Written by: Stephen R. Nehmad, Esquire

You are a land use practitioner who handles objectors work, as well as applicant's work. A very financially responsible business entity ("Redco") contacts you to represent them in opposing the application for variance relief and site plan approval that a business competitor ("Blueco") has filed in an adjacent municipality. The prospective client says that he wants to go "all out" to stop or delay this application for development at any and all cost.

Like so many other answers to legal questions presented by various factual predicates, the answer is of course "it depends" but in all likelihood you may not. If Redco wishes to make all decisions concerning the conduct of the opposition in any ensuing litigation to the exclusion of the neighboring clients who you will, with their consent, indicate you are representing, the answer is that 2 you may not ethically undertake the opposition case under existing decisional law. If, however, Redco says that the neighboring land owners who you will represent may make all strategic decisions concerning your conduct in handling of the opposition and any ensuing litigation (an unlikely prospect) then the answer is that you may ethically undertake the case. This article explains why the answer is perplexing and often misunderstood.

In the matter of In Re State Grand Jury Investigation, 200 N.J. 481 (2009), the New Jersey Supreme Court has determined that under the Rules of Professional Conduct a lawyer may only "accept payment, directly or indirectly, from a third party provided each of the following six conditions is satisfied" (emphasis added): 

(1) The informed consent of the client is secured; 

(2) The third-party payer is prohibited from, in any way, directing, regulating or interfering with the lawyer's professional judgment in representing his client; 

(3) There cannot be any current attorney-client relationship between the lawyer and the third-party payer; 

(4) The lawyer is prohibited from communicating with the third-party payer concerning the substance of the representation of his client; 

(5) The third-party payer shall process and pay all such invoices within the regular course of its business, consistent with the manner, speed and frequency it pays its own counsel; 

(6) Once a third-party payer commits to pay for the representation of another, the third-party payer shall not be relieved of its continuing obligations to pay without leave of court brought on prior written notice to the lawyer and the client. 200 N.J. at 481, 495-496 (2009).

As explained by our Supreme Court, these factors result from a "synthesis of [Rules of Professional Conduct] 1.7(a)(2), 1.8(f) and 5.4" and thus apply "[r]egardless of the setting - whether administrative, criminal or civil, either as part of an investigation, during grand jury proceedings, or before, during and after trial." See In Re Grand Jury, supra at 495 (emphasis added).

In our hypothetical, it is highly likely that Redco, as the company paying the legal fees and desiring to inhibit, thwart or delay business competition, will most assuredly want to have a meaningful say in the conduct of the opposition and any ensuing litigation. Accordingly, under factors (2) and (4) set forth above established in In Re Grand Jury, supra, counsel would be prohibiting from representing the named residence only in the land use opposition case. Note that a different result would likely ensue in the highly unlikely event that Redco was willing to allow the neighboring property owners to control the conduct of the opposition case, and any potential litigation, and Redco further agreed to be barred from receiving communications concerning the opposition case in any future litigation ensuing should an approval be granted.

It is noteworthy that although the In Re Grand Jury case obviously arose in the context of a criminal proceeding, the Supreme Court was very careful to note that its holding applies regardless of the setting. That is, the holding applies to administrative, criminal and civil proceedings as specifically stated by the Court. Clearly the proceeding before the local Land Use Board would be an administrative proceeding, and obviously any ensuing prerogative writ action would be a civil proceeding.

The lesson of the case is that applicant's counsel should be on the alert whenever objector's counsel indicates that he or she is representing neighboring property owners and applicant's counsel has reason to believe that there may be funding of the opposition by a business competitor. Conversely, objector's counsel must be careful to note the admonitions of In Re Grand Jury as representing named neighbors who clearly have standing at the expense of a business competitor who is funding the opposition but does not want to be named.