Out-of-State Lawyers Hope Archaic Law Gets Repealed
When Ekaterina Schoenefeld was considering opening her own law firm about 15 years ago, she attended a New York State Bar Association CLE course called “Starting Your Own Practice,” where she first learned about Judiciary Law Section 470, which requires lawyers admitted to practice in New York – but residing in other states – to maintain a brick-and-mortar law office in New York State.
“That neither made sense nor did it sound right to me,” said Schoenefeld, who resides in New Jersey and is admitted to practice in her home state and in New York.
After she opened her firm in October 2007, she did some research and decided to challenge the constitutionality of Section 470. What came next was nearly a decade of litigation closely watched by the legal community – especially from nearby out-of-state residents who hoped the outdated law would no longer impede their practicing in New York without an office.
While that challenge was ultimately unsuccessful, Schoenefeld is hopeful that pending NYSBA-backed legislation will garner enough support from lawmakers to finally repeal the controversial statute.
“I’m glad I tried,” said Schoenefeld, noting that she feels her case brought the issue to light. “It wasn’t a literal win, but once the repealing of the statute passes, I would consider it a win.”
Schoenefeld is closer than ever to seeing that victory. The New York State Senate unanimously approved the legislation, and the New York State Assembly’s Judiciary Committee voted to advance the bill. As of press time, the measure was awaiting approval from the Assembly’s Rules Committee before going to the full Assembly. If approved by the Assembly, all that would be needed to repeal the archaic law is Gov. Andrew M. Cuomo’s signature.
“The New York State Bar Association enthusiastically supports the repeal of this antiquated law,” said NYSBA President Scott M. Karson, who submitted written testimony to lawmakers in March in support of the legislation.
NYSBA has long supported efforts to repeal the law as nearly 25% of its members reside or practice outside the state of New York.
“In our rapidly modernizing legal world, the profession has adapted with electronic filing of documents in the courts, virtual conferences and court proceedings, along with already established standards for perfecting service. Our laws must continue to adapt with the times too,” said Karson. “Judiciary Law Section 470 places an onerous burden on rural and underserved communities and limits the availability of legal services simply because of where an attorney chooses to call home.”
Impact on the Profession
As far back as 1862, New York State required practicing attorneys to be state residents. The statute recognized as Section 470 was enacted in 1909 and the law was passed because the New York State Legislature then believed that a nonresident attorney without an office in New York would be more difficult to find when serving notice of a legal action.
In 1981, the New York Court of Appeals struck down the residency requirement on the ground that it violated the federal Constitution, but the New York Legislature did not amend the language of Section 470. Thus, if non-resident lawyers do not maintain a law office in New York, then they are in violation of Section 470.
As technology has continued to evolve in recent decades, the law has only grown increasingly more outmoded. For Ronald B. McGuire, a solo practitioner who lives in New Jersey and practices there and in New York, staying compliant with the law has been a struggle for over 30 years.
“If you are not working out of a traditional law office, it’s impossible to know from the case law and the statutory law exactly what the minimum requirements for an office are,” said McGuire. “The cases are inconsistent, and the statute is completely vague to the issue.”
McGuire said if there was no Judiciary Law Section 470, he would have worked out of his home office in New Jersey and saved the costly expense of renting out office space in New York City.
The lack of clear guidance on what constitutes a law office after all these years particularly bothers McGuire. He started his career at a large law firm and did not have to worry about compliance with Section 470 until starting his own practice. He soon discovered a dearth of information on what constituted a law office for the purposes of the statute. He said every single case on the issue had been decided on an ad hoc basis, and that no court has articulated a bright-line rule on what the minimum requirements of a law office are: Does it require being open certain hours? Does the office need to be open, requiring him to hire a staff member while he is away on vacation? Must it have a fax machine, phone, etc.?
“It’s clear that whatever a law office was in 1909, it’s not that anymore,” said McGuire. “We need 21st century rules for a 21st century law practice.”
While the Schoenefeld case was pending, Georgetown University Law Center’s Institute for Public Representation submitted an amicus brief detailing the struggles lawyers have had navigating Section 470.
For instance, with regard to the financial burden, one lawyer paid $2,436.40 per month to rent a Manhattan office in addition to her New Jersey office – an expense she could no longer afford. She was only able to do this temporarily by not paying for a legal assistant. Another paid $10,000 per year to rent a New York office in addition to maintaining his New Jersey office.
Maintaining an office address in New York and forwarding the mail to out-of-state locations has also been a burden. Some lawyers pay to have their mail sent by FedEx daily from the New York office to the out-of-state office. This is quite costly. For others – who do not receive the mail in as timely a fashion – it has been costly as well, with one lawyer reporting missing a deadline in a case.
Many other lawyers reported turning down cases in New York or refraining from practicing law in New York altogether due to the costs associated with acquiring office space.
Andy Chen, a California lawyer in the Silicon Valley (who was not part of the amicus brief), is also admitted to practice law in New York but refrains from doing so due to Section 470.
“If [Section] 470 went away, I think it would allow me to change my current practice to include more people who have legal issues involving hybrids of New York and California law or to actually help those clients in New York,” said Chen. “Right now, I think it’s a circular thing. In other words, I don’t have any clients in California requiring New York law knowledge because I haven’t bothered to seek those clients out because Section 470 means I wouldn’t be able to take those clients anyway. So, it’s pointless to even go after them.”
Schoenefeld – knowing that courts have long held that one’s residency cannot be a prerequisite for admission to the bar of any state and that federal courts may not require an attorney to maintain an office in the state where a district court is located – challenged the constitutionality of Section 470 in federal district court in 2009.
In Schoenefeld v. State of New York, the U.S. District Court for the Northern District of New York ruled in 2011 that Section 470 violates the Privileges and Immunities Clause of the U.S. Constitution. The state Attorney General appealed and during the appeal process in 2014, the U.S. Court of Appeals for the Second Circuit asked the state Court of Appeals to clarify the meaning of Section 470.
In a 2015 opinion written by then-Chief Judge Jonathan Lippman, the state Court of Appeals replied, “We hold that the statute requires nonresident attorneys to maintain a physical office in New York.”
By 2016, the Second Circuit upheld Section 470, holding that the statute did not violate the Privileges and Immunities Clause. Schoenefeld filed a petition for certiorari to the U.S. Supreme Court, which was denied in 2017.
In 2016, after the Second Circuit opinion, then-NYSBA President David P. Miranda formed the Working Group on Judiciary Law Section 470 to address concerns from members about the law. Past NYSBA President David M. Schraver was appointed to lead the 12-member working group.
In January 2019, NYSBA’s House of Delegates approved a resolution calling for the outright repeal of the law as recommended in the report of the working group.
“The working group has concluded that Section 470 is no longer necessary to ensure that a nonresident attorney who is a member of the New York bar may be served with process,” the group wrote in its report. “Moreover, the requirement of a physical office is often onerous to non-resident attorneys, but there is no nondiscriminatory basis for imposing that burden.”
The report acknowledged that the most frequent consequence of Section 470 has been dismissal of actions brought by nonresident attorneys who do not maintain a physical office within New York State.
Recent cases further illustrate this. In Arrowhead Capital Finance v. Cheyne Specialty Finance Fund, defense counsel hired an investigator who discovered the plaintiff’s lawyer’s failure to maintain an office in New York. The case was then dismissed, and the Appellate Court affirmed the dismissal without prejudice because of the Section 470 violation.
In Marina District Dev. Co. v. Taledano, the case was dismissed because plaintiff’s counsel did not maintain a physical office in New York. The lawyer, with a Philadelphia office and phone number, unsuccessfully argued that his virtual office at the New York City Bar Association satisfied the requirements of Section 470.
“By definition, a virtual office is not an actual office,” the Supreme Court in New York County wrote in its ruling.
That ruling had relied on Law Office of Angela Barker, LLC v. Broxton, where the Appellate Court similarly was unconvinced by the notion of a “virtual office.”
“Plaintiff’s counsel’s use of a ‘virtual office’ at a specified New York City address, instead of maintaining a physical office for the practice of law within New York at the time the action was commenced, was a violation of Judiciary Law Section 470, and requires dismissal of the underlying action,” the court wrote.
Access to Justice
John B. Sheehan, who serves on NYSBA’s Membership Committee and was also part of the Working Group on Judiciary Law Section 470, said that the coronavirus pandemic has only further illustrated how antiquated the law really is. During the pandemic, most every lawyer had a “virtual office.”
“Considering the experiences we’ve all gone through over the past year and seeing the wheels of justice continue to move forward with conference calls and Zoom, it shows it can be done,” said Sheehan. “You don’t need to be sitting in one location . . . . What it comes down to is access to justice.”
Regarding access to justice, NYSBA members have noted that the law restricts retired lawyers from pursuing New York pro bono work if they now live in another state.
After Sheehan retired, he moved five minutes over the border to the Berkshires in Massachusetts. Suddenly, he could not help clients who had also moved from New York and still had legal needs. Sheehan, who now lives in Vermont, said he has had to refer cases due to Section 470.
“It’s not a big hardship on me but if people want you to represent them, then it should be up to them to choose,” said Sheehan. “. . . It’s not like I’d be throwing up billboards on the [New York State] Thruway if 470 was repealed.”