JAMS Disputes NJ’s Classification of its Operations as the Practice of Law

By Elena Gurevich

Earlier this month the New Jersey Supreme Court granted a cert petition request by JAMS, the nation’s largest private alternative dispute resolution provider, giving the organization a chance to argue that the retired lawyers and judges who serve on its neutrals’ panels are not practicing law, and therefore do not have to comply with all the state’s requirements for doing so.

In August 2016, JAMS filed a request for an advisory opinion from three New Jersey Supreme Court committees as to whether it could open an office to provide neutral services “without the requirements of a law office practice.”

Having reviewed the committee and Court opinions that guide New Jersey law practice, JAMS concluded that so long as its ADR office is “maintained as a business which does not offer or advertise traditional legal services where there is an attorney-client relationship, this business may be independently maintained, even though staffed by retired judges and lawyers who act as Neutrals in providing ADR services such as mediation, arbitration and the like and are held out to the public using the designation retired judge or ‘Esq.’ for lawyer neutrals.”

JAMS is a nearly 40-year-old Irvine, Calif.-based firm that focuses on mediating and arbitrating complex business and commercial cases via its panel of neutrals. See www.jamsadr.com. The ADR provider has offices in 14 states, the District of Columbia, and in London and Toronto.

JAMS agreed that its New Jersey lawyer-neutrals are subject to the Rules of Professional Conduct for lawyers, but argued that the New Jersey requirements for a traditional law practice “are not necessary for the provision of neutral services in the state.”

On May 1, 2017, three New Jersey Supreme Court advisory committees—the Advisory Committee on Professional Ethics, the Committee on the Unauthorized Practice of Law and the Committee on Attorney Advertising—responded to JAMS’ request with a joint advisory letter decision that says that the state’s ethics rules apply to the provider.

The consequences of the determination are that JAMS would need to open a bona fide office in the state, and maintain a trust account.

Predominantly relying upon ACPE Opinion 676/CAA Opinion 18 (April 1994)(available at http://bit.ly/2hRLF7E), the joint committee decision advised that, because the lawyers and retired judges at JAMS work as third-party neutrals, they are engaged in the practice of law and as such must “comply with the rules governing lawyers in private practice.”

On June 30, JAMS filed a petition to New Jersey Supreme Court seeking review of the joint decision. JAMS asserted that as a provider of “non-traditional legal services” it does not establish any attorney-client relationship.

The state’s top Court granted the petition on Oct. 4.

In the petition, JAMS cited a University of Baltimore law review article asserting that mediation “is not the practice of law because it is not illegal for non-lawyers to be mediators.” Robert Rubinson, “The New Maryland Rules of Professional Conduct and Mediation: Perplexing Questions Answered and

Perplexing Questions That Remain,” University of Baltimore Law Forum Vol. 36: No. 1, Article 2 at 12 (available at http://bit.ly/2yEf8fk).

The article also emphasizes the definition of mediation that involves mediators “who, without providing legal advice, assist the parties in reaching their own voluntary agreement.” That, according to the article, signified the fact that under Maryland law mediators are not practicing law.

In its joint answer brief prepared by the state attorney general’s office and filed Aug. 30, the Supreme Court committees reject the argument. saying that the Maryland law “carries no weight in New Jersey” since the jurisdiction uses a different analysis when it tries to determine if someone has engaged in the unauthorized practice of law. It explains that New Jersey “first decides whether an activity constitutes the practice of law; it then considers whether, if non-lawyers engage in that activity, it is in the public interest to permit them to continue.”

The joint answer also notes that the attorney-client relationship was “immaterial to the issue.” Instead, it focuses on the public interest and regulation of neutral services, saying it was “germane to the Committees ‘ analysis.”

According to the joint answer, the Court committees “sufficiently addressed” the public interest concerns in their decision, pointing out that JAMS’ “expressly markets its neutrals’ legal experience and skill through their roles as lawyers and retired judges.” The committees expressed their concern that JAMS’ prospective customers “are entitled to rely on that experience and those designations in their selection of a neutral, calling for proper regulation of “these individuals.”

JAMS filed a Sept. 18 reply brief arguing that “[p]ermission for N.J. admitted lawyers and retired judges to conduct a neutral practice under the JAMS umbrella does not diminish regulatory oversight or the public interest.”

JAMS asserted that it mentioned the Maryland law review article simply to “illustrate the shift by other courts throughout the nation towards acceptance of the provision of neutral services as not being tantamount to the practice of law.  . . .”

JAMS also underscored that it did not “seek to redefine how ADR practice in New Jersey fits into law,” asking the court to recognize that practice has evolved immensely over the past 20 years since Joint Opinion 676, discussed above, was issued.

The ADR provider drew the court’s attention to the dichotomy Joint Opinion 676 presented. According to the reply brief, “an ADR neutral’s practice is a part of law practice,” but the joint opinion simultaneously recognizes that non-admitted lawyers and other professionals also may practice in the field. JAMS opined, “It would be helpful and in the public interest for the court to address this dichotomy.”

JAMS expects to file a supplemental brief on or before Nov. 13, according to its attorney, Robert Margulies, of Jersey City, NJ’s Margulies & Wind. The joint committee’s response brief would be due on or before Dec.18.

The Court’s acceptance of the case was first reported in Michael Booth, “Justices Will Hear JAMS Challenge to NJ Ethics Rules,” N.J.L.J. (Oct. 10)(available at http://bit.ly/2hSuMdg).

 

The author, who has just completed her L.L.M. with a focus on IP law at Cardozo School of Law in New York, is a 2017 CPR Institute Fall Intern.

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