No Office, No Problem: Court of Appeals Holds that Violation of Judiciary Law § 470’s “Physical Office” Requirement Does Not Render Action a Nullity, But Could Subject Attorney to Discipline

In a unanimous decision authored by Judge Michael Garcia, the Court of Appeals today resolved an important issue of first impression implicating multi-state practice in New York—“whether 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.”

In Arrowhead Capital Finance, Ltd. v Cheyne Specialty Finance Fund L.P., the Court held that the failure of a nonresident attorney to comply with the physical office requirement in Judiciary Law § 470 at the time an action is commenced does not render the action a nullity. The opinion resolved a split between the First Department, which has held that any action taken by a nonresident attorney who fails to maintain a physical office in New York as required under Judiciary Law § 470 is a nullity, and the Second and Third Departments, which have permitted nonresident attorneys to cure a Judiciary Law § 470 violation by obtaining an attorney with a New York office or by application for admission pro hac vice by appropriate counsel.

The Court noted that the rule adopted by the Second and Third Departments stems from its prior decision in Dunn v Eickhoff (35 NY2d 698, 699 [1974]) where it held that “[t]he disbarment of a lawyer creates no ‘nullities,’ the person involved simply loses all license to practice law.” The Court held that “given [its] holding in Dunn, it would be incongruous to conclude that, unlike the acts of a disbarred attorney, actions taken by an attorney admitted to the New York bar who has not satisfied Judiciary Law § 470’s office requirement are a nullity.” Thus, the Court adopted the Second and Third Department rule and concluded that “the party can cure the section 470 violation with the appearance of compliant counsel or an application for admission pro hac vice by appropriate counsel.”

The Court, however, clarified that a Judiciary Law § 470 violation is not without consequences. The attorney who violates section 470 by practicing in the State without a physical office could face discipline. The court held that “[w]here further relief is warranted, the trial court has discretion to consider any resulting prejudice and fashion an appropriate remedy and the individual attorney may face disciplinary action for failure to comply with the statute.” “This approach,” the court concluded, “ensures that violations are appropriately addressed without disproportionately punishing an unwitting client for an attorney’s failure to comply with section 470.”

Important Practice Tip

Beyond clarifying the effect of a nonresident attorney’s violation of the physical office requirement in Judiciary Law § 470, the Court’s decision in Arrowhead includes a notable practice point that should not be overlooked.

In its motion for leave to appeal, Arrowhead limited its appeal “to the extent that the Appellate Division failed to reverse and remand the Order and Judgment of Supreme Court dismissing [its] Complaint as a ‘nullity’” for the Judiciary Law § 470 violation. The Judiciary Law § 470 dismissal, however, only related to the breach of contract and fiduciary duty claims that survived Defendant’s first motion to dismiss. By limiting its appeal to the distinct Judiciary Law § 470 issue, and not appealing the dismissal of its other claims, Arrowhead precluded the Court from reviewing the propriety of Defendant’s first motion to dismiss (see Quain v Buzzetta Constr. Corp, 69 NY2d 376, 380 [1987]). Thus, the Court granted defendant’s motion to strike the portion of Arrowhead’s brief addressed to defendant’s first motion to dismiss.

It is unclear whether Arrowhead’s decision to limit the appeal was strategic. Certainly, crystalizing an issue of first impression doesn’t hurt a party’s chances of having its motion for leave to appeal granted. But, by limiting the appeal, you give up other issues that could have otherwise been raised. Attorneys should be wary of the Court’s rule in Quain and only limit their appeals if they are willing to relinquish their rights to challenge other issues in the case.

And one more thing. The Court would do well to explain the practical impacts of its decisions to the parties and the bar in general in as plain of terms as possible. Here, the Court’s decretal paragraph reads:

To aid the parties and trial court, adding a clarifying clause to the decretal saying expressly that only the claims dismissed for the Judiciary Law § 470 violation remain to be litigated on remand would go a long way. Although this may appear straightforward in this case, many times the Court’s decisions on jurisdiction and reviewability leave parties scratching their heads about what to do next to fix the issues. The Court should try to help address those issues in its decisions to the best it can.

The Court of Appeals’ opinion can be found here.

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