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Ellenstein v. Herman Body Co.

Decided: February 4, 1957.


For affirmance -- Justices Heher, Oliphant, Burling and Jacobs. For reversal -- Chief Justice Vanderbilt.

Per Curiam

The judgment is affirmed for the reasons expressed in the opinion of Judge Weintraub in the court below.

On appeal from a judgment of the Superior Court, Law Division, where Judge Weintraub delivered the following oral opinion.

"Plaintiff sues to recover the balance payable under a contract in writing between Ellenstein & Cooper, to whose interest plaintiff is entitled as assignee on dissolution, and Unique Art Manufacturing Company, the defendant, now known as the Herman Body Company.

"The contract consists of two letters, a letter signed by Ellenstein, addressed to Berger of Unique Art Manufacturing Company dated October 11, 1950, and a letter of Unique Art Manufacturing Company, Inc., signed by Berger as president, addressed to Ellenstein & Cooper, dated October 26, 1950. Ellenstein's letter describes the subject matter as follows: 'You are engaging our firm as your representative to negotiate on behalf of your firm with the employees of Unique Art Manufacturing Company and for services for a period of two years commencing December 1, 1950, as labor relations consultant.' The letter of Unique Art to Ellenstein & Cooper uses essentially the same language. It reads: 'We are engaging your firm to represent us in our negotiations with our employees and the CIO union and for your services as labor relations consultant for a period of two years commencing with December 1, 1950 at a yearly payment of $10,000 on condition that a contract with the union ensue.' The contract referred to in the letter of the Unique Art Manufacturing Company did come into being; it is Exhibit P-3 dated November 9, 1950.

"The defendant does not deny the making of the contract, does not deny performance by the plaintiff, and suggests the existence of no defense whatever to this action other than that plaintiff was engaged to render services as a member of the Bar and that this court should exercise its equitable powers and judicial superintendence of engagements between attorney and client to determine whether the contract is fair and whether the compensation claimed is a reasonable sum for the services rendered.

"I just note in passing a circumstance that Mr. Kessler referred to, namely, that there was a change in the ownership of the company. The theory upon which a court of equity will inquire into the contractual relationship between lawyer and client stems from the existence of a fiduciary relationship between the parties. Equity deems it appropriate that inquiry be made to be sure that there was no overreaching or abuse of the fiduciary relationship, perhaps even with respect to a large corporation, because there are individuals as stockholders who realistically stand behind the company. If we get behind the corporate veil we find a rather anomalous situation, namely, that the individuals who urge this challenge are not the ones who were involved in the transaction and hence in effect they are urging that there was unfairness exhibited by the plaintiff toward other individuals.

"Moreover, there was an understanding that the claim of the plaintiff would be taken care of. By that I mean it appears from the testimony that in connection with the sale of the stock there was an examination of the liabilities of the company for the purpose of determining the value of the shares and the item for which plaintiff sues was upon the books and hence affected the purchase price. However, I don't think that I should attempt to dispose of this matter upon the approach that the individuals actually concerned in the making of the contract have not charged overreaching. I will assume for present purposes that a corporation is entitled to the equitable inquiry notwithstanding the mentioned circumstances. Hence I proceed to the question whether this is an action for compensation for legal services or an action for compensation under a contract for non-legal services.

"It should be noted that the contract itself -- I refer to the two letters -- nowhere explicitly suggests that plaintiff was engaged to render legal services. The engagement is to represent the corporation to negotiate on behalf of the firm with employees of Unique Art Manufacturing Company and for services for a period of two years as labor relations consultant. I emphasize the word consultant and point out that the word lawyer or attorney or the like was not used. There is no doubt that attorneys engaged as attorneys frequently spend a good part of their time in the pursuit of matters which are not, strictly speaking, the practice of law. Every practicing lawyer knows that he has difficulty in his endeavor to have the client understand where the lawyer's function ends and the client's obligation to use sound business judgment begins. It is not at all uncommon when a lawyer is engaged to furnish legal services in the preparation of a contract in connection with some transaction that he soon finds himself negotiating business terms. That kind of negotiating is something that a broker could do and usually is expected to do. It is not the practice of law as such.

"It is my belief that the controlling circumstance is whether the attorney was in fact engaged for the purpose of obtaining his legal services. If he was so engaged, then the fact that in the course of the rendition of the services he stepped beyond the strictly legal role to undertake to render services which a non-lawyer could render, would not justify the conclusion that he was engaged other than as a lawyer. On the other hand if he is engaged for the rendition of work which inherently is not the practice of law and his knowledge of law may along the line come into play, the engagement is for non-legal work. I think this is essentially the test which is set forth in Auerbacher v. Wood, 142 N.J. Eq. 484 (E. & A. 1948). In that case the court recognized that a labor relations consultant is a business entrepreneur, separate and distinct from a lawyer.

"The court said at page 485 [of 142 N.J. Eq. ]:

'Thus, defendant announced his intention to practice the profession of a consultant in industrial relations and personnel management; and where the use of such practitioner's knowledge of the law, whether he be a trained lawyer or layman, is but an incident of the practice of this calling, he is not engaged in the practice of law within the intendment of regulations forbidding that pursuit to those not duly licensed.

What constitutes the practice of law does not lend itself to precise and all-inclusive definition. There is no definitive formula which automatically classifies every case. The field of industrial relations, while it overlaps the law in some areas, like other professions and businesses, is yet in its major aspects and objective separate and distinct from the practice of the law and is not in essence of the domain for reasons of policy assigned to the practitioner of the law. The contentions and problems growing out of the industrial relation and personnel administration involve in the main sociological, economic and public relation factors and administrative policies, procedures and practices wholly unrelated to the practice of law. This has become a specialty due to the intricacies of labor-management relations in a complex society; and the use of the specialist's knowledge of the law as a mere incident of the application of his skill in and understanding of related scientific principles, policies and technique and his training and experience in administrative procedures, now the subject of college classroom instruction as a technical profession in itself, toward the ...

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