In Debt
A decision of the New Jersey Appellate Court is summarized on the court’s web page.
The litigation was initiated after a bar discipline investigation was commenced.
That investigation was stayed pending this constitutional challenge.
In this litigation, a law firm and its partner challenge the constitutionality of the so-called “limited attorney exemption” of the Debt Adjustment and Credit Counseling Act (“DACCA”), N.J.S.A. 17:16G-1 to -9. The present case was initiated when the Office of Attorney Ethics (“OAE”) launched an investigation of plaintiffs who, among other things, represent debtors in bankruptcy and collections cases. Such debt adjustment work may violate DACCA, which prohibits debt adjusters from operating for-profit in New Jersey unless exempted by the statute.
DACCA initially exempted “any attorney-at-law of this State.” In 1986, however, the Legislature amended DACCA to narrow the exception to the current “limited attorney exemption,” which exempts only those attorneys who are “not principally engaged as debt adjuster[s].” N.J.S.A. 17:16G-1(c) (emphasis added). While rarely prosecuted, attorneys “principally engaged” in debt adjustment work may be subject to heavy civil and criminal sanctions under DACCA and the Criminal Code.
This court invalidates the limited attorney exemption within DACCA because it (1) violates principles of separation of powers, and (2) is void for vagueness.
First, this court holds that DACCA’s limited attorney exemption is an unconstitutional violation of separation-of-powers principles. As applied to attorneys who principally conduct their legal practice for clients seeking an adjustment of their debts, N.J.S.A.17:16G-1(c)(2)(a) represents an undue encroachment upon the Court’s exclusive authority to regulate attorneys set forth in Article VI, Section 2, paragraph 3 of the New Jersey Constitution.
Second, this court further holds that the limited attorney exemption is unconstitutional for its vagueness. The ambiguity of the limited attorney exemption denies attorneys due process because of the statute’s failure to provide them with fair notice of what constitutes “principal engagement.”
This court therefore reverses the trial court’s grant of summary judgment to defendants and remands the matter for further consideration of plaintiffs’ civil rights and other claims. In doing so, this court invalidates the limited attorney exemption in N.J.S.A. 17:16G-1(c)(2)(a) and its cross-reference to N.J.S.A. 2C:21-19(f). The rest of the statute remains intact.
Plaintiff
Plaintiff Anchor Law Firm represents clients in New Jersey and other states in numerous practice areas, including but not limited to, litigation defense and debt settlement. Co-plaintiff Andrew M. Carroll is a New Jersey attorney who provides legal services in his private practice to individuals and businesses in various legal areas, including bankruptcy. He is a member of the Anchor law firm, responsible for New Jersey debtor-creditor matters for Anchor’s clients.
Bar investigation
In or around March 2021, the OAE of the New Jersey Supreme Court opened an investigation to determine: (1) whether Carroll was “principally engaged” as a debt adjuster in violation of DACCA, and (2) whether Anchor engages “principally” in the practice of debt adjustment services in violation of DACCA. Sometime thereafter, the OAE administratively stayed its investigation pending the outcome of this litigation.
Separation of powers
The separation-of-powers question here therefore hinges on whether N.J.S.A. 17:16G-1(c)(2)(a), as applied to attorneys who principally conduct their legal practice for clients seeking an adjustment of their debts, represents an undue encroachment on the Court’s exclusive authority to regulate attorneys. We conclude it is.
To analyze this question of encroachment, we must consider what is meant by “the practice of law.” Our Supreme Court has long recognized the practice of law is not “limited to the conduct of cases in court but is engaged in whenever and wherever legal knowledge, training, skill and ability are required.” Stack v. P.G. Garage, Inc., 7 N.J. 118, 121 (1951). “[I]t is clear that the ‘practice of law’ is not limited to litigation, ‘but extends to legal activities in many non-litigious fields.'” State v. Rogers, 308 N.J. Super. 59, 66 (App. Div. 1998) (quoting N.J. State Bar Ass’n v. N. N.J. Mortg. Assocs., 32 N.J. 430, 437 (1960))
Regulation
Defendants argue DACCA creates no undue encroachment on the Judiciary’s exclusive authority over the practice of law because the limited exemption only permits the DOBI Commissioner and criminal prosecutors to fine and punish lawyers who are “principally engaged” in debt adjustment activities. This begs the question of whether the State Constitution permits the Executive Branch of government to regulate the debt adjustment activities of any lawyers. We conclude it does not, at least when the attorney is engaged in the practice of law.
Chilling effect
In this case, DACCA is exposing lawyers who “principally” engage in debt adjustment matters to heavy civil and criminal sanctions. That exposure can easily discourage lawyers from undertaking the representation of clients who are beset with debts and who could benefit from their expertise and services. As the court rightly observed in Furman, the activity of debt adjustment is “often an integral and essential part of an attorney’s job when [the attorney] represents a debt-ridden client.” 67 N.J. Super. at 143
(Mike Frisch)