For years you commuted from your home in New Jersey to law school in New York. You studied hard, took a number of New York-specific courses, including criminal procedure, trusts and estates, and, of course, New York Practice. You took the bar and passed on the first try, aced your character and fitness interview, and were sworn in with beaming family members in attendance.

Having decided to hang out your own shingle, you renovate and create a state of the art home office; submit an application for malpractice insurance, order stationary, and prepare to send announcements to your 6,000 Facebook friends. You're all set, right?

Not so fast. You are not welcome to practice law in New York.

Judiciary Law §470

Judiciary Law §470 requires:

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 statute traces its origin back to 1862, and has “remained virtually unchanged since 1909.” In Schoenefeld v. State of New York, 25 N.Y.3d 22 (2015), the Court of Appeals explained that “the statute appears to presuppose a residency requirement for the practice of law in New York State. It then makes an exception, by allowing nonresident attorneys to practice law if they keep an 'office for the transaction of law business' in this State. By its plain terms, then, the statute requires nonresident attorneys practicing in New York to maintain a physical law office here.”

'Schoenefeld v. Schneiderman'

Schoenefeld came to the New York Court of Appeals on a certified question from the Second Circuit, asking the court “to set forth the minimum requirements necessary to satisfy the statutory directive that nonresident attorneys maintain an office within the State 'for the transaction of law business” under Judiciary Law §470.'”

The Schoenefeld decision recited the facts of the case:

Plaintiff Ekaterina Schoenefeld is a New Jersey resident who was admitted to the practice of law in New York in 2006. Schoenefeld is also admitted to practice in New Jersey and maintains her only law office in Princeton. According to the complaint, in 2007, Schoenefeld attended a continuing legal education class entitled Starting Your Own Practice, which was offered by the New York State Bar Association in New York City. There, she learned of the statutory requirement that nonresident attorneys must maintain an office within New York in order to practice in this State.

Applying well-settled rules of statutory construction, the Schoenefeld court answered the certified question: “We hold that the statute requires nonresident attorneys to maintain a physical office in New York.”

With New York's response in hand, the Second Circuit in Schoenefeld v. Schneiderman, 821 F.3d 273 (2d Cir. 2016) dismissed Schoenefeld's constitutional challenge to Judiciary Law §470:

[W]e conclude that §470 does not violate the Privileges and Immunities Clause because it was not enacted for the protectionist purpose of favoring New York residents in their ability to practice law. To the contrary, the statute was enacted to ensure that nonresident members of the New York bar could practice in the state by providing a means, i.e., a New York office, for them to establish a physical presence in the state on a par with that of resident attorneys, thereby eliminating a service-of-process concern. We identify no protectionist intent in that action. Indeed, it is Schoenefeld who, in seeking to practice law in New York without a physical presence in the state, is looking to be treated differently from, not the same as, New York resident attorneys.

The holding that a non-resident attorney admitted to practice in New York must maintain a physical office spawns two related questions. First, what qualifies as a “physical office?” Second, what happens when an attorney in violation of Judiciary Law §470 commences an action in New York?

A Physical Office in New York

Pre-Schoenefeld, in Reem Contr. v. Altschul & Altschul, 117 A.D.3d 583, 584 (1st Dep't 2014), the First Department held Judiciary Law §470 was satisfied based upon “[c]ounsel's affirmation [] that the [New Jersey] firm leases a New York office with a telephone, that partners of the firm use the office periodically, and that many of the firm's attorneys are admitted to practice in New York.”

Since Reem, trial courts have considered a number of different arrangements purportedly qualifying as a “physical office.” One fact pattern is set forth in detail in Arrowhead Capital Fin., Ltd. v. Cheyne Specialty Fin. Fund L.P., 2016 NY Slip Op 31407[U] (Sup. Ct., New York County 2016), where Justice Kornreich determined that the attorney in question violated Judiciary Law §470:

Here, there is no evidence that Goldin maintained an office or a phone in New York when this action was filed in June 2014. The record reflects that from May 2014 onward, he used the office of Edit and Brashich, whom he employed as an assistant, to receive packages and mail. Although there is an issue of fact as to whether Goldin had a sign, which defendant's investigator did not see in July 2014, anyone can hang a sign. Receiving mail and documents is insufficient to constitute maintenance of an office. Schoenefeld, supra. This court holds that hanging a sign coupled with receipt of deliveries would not satisfy the statute. Furthermore, there is evidence that Goldin criticized defendant for serving documents at 240 Madison and directed Korn to use the PA Office address, an address he has consistently used in litigation.

Consistent with controlling First Department authority, Justice Kornreich held that the commencement of the action was a nullity and dismissed the complaint, without prejudice, and the First Department affirmed: “The record supports the court's determination that plaintiff's counsel failed to maintain an in-state office at the time he commenced this action … . Plaintiff's subsequent retention of cocounsel with an in-state office did not cure the violation, since the commencement of the action in violation of Judiciary Law §470 was a nullity.” 154 A.D.3d 523 (2017).

The Second and Third Departments have rejected the idea that the commencement of an action by an attorney in violation of Judiciary Law §470 was a nullity requiring dismissal, holding instead that the violation could be cured by the appearance in the action by a compliant attorney. See, e.g., Elm Mgt. Corp. v. Sprung 33 A.D.3d 753 (2d Dep't 2006).

This split in the Appellate Divisions has just been resolved.

'Arrowhead' and the Penalty for Violating §470

Two weeks ago the Court of Appeals decided the appeal from the First Department decision in Arrowhead, 2019 NY Slip Op 01124 (2019), resolving the split in the Departments over “[w]hether an action, such as filing a complaint, taken by a lawyer duly admitted to the bar of this State but without the required New York office, is a 'nullity,' [] an issue of first impression for this Court.”

The court's determination hinged on its 1974 holding in Dunn v. Eickhoff, 35 N.Y.2d 698 (1974) that “'[t]he disbarment of a lawyer creates no nullities, the person involved simply loses all license to practice law.'” The court analyzed the Second and Third Departments' reliance on Dunn in their decisions on Judiciary Law §470 violations:

These courts, relying on our holding in Dunn, have extrapolated “a general rule,” namely, given that representation of a party “by a person who was not authorized or admitted to practice law under the Judiciary Law—whether a disbarred attorney or a person practicing law without a license—does not create a nullity' or render all prior proceedings void per se,” then “[t]he same principle should apply when a party is represented by an attorney who, although a member in good standing of the Bar of State of New York, has failed to demonstrate compliance with Judiciary Law §470.”

The Arrowhead court sided with those Departments:

We agree with the Second and Third Departments that, given our holding in Dunn, it would be incongruous to conclude that, unlike the acts of a disbarred attorney, actions taken by an attorney duly admitted to the New York bar who has not satisfied Judiciary Law §470's office requirement are a nullity. We therefore hold that a violation of Judiciary Law §470 does not render the actions taken by the attorney involved a nullity. Instead, the party may cure the section 470 violation with the appearance of compliant counsel or an application for admission pro hac vice by appropriate counsel.

This is not necessarily the end of the inquiry. The court added that “[w]here further relief is warranted, the trial court has discretion to consider any resulting prejudice and fashion an appropriate remedy … . This approach ensures that violations are appropriately addressed without disproportionately punishing an unwitting client for an attorney's failure to comply with section 470.”

Among the further relief noted by the court was the possibility that “the individual attorney may face disciplinary action for failure to comply with the statute,” citing two cases where a Judiciary Law §470 violation, in conjunction with other violations, led to the imposition of discipline, or the imposition of sanctions if counsel made a false material statement.

Conclusion

Ekaterina Schoenefeld and the hypothetical attorney in the introduction could be forgiven for feeling a bit like Amazon after its recent foray into New York, and there may be some who will find anachronistic the requirement of a “physical office” in the 21st century.

The Second Circuit acknowledged that Judiciary Law §470's requirement for non-resident attorneys “reflect[s] an important state interest and implicate[s] significant policy issues.” Given the vast privileges that accompany a license to practice law in New York, and the myriad, bona fide arrangements that can be employed to satisfy the requirement, the physical office requirement is one that can be met without undue hardship to the non-resident attorney.

With the adoption of the Uniform Bar Exam (UBE) in New York commencing with the July 2016 bar exam, and the concomitant ability of lawyers from other jurisdictions utilizing the UBE to obtain admission in New York, it is likely that New York will see an increase in non-resident attorneys obtaining a law license in New York. Recognizing that Ms. Schoenefeld's initial lack of awareness of the requirements of Judiciary Law §470 was not unique to her, an effort to alert attorneys to the requirement may be in order. One way could be a requirement that attorneys certify their compliance with Judiciary Law §470 on their biennial registration forms.

Fans of AMC's fictional attorney Jimmy McGill in “Better Call Saul,” familiar with his willful ignorance and frequent disobedience of the law, may wonder whether his law office, transported to New York, would qualify as a bona fide physical office for the practice of law. For a season or two, Jimmy transacted legal business from a small room located in the rear of a strip mall nail salon and spa, reachable only by passing through a narrow corridor lined with supplies, and requiring that the office desk be pushed aside in order to be able to open the door to his office. On his desk was a landline phone.

Based upon the authority of, inter alia, Reem, and likely unbeknownst to Jimmy, he probably would be found to be in compliance with Judiciary Law §470.

David Paul Horowitz is a member of McNamara & Horowitz in New York City, Lecturer at Law at Columbia Law School, and serves as a legal malpractice expert, private arbitrator, mediator, and discovery referee. He can be reached at [email protected]. Lukas M. Horowitz is a member of the Albany Law School Class of 2019.