Frankfurt Kurnit Klein & Selz

April 9th, 2015

Bits or Mortar: Will New York Continue to Require Non-Resident Lawyers to Have Physical Offices?

For a variety of reasons, some New York lawyers choose to practice "virtually" - that is, they conduct their business primarily over the Internet, rather than through a physical law office.  Other New York lawyers maintain physical offices in New Jersey, Connecticut or another state. And then there are the many non-New York firms that handle or hope to handle matters with a New York nexus. Each has had to wrestle with Section 470 of New York's Judiciary Law ("Section 470"), which governs whether a nonresident lawyer must maintain a physical office within the state.

Last week, the New York Court of Appeals held that Section 470 requires nonresident lawyers who practice in New York to maintain a physical office in the state. While at first blush, Schoenefeld v. State of New York appears to resolve the issue for firms and practitioners, in fact, the Court's decision sets the stage for the Second Circuit to hold Section 470 unconstitutional and permit virtual law practice in New York. Here's a summary of the case followed by information about opportunities to obtain CLE credits in ethics.

Section 470 and Nonresident Lawyers

Section 470, which was first enacted more than 150 years ago, requires all nonresident lawyers who practice in New York to maintain an "office for the transaction of law business" within the state. Until now, the Court of Appeals has been silent on whether the statute requires a lawyer to have a physical office or something less. However, state appellate courts have regularly held that a physical office is required and have dismissed cases for noncompliance. See e.g. Kinder Morgan Energy Partners, LP v. Ace Am. Ins. Co., 51 A.D.3d 580 (1st Dep't 2008); Keenan v. Mitsubishi Estate, N.Y., Inc., 228 A.D.2d 330 (1st Dep't 1996).

Schoenefeld v. State of New York

Ekaterina Schoenefeld, a New Jersey resident who is licensed to practice law in both New York and New Jersey and maintains an office in New Jersey, filed an action in federal court challenging the constitutionality of Section 470. She argued that the physical office requirement restricted her right to practice law. The U.S. District Court for the Northern District of New York agreed and held Section 470 violated the Privileges and Immunities Clause.

On appeal, the Second Circuit concluded that the constitutionality of Section 470 depends on the definition of an "office for the transaction of law business" within the statute. Responding to a certified question, the Court of Appeals answered that Section 470 "requires nonresident attorneys to maintain a physical office in New York." We believe the Court's decision may set the stage for the Second Circuit to hold Section 470 unconstitutional: The Second Circuit strongly hinted that if Section 470 were to require nonresident lawyers to maintain a physical office within the state, it would violate the Privileges and Immunities Clause.

Opponents of the law have argued that Section 470 imposes an additional burden on nonresident lawyers because they must incur additional expense in order to practice in New York. This is particularly true in light of new technological options that can lessen or eliminate the need for a physical office. The parties are currently submitting briefs to the Second Circuit. We will alert you when the court rules. In the meantime, if you have any questions about practicing law in New York without a physical office, or about other professional responsibility issues, please contact Nicole Hyland at (212) 826 5552 or nhyland@fkks.com, Ronald Minkoff at (212) 705 4837 or rminkoff@fkks.com, Tyler Maulsby at (212) 705 4893 or tmaulsby@fkks.com, or any other member of the Frankfurt Kurnit Legal Ethics & Professional Responsibility Group.