No Second Chance for Rationality After Second Circuit Ruling on Constitutionality of Jud. Code 470

After five years and three different courts, solo Ekaterina Schoenefeld’s challenge to the constitutionality of Jud. Law 470  has come to an unfortunate conclusion.  A decision by the Second Circuit ruled that the Jud. Law 470 – which requires non-resident, New York-barred lawyers to maintain a bonafide office in the state while resident lawyers are not similarly obligated – does not violate the Privileges and Immunities Clause of the Constitution.

As we’ve covered here, the case went through a series of twists and turns: Ms. Schoenefeld initially prevailed before the federal district court, the state appealed  the ruling to the Second Circuit  (and I joined the case as an amicus), the Second Circuit sought an opinion from the New York state courts as to whether the “bonafide office” requirement of Jud. Law 470” could be satisfied through less onerous means, the New York court said no – which left many of us believing  that the Second Circuit would have no choice but to find the law unconstitutional.

But the Second Circuit didn’t. The court found that the bonafide office requirement was not enacted for protectionist reasons but instead, to ensure that clients could   effect personal service on a lawyer who committed malpractice. Never mind that a lawyer who skips town to evade service isn’t likely to have the means to satisfy the judgment anyway. Even worse, the Second Circuit just didn’t get how the bonafide office requirement imposes more of burden on out of state lawyers. From the opinion:

To practice law in New York, every attorney admitted to its bar must have a presence in the state in the form of a physical premises.   The fact that a nonresident attorney will have to establish that presence by leasing an office, while a resident attorney can use his home, does not unduly burden the nonresident.  Not only is the expense of a New York office likely to be less than the expense of a New York home, but Schoenefeld has adduced no evidence indicating that significant numbers of resident New York attorneys in fact practice from their homes rather than from offices.

Of course the nonresident will be burdened. Schoenefeld already has a home in New Jersey – if she is required to purchase a home, or lease a space in New York, she winds up worse off than the New York resident lawyer who only needs one space. Moreover, the majority’s decision is completely divorced from the interest of clients. As the dissent points out, a lawyer can open an office as a kitchen table in a studio apartment can meet the bonafide office requirement, while  Schoenfeld – with a real office space in Southern New Jersey where she can actually meet clients in person – does not. A lawyer in the outer reaches of the Western New York can serve clients in Manhattan from his basement although he might be an 8-hour drive from the city while a NY-barred lawyer with a Connecticut office could not represent a client just over the border in Westchester without an office in the state. How does this result serve clients.

As for the majority’s claim that Schoenefeld failed to “adduce evidence that significant number of resident New York attorneys practice from home,” – maybe the court should take a look at the news. In the five years since Schoenefeld initiated this litigation, the unemployment rate amongst new graduates remains high, and as the NYSBA documents, record number of lawyers continue to go solo and likely work from home to save costs. In addition, with the rise of companies like Axiom and other freelance services  where lawyers work remotely from home, I have a hunch that there are many New York barred lawyers working on a freelance basis from home either outside the state or even outside the country who don’t have an office in New York. Really, does anyone even bother to enforce this law anymore?

Over at Simple Justice , Scott Greenfield, while acknowledging that Jud. Code 470 does serve a legitimate purpose, faults the Second Circuit for ignoring the rationale for the law:

It’s not that there aren’t good reasons [for Jud. Code 470] There are. But by acknowledging what the good reason are, it gives rise to finding solutions that would enable a lawyer from an adjoining state to practice law in New York without any risk to their clients.

Ironically, the rationale used by the circuit, that the law provides a means for out-of-state lawyers to practice in New York, is primarily protectionist for New York commercial landlords. Of course, telling lawyers that the answer is rent a friggin office is nonsensical. The law states that they need an in-state office for the transaction of law business, as if that’s the means rather than the conclusion. It’s just silly.

No, Scott still supports the physical office requirement (which is where we part ways) but even he seems to suggest that a conveniently located physical office in another state may be preferable to a kitchen table in upstate New York.

So where are we left now? Petition for rehearing or cert to the Supreme Court? (what do you think, Tom Goldstein?. Or more likely, a protectionist and utterly hypocritical law on the books that law-abiding attorneys like Ms. Schoenfeld will continue to follow to their disadvantage while others more willing to push the envelope will not – and will profit.  Five years ago, I wrote that ethics rules are stupid, but rules are rules – and suggested that lawyers needed to abide them or change them. Five years later, I’m not so sure.