New York Lawyers Currently Need a New York Office—An Unnecessary Licensing Restriction?
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Thomas F. Gleason[/caption] Section 470 of the Judiciary Law states that “A person, regularly admitted to practice as an attorney and counsellor, in the courts of record of this state, whose office for the transaction of law business is within the state, may practice as such attorney or counsellor, although he resides in an adjoining state.” The effect of this “permission” actually is restrictive, because no one admitted to the New York Bar may practice law here without a physical office. The statute was challenged on constitutional grounds in Schoenfeld v. New York (907 F.Supp.2d 252, 266 [N.D.N.Y 2011]). In Schoenfeld, a New Jersey resident sued on several constitutional theories, and the U.S. District Court for the Northern District of New York initially held Section 470 unconstitutional for violating the privileges and immunities clause of the U.S. Constitution. That clause guarantees citizens of sister states the right to do business in the home state on terms substantially equal to citizens of the home state, and it has been held that the practice of law is a fundamental right within the meaning of that clause. (Good news on that score, see United Building and & Construction Trades Council of Camden County & Vicinity v. Mayor and Council of Camden, 464 U.S. 208, 219 [1984]). Is the Section 470 requirement of a physical office an unnecessary burden that disadvantages nonresident-admitted attorneys without advancing a substantial state interest? On appeal to the U.S. Court of Appeals for the Second Circuit, the court noted that the statutory language implied more than “just an address or an agent appointed to receive process.” However, because the Privileges and Immunities Clause was implicated, the court preferred not to undertake the statutory interpretation until it became necessary to do so. The meaning of the statutory requirement was a question of state law on which the interpretation of the state’s highest court would be binding, so the Second Circuit certified a question to the New York Court of Appeals, asking for guidance on “the minimum requirements to satisfy [the New York office] mandate.” The Court of Appeals accepted the certification, and held “… even if one wanted to interpret the term "office" loosely to mean someplace that an attorney can receive service, the additional phrase [in Section 470] ‘for the transaction of law business’ makes this interpretation much less plausible.” Further, the Court of Appeals noted, the Appellate Divisions had generally interpreted the statute as requiring a nonresident attorney to maintain a physical office in New York, although they had not limited the application of the statute to residents of adjoining states, but to nonresident attorneys in general. (See, Schoenfeld v. State, 25 N.Y. 3d 22, 27-29; see also, Lichtenstein v. Emerson, 251 A.D.2d 64 [1st Dept. 1998]). Thus the requirement of a physical office continues as a prerequisite to practice law in the state—a requirement that can be dangerous for clients as well. Presently, there is a conflict among the Appellate Divisions on the effect of papers filed by a nonresident attorney that does not have a physical office in the state. In a Third Department case, Stegemann v. Rennsselaer County Sheriff’s Office (153 A.D.3d 1053 [2017]), the court declined to hold the actions of the nonresident attorneys to be void. The case involved an application during an appeal by two Massachusetts attorneys, who were admitted to the New York Bar but who had no New York office. They sought an order nunc pro tunc, waiving the application of Judiciary Law 470, and allowing them to proceed with briefing on the appeal. The application was denied based on the “clear mandate” of Section 470, which brooks no authority for waivers. However, the Third Department declined to go as far as the plaintiff requested, who wanted the court to hold that all prior work performed by the nonresident attorneys in the case was “void from the beginning.” In denying that relief the Third Department noting its disagreement with holdings of the First Department to that effect. A scary example of such a First Department case is Arrowhead Capital Finance v. Cheyne Specialty Finance Fund (154 A.D.3d 523, lv. to appl. granted, 30 N.Y.3d 909 [2018]), a case in which a nonresident attorney without an office in New York commenced an action and later retained co-counsel that did have an in-state office. This “… did not cure the violation, since the commencement of the action in violation of Judiciary Law Section 470 was a nullity.” In affirming the dismissal, the court further noted that defendant had not waived the Section 470 objection and the court below was not bound by the then outstanding district court holding in Schoenfeld, that the statute was unconstitutional. Yikes! We will see what happens when the Court of Appeals decides the Arrowhead appeal, but the Appellate Division order in Stegemann, discussed above, points out the need for some reform. Here is what the court said: “ORDERED that the applications are denied, without costs, [and the named] defendants … shall, within 30 days of the date of this court's decision, cause to be served and filed with this court an application for admission pro hac vice by appropriate counsel or a notice of appearance upon the appeals by new counsel; if such counsel have not previously appeared in these matters, such counsel shall file and serve … a new responding brief or a statement adopting the brief previously submitted … .” It is pretty clear that the court was inviting a pro hac vice motion, which are commonly granted for out of state counsel in New York cases. On what principled basis can we justify the disadvantage to members of the New York bar under Section 470, while routinely granting pro hac vice motions for out of state attorneys who have no office here? CPLR 2101 provides that each paper served or filed shall be indorsed with the name, address and telephone number of the attorney for the party serving the paper. It would appear that this would be an acceptable and easy method of identifying an out of state office location for a New York admitted attorney. Let’s face it, out of state mailing is pretty reliable for service, at least within the United States, and the days of interlocutory service by mail may be numbered anyway. Another possible source of an address for service on an attorney would be their attorney registration address with the Office of Court administration, so the logistical problems of doing away with Section 470 are not complicated. The cases discussed above only address the effect and constitutionality of Section 470—they do not extensively discuss whether the statute is a good idea or has outlived its usefulness. Other states, such as Delaware have a physical office requirement, but New Jersey recently changed its rule. Why? One reason is that the physical office requirement may look like a favor for resident lawyers that is not really needed or sufficiently justified. Is there a whiff of “rent seeking,” a term that economists derisively apply to the enlistment of regulators to restrict market entry and reduce competitive pressure on licensees? No one in their right mind would contend that lawyers and other professionals who may cause harm don’t need license standards, but the standards should be as limited as is consistent with the protection of the public, and also reexamined as times change. (Witness the controversy between Uber, Lyft and the taxi medallion owners.) If there really is a need for a lawyer to have a physical office in the state, let the case be made. This author is skeptical. (See, https://www.nytimes.com/2014/05/29/opinion/why-license-a-florist.html). Thomas F. Gleasonis a member of Gleason, Dunn, Walsh & O’Shea in Albany and an adjunct professor at Albany Law School.
