May the attorneys for a nonprofit association that runs an unemployment-compensation reserve fund represent the association's member institutions in contesting former employees' unemployment claims?

Plain-English summary

The inquiry asked whether the attorneys to an association of nonprofit institutions, which administered an "Unemployment Compensation Reserve Fund" for its members under P.L. 1971, c. 346 (N.J.S.A. 43:21-7.2), could represent each member organization in processing, investigating, and contesting former employees' claims before the Division of Employment Security and in appellate tribunals, so that the members' liabilities to the Fund could be properly determined. A member of the New Jersey Bar had to appear at each step. The Fund would pay the attorneys at the same rates the association already paid for general legal services, the member-employer was free to engage its own counsel, and although an adjudicated claim ran against the Fund, the member-employer had a stake through its experience rating and required contributions.

The Committee viewed the services as rendered to limit groundless claims and the consequent depletion of reserves, comparing United Mine Workers of America v. Illinois State Bar Association, 389 U.S. 217 (1967), where the objective was to assure adequate payments to qualified group members. It found the Unemployment Security Law serves the public interest both in assuring proper payment to qualified claimants and in protecting the economy from groundless claims, citing Campbell Soup Co. v. Division of Employment Security and Krauss v. A & M Karagheusian.

The Committee noted that the association's primary purpose was general operational assistance to members, with legal services incidental, that the employer-member would be regarded as the client though free to engage other counsel, and that neither the Fund nor the association would derive any financial benefit from the legal services. It distinguished Opinion 172 (improper for a corporation's attorney to participate in a company plan advising employees on estate plans) and Opinion 256 (disapproving a union plan to have its general counsel draw members' wills), which had applied DR 2-103(D). On the facts here, the Committee concluded the proposed legal services met the standards and criteria of DR 2-103(D) and Opinion 256 and were approved.

Currency note

This opinion was issued in 1973, before New Jersey's adoption of the 2004 revisions to the Rules of Professional Conduct, and predates the 1984 replacement of the Disciplinary Rules by the RPCs. It applied DR 2-103(D), which governed a lawyer's participation in organizations furnishing legal services; the modern treatment of professional independence and group legal services is found in RPC 5.4 and RPC 7.2. Treat this page as historical context, not current guidance. Verify against current rules before relying on any specific rule, deadline, or requirement mentioned here.

Common questions

Q: Can a nonprofit association's lawyers represent its member employers in unemployment claims?

A: Under this opinion, yes; the Committee approved the arrangement as meeting the standards of DR 2-103(D).

Q: Why was this approved when similar group-service plans were not?

A: The Committee distinguished Opinions 172 and 256 because here the member-employer was the client, was free to use other counsel, and neither the fund nor the association profited from the legal services.

Q: Who is the client in this arrangement?

A: The employer-member is regarded as the client, even though the Fund pays the attorneys and the member is free to engage its own counsel.

Background and rules framework

The opinion applied DR 2-103(D), which limited a lawyer's cooperation with organizations furnishing legal services, distinguishing earlier disapprovals where the plan benefited the organization rather than treating the member as the client. In current New Jersey terms, the professional-independence and group-legal-services questions are addressed by RPC 5.4 and RPC 7.2.

Citations and references

Rules of Professional Conduct:

• DR 2-103(D) (furnishing legal services through an organization), as in effect 1973; now addressed by MR 5.4 / NJ RPC 5.4 and MR 7.2 / NJ RPC 7.2

Statutes:

• P.L. 1971, c. 346; N.J.S.A. 43:21-7.2 (Unemployment Compensation Reserve Fund); N.J.S.A. 43:21-6 (procedures)
• N.J.A.C. 12:20-5.3 (Division of Employment Security regulations)

Cases:

• United Mine Workers of America v. Illinois State Bar Association, 389 U.S. 217 (1967)
• Campbell Soup Co. v. Division of Employment Security, 13 N.J. 431 (1953)
• Krauss v. A & M Karagheusian, 13 N.J. 447 (1953)

Other opinions cited:

• NJ ACPE Opinion 172, 93 N.J.L.J. 81 (1970); Opinion 256, 96 N.J.L.J. 745 (1973)

See also

• NJ ACPE Op. 284: Serving Tenants Through a For-Profit Corporation
• NJ ACPE Op. 335: An Attorney Organizing a Prepaid Legal Services Group
• NJ ACPE Op. 455: A Bar Foundation Legal Services Financing Plan

Source

• Full text (Justia mirror): https://law.justia.com/cases/new-jersey/advisory-committee-on-professional-ethics/2004/acp270-1.html
• Issuing authority: New Jersey Supreme Court Advisory Committee on Professional Ethics, via the NJ Courts Supreme Court Committees page

Original opinion text

Reproduced from a full-text mirror of the official opinion for research purposes. The linked official source controls.

96 N.J.L.J. 1332, November 15, 1973

OPINION 270

Representing Members of Nonprofit Association Unemployment Security Claims

Inquiry is made whether or not the attorneys to an association of nonprofit institutions, which administers an "Unemployment Compensation Reserve Fund" for its members under P.L. 1971, c. 346, N.J.S.A. 43:21-7.2, may represent each member organization, in processing, investigating and contesting the claims of former employees of such member before the Division of Employment Security and in appellate tribunals, to the end that the liabilities of the member institutions to the Fund may be properly determined. The Fund is responsible to the Division of Employment Security for reimbursement for any benefits paid by the Division on behalf of the members of the Fund.

The services to be provided include legal services, and a member of the New Jersey Bar must appear at all steps in such proceedings. See N.J.A.C. 12:20-5.3 of the Rule and Regulations of the Division of Employment Security of the New Jersey Department of Labor and Industry. And see N.J.S.A. 43:21-6 for the general procedures. The Fund will pay the attorneys on the same time basis at specified rates as the association now pays for general legal services to the association. The member-employer is free to engage its own counsel. Although an adjudicated claim is against the Fund, the member-employer has a stake in the result in respect to its experience rating and the contributions that will be required of it. And the association, as the group administering the Fund, has an interest in advancing the public benefit served by a proper and efficient management of the Fund under the Employment Security Law.

In this inquiry the legal services are being rendered to limit the payment of groundless claims and consequent depletion of the funds reserved. Cf. the situation in United Mine Workers of America v. Illinois State Bar Association, 389 U.S. 217 (1967), where the objective of the legal services provided to the union members was to assure the receipt of adequate payments to qualified members of the group. The Unemployment Security Law is designed to benefit our economy through maintenance of purchasing power and labor standards; and the public interest is served both in assuring proper payment to qualified claimants and in protecting the economy from the payment of groundless claims. See Campbell Soup Co. v. Division of Employment Security, 13 N.J. 431, 436, 100 A.2d 287, 289 (1953), and Krauss v. A & M Karagheusian, 13 N.J. 447, 455-66, 100 A.2d 277, 281 (1953). Thus, the rendition of legal services to employer-members of the association in this inquiry is in pursuit of these policy objectives and is in the public interest.

The inquiry states that the primary purpose of the association is to provide general assistance to its members to achieve operational efficiency. The addition of legal services to members in respect to claims on the Fund is incidental to the primary purpose although certainly of benefit to the members in protecting their rate of contributions. The employer-member will be regarded as the client although free to engage other counsel; and neither Fund nor association will derive any financial benefit from the legal services to be rendered the member before the Division of Employment Security. However, we recognize that an association that extends additional services to its membership generally increases its appeal to nonmembers; and to the extent that such additional services attract new members and dues there is a consequent economic benefit. The association is a nonprofit one and such economic benefit is of no consequence in the considerations of concern here.

We have already expressed our views on similar inquiries. In our Opinion 172, 93 N.J.L.J. 81 (1970), we held it improper for an attorney for a corporation to participate in a company plan for advising employees on estate plans. In our Opinion 256, 96 N.J.L.J. 745 (1973), we disapproved a plan whereby a union sought to provide the services of its general counsel to its members for drawing wills. There we discussed the standards required by Disciplinary Rule 2-103(D) effective September 13, 1971, by order of the Supreme Court of New Jersey.

However, under the facts presented in this inquiry, our opinion is that the legal services here proposed to be provided by a nonprofit association to its members to represent the members in Unemployment Security claims meet the standards and criteria of DR 2-103(D) and of our Opinion 256, supra, and accordingly, are approved.