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Question about unauthorized practice of law

August 6, 2014

This post is meant to relay information on my attempt to get a legal opinion on the topic of unauthorized practice of law as it pertains to my employee benefits practice.  I presented the facts to my own attorney and one other attorney and neither was able to offer an opinion. I am looking for an opinion on what I might do next to gain clarification on this issue and adapt suitable practices accordingly.

If it matters, my professional license is issued in DE, I work from home in PA and NJ and clients in all 50 states and DC. I have insurance licenses in all states and DC.

Facts

I maintain a collection of redacted or prototype employee benefit plan documents that I’ve accumulated over several decades. There might be 200-300 documents in all. It started when I was employed by a law firm in the early 1980s and was responsible (under the direction of an attorney) for the drafting of customized pension plan documents. As far as I know, this collection is the largest of its type focusing specifically on small business compensation planning issues. I do not have concerns about copyright; most of these documents were previously published in some public form or intended for public domain.

I am not an attorney. I seem to be more familiar with the background and structure of benefit plan documents than attorneys who have not worked in this field and so attorneys sometimes ask if I have a specific document for a specific purpose. I discuss it with them, offer a document I have, but do not charge for this service. An argument could be made that I benefitted from the documents as a form of public relations.

I have a master’s degree from a law school in compensation planning (I mention this only because training seems to play a role in the NJ definition of unauthorized practice). I also taught CPE courses for CPAs, attorneys and insurance agents in Pennsylvania and sometimes used these employee benefit plan documents as a teaching tool in the courses. So it is fair to conclude that I have experience in the field as a non-attorney.

Until recently I made my collection of documents available to the public online, attorneys and non-attorney alike, free, online and across all state lines, and without any representations as to their suitability for any purpose. I temporarily removed the collection of documents from my Web site because I felt that some were abusing my offer by distorting interpretations of the ACA. My document removal had nothing to do with the question of unauthorized practice of law.

When working with a client, I was always careful to recommend in writing that they consult an attorney before adopting any legal document and this disclosure is part of my agreement to provide service. I’ve made it clear that I am not charging for any legal documents or any part of their preparation, review or opinion as to suitability. Yet I am aware that some small business clients do use documents without consulting an attorney.

A New Jersey accountant raised the question of whether this practice might violate that state’s tough new law against unauthorized practice of law. Apparently the language and penalties of NJ’s law is tougher than in other states.

Discussion

Benefit plan documents are at the core of a compensation planning practice and I’ve operated for decades giving out these sample documents without any complaint, question or problem. I’m fond of saying that compensation planning is nothing more than the manipulation of employment contracts to achieve a desired result. Some of these documents are meant as “fill in the blank” documents, for example, the Simplified Employee Pension plan documents published on the IRS Web site.

My initial position

Until recently, I believed that this specific issue and all issues relating to ERISA plans were under the jurisdiction of federal law and not state law. I understood that employee benefits practice was exempted by the tough NJ law against unauthorized practice of law. One of the attorneys who received my inquiry did not agree and said that I should not rely solely on the ERISA pre-emption.

Review notes

Pro-consumer stance: http://www.fed-soc.org/aboutus/DownloadLibrary?id=688

NJ legal ethics: http://www.law.cornell.edu/ethics/nj/narr/

5.5:210      Practice of Law by Nonlawyers

The New Jersey Constitution provides that “[t]he Supreme Court shall have jurisdiction over the admission to the practice of law and the discipline of persons admitted.” N.J. Const. art. 6, §2, para. 3. The New Jersey Supreme Court has interpreted this paragraph as giving it “the power to punish for contempt those engaged in the unauthorized practice of law.” N.J. State Bar Ass’n v. Northern N.J. Mortgage Associates, 22 N.J. 184, 193 (1956). In an earlier case, In re Baker, 8 N.J. 321, 334 (1951), the New Jersey Supreme Court reasoned that its jurisdiction over the admission and discipline of members of the bar would be meaningless if nonlawyers were permitted to practice law “with impunity.” Consequently, the New Jersey Supreme Court concluded that the power to prevent laymen from practicing law was a necessary adjunct to its constitutionally granted authority to establish qualifications for lawyers. See id.

The New Jersey Legislature has created an additional avenue for the prevention of the unauthorized practice of law, which coexists with the judiciary’s power to punish such conduct in contempt proceedings, to enjoin and to refuse compensation.

The relevant current statute, N.J.S. 2C:21-22, treats unauthorized practice as either a disorderly persons offense or a fourth degree crime:

a. A person is guilty of a disorderly persons offense if the person knowingly engages in the unauthorized practice of law.

b. A person is guilty of a crime of the fourth degree if the person knowingly engages in the unauthorized practice of law and:

(1) Creates or reinforces a false impression that the person is licensed to engage in the practice of law; or

(2) Derives a benefit; or

(3) In fact causes injury to another.

c. For the purposes of this section, the phrase “in fact” indicates strict liability.

Pennsylvania:

Pennsylvania

Gmerek v. State Ethics Com’n, 751 A.2d 1241 (Pa.Cmwlth. 2000)

In attempting to determine the parameters of what constitutes the “practice of law”, the Pennsylvania Supreme Court stated long ago:

There is no need for present purposes to venture upon a comprehensive survey of the boundaries- -necessarily somewhat obscure–which limit the practice of law. An attempt to formulate a precise definition would be more likely to invite criticism than to achieve clarity. We know, however, that when a lawyer has, through patient years of study, acquired an understanding of the law and obtained a license to engage in its practice, he applied his knowledge in three principal domains of professional activity:

1. He instructs and advises clients in regard to the law, so that they may properly pursue their affairs and be informed as to their rights and obligations.

2. He prepares for clients documents requiring familiarity with legal principles, beyond the ken of the ordinary layman,–for example, wills and such contracts as are not of a routine nature.

3. He appears for clients before public tribunals to whom is committed the function of determining rights of life, liberty and property according to the law of the land, in order that he may assist the deciding official in the proper interpretation and enforcement of the law…

Shortz v. Farrell, 327 Pa. 81, 84, 193 A. 20, 21 (1937). Thus, although the “practice of law” may be difficult to define, it most assuredly encompasses: advising clients regarding the law; preparing documents for clients which require a familiarity with legal principles beyond the ken of the ordinary layman such as wills and contracts; and appearing for clients before public tribunals charged with the power of determining liberty or property rights. Id.

However, it is important to stress that the “practice of law” is not limited to a lawyer’s appearance in court. As it has been previously noted:

[I]t is too obvious for discussion that the practice of law is not limited to the conduct of cases in courts. According to the generally understood definition of the practice of law in this country, it embraces the preparation of pleadings, and other papers incident to actions and special proceedings, and the management of such actions and proceedings on behalf of clients before judges and courts, and, in addition, conveyancing, the preparation of legal instruments of all kinds, and, in general, all advice to clients, and all action taken for them in matters connected with the law. An attorney at law is one who engages in any of these branches of the practice of law. The following is the concise definition given by the Supreme Court of the United States: “Persons acting professionally in legal formalities, negotiations, or proceedings by the warrant or authority of their clients may be regarded as attorneys at law within the meaning of that designation as employed in this country.” [Savings Bank v. Ward, 100 U.S. 195, 199, 10 Otto 195, 25 L.Ed. 621 (1879).]

In re Duncan, 83 S.C. 186, 187-190, 65 S.E. 210, 211 (1909).

New Jersey:

In re Jackman, 761 A.2d 1103 (N.J. 2000)

The practice of law in New Jersey is not limited to litigation. State v. Rogers, 308 N.J.Super. 59, 67-70, 705 A.2d 397 (App.Div.), certif. denied, 156 N.J. 385, 718 A.2d 1214 (1998). One is engaged in the practice of law whenever legal knowledge, training, skill, and ability are required. Id. at 66, 705 A.2d 397. Other jurisdictions have adopted a similar definition. See Kennedy v. Bar Ass’n, 316 Md. 646, 561 A.2d 200, 208 (1989)(using legal education, training, and experience to apply legal analysis to client’s problems constitutes practice of law).

In re Opinion 33 of Committee on Unauthorized Practice of Law, 733 A.2d 478 (N.J. 1999)

In In re Opinion 26, supra, 139 N.J. at 340, 654 A.2d 1344, we described that standard in simple and pragmatic terms:

Practically all of the cases in this area are relatively recent. They consistently reflect the conclusion that the determination of whether someone should be permitted to engage in conduct that is arguably the practice of law is governed not by attempting to apply some definition of what constitutes that practice, but rather by asking whether the public interest is disserved by permitting such conduct. The resolution of the question is determined by practical, not theoretical, considerations; the public interest is weighed by analyzing the competing policies and interests that may be involved in the case; the conduct, if permitted, is often conditioned by requirements designed to assure that the public interest is indeed not disserved.

Our earliest precedents are faithful to that formulation. In Auerbacher v. Wood, 142 N.J.Eq. 484, 59 A.2d 863 (E. & A.1948), . . . observing that “[w]hat constitutes the practice of law does not lend itself to precise and all-inclusive definition.” Id. at 485, 59 A.2d 863

New law advisory

https://www.judiciary.state.nj.us/legis/P.L.%202011,%20c.209%20-%20Upgrades%20offenses%20related%20to%20unauthorized%20practice%20of%20law.pdf

Real estate exception is  narrowly defined:

http://njlaw.rutgers.edu/collections/ethics/cuap/cua35_1.html

Employee benefit law is governed by ERISA

http://www.americanbar.org/content/dam/aba/administrative/labor_law/meetings/2010/annualconference/060.authcheckdam.pdf

  • Treasury Circular 230 seems to override state law

NJSCPA Professional Conduct Committee weighs in:

Unauthorized Practice of Law

Pro-consumer stance: http://www.fed-soc.org/aboutus/DownloadLibrary?id=688

NJ legal ethics: http://www.law.cornell.edu/ethics/nj/narr/

5.5:210      Practice of Law by Nonlawyers

The New Jersey Constitution provides that “[t]he Supreme Court shall have jurisdiction over the admission to the practice of law and the discipline of persons admitted.” N.J. Const. art. 6, §2, para. 3. The New Jersey Supreme Court has interpreted this paragraph as giving it “the power to punish for contempt those engaged in the unauthorized practice of law.” N.J. State Bar Ass’n v. Northern N.J. Mortgage Associates, 22 N.J. 184, 193 (1956). In an earlier case, In re Baker, 8 N.J. 321, 334 (1951), the New Jersey Supreme Court reasoned that its jurisdiction over the admission and discipline of members of the bar would be meaningless if nonlawyers were permitted to practice law “with impunity.” Consequently, the New Jersey Supreme Court concluded that the power to prevent laymen from practicing law was a necessary adjunct to its constitutionally granted authority to establish qualifications for lawyers. See id.

The New Jersey Legislature has created an additional avenue for the prevention of the unauthorized practice of law, which coexists with the judiciary’s power to punish such conduct in contempt proceedings, to enjoin and to refuse compensation.

The relevant current statute, N.J.S. 2C:21-22, treats unauthorized practice as either a disorderly persons offense or a fourth degree crime:

a. A person is guilty of a disorderly persons offense if the person knowingly engages in the unauthorized practice of law.

b. A person is guilty of a crime of the fourth degree if the person knowingly engages in the unauthorized practice of law and:

(1) Creates or reinforces a false impression that the person is licensed to engage in the practice of law; or

(2) Derives a benefit; or

(3) In fact causes injury to another.

c. For the purposes of this section, the phrase “in fact” indicates strict liability.

Pennsylvania:

Pennsylvania

Gmerek v. State Ethics Com’n, 751 A.2d 1241 (Pa.Cmwlth. 2000)

In attempting to determine the parameters of what constitutes the “practice of law”, the Pennsylvania Supreme Court stated long ago:

There is no need for present purposes to venture upon a comprehensive survey of the boundaries- -necessarily somewhat obscure–which limit the practice of law. An attempt to formulate a precise definition would be more likely to invite criticism than to achieve clarity. We know, however, that when a lawyer has, through patient years of study, acquired an understanding of the law and obtained a license to engage in its practice, he applied his knowledge in three principal domains of professional activity:

1. He instructs and advises clients in regard to the law, so that they may properly pursue their affairs and be informed as to their rights and obligations.

2. He prepares for clients documents requiring familiarity with legal principles, beyond the ken of the ordinary layman,–for example, wills and such contracts as are not of a routine nature.

3. He appears for clients before public tribunals to whom is committed the function of determining rights of life, liberty and property according to the law of the land, in order that he may assist the deciding official in the proper interpretation and enforcement of the law…

Shortz v. Farrell, 327 Pa. 81, 84, 193 A. 20, 21 (1937). Thus, although the “practice of law” may be difficult to define, it most assuredly encompasses: advising clients regarding the law; preparing documents for clients which require a familiarity with legal principles beyond the ken of the ordinary layman such as wills and contracts; and appearing for clients before public tribunals charged with the power of determining liberty or property rights. Id.

However, it is important to stress that the “practice of law” is not limited to a lawyer’s appearance in court. As it has been previously noted:

[I]t is too obvious for discussion that the practice of law is not limited to the conduct of cases in courts. According to the generally understood definition of the practice of law in this country, it embraces the preparation of pleadings, and other papers incident to actions and special proceedings, and the management of such actions and proceedings on behalf of clients before judges and courts, and, in addition, conveyancing, the preparation of legal instruments of all kinds, and, in general, all advice to clients, and all action taken for them in matters connected with the law. An attorney at law is one who engages in any of these branches of the practice of law. The following is the concise definition given by the Supreme Court of the United States: “Persons acting professionally in legal formalities, negotiations, or proceedings by the warrant or authority of their clients may be regarded as attorneys at law within the meaning of that designation as employed in this country.” [Savings Bank v. Ward, 100 U.S. 195, 199, 10 Otto 195, 25 L.Ed. 621 (1879).]

In re Duncan, 83 S.C. 186, 187-190, 65 S.E. 210, 211 (1909).

New Jersey:

In re Jackman, 761 A.2d 1103 (N.J. 2000)

The practice of law in New Jersey is not limited to litigation. State v. Rogers, 308 N.J.Super. 59, 67-70, 705 A.2d 397 (App.Div.), certif. denied, 156 N.J. 385, 718 A.2d 1214 (1998). One is engaged in the practice of law whenever legal knowledge, training, skill, and ability are required. Id. at 66, 705 A.2d 397. Other jurisdictions have adopted a similar definition. See Kennedy v. Bar Ass’n, 316 Md. 646, 561 A.2d 200, 208 (1989)(using legal education, training, and experience to apply legal analysis to client’s problems constitutes practice of law).

In re Opinion 33 of Committee on Unauthorized Practice of Law, 733 A.2d 478 (N.J. 1999)

In In re Opinion 26, supra, 139 N.J. at 340, 654 A.2d 1344, we described that standard in simple and pragmatic terms:

Practically all of the cases in this area are relatively recent. They consistently reflect the conclusion that the determination of whether someone should be permitted to engage in conduct that is arguably the practice of law is governed not by attempting to apply some definition of what constitutes that practice, but rather by asking whether the public interest is disserved by permitting such conduct. The resolution of the question is determined by practical, not theoretical, considerations; the public interest is weighed by analyzing the competing policies and interests that may be involved in the case; the conduct, if permitted, is often conditioned by requirements designed to assure that the public interest is indeed not disserved.

Our earliest precedents are faithful to that formulation. In Auerbacher v. Wood, 142 N.J.Eq. 484, 59 A.2d 863 (E. & A.1948), . . . observing that “[w]hat constitutes the practice of law does not lend itself to precise and all-inclusive definition.” Id. at 485, 59 A.2d 863

New law advisory

https://www.judiciary.state.nj.us/legis/P.L.%202011,%20c.209%20-%20Upgrades%20offenses%20related%20to%20unauthorized%20practice%20of%20law.pdf

Real estate exception is  narrowly defined:

http://njlaw.rutgers.edu/collections/ethics/cuap/cua35_1.html

Employee benefit law is governed by ERISA

http://www.americanbar.org/content/dam/aba/administrative/labor_law/meetings/2010/annualconference/060.authcheckdam.pdf

  • Treasury Circular 230 seems to override state law

Model complaint:

http://www.judiciary.state.nj.us/criminal/charges/unprlaw.doc

Employee benefits planning as an exception:

N. J. Comm. on Unauth. Pract. Op. 22 (Mar. 22, 1979)

An excellent source regarding these exceptions can be found at Chapter 39 of Michels, New Jersey Attorney Ethics (Gann 2013).

Economic protectionism

http://ir.lawnet.fordham.edu/cgi/viewcontent.cgi?article=4997&context=flr

Michael Gould does not address the exceptions, specifically employee benefits.

Model complaint:

http://www.judiciary.state.nj.us/criminal/charges/unprlaw.doc

Employee benefits planning as an exception:

N. J. Comm. on Unauth. Pract. Op. 22 (Mar. 22, 1979)

An excellent source regarding these exceptions can be found at Chapter 39 of Michels, New Jersey Attorney Ethics (Gann 2013).

Economic protectionism

http://ir.lawnet.fordham.edu/cgi/viewcontent.cgi?article=4997&context=flr

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