Bona Fide Office Rule in New Jersey: No Virtual Law Firms

New Jersey is one of the few states that has what is known as a “bona fide office” rule. A NJ Bar Committee recently endorsed the role and this has created a lively debate within the legal blogosphere. [ See ABA Journal Article ].

“Virtual law offices” violate the state requirement for a bona fide office, according to a joint opinion by the New Jersey Advisory Committee on Professional Ethics and the Committee on Attorney Advertising. See Opinion ACPE 718/CAA 41.

Rule 1:21-1(a) requires that a New Jersey attorney maintain a bona fide office for the practice of law.

For the purpose of this section, a bona fide office is a place where clients are met, files are kept, the telephone is answered, mail is received and the attorney or a responsible person acting on the attorney’s behalf can be reached in person and by telephone during normal business hours to answer questions posed by the courts, clients or adversaries and to ensure that competent advice from the attorney can be obtained within a reasonable period of time.

The purpose, according to the opinion, is to make sure lawyers are available and can be found by clients.

The Committee quotes on a 1994 Opinion:See Committee on Attorney Advertising Opinion 19, 138 N.J.L.J. 286, 3 N.J.L. 1821 (September 19, 1994):

“A so-called “virtual office” does not qualify as a bona fide office. A “virtual office” refers to a type of time-share arrangement whereby one leases the right to reserve space in an office building on an hourly or daily basis. Accordingly, an attorney’s use of a “virtual office” is by appointment only. The office building ordinarily has a receptionist with a list of all lessees who directs visitors to the appropriate room at the appointed time. Depending on the terms of the lease, the receptionist may also receive and forward mail addressed to lessees or receive and forward telephone calls to lessees.”

“As noted above, a bona fide office is, in part, a place where “the attorney or a responsible person acting on the attorney’s behalf can be reached in person and by telephone during normal business hours to answer questions posed by the courts, clients or adversaries . . . .” R. 1:21-1 (a). A “virtual office” cannot be a bona fide office since the attorney generally is not present during normal business hours but will only be present when he or she has reserved the space. Moreover, the receptionist at a “virtual office” does not qualify as a “responsible person acting on the attorney’s behalf” who can “answer questions posed by the courts, clients or adversaries.” Presumably, the receptionist can redirect a telephone call to the attorney lessee of the “virtual office” much like an answering service, but would not be privy to legal matters being handled by the attorney and so would be unable to “act[] on the attorney’s behalf” in any matter.”

Note that this is a “1994” Opinion that was published before the Internet affected every aspect of American society. Stephanie Kimbro in her post of this topic correctly points out that the Committee is solely focused on “physical office sharing” arrangements and not the concept of the “Web-based virtual office” that is designed to serve clients exclusively over the Internet. A pure “virtual law firm” that operates solely on the Internet, has the capacity of offering legal services at much lower fees, because of less “friction” in the transaction, resulting in increased access to the legal system for clients who can't afford the the high fees of a traditional legal practice.

Carolyn Elefant in her blog, MyShingle thinks the rule is moronic because it is out of touch with modern Internet technology, increases the cost of running a solo practice, which therefore increases the costs to consumers who are looking for lower priced legal services. She argues that the ruling discriminates against work at home parents with child care responsibilities, Although “home offices” are permitted, provided the address of the home office is published.

Brian Tannenbaum, who writes the blog My Law License, agrees with the opinion because he states that he is a “traditionalist”, consumers should not be telling the legal profession how to practice law, and cites the Florida bona fide office rules where he practices, as another good example of a state that is seeks to maintain high standards of legal practice.

Josh King, AVVO General Counsel and Vice President for Business Development, agrees with Carolyn Elefant, that the impact of this ruling is to increase the overhead of solo practitioners and the cost of legal services to consumers.

This issue has been debated or a long period of time. In a 2002 article in the New York Times it was reported that the real reason for the rule is to keep lawyers who are a member of the New Jersey bar, but who practice elsewhere, such as Philadelphia, from encroaching on the territory of “traditional” law firms in New Jersey.

One Philadelphia lawyer commenting on the rule stated:

“In this age of Internet, e-mail, overnight delivery, and faxes, we're dealing with people all over the world, and this clearly is a protectionist stance,” said Leonard Bernstein of Reed Smith, a Philadelphia-based law firm. “The New Jersey lawyer is an anachronism that is out of step with the times, and the rule should be changed.”

What was true in 2002, is even more true today. The Internet is changing the way legal services are delivered and for solos and small law firms to remain competitive with non-lawyer online legal service providers like LegalZoom, who continue to take market share from solos and small law firms. This is a blow to innovation in the delivery of legal services. I wish the Committee would have examined more closely developments in Internet and information technology generally as these developments are providing the platform for a new way of delivering legal services.

The Opinion reinforces the market position of established law firms who already have made an investment in physical offices and continue to offer legal services based on a high cost, bill by the hour economic model. The “traditional” model works best for certain kinds of cases and certain kinds of clients, but our market research shows that millions of consumers are turning their backs on the legal profession and searching for lower cost alternatives, often on the Internet. It is interesting that none of these considerations enter into the analysis of the NJ Bar committee. It is as if the Committee is stuck in 1994 and is unaware of the changing patterns of legal service delivery that are being driven by the Internet.

In fact, the ruling is not in the consumer interest. The ruling will raise law firm costs and restrict competition in the legal profession in New Jersey, and raises costs to consumers. The United Kingdom recently reorganized the legal profession by taking the subject of law firm regulation away from the legal profession and putting it in the hands of an official who would be more sensitive to consumer needs and interests. Perhaps it is time to do the same in the United States. If state bar associations make regulatory decisions which in fact are designed to maintain the status quo of established law firms within their states, at the expense of consumer interests and innovation in the delivery of legal services, perhaps it is time for more fundamental change in the way the legal profession is regulated.

photo image from second life video game: Panel on "Real Laws in Virtual Spaces"

[thanks to kaseido and richard granat via cc]