Federal court rebukes challenge to 19th century NYS law requiring non-resident attorneys to maintain a physical office in New York.
In a two-to-one split decision released on April 22, 2016, the U.S. Court of Appeals for the Second Circuit held that a New York State law requiring non-resident attorneys to have a physical office address in New York did not violate the privileges and immunities clause of the U.S. Constitution.
The case was initially brought by Ekaterina Schoenefeld, a New Jersey resident and solo attorney who is admitted to practice law in New York. Schoenefeld claimed that New York State Judiciary law §470 was unfairly burdensome to non-resident attorneys and violated the Privileges and Immunities Clause.In disappointing decision, court upholds antiquated attorney office requirement law. Click To Tweet
Schoenefeld won her motion for summary judgment in 2011 and the State appealed that decision. The circuit court certified to the New York Court of Appeals the question of “what are the minimum requirements” necessary to satisfy §470.
Earlier ruling seen to bolster Schoenefeld’s argument
In 2015, the Court of Appeals indicated that §470’s plain language requires non-resident attorneys to maintain a physical office in New York. According to many experts, including Schoenefeld, the Court of Appeals’ strict interpretation of the statute was seen as bolstering Ms. Schoenefeld’s argument.
The circuit court thought otherwise. In the majority opinion, the court found that §470 “was enacted not for a protectionist purpose to favor New York resident attorneys but, rather, to provide a means whereby nonresidents could establish a physical presence in the state akin to that of residents, thereby resolving a service concern while allowing nonresidents to practice law in the state’s courts.” Further, the court held that what Schoenefeld sought was “not to practice law in New York on the same conditions as a resident attorney who by virtue of home (or home and office) maintains a physical presence in the state. Rather, she seeks to practice law on different terms, specifically, without maintaining a physical presence in the state.”
In December 2015, I had the privilege of participating in a NYS Bar Association CLE panel discussion about this issue with Ms. Schoenefeld and other legal ethics experts. The consensus among the panelists was that Ms. Schoenefeld had a very persuasive argument. The unfavorable outcome in Ms. Schoenefeld’s case was clearly unexpected.
Now what? How should non-resident attorneys comply with §470?
Under New York Judiciary Law (“NYJL”) § 470, an out-of-state attorney who is licensed to practice in New York can do so if they maintain an “office for the transaction of law business” within the State of New York. Section 470 differentiates between instate and out-of-state residents, presumably, because an instate resident can use his or her home within New York State as the firm’s law office.
The trouble for non-resident attorneys is that there is no explicit guidance from the Rules of Professional Conduct or the legislature about what constitutes “an office for the transaction of law business”. Attorneys are left to figure it out for themselves.
According to case law, a traditional office or deskspace rental would meet the §470 office requirement. See, for example, Austria v. Shaw, 143 Misc. 2d 970 (1989); Rosenshein v. Ernstoff, 176 AD 2d 686 (App. Div. 1991); and Matter of Scarsella, 195 AD 2d 513 (App. Div 1993).
I also continue to maintain that non-resident attorneys can satisfy the requirements of §470 with an inexpensive and ethically compliant virtual office rental in New York. I have based this position on available case law, formal ethics opinions and policy statements made in the State’s filings in Schoenefeld. This video outlines my analysis.
Based on the lack of cases brought against non-resident practitioners, it would appear that the State doesn’t have an appetite for enforcing Judiciary Law §470. However, it has been used as a tool for litigators to get the pleadings of non-resident adversaries dismissed, creating situations where a client’s case could be prejudiced, and potentially exposing attorneys to malpractice claims or disciplinary actions.
What’s the future for the Judiciary Law §470 office requirement?
The earlier district court rulings in favor of Ms. Schoenefeld resonated with solo attorneys around the country, especially those who have licenses to practice in multiple jurisdictions. This has motivated ethics regulators in many states to re-examine their out-of-date law office requirements. New Jersey is one of the more recent states to do so.
In the case of §470, the lawyer office requirement was originally enacted in 1862 in a predecessor statute. According to the circuit court, it was “a means to ensure that the nonresident attorney establish a physical presence in the state (and therefore place for service).” Something no longer needed in today’s digital economy.
Overall, the regulatory trend is moving away from requiring an office to practice. It’s hard to believe that the State of New York, which touts itself as being business friendly and forward thinking, would not update this law to reflect modern-day practice.
According to the New York Law Journal, the NYS Bar Association has assembled a panel of 12 members to review Judiciary Law §470 and the recent decision in Schoenefeld. Given that roughly one-third of the Bar Association’s members are non-resident attorneys, we expect that a push will be made by them to change the law.