that this is not a suit for malicious prosecution and it is therefore difficult to perceive how the advice of counsel has any bearing upon the matter. A layman cannot excuse a violation of the law by saying that he acted on the advice of counsel, and there would appear to be no sound reason for extending such an immunity to an attorney charged with unethical conduct. Were the rule otherwise, a more effective means of circumventing the Canons of Professional Ethics could hardly be devised. Even more troublesome is the fact that the record shows that the respondents did not make the slightest effort to conform to In re L.R. ; on the contrary, they continued their soliciting and their advertising on an enlarged scale even after proceedings were commenced against them. It is important at this point to note the chronology. In re L.R. was decided on June 25, 1951. On July 1, 1951, six days later, the contract hereinbefore mentioned between the law partnership and the mortgage company was entered into whereby all legal fees were paid by the borrowers to the mortgage company, and the mortgage company paid a fixed annual sum, first of $42,000, later reduced to $33,000, to the law firm. It is impossible for us to comprehend how this can be taken as compliance with the ruling laid down in In re L.R. in which the pertinent canons, as here, were quoted at length. Third, it is argued that there are other lawyers in the State, and especially in Bergen County, who are guilty of the same offenses. This is, of course, no defense; it merely furnishes the information for the institution of disciplinary action against the offenders. Finally, it is urged in behalf of the respondent Irving that if he were guilty of the offenses charged, they were cured by the dissolution of the partnership on November 1, 1952. Passing over the question of whether the dissolution of the partnership was the result of the pending proceedings or rumors thereof, it is quite clear that the present set-up is a violation of all three canons. The mortgage company, of which Irving is still a one-third stockholder, is still advertising and still soliciting business by exactly the same methods as before. The business of Irving as a lawyer and the business of the mortgage company are still intermingled. For example, Irving testified that he did not yet know what his rent would be, even though he is a one-third owner of the corporation. Nor is it to be overlooked that Irving owes his present legal business to his long continued violations of the three canons relied on herein. The respondent Rothman, as we have said, filed no brief but at the oral argument adopted the brief filed in behalf of Irving, which had no special applicability to the case of Rothman. At the oral argument Rothman's counsel took the position that while Rothman was not practicing law, he was not bound by the Canons of Professional Ethics although still a member of the bar. It is not difficult to imagine the results which would flow from the acceptance of such a novel doctrine. Fortunately for the profession and the public alike, it has not been and is not now the law. Obligations of the lawyer are binding upon him as long as he remains admitted to the bar. The fact that an attorney is no longer practicing law does not relieve him of the responsibility of living up to the Canons of Ethics. In In re O'Neil, 228 App. Div. 129, 239 N.Y.S. 297, 299 ( App. Div. 1930), the court stated: We are of the opinion that respondent, as an attorney, was bound to practice good faith and observe the canons of ethics of his profession as fully when he became vice president or president of the [insurance] company as when he was its general counsel. Rothman has gambled for large stakes in business and has won them, but by reason of his blatent flaunting of the Canons of Professional Ethics it should be at the expense of his right to practice law. There is scarcely a phrase in Canon 27 that he has not deliberately and over a long period of years consistently violated, by soliciting professional employment, by circulars, advertisements, through touters or by personal communications or interviews not warranted by personal relations. He has disregarded the admonition that indirect advertisements for professional employment such as furnishing or inspiring newspaper comments, or procuring his photograph to be published in connection with causes in which the lawyer has been or is engaged or concerning the manner of their conduct, the magnitude of the interest involved [here a quarter of a billion dollars worth of mortgages], the importance of the lawyer's position and all other like self-laudation, offend the traditions and lower the tone of our profession and are reprehensible. He has set up a corporation between the customers he solicited and the former law firm originally and the respondent Irving now, and he has permitted the corporation to collect legal fees from these customers where the real work was done by the law firm or by Irving. Irving likewise has been a party to all of these matters and, with Rothman, has made possible the unauthorized practice of the law by their mortgage company. Both respondents are clearly guilty of violating the 27th, the 35th, and 47th Canons of Professional Ethics.