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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 firstname.lastname@example.org, Ronald Minkoff at (212) 705 4837 or email@example.com, Tyler Maulsby at (212) 705 4893 or firstname.lastname@example.org, or any other member of the Frankfurt Kurnit Legal Ethics & Professional Responsibility Group.
Other Legal Ethics and Professional Responsibility Alerts
Third Annual Litigation Ethics Summit
On November 13, 2020, Frankfurt Kurnit held its Third Annual Litigation Ethics Summit, consisting of three hour-long panels, earning the attendees three ethics CLE credits in New York and California. Read more.
November 19 2020
A Primer On New York’s COVID-19 Executive Orders and What They Mean for Your Practice
This past week, New York has taken a number of steps to restrict movement in and around the State in an effort to contain the COVID-19 crisis. Governor Andrew Cuomo has issued executive orders and the chief judges of the state and federal courts have issued administrative orders that have had a sweeping impact on the legal industry as well as the business community at large. Read more.
March 22 2020
ABA Opinion Limits Restrictions on Departing Partners
There’s important news for law firm leaders who have recently revised partnership and shareholder agreements to restrict partner departures. In ABA Formal Opinion 489, the ABA Standing Committee on Ethics and Professional Responsibility spells out new limits on notice periods, on rules governing communications with clients, and on so-called “ownership” of clients. Here’s what firm managers need to know to stay on the right side of the ethics rules. Read more.
February 6 2020