This is a status report provided by the New Jersey State Bar Association on recently passed and pending legislation, regulations, gubernatorial nominations and/or appointments of interest to lawyers, as well as the involvement of the NJSBA as amicus in appellate court matters. To learn more, visit njsba.com.
The New Jersey State Bar Association requested a stay of the enforcement of an Advisory Committee on Professional Ethics (ACPE) opinion about referral fees, which has upended a decades-long interpretation of the rule governing the ability of certified trial attorneys to pay such fees.
The NJSBA is seeking a stay of Opinion 745, pending a disposition of various petitions for review of the opinion pending before the state Supreme Court, noting the potential harm that will be caused by enforcement of the opinion. Opinion 745 interprets the New Jersey Rules of Court to prohibit referral fees from certified trial attorneys to out-of-state lawyers, calling the fees compensation for legal services. In its petition, the NJSBA urged the Supreme Court to reverse the decision, arguing the plain language of the rule says otherwise. NJSBA Treasurer Diana C. Manning, Christina Vassiliou Harvey and Kyle A. Valente wrote the brief.
“A certified trial attorney has three choices upon the resolution of a pending matter that has been referred by an out-of-state attorney, in the aftermath of Opinion 745,” the NJSBA said in a brief signed by NJSBA President William H. Mergner Jr. advocating for the stay.
“One, an attorney may refuse to pay the referral fee ‘earned’ at the time of the referral and risk a claim for breach of contract. Two, the attorney may pay the referral fee in the face of a clear pronouncement by the ACPE that the payment of such fee is not ethical and risk prosecution for an ethical violation. Three, the attorney may retain the referral fee funds until the requested review of Opinion 745 is resolved,” the brief said.
The ACPE declined to stay the matter, saying it does not have such authority. The NJSBA noted the entity has issued a stay in at least one previous matter.
The NJSBA argued Opinion 745 misinterprets the plain language of R. 1:39(6)(d), which permits referral fees to be paid by a certified trial attorney to “the referring attorney or referring attorney’s estate… without regard to services performed or responsibility assumed by the referring attorney…” The ACPE has interpreted this to mean that only New Jersey attorneys may receive a referral fee. The NJSBA disputes that conclusion.
The rule is clear and unambiguous, said the NJSBA in its reply brief. “The ACPE does not refute in a meaningful way the connection that because the terms ‘out-of-state attorney’ and ‘New Jersey attorney’ appear elsewhere in the Court Rules, the fact that Rule 1:39-6(d) does not have these qualifications indicates that the intent was to apply to ‘all attorneys’ without qualification.”
In its stay request, the NJSBA said that enforcement of Opinion 745 puts in jeopardy a civil trial attorney who declines to pay a promised referral fee. That attorney could face “costly litigation” for failure to pay the fee in the face of case law that clearly compels such payment. On the flipside, payment of a referral fee could land the certified trial attorney with an ethics complaint for failure to abide by Opinion 745. Additionally, there are tax ramifications as a result of this conflict for the law firm who receives the referral fee and the law firm who initiated the referral, neither of which has received the benefit of the actual funds at the time the tax obligation is due.
The NJSBA cautioned further that potential clients with out-of-state attorneys may also suffer if they are unable to avail themselves of the benefits of a certified trial attorney with procedural and substantive knowledge of New Jersey law. “Out-of-state attorneys may delay referring cases to a New Jersey attorney to await the outcome of the Court’s potential review in this matter,” the NJSBA stated. “Such a delay may, unbeknownst to the out-of-state attorney, cause peril for litigants, because there are strict time and substantive requirements for various types of litigation, such as the need to file a Tort Claims Notice or an Affidavit of Merit.”
The Bergen, Essex, Hudson, Middlesex and Monmouth county bar associations joined in the NJSBA petition for review. Several other groups filed individual petitions for review of the opinion, including the New Jersey Association of Justice, the Trial Attorneys of New Jersey, the American Board on Trial Advocacy and the law firm of Blume, Forte, Fried, Zerres & Molinari, P.C. The petitions for review and the request for a stay are pending before the state Supreme Court.