If you want to see an example of how laws purported to protect clients do anything but, look no further than Platinum Rapid Funding Group v. HD Raleigh Inc, d/b/a/ Pure Med Spa, a recent decision out of a New York court in Nassau County. There, the court granted the plaintiff’s motion to disqualify New York-licensed defense counsel for (horrors!) failing to comply with New York Jud. §470, New York’s in-state office requirement.
First, the facts. The plaintiffs, a New York-based Platinum Rapid Funding Group – a merchant cash advance company brought suit in Nassau County, New York against a North Carolina business for reneging on repayment. The North Carolina company retained Rayminh L. Ngo, an attorney licensed in Utah and New York, and of counsel to Higbee & Associates , a national practice headquartered in California. The plaintiffs moved to disqualify Ngo from appearing before the court representing the defendants “for failure to maintain an office for the transaction of law business in the State of New York” in New York Jud. §470. In response, Ngo contended that his firm maintained offices throughout the country, and produced two leases – one that the firm held in 2012 but had since expired, and a second lease that was executed in October 2017 – presumably after the disqualification motion was filed. But the court wasn’t persuaded that Ngo met the bonafide office requirement because the office leases were not in effect at the time the action was filed. Moreover, a process server dispatched to the leased space confirmed that neither Ngo nor the Higbee firm actually had lawyers physically present at those locations. For those reasons, the court granted the motion to disqualify.
There’s plenty wrong with this picture.
For those who don’t recall, New York Jud. Code §470 requires non-resident attorneys licensed to practice in New York to maintain an office in the state, while New York residents needn’t do so. Because Jud. Code §470 unfairly forces non-resident lawyers to bear the cost of maintaining physical office space in New York while allowing resident lawyers to operate out of a basement or a Starbucks, Ekatariana Schoenfeld challenged the law, arguing that New York’s Jud. Code §470 violated the Privileges and Immunities Clause by discriminating against out-of-state attorneys. Initially, a federal district court agreed. But New York regulators appealed, doggedly defending the physical office requirement up and down to the Second Circuit as necessary to protect clients by ensuring that they can access their attorney and files and serve process on scofflaw out-of-state lawyers.
Yet the New York court’s disqualification of Ngo does anything but ensure that clients can access their attorneys. To the contrary, the judge’s ruling prevented a North Carolina business involuntarily hauled into court in New York from accessing an attorney at all. Instead, the court’s decision to disqualify Ngo stripped an out-of-state client of representation by a New York-barred lawyer because he didn’t have an in-state office that realistically, the North Carolina client would never have visited anyway. With protection like that, who needs enemies?
Even from a protectionism angle, the judge’s disqualification decision falls short. Often, in-state requirements like Jud. Code §470 are nothing more than a ruse to ensure in-state lawyers first dibs on juicy matters. Yet, Ngo’s case is hardly a prize. Most in-state attorneys are unlikely to be chomping at the bit to take on a cash-strapped client (let’s face it – Fortune 500 businesses aren’t taking out the equivalent of payday loans for small businesses) with a ticking-clock deadline and an opposing counsel out for bear. In fact, that may be why the North Carolina client sought representation from an out of state firm to begin with.
The court’s decision rewarded only one interest: that of the New York-based plaintiff represented by a local lawyer who was able to use an otherwise useless ethics rule to shut down an adversary and deprive an out-of-state business of representation. That outcome is far worse than ethics as protectionism. It’s ethics as gamesmanship.