The wheels of justice grind slowly, but exceedingly fine.
Nearly four years have passed since New-York barred, New Jersey residing attorney Ekaterina Schoenefeld refused to play scofflaw and ignore a valid law requiring only non-resident lawyers to maintain an in-state office simply because she personally believed it to be outdated or unjust. Instead, Schoenefeld did what we lawyers are uniquely trained and empowered to do: in October 2007, she challenged the law in federal court, arguing that the in-state office requirement in New York Judicial Code Section 470 , which applies only to nonresident, New York-licensed attorneys infringed on her right to practice law in New York on substantially equal terms as her in-state colleagues in violation of the Privileges and Immunities Clause of the United States Constitution.
And then Schoenefeld waited. She waited and turned down business from New York State clients — even as the New York State Attorney General took the position that Schoenefeld was required to violate the law (thereby exposing herself to misdemeanor charges, treble damages and a bar disciplinary action) in order to challenge it. (The judge disagreed. She waited and placed herself at a competitive disadvantage to other non-resident New York lawyers who didn’t share the same sense of professional responsibility. She waited even as the legal landscape shifted underneath her feet — as nearly 15,000 lawyers (many from big New York firms) lost their jobs and thought about hanging a shingle in a lower-cost, adjacent state; as technology facilitated virtual law practice and even as the staid ABA initiated a fresh look at the relevance of multijurisdictional practice rules in the twenty-first century.
Now, Schoenefeld’s wait is over – and she has prevailed! Yesterday, U.S. District Court Judge Lawrence Kahn (ND NY) issued this decision, concluding that “as a matter of law [Section 470 is unconstitutional] because it infringes on nonresident attorneys’ right to practice law in violation of the Privileges and Immunities Clause. First, the court found that the practice of law is “a fundamental right within the meaning of of the Privileges and Immunities Clause because the profession has both a commercial and noncommercial role in the United States.” The court then determined that Section 470 impermissibly infringed on Schoenefeld’s right to practice law in New York based on residency by placing an additional threshold cost on all nonresidents who practice in New York.
Quoting Schoenefeld’s brief, the court described:
Under Section 470, nonresident attorneys bear a significant competitive cost that resident attorneys do not: whereas “new York resident attorneys may practice law out of their basements,” “nonresidents are required to rent offices in New York (no matter how few in number their New York clients may be) in addition to maintaining offices and residences in their home states.”
Thus, the court found that Section 470′s requirement that nonresident attorneys maintain an office in-state implicates the fundamental right to practice law under the Privileges and Immunities Clause.
The court then went on to examine whether Section 470′s differential treatment could be justified by a substantial state interest. The court identified – and dispatched as non-meritorious - three potential state interests in an in-state office requirement for out of state residents: (1) service of process, (2) availability at court proceedings and (3) ensuring the availability of the remedy of attachment of property when a resident sues a non-resident attorney.
With regard to service of process, the court found that the state has less restrictive means available to ensure service on attorneys, such as requiring out-of-state lawyers to designate a registered agent within the state. The court noted that in Mississippi, lawyers admitted to practice are deemed to have appointed the Mississippi bar as their agent for service of process.
Next, the court found that the state’s interest in ensuring attorney availability is not necessary served by an in-state office requirement which “erroneously presumes a link between an in-state office and proximity to a courthouse.” For example, Schoenefeld, who resides in New Jersey “may be better able to travel to a court proceeding in New York City than would an attorney in Syracuse or Buffalo,” noted the court. Moreover, a court could require all attorneys located a long distance from the courthouse to retain local counsel for the duration of the proceedings who could be available on short notice. This type of requirement is geographically-independent (it would apply equally to the Buffalo lawyer handling a case in New York City as it would to the Philadelphia lawyer doing the same) and thus, would not implicate the Privileges and Immunities Clause.
Finally, the court found that Section 470, as currently applied, does very little to further the state’s purported interested in ensuring the availability of attachment of property in the state. Because the requirements of Section 470 may be satisfied through an of counsel affiliation with a New York lawyer, or even a rented desk space in a shared office, many attorneys who comply with Section 470 will not necessarily have any significant property to attach if sued. The court acknowledged that “the majority of attorneys maintain some form of professional liability insurance,” which offers a more efficient means for potential plaintiffs to recover in malpractice against both resident and nonresident lawyers.
So does Judge Kahn’s decision open the door for any New York licensed lawyer living anywhere in the country, or even the world to hang up a virtual shingle to serve New York clients? Not so fast. First, although the decision takes effect immediately, meaning that Section 470′s nonresident office requirements are now invalid, the case will likely be appealed to the Second Circuit. Second, the decision leaves open the door for New York to require out-of-state lawyers to designate registered agents within the state or to purchase malpractice insurance to enable the state to lawfully accomplish the purposes that it can no longer achieve now that Section 470 is no longer valid.
In addition, the New York bar can and should require all lawyers who advertise in the state or target New York clients to disclose to clients their primary, physical location. Even in a world rapidly going virtual, many clients (myself included) want to know where their lawyer is physically located. A client who lives in Manhattan may not have any objection to hiring a lawyer who works from a New Jersey or Connecticut office — but might not be too happy to discover that the lawyer who held himself out as licensed in New York happens to work from Israel or China. On the other hand, many clients may not have a problem with hiring a remotely located New York attorney. However, in either case, the client is entitled to information about the lawyer’s physical location in order to make an informed decision.
Overall, I was thrilled with Judge Kahn’s ruling – both because it removes barriers for non-resident New York solos to make use of their law license, no matter where they’re located and because the victory would not have been possible but for the heroic efforts of a single solo who didn’t settle for anything less than changing the law. So here’s a salute to Ekaterina Schoenefeld – for a job well done, and more importantly, for setting a shining example as a solo lawyer in the best sense.
UPDATE: Other Coverage
Eric Turkewitz, New York Personal Injury Attorney Blog