Non-Resident Attorneys Must Maintain a New York Office to Practice Here – For Now

Schoenefeld v State of New York,

___ NY3d ___, 2015 NY Slip Op 02674 [2015]

The Court of Appeals has construed Judiciary Law § 470 as indeed meaning what it says: a non-resident attorney, admitted to the Bar of New York and in compliance with all other requirements, may practice before the courts of the state only if she maintains a physical office for the transaction of business in New York. In so holding, the Court almost certainly paved the way for the US Court of Appeals for the Second Circuit to invalidate the statute under the Privileges and Immunities Clause of the US Constitution.

The statute reads: 
“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 Court responded to a certified question from the Second Circuit. (Schoenefeld v State of New York, 748 F.3d 464 [2d Circ., 2014]) Plaintiff Ekaterina Schoenefeld is a resident of New Jersey and a member of the New Jersey bar, whose only office is in Princeton. She has also been admitted to the bars of New York and California. She alleges in her complaint that she has in fact passed up the opportunity to represent clients in New York courts to avoid violating the Judiciary Law provision.

She sued in federal court, claiming that the requirement for the maintenance of an office in New York places a burden upon her and other non-resident attorneys, not placed upon residents. The District Court found that the statute violates the Privileges and Immunities Clause, in that the added burden infringed upon the right of non-residents to practice law, without justification by a corresponding substantial state interest.
The Second Circuit noted that a resident attorney need not maintain a separate business office at all, and “may set up her ‘office’ on the kitchen table in her studio apartment and not run afoul of New York law.” (748 F.3d @ 468) [Indeed, I maintain no separate office, and write this post in my daughter’s old bedroom.] A non-resident must go to the additional expense of setting up a physical office in New York, in addition to whatever facilities she maintains in her home state.

The Second Circuit noted several Appellate Division cases where the requirement has been enforced, although we should note also that the consequences of non-compliance have varied widely. In Kinder Morgan Energy Partners, LP v. Ace American Ins. Co., the First Department held that an action filed by a non-compliant attorney had to be dismissed, without prejudice. The rationale was that the attorney’s improper action rendered the very commencement of the action a nullity (see, Neal v Energy Transp. Group, 296 A.D.2d 339, [1st Dept., 2002]; Lichtenstein v Emerson, 171 Misc 2d 933, affd 251 AD2d 64). The harshness of the result can be seen if we consider that the limitations period might have expired before the dismissal. A purported action which is in fact a nullity is not entitled to the extension period of CPLR 205(a) (Parker v Mack, 61 NY2d 114 [1984]), and so the cause would be lost entirely. On the other hand, in Elm Management Corp. v. Sprung, the Second Department held that the violation did not invalidate any of the actions taken by the non-resident attorney. The plaintiff in Elm Management had found New York counsel, so the only consequences were to the non-resident attorney. In Application of Tang, 39 A.D.2d 357 [1st Dept., 1972], a New Jersey resident without a bona fide New York residence or office was denied admission to the New York bar. Whether Ms Schoenefeld had a New York residence at the time of her admission is not stated in any of the opinions in this case.

The State argued that the Judiciary Law could be interpreted as imposing nothing more than the obligation to maintain a physical presence within the state for the receipt of service. A post office box would do, or even the designation of an agent. Such an interpretation would avoid the Constitutional issue. It would not, however, be supported by the existing appellate authority. The State also argued that the imposition on non-resident attorneys was merely incidental, and served the substantial State interest of service of legal papers and resolution of service-related disputes.

Resolution of the issue turned, therefore, on whether the Judiciary Law actually meant what it said. The Second Circuit certified to the New York Court of Appeals, the question of what the minimum requirements to satisfy the statute actually are.

Our Court of Appeals rejected the interpretation that a post office box or letter drop would suffice. While the interpretation might have avoided the Constitutional question, it conflicted with the actual language of the statute, as well as its historical development. The statute is specific: the office has to be for the “transaction of law business,” and not merely for the receipt of service of papers. That means a physical office. The Court declined to rewrite the statute to preserve its constitutionality. The level of staffing or of office equipment necessary to constitute a “physical office” was not discussed, but seems immaterial. The burden of maintaining even an empty room with a name on the door and a mail slot would seem to be sufficient to create the constitutional problem.

The Court noted that CPLR 2103 (b) allows several different methods of service of interlocutory papers on attorneys, including mail, overnight delivery service, fax (where consented to) and e-mail (where permitted). We may note that of the various methods for service, only one is dependent on the recipient attorney’s physical presence in the state: delivery to a person of suitable age and discretion at the attorney’s residence within the state (CPLR 2103 [b][4]). That method is certainly the least useful.

It should also be noted that the definition of “mailing” in CPLR 2103 (f)(1) specifies that the mailing must be made within the state. In M Entertainment v Leydier, the Court of Appeals held that the mailing of a notice of appeal from a mailbox outside the state was a defect, but curable under CPLR 5520 (a), which specifically concerns notices of appeal. The Appellate Division had held more generally that the defect under CPLR 2103 (f) could not be deemed a mere irregularity pursuant to CPLR 2001. Whether any part of that general holding survives the more limited holding in the Court of Appeals remains an open question. These issues, however, concern service of papers by the non-resident attorney, not service upon her.

The Court noted, finally, that its own rules provide that an applicant for admission to the bar, who is a non-resident and is not employed full-time in New York, must designate the clerk of the Appellate Division as her agent for the service of process in actions or proceedings against her relating to legal services provided by her in the state. (Rules of the Court of Appeals, 22 NYCRR § 520.13 [a]) This rule is clearly intended to facilitate service of process on non-resident attorneys. It does not provide a basis for the assertion of general jurisdiction, being limited to actions and proceedings growing out of specific legal services (see, Eastboro Foundation Charitable Trust v. Penzer, 950 F.Supp.2d 648 [S.D.N.Y.,2013]) It would seem to fall short of its full purpose, however, since its applicability depends on the applicant’s circumstances at the time of admission. If, after admission, the attorney establishes residence or a law office in New York, or obtains full-time employment here, she may revoke the designation. There is no corresponding provision for New York admittees to designate the clerk if they later leave the state. Contrast this with Judiciary Law § 470, which (valid or not) speaks to all admitted attorneys throughout their careers.

The tenor of the opinion is that the Court recognized that Judiciary Law § 470 cannot be sustained under the Privileges and Immunities Clause, and that it was unwilling to rewrite it in order to save it. That the Second Circuit will invalidate it seems a foregone conclusion.