N.Y. Advertising Rules Pose No Obstacle To Operation of ‘Purely Virtual' Law Office

By Samson Habte

Oct. 1 — Ethics rules that require attorneys to list their “principal law office address” in advertisements do not prohibit a nonresident attorney who is licensed in New York from providing legal services to New Yorkers through a “purely virtual” practice operated in another state or abroad, the New York state bar's ethics committee concluded Sept. 30.

The committee noted that New York's highest court is now weighing a constitutional challenge to a statute that has been interpreted as requiring nonresident attorneys licensed in New York to maintain a physical office in the state to practice there.

The panel expressed no opinion on how the “statutory issues regarding virtual law offices” should be resolved in that pending case. However, it rejected the notion that New York Rule of Professional Conduct 7.1(h), which governs lawyer advertising, “provide[s] an independent basis for requiring a physical office.”

Relaxation of Office Mandate Elsewhere

The New York state bar ethics committee noted that “the physical office requirement is undergoing changes in other states,” citing several developments as support for reversing its prior conclusion that “Rule 7.1(h)—a rule that on its face regulates only advertising—provides an independent basis for requiring a physical office.”

The opinion points to a 2013 amendment that eradicated the office requirement in New Jersey. See 29 Law. Man. Prof. Conduct 70.

The committee also cited In re Carlton, 708 F. Supp.2d 524, 26 Law. Man. Prof. Conduct 376 (D. Md. 2010), which held that an analogous mandate in the local rules of a federal district court should be relaxed because technological advances have reduced the need to require lawyers to maintain continuous physical presence in jurisdictions where they practice.

Other ethics panels also have concluded that lawyers may operate virtual law offices without traditional bricks-and-mortar counterparts, the committee noted. See North Carolina Ethics Op. 2005-10 22 Law. Man. Prof. Conduct 139 (2006); Pennsylvania Formal Ethics Op. 2010-200, 26 Law. Man. Prof. Conduct 606 (2010); see also New York City Ethics Op. 2014-2 (2014) (lawyers may use street address of “virtual law office” as principal law address for purposes of complying with Rule 1.7(h) even if they work primarily from another location).

The committee “modified” two earlier opinions in which it had suggested that Rule 7.1(h) “imposes an obligation for a physical office.”

Operation of ‘Virtual' Practice

The opinion responds to an inquiry from a solo transactional attorney who wants to establish a “virtual law office” in New York, where the attorney is licensed but does not live.

Under the proposed arrangement, the attorney would interact with clients electronically. Client information and communications would be accessed through a secure Internet portal maintained by a third-party vendor.

The vendor would also provide someone based in New York to answer calls to the lawyer's New York phone number, forward mail to the lawyer and accept service of process on the lawyer's behalf. Alternatively, the lawyer would rely on a relative who lives in New York to perform those functions.

No Ethical Barrier

The opinion cites two possible obstacles to virtual law practices.

The first is Rule 7.1(h), which requires attorneys to list a “principal law office address” in advertisements.

The extent to which Rule 7.1(h) forbids the operation of a “purely virtual” office is not clear from the black letter of the provision, the committee said. That's because although the rule “states what an attorney's advertising must contain, [it] does not expressly state that all attorneys ‘shall' or ‘must' maintain a physical office, or set standards to determine what constitutes such an office,” the committee explained.

However, two prior ethics opinions “implied that Rule 7.1(h) by itself provided an independent basis for requiring a physical office,” the committee noted.

In New York State Ethics Op. 756 (2002), the committee said, “we interpreted the phrase ‘office address' in DR 2-101(k), the predecessor of Rule 7.1(h), to require a physical address.” That conclusion was cited in New York State Ethics Op. 964, 29 Law. Man. Prof. Conduct 302 (2013), which interpreted Rule 7.1(h) to mean that “[a]dvertising for legal services may not identify a mail drop as the sole address, and must include the street address of the lawyer's principal office.”

Nevertheless, the panel said it now concluded that “it is incorrect to interpret the attorney-advertising rule as an independent mandate for attorneys who advertise to maintain a physical office address.”

“To the extent N.Y. State 756 and 964 opine that Rule 7.1(h) or its predecessor imposes an obligation for a physical office, they are modified,” the committee said.

But Statutory Barrier May Exist

The committee said its new tack was attributable in part to the fact that “the physical office requirement has come under judicial scrutiny.” It specifically cited a pending challenge to the second potential barrier to the operation of a virtual law practice: N.Y. Judiciary Law §470.

That statute—which provides that all lawyers licensed in New York must keep an office in the state if they wish to practice there—was struck down by a federal judge who concluded in 2011 that it discriminates against nonresident attorneys and violates the privileges and immunities clause of the U.S. Constitution. See Schoenefeld v. New York, No. 1:09-CV-0504 (LEK/RFT), 27 Law. Man. Prof. Conduct 560 (N.D.N.Y. Sept. 7, 2011).

The ruling was appealed to the U.S. Court of Appeals for the Second Circuit, which in April asked New York's highest court for guidance on a potentially dispositive question: “what are the minimum requirements necessary to satisfy [the] mandate” in Section 470 that a nonresident attorney maintain an “office for the transaction of law business” in New York? See Schoenefeld v. New York, No. 11-4283-cv, 30 Law. Man. Prof. Conduct 236 (2d Cir. April 8, 2014).

“In whatever manner the courts resolve the statutory issues regarding virtual law offices—and we express no opinion on how they will or should resolve those issues—neither Rule 7.1(h) nor any other advertising rule imposes or defines the contours of an attorney's office or style of practice,” the committee concluded.

Full text at http://www.nysba.org/CustomTemplates/Content.aspx?id=52143.

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