New York Says You Can Peek Now Under RPC 4.4, But Will You?

Yesterday the New York City Bar Association issued an opinion attempting to clarify what lawyers there must and must not do when in receipt of material sent in error by an opponent. Part of the opinion is common sense – you need to tell your opponent you received it – and part of the opinion invites your own judgment – you may be able to use it, but proceed at your own risk.

NYCBA Formal Opinion 2012-1 unambiguously instructs lawyers that they must promptly notify the sender, under Rule 4.4(b) of the New York Rules of Professional Conduct. The duty holds regardless of whether the communication is electronic or hard-copy, and applies no matter who sends the material.

The tricky part? Now lawyers are tempted with the discretion to decide for themselves how to answer the next question: ”Now that I have it, and I told the other side about it, is it  it is ethically permissible to use this material?” Here the Opinion eases away from prior bans against such use. 

Now, “depending on the facts and circumstances” use of the material may be appropriate, or at least allowed. Of course, you are free to engage your noblest qualities and decide that such use would be unfair, and decline to look. In other words, look to your value system. Need you raise the issue with your client, who might be angry with you for passing up the opportunity to learn some secrets? You’re on your own there, but the comments to the Opinion suggest you may want to do that too.

So, green light right? Not so fast. The Opinion cautions that counsel would to remember the New York State Bar Association comment that “a lawyer who reads or continues to read a document that contains privileged or confidential information may be subject to court-imposed sanctions, including disqualification and evidence-preclusion”. 

You didn’t think it would be that easy did you?

Frivolous Anti-SLAPP Motion Results in Referral to State Bar

In Personal Court Reporters Inc. v. Rand, et al.,  — Cal.Rptr.3d —-, 2012 WL 1372196, (2nd. Dist., April 20, 2012), defendant attorneys filed an anti-SLAPP motion in response to a breach of contract complaint filed by Plaintiff court reporters seeking recovery of $32,323.45 plus interest in overdue fees. Defendants had objected that the court reporter fees were illegal, excessive and unnecessary.  Defendants further argued that their professional corporation had the contractual relationship, and therefore, they, as individual defendants and a nonexistent DBA, were not proper parties to the suit.

The California Court of Appeal (Second District) upheld the trial court’s denial of the motion because the lawsuit involved unprotected activity – the nonpayment of overdue invoices – even though the invoices were for services related to litigation.  Of note is the Court’s discussion in granting Plaintiff’s sanctions request, citing to authority allowing the Court of Appeal to award “such damages as may be just” when the Court finds that the appeal was frivolous and taken solely for delay.  The Court noted Defendants’ attempt to argue that the collections action  implicated constitutional interests, and remarked that it normally would not impose sanctions simply because an appeal is based on a creative argument with little hopes of success.  However, “where a party bases an appeal on an argument that has been rejected in another trial court and affirmed on appeal, the principle ‘once burned, twice shy’ applies.”  The Court stated that attorney defendant was a party defendant in another reported anti-SLAPP decision – that one over a lien dispute with a medical provider, California Back Specialists Medical Group v. Rand (2008) 160 Cal. App. 4th 1032.  In California Back Specialists, the same attorney defendant had resisted payment of a medical lien because he questioned the reasonableness and necessity of the medical care provided, and also, because the treating physician had stipulated to reprimand by the California Medical Board.  Attorney defendant argued that this was protected activity in an anti-SLAPP motion.  That motion was denied, and sanctions were awarded to Plaintiff medical group. On appeal, represented by the same counsel, the California Back Specialists court found no protected activity because the activity at issue was a lien dispute, something never under consideration by a judicial body even though they related to pending litigation.

Turning back to the case at bar, the Court of Appeal concluded “Where, as here, a party appeals and merely repeats an argument that was soundly rejected by another appellate panel, we have little difficulty in concluding that the party lacked good faith in pursuing the appeal. Defendants’ conduct is especially egregious because they failed to bring the prior case to our attention and did not address its holding after plaintiff cited it in its brief.” Rejecting Defendants contention they should be excused because they relied on their counsel, the Court found they themselves were attorneys, and one had been a party defendant in the California Back Specialists case.  The Court awarded sanctions in the amount of $22,000.00, constituting Plaintiff’s attorneys fees, and referred the matter to the State Bar, under California’s mandatory reporting statute of non-discovery sanctions over $1,000.00.

Take away: If an attorney or party feels an appeal has merit notwithstanding a prior loss on a related issue, at the very least the party should disclose the prior matter and make the conscious effort to explain why the new is distinguishable from the prior one and why, either through different facts or law, the Court of Appeal should rule differently the second time.  The Court of Appeal will find out, and as this case illustrates, counsel risks discipline for failure to do so.

South Carolina Disapproves “Expert” Answering of Specific Online Legal Questions

In Ethics Advisory Opinion 12-03, the South Carolina Bar’s Ethics Advisory Committee addressed the question of the propriety of an attorney’s participation in answering online legal questions from the general public.

The opinion arises in the context of www.justanswer.com, a website which permits members of the public to post questions concerning a number of topics, for a fee, to be answered by preselected “experts” in various fields, including the legal profession.  As described by the Committee, members of the public posting the questions are not limited to residents of South Carolina.  The site’s terms of use notes that the site’s use of the term “experts” refers only to those who answer questions, and does not guarantee any particular level of expertise of those “experts.”   The attorney “expert” and the website enter an agreement providing that all “experts” in legal categories must be licensed attorneys in good standing in at least one jurisdiction, may provide only general information such as descriptions of general principles of law,  may not provide legal advice, and may not create an attorney client relationship on the site.  A lawyer who answers a question on the site is paid a fee by the website.

The Committee also noted that the site included a boilerplate initial response to posed questions stated “Hi, JustAnswer has asked me to answer your question…because it falls within my area of expertise.  I just need a few more details about your situation and I will get to work.”  It contains other statements such as “CUSTOMER SATISFACTION GUARANTEED”, “expert” and permitted some attorneys to have been verified to be credentialed as an  “VERIFIED EXPERT.”  Attorneys are identified initially through a user name and a photo.  Attorney profiles contain “feedback” that include testimonials and endorsements.  A “Recent Answers” section attributes specific legal advice given in response to detailed specific legal matters to specific attorneys.  The Committee noted only a small percentage of the answers was legal information of general applicability.

The Committee stated that only at the very bottom of the page, in smaller type than the substantive and promotional information is a disclaimer that the “answers” were not a substitute for legal advice, were provided “as is”, that the “expert” was not the questioner’s attorney, that the answer was not legal advice, that the information was not confidential or private or protected by the attorney client privilege, and that the questioner should consult with an attorney before acting.  A similar disclaimer of any provision of legal advise is also contained int the site’s terms of Service.

The Committee opined this scenario raised three ethics issues 1) advertising, 2) the creation of an attorney client relationship, and 3) third party compensation.

1) Advertising and Communication.

The Committee found the Site identified the attorneys as “experts” in violation of Rule 7.4(b), which prohibits  the use of the term “expert” (or a variation thereof), unless certain conditions, not triggered by the site, were met.  The site’s disclaimer of the meaning of the word “expert” did not absolve an attorney from the violation.  Further, the “as is” disclaimer could be construed as an attorney’s attempt to prospectively limit liability, in violation of Rule 7.1.  Finally, the testimonials and endorsements violated Rule 7.1 by not containing the required statements, and is misleading by using buried language to disclaim an attorney client relationship when the actual facts could result in the creation of one.

2) Creation of an Attorney Client Relationship

The Committee noted that it encouraged attorneys to participate in education and public relations programs about the law.  Citing its earlier Ethics Opinion 94-27,  the Committee approved an attorney’s participation in an online education and information program so long as no specific legal advice was provided.  Attorneys must refrain from appearing to give a general solution applicable to all similar situations, and must caution laymen not to attempt to solve individual programs on the basis of the information being provided.  The Committee cited with approval Opinion 94-13 from the Ohio Supreme Court Board of Commissioners on Grievances and Discipline, which noted that “particular caution is warranted” in formats that invite individuals to ask questions. A disclaimer of an attorney client relationship will not prevent the formation of an attorney client relationship if the parties’ subsequent conduct is inconsistent with the disclaimer.

Turning to the site in question, because it asked attorneys to provide specific legal advice in response to specific questions, it was substantively inviting the creation of an attorney client relationship despite the disclaimers.  “At a minimum, justanswer.com provides, not just question-and-answer, but a specific question-and-paid-professional-answer service,” which distinguished it from the public education program previously approved by the Committee.

3) Third Party Compensation

Finally, the site’s compensation structure violated Rule 1.8(f), which prohibits an attorney from receiving compensation from a third party unless the client gives informed consent, there is no interference with the attorney’s independent professional judgment, and the attorney client relationship, and the client’s confidential information is protected.  If the relationship between the attorney and questioner arises to the level of the creation of an attorney client relationship, the attorney cannot accept the fee unless she complies with Rule 1.8(f).

Opinion 12-03 expressly does not prohibit an attorney from participating in a legal website in general.  “Lawyers may participate in such sites only to the extent their participation (1) is limited to providing information of general applicability, and (2) the lawyer’s individual responses clearly advise against any reliance on the information as advice or application of it to a specific situation without a more thorough consultation with counsel. [citation].  When an inquirer attempts to explore specific circumstances with a participating lawyer, the lawyer should decline to respond beyond advising the inquirer to seek legal advice; otherwise, she risks creating an attorney-client relationship.”  The attorney must also ensure the website complies with the advertising and communication rules before using it.

The Committee concluded that generally that an attorney who elects to create an attorney client relationship through an online service, following the rules attendant to that relationship, would not violate the rules.  But on this site, they would.  The site specifically disclaimed the creation of an attorney client relationship.  An attorney who used it with the intent to create that attorney client relationship “would be tantamount to false, “bait and switch” advertising by the lawyer.”

Non-Lawyer Firm Ownership in the U.S.? New York Says Fuggedaboutit!

As the debate over whether to allow non-lawyer firm ownership in the U.S. heats up, the New York State Bar Committee on Professional Ethics has determined that a lawyer who primarily practices in New York cannot be an employee of an out-of-state or foreign firm owned or managed by nonlawyers, even if nonlawyer ownership is permitted where the firm is established. Is this a New York tea party? Fuggedaboutit!

The opinion, which may be challenged in court and is not legally binding, arose from an inquiry to the NYSBA by lawyers interested in starting a New York office for a United Kingdom-based firm that includes non-lawyer owners.

NYSBA Opinion 911, issued March 14, cited Rule 5.4 (a) of the New York Rules of Professional Conduct barring lawyers from sharing fees with non-lawyers, and Rule 5.4(d) which disallows practicing law for profit with an entity that includes a non-lawyer owner or member.

Obviously the main impact is on firms in the United Kingdom and Australia, which already permit ownership by nonlawyer investors. New York and forty-nine other states prohibit nonlawyer ownership of law firms. The District of Columbia allows nonlawyer employees to have an equity interest in law firms, but we know why that is don’t we, so does it really count?

So the focus returns to the ABA Commission on Ethics 20/20, which has been debating whether to drop this long-standing tradition in American legal practice. But the current proposal under the ABA’s consideration is tighter than the version defeated at the ABA House of Delegates in 2000.  The 2000 proposal would have allowed firms to both provide legal and nonlegal services (e.g. accounting, and investment banking). What the ABA is mulling now is a version of what exists in D.C. - where non-lawyers may co-own law firms but lawyers must retain financial control.

The ABA is in no hurry to resolve this issue: no formal proposal will be voted by the ABA House of Delegates any sooner than February, 2013.

Non-Lawyer Firm Ownership in the US? Jacoby & Myers Loses the First Battle

Many are watching with great interest what will happen in the US legal market with respect to non-lawyer firm ownership. It has occurred in a few countries across the oceans, and many predicted a tsunami would hit our shores, but as Lee Corso might say on ESPN’s College Game Day — “Not So Fast My Friends!”  The movement abroad has not resulted in transformations of the profession those places, despite the hype. One Australian personal injury firm was purchased by investors, but most seem to agree that it is far from clear whether this model will even be profitable, aside from the question of whether it besmirches the integrity of law firms. Maybe it is just too soon to tell.

In America, it remains to be seen whether it will even happen at all. Yesterday a challenge by Jacoby & Meyers to New York state’s ban on law firms accepting equity investments from non-lawyers was dismissed by Southern District Judge Lewis A. Kaplan. The personal injury firm attacked NYRPC 5.4 regarding independence of lawyers.  Judge Kaplan said the Rule was not the only applicable New York regulation that prevented the plaintiffs from accepting non-lawyer equity investments, so even a favorable ruling would not have been dispositive on the merits, while also been a constitutionally impermissible advisory ruling  forbidden to federal courts under Article III of the U.S. Constitution. For these and other procedural reasons the suit may have been ill-conceived, or at least pressed in the wrong forum.

The challengers believe the relevant part of Rule 5.4 which states that “(a) A lawyer or law firm shall not share legal fees with a nonlawyer” and “(d) A lawyer shall not practice with or in the form of an entity authorized to practice law for profit, if: (1) a nonlawyer has any interest therein” puts them at a disadvantage compared to larger firms with more capital. The firm stated its commitment to press the issue in New York and other states, analogizing the battle to those that opened up attorney advertising decades ago.

Is a change to the rule really necessary in this era of alternative litigation financing? Multi-million dollar commercial cases are already funded by ALFs here. Is the playing field really unlevel? Or is it about profit percentages? And if so, should the courts or the marketplace sort that out? Perhaps the proponents of non-lawyer ownership underestimate the opposition to this change in the rules in the US.

Are You “Certified”? New York Attorney Wins First Amendment Fight Over Attorney Ads

The U.S. Court of Appeals for the Second Circuit ruled yesterdaythat parts of a New York rule requiring that attorneys who claim to be certified specialists make prescribed disclosure statements violates the First Amendment. Is this a victory for the First Amendment, or just a rule that could have been written more carefully?

Either way, Buffalo personal injury lawyer J. Michael Hayes persuaded the court that there was a lack of clear standards for enforcing Rule 7.4 of the New York Rules of Professional Conduct on attorney specializations.

The issue came up when the NY Attorney Grievance Committee confronted Hayes over what it claimed were inadequate disclosures on his letterhead and on one of two billboards advertising his services in 1999. Hayes was never formally disciplined, but it what turned out to be a wise move he got ahead of the issue and filed for a ruling seeking a declaration that the rule was unconstitutional both on its face and as applied.

While ultimately he lost on the first issue, he was vindicated on the second. The Second Circuit reversed the lower court 2010 bench trial ruling in Hayes v. State of New York Attorney Grievance Committee of the Eighth Judicial District. NY Rule 7.4 allows a lawyer who is certified as a specialist to include that in an advertisement if the organization is identified and the following statements are “prominently made”: “[1] The [name of the private certifying organization] is not affiliated with any governmental authority [,] [2] Certification is not a requirement for the practice of law in the State of New York and [3] does not necessarily indicate greater competence than other attorneys experience in this field” of law.

While the Second Circuit found New York had a substantial interest in protecting the public from potentially misleading attorney ads that was furthered by the rule, and that the rule was narrowly drawn, they decided although the rule was not vague on its face, a question remained whether it was vague as applied. And while Hayes was never actually disciplined for violation of the rule, the court found the ”repeated and extended investigations of his conduct created a cloud on his good standing” that was adverse to Hayes and would ”clearly chill legitimate advertising by similarly situated lawyers” since there was no way for those affecetd by the Rule to have a clear idea how to comply. 

The decision is interesting in picking apart both the requirements and the Grievance Committee’s rationale for defending them. As for Hayes, in addition to feeling vindicated, he speculated “(P)eople now are going to start getting certified-I know a lot of attorneys who had thought about it and decided not to do it because they didn’t think they could use it”.

Two things — 1. What do your state rules require in advertising specialties and are they subject to the same challenge? 2. Do you see increasing lawyer certification as a result of this ruling, an independent trend that was happening anyway, or a non-trend regardless?

Getting or Losing a Lawyer? Lateral Conflicts Can Take a Bite Out of Your Business

At The EQ, we are always looking for cases that might be important regardless of jurisdiction. Here is another one, with a hat tip to our Hinshaw team for the write-up!

Krutzfeldt Ranch LLC v. Pinnacle Bank, ___ P.3d ___, 2012 WL 273311 (Mont. 2012)

Another in Our Series of Hinshaw Lawyers for the Profession® Alerts

Brief Summary

The Montana Supreme Court disqualified a law firm that hired a lawyer with a concurrent conflict of interest involving direct adversity. Given the nature of the conflict, the Court declined to consider prejudice against the disqualified law firm’s client or otherwise balance hardships.

Complete Summary

After bringing a lawsuit against defendant bank, plaintiffs’ lawyer retained a separate attorney for advice on settlement and tax-related issues (Tax Lawyer). The Tax Lawyer’s final meeting with, and work for, plaintiffs was in the summer of 2010. Thereafter, the Tax Lawyer sent an engagement letter and a bill for his work to plaintiffs’ lawyer, which was paid. On January 1, 2011, the Tax Lawyer moved to the bank’s law firm, which was opposing plaintiffs in their lawsuit. On January 5, 2011, the Tax Lawyer sent a letter to plaintiffs’ lawyer stating, “we feel we will be more responsive and efficient to your needs and the ever changing tax and regulatory world by utilizing the resources that [the bank’s firm] has to offer.”

Plaintiffs moved to disqualify the bank’s law firm in the litigation. The trial court denied the motion, concluding that the Tax Lawyer and plaintiffs had a former attorney-client relationship, and that the Tax Lawyer had been effectively screened from the matter. The Montana Supreme Court reversed, holding that the trial court ruling was clearly erroneous.

Focusing on the doctrine that the existence of an attorney-client relationship hinges on the client’s reasonable belief, the Court highlighted the fact that the Tax Lawyer’s work for plaintiffs was necessarily intermittent, and therefore that it was reasonable for plaintiffs to continue to believe that a lawyer-client relationship existed even five months after their last meeting with the Tax Lawyer. The Court also focused on the engagement letter and the letter sent on January 5, 2011, both of which indicated the prospective nature of the Tax Lawyer’s services. Finally, in concluding that the Tax Lawyer had a current-client relationship with plaintiffs, the Court found significant the fact that the Tax Lawyer had never communicated any intent to end the lawyer-client relationship.

The Court then considered whether the concurrent conflict of interest would prejudice plaintiffs. That step was necessary because it is generally well-established that a violation of a rule of professional conduct, although it may be relevant, does not per se and on its own necessarily justify disqualification. The court found prejudice to plaintiffs because they effectively lost time and money on the Tax Lawyer, lost their trial date as a result of the Tax Lawyer’s switching firms, and, perhaps most importantly, lost the Tax Lawyer’s loyalty.

Finally, given that this case involved a violation of RPC 1.7 (current-client conflict of interest), the Court declined to balance hardships by weighing any prejudice suffered by the bank in losing its counsel.

Significance of Opinion

Despite the Court’s refrain that the violation of a rule of professional conduct is not alone sufficient to require disqualification, this opinion demonstrates that disqualification may be difficult to avoid upon a violation of RPC 1.7(a)(1) when there is a conflict involving direct adversity. This opinion further makes clear the importance of assessing potential conflicts before switching firms, and of clearly communicating the end of the lawyer-client relationship with, inter alia, disengagement letters.

Do You Offer a Groupon to Clients? Would You?

While the legal industry may be in the late majority to adapt technology, perhaps change and adaptation is inevitable even for law firms. And while perhaps not all adaptations are necessary — i.e. not all innovations present an “adapt or die” proposition — some new uses are more curious than others. Like Groupon for lawyers.

Which came first, Groupon asking lawyers if they wanted to place ads or vice versa? We may not know. But the issue of lawyers advertsiing on the service has been considered now by the vigorous, thoughtful individuals at the New York State Bar Association.

Key ethics and risk management issues for lawyers who want to market discounted services with Groupon or similar websites include whether the money paid to the website running the ad is an improper referral fee (RPC 7.2), compliance with other advertising regulations (RPC 7.1. et al), appropriateness of the fee (RPC 1.5), and whether the lawyer can make necessary conflict checks and determine the lawyer’s ability (or not) to perform the work requested competently (RPCs 1.1, 1.10). If the advertising is not misleading or deceptive and makes clear that no lawyer-client relationship will be formed until the lawyer can check for conflicts and competence to provide the services, these arrangements won’t likely earn you a date with the New York disciplinary authorities.  Unlike a restaurant that delivers a bad meal, however, the lawyer must grant the coupon buyer a full refund if the work requested cannot be provided.  Additional ethics considerations apply (just like the small print on coupons!).

You can find the full text of the NYSB Opinion here.

Anecdotally I have heard many business owners having widely diverging levels of satisfactions with coupon services. Is this just another way for lawyers to attract clients and offer value, or an invitation to an unpleasant experience? Can you structure a Groupon to avoid flat fee and trust account problems? And what if the client requires something more complex, are you stuck with your bargain or do you run into the problem of potentially seeking to alter the fee and/or the engagement? The risk, to license and reutation, might be more than it’s worth.

Undercover Investigations and Contact with Represented Parties

A colleague who practices primarily in white collar defense recently approached me with an interesting ethical question.  She told me that her client, a defendant in a criminal case, had been secretly tape recorded by a co-defendant after both had been indicted, and while both were known to be represented by counsel.  In addition to implicating Sixth Amendment concerns, didn’t that violate the ethical rule prohibiting contact with a represented party?  Weren’t both the prosecutor and the co-defendant’s attorney in breach of their ethical obligations?

The answer to that question is fairly straightforward in a literal sense, but very tricky as a practical matter.  Under Model Rule 4.2, “In representing a client, a lawyer shall not communicate about the subject of the representation with a person the lawyer knows to be represented by another lawyer in the matter, unless the lawyer has the consent of the other lawyer or is authorized to do so by law or a court order.”  Lawyers for the Government have long relied on the “authorized … by law” exception, although the boundaries of what that means are up for debate.  Comment 5 to Model Rule 4.2 explains, “Communications authorized by law may … include investigative activities of lawyers representing governmental entities, directly or through investigative agents, prior to the commencement of criminal or civil enforcement proceedings.”  According to the United States Attorney’s Manual, “Generally, the case law recognizes covert contacts in non-custodial and pre-indictment situations as ‘authorized by law.’”  It seems well-settled that a Government lawyer may secretly record a defendant pre-indictment. 

Post-indictment, however, is a different story.  It is not well-settled that the Government may engage in the same investigative activities as they would prior to the commencement of proceedings.  At least one recent case stands for the proposition that, so long as contact does not violate the Sixth Amendment, it is “authorized by law” and not a violation of the Rules of Professional Conduct.  In United States v. Basciano, 763 F. Supp. 2d 303 (2011), the Eastern District of New York upheld the use of an informant post-indictment on the grounds that the informant sought information from the defendant for other uncharged offenses, and therefore the Sixth Amendment right to counsel had not attached.  But the Model Rules did not intend to countenance such a result.  Comment 5 to Model Rule 4.2 specifically notes, “The fact that a communication does not violate a state or federal constitutional right is insufficient to establish that the communication is permissible under this Rule.”  It seems to me that if “authorized by law” is coextensive with “not unconstitutional,” it will swallow the rule.  There needs to be a better balance between protecting legitimate investigative techniques while still maintaining a high standard of professionalism for Government attorneys. 

And what about the private attorney whose client is contacting – and deceiving – a represented party?  This conduct certainly constitutes a literal violation of Rule 4.2.  The “authorized by law” exception clearly applies only to attorneys for the Government, not to private counsel.  This puts the defense lawyer in quite a bind.  A lawyer who is confronted with that circumstance, and who contiues to represent a client who is deliberately eliciting statements by a represented party, would apparently be left to argue that his conduct is somehow encompassed by the leeway that is afforded the Government.  There is no instance in which the courts have accepted that argument, but, on the other hand, I know of no instance in which an attorney has been disciplined for violating Rule 4.2 by counseling his client to secretly record a co-defendant.  This seems to be a case of all parties “looking the other way.”

New York Decision Erodes Geographic Boundaries Limiting Law Practice

Are geographic boundaries becoming obsolete to practicing lawyers? We at Hinshaw invite you to consider the issue in light of a newly decided case holding that a New York law office requirement is unconstitutional.

Another in Our Series of Hinshaw Lawyers for the Profession® Alerts

Schoenefeld v. New York, 2011 WL 3957282 (N.D.N.Y., 2011)

Brief Summary

The U.S. District Court for the Northern District of New York struck down a New York statute that required New York-licensed lawyers who reside out-of-state to maintain an in-state office as unconstitutional under the privileges and immunities clause.

Complete Summary

Plaintiff lawyer sought declaratory relief alleging that a New York statute was unconstitutional under the privileges and immunities clause. The law required New York-licensed attorneys who reside outside of New York (but not those who resided in the state) to maintain law offices within the state of New York. The district court held the statute unconstitutional.

The court first held that the practice of law is a fundamental right under the privileges and immunities clause because it has both commercial and noncommercial purposes. The court then held that the statute discriminated against nonresident attorneys because such lawyers, at a minimum, must maintain both a residence in their home state and a law office in New York, whereas an attorney residing and licensed in New York could, for example, operate his or her law practice out of his or her residence. The court held that the law “effectively preclude[d] a number of non-resident attorneys from practicing law in New York” and that it imposed a “significant competitive cost” burden on nonresident attorneys licensed in New York who must maintain a New York office outside their home to practice law. 

Given that the privileges and immunities clause was implicated by the statute, the court analyzed the issue of whether the law’s discriminatory effect had a substantial relationship to a substantial state interest. The court rejected the state’s contention that there existed a substantial state interest here. It also determined that, if any such interest did exist here, the law had no valid substantial relationship to such interest.

The court held that ensuring the availability of attorneys to court proceedings and interested parties was not a substantial state interest because the in-state office requirement did not necessarily ensure the lawyer’s proximity to a given courthouse (e.g., an attorney in New Jersey might be closer to courthouse in New York City than a lawyer in Buffalo). The court then held that the ability of the state Bar and courts to oversee attorney character and fitness was not a substantial state interest here because such oversight is available during and after an attorney’s admission to the Bar regardless of where he or she resides. Finally, the availability of the remedy of attachment against lawyers was not a substantial interest because attorneys could satisfy the in-state office requirement by maintaining an of-counsel relationship with a New York office and such lawyers would have little, if any, property to attach.

Alternatively, the court held that the statute did not bear a substantial relationship to any alleged substantial state interests. The court found that the statute was unnecessary to ensure attorneys’ availability for service of process because the state could impose a less restrictive requirement for appointing an agent for service of process. Similarly, the existence of modern communications and/or local counsel would address issues regarding an out-of-state resident lawyer’s availability for court proceedings.

Significance of Opinion

This decision likely will affect many lawyers by giving out-of-state resident New York-licensed lawyers easier access to practice within the state. More importantly, the decision reflects a proper, growing skepticism for the continuing viability of or justification for laws and court rules that impose archaic geographical border limitations on the practice of law by licensed attorneys.