United States: Miracle On Eagle Street: New York's Temporary Practice Rule

Last Updated: January 5 2016
Article by Ronald C. Minkoff

To many in the New York professional responsibility community, it seemed like a Christmas miracle. For more than 15 years, the New York State Bar Association and legal ethics experts have implored the Office of Court Administration, the Presiding Justices of the four Appellate Divisions, and the Chief Judge of the Court of Appeals (the Presiding Justice and Chief Judge, the "Administrative Board") to adopt a version of ABA Model Rule 5.5, the so-called "multijurisdictional practice rule" that would allow lawyers admitted in other jurisdictions to come to New York on a temporary basis to handle particular litigation and transactional matters. This would, proponents hoped, bring New York's ethics rules into step with the day-to-day reality of modern law practice. Every day, New York lawyers travel to other states and out-of-state lawyers come here to serve their clients. But numerous reports, resolutions, and articles fell on deaf ears. The revised New York Rule of Professional Conduct 5.5 was never passed, even as 46 other U.S. jurisdictions adopted it in some form.

All this changed on Dec. 10, 2015. On that day, Chief Judge Lippman promulgated 22 NYCRR §523 (Section 523), permitting temporary practice in New York for the first time. Section 523 is a court rule, not a Rule of Professional Conduct, but it has the same effect: It allows lawyers admitted in other U.S. jurisdictions or certain foreign jurisdictions to practice here on a temporary basis. For those who had labored since 1999 in what seemed a fruitless effort to make this happen, it was as if Santa Claus had appeared in person to light the Rockefeller Center Christmas tree.

In this article, we will discuss Section 523, why it is so important, and how it evolved. We will also discuss another, simultaneous development, the amendment of New York's in-house counsel registration rule, 22 NYCRR §522 (Section 522), to allow certain foreign in-house lawyers to register to practice here.

Section 523 — The Basic Criteria

Section 523 is very simple, but it has revolutionary impact on the way New York regulates the legal profession. It continues to prohibit lawyers not admitted here ("out-of-state lawyers") from "establish[ing] an office or other systematic or continuous presence" in New York or from holding themselves out to the public as New York lawyers — the exact same prohibition found in New York Rule of Professional Conduct (RPC) 5.5. But Section 523 permits certain out-of-state lawyers to practice in New York temporarily under four separate sets of circumstances — the so-called "safe harbors." Section 523 thus redefines and narrows the scope of unauthorized practice in New York by out-of-state lawyers, an act which remains a crime under Sections 478 and 484 of the N.Y. Judiciary Law.

To invoke the safe harbors of Section 523, out-of-state lawyers must meet three criteria. They must: (i) "be admitted or authorized to practice law in a state or territory of the United States or in the District of Columbia, or [be] a member of a recognized legal profession in a non-United States jurisdiction," as long as they are "admitted or authorized to practice as attorneys or counselors at law or the equivalent and are subject to effective regulation and discipline by a duly constitute professional body or public authority" (this rules out countries where lawyers are not effectively regulated) [22 NYCRR §523.2(1)]; (ii) be in good standing in every jurisdiction in which they are admitted [Id. §523.2(2)]; and (iii) perform services they are authorized to perform in their home jurisdictions, and which New York lawyers may perform here. Id. §523.3. (We will call lawyers who meet these criteria "qualified out-of-state lawyers.") Thus, if an out-of-state lawyer is not subject to effective professional regulation in his or her home jurisdiction, has already been disciplined there, or is attempting to perform services here they would not be allowed to perform there (such as, arguably, a British solicitor seeking to try a case in New York), they are not permitted to practice in New York, even temporarily, and even if they fall within the safe harbors.

The Safe Harbors

What are the safe harbors? Let's examine each in turn.

First, qualified out-of-state lawyers may engage in temporary practice in New York if their work is "undertaken in association with a lawyer admitted to practice in this State who actively participates in, and assumes joint responsibility for, the matter." Section 523.2(3)(i) (emphasis added). The italicized "and" underscores the conjunctive nature of this requirement: The local lawyer must not only assume joint responsibility for the matter from a malpractice standpoint, he or she must also actively participate in the work. While just one or the other is necessary to earn a fee split [RPC 1.5(g)(1)], both are required to provide a safe harbor for an out-of-state lawyer wishing to practice here. The local lawyer, in short, cannot be a mere mail drop; they must be an engaged member of the legal team.

Second, a qualified out-of-state lawyer may perform work in New York "in or reasonably related to" a court proceeding pending here or in another jurisdiction in which they are authorized to practice, as long as the lawyer "or a person the lawyer is assisting" is authorized by law or order to appear in that proceeding or reasonably expects to be so authorized. Section 523.2(3)(ii). This means that the qualified out-of-state lawyer herself, or a person she is assisting, must gain, or reasonably expect to gain, pro hac vice admission in New York. The "person" need not be a lawyer; for example, it may be a patent examiner authorized to practice by the U.S. Patent and Trademark Office. See Sperry v. Florida ex. rel Florida Bar, 373 U.S. 379 (1963) (states may not prevent nonlawyers from engaging in patent work authorized by USPTO). In any event, the qualified out-of-state lawyer need not wait for any pro hac vice process to be completed; they can start work immediately, as long as they "reasonably anticipate" that pro hac admission will be sought and eventually granted. See Spanos v. Skouras Theatres Corp., 364 F.2d 161, 168 (2d Cir. 1966) (decision en banc) (California lawyer who came to New York to perform services in federal lawsuit here did not engage in unauthorized practice even though case settled before lawyer could be admitted pro hac vice, where "it cannot seriously be doubted" that such admission would have been granted if requested).

Third, the out-of-state lawyer may practice here if they perform work "in or reasonably related to" an arbitration, mediation or other ADR proceeding held or to be held in this or another jurisdiction." Section 523.2(3)(iii). This makes clear that qualified out-of-state lawyers wishing to participate in New York-based ADR need not engage in any special process or registration before they can do so. This is a direct response to the California Supreme Court's seminal decision in Birbrower, Montalbano, Condon & Frank, P.C., 17 Cal.4th 119, cert. denied, 525 U.S. 920 (1998) (Birbrower), discussed in more detail below. It is also consistent with Judge Weinfeld's holding in Williamson v. John D. Quinn Const. Corp., 537 F. Supp. 613, 616 (S.D.N.Y. 1982), that a New Jersey-admitted lawyer performing an arbitration in New York was not engaging in unauthorized practice here.

Fourth, and finally, is the most far-reaching safe harbor of all. It permits a qualified out-of-state lawyer to perform services in New York that "arise out of or are reasonably related to the lawyer's practice in a jurisdiction in which the lawyer is admitted or authorized to practice." Section 523.2(3)(iv). This means that a transactional lawyer from another state may come here to perform any services arguably related to that lawyer's "practice" in his or her home state (not just services related to a particular matter), and may do so without engaging a local lawyer, as long as the work is sufficiently temporary so as to fall outside the basic requirement of Section 523.1(a) that the lawyer not establish a permanent presence here.

This is one of most revolutionary aspects of Section 523, expanding cross-border practice to commercial lawyers, not just litigators. In addition, as already noted, Section 523 covers lawyers from foreign jurisdictions, as long as such lawyers are "authorized to practice as attorneys or counselors at law or the equivalent and are subject to effective regulation" in those jurisdictions. Although 46 U.S. jurisdictions have adopted a form of Model Rule 5.5, the template for Section 523, only 11 have expanded it to lawyers from other countries. New York has gone from the back of the pack to the front, leading the way in making the U.S. amenable to "fly in, fly out" legal practice by qualified lawyers on international commercial matters.

Other Important Features of Section 523

Significantly, Section 523 includes disciplinary mechanisms for qualified out-of-state lawyers temporarily practicing here. It subjects them to "the New York Rules of Professional Conduct and to the disciplinary authority of this State" to the same extent as a New York practitioner doing the same work. Section 523.3. A New York disciplinary authority may either act independently on a complaint directed at an out-of-state lawyer or refer the matter to "the appropriate disciplinary authority of any jurisdiction in which the attorney is admitted or authorized to practice law." By expanding the authority of New York disciplinary authorities to qualified out-of-state lawyers, Section 523 ensures that New Yorkers have recourse if those lawyers violate ethical requirements.

Finally, Section 523 solves an embarrassing interstate problem with neighboring Connecticut. Stung by New York's refusal to allow Connecticut lawyers to perform temporary legal tasks in New York, while New York lawyers were allowed to do so in Connecticut under that state's version of Rule 5.5, Connecticut imposed a reciprocity requirement: it would allow out-of-state lawyers to engage in temporary practice there if their home states allowed Connecticut lawyers to do the same. Conn. R.P.C. 5.5(c). Section 523 ends this petty tit-for-tat.

In short, Section 523 opens our borders to lawyers from across the country and across the globe to transact legal business here, while adequately protecting the public, thus enhancing New York's reputation as the center of national and international commerce.

How We Got Here — Unauthorized Practice Cases in New York

The events culminating in the promulgation of Section 523 could fill a long and fascinating novel. Its characters include an unhappy divorcee in New York, a Rockland County law firm with a difficult California-based client, visionary academics, xenophobic lawyers and judges protecting their turf. But the main character has been the lawyer regulatory system itself, a system which allows each state to determine who may practice law within its borders. This system is embedded in New York statutes: N.Y. Jud. Law §478 and §484, which define legal practice in New York, "literally prohibit nearly all practice by out-of-state lawyers in New York, and make the unauthorized practice of law a criminal offense (previously a misdemeanor and now a felony)." R. Simon, Simon's New York Rules of Professional Conduct Annotated, 1363 (2015 ed.) (hereafter, Simon). Indeed, these New York statutes treat unauthorized practice in New York by lawyers admitted in another state exactly the same as practice by someone who has never been admitted as a lawyer at all, anywhere. Id. And a whole bureaucracy has grown to enforce these rules, including the New York Board of Bar Examiners, the Character and Fitness Committees of all four judicial Departments, and state criminal prosecutors.

Occasionally the courts have gotten into the act. For example, in Spivak v. Sachs, 16 N.Y.2d 163 (1965), a New York resident in a Connecticut divorce proceeding, unhappy with her New York lawyer and feeling as if she was being pressed into an unfavorable settlement, contacted an old friend and California lawyer, asking him to come to New York to assist her. The lawyer traveled to New York and stayed for two weeks, reviewing the Connecticut settlement documents, recommending its rejection and the commencement of a lawsuit in New York, and interviewing replacement New York counsel. He then returned to California. When he sought payment — the client had agreed to pay him to induce him to come — the client refused, claiming the California lawyer was not authorized to practice in New York. The New York Court of Appeals agreed. "Not only did [the lawyer] give her legal counsel as to those matters but essayed to give his opinion as to New York's being the proper jurisdiction for litigation concerning the marital res and as to related alimony and custody issues, and even went so far as to urge a change in New York counsel." Id. at 168. This, the Court said, constituted the practice of law, even if it did not involve a permanent presence in New York. Id.

The issue of unauthorized practice came before the Court of Appeals again in El Gemayel v. Seaman, 72 N.Y.2d 701 (1988), with a more felicitous result for the lawyer. There, a New York client contacted a Lebanese lawyer about an estate matter. The lawyer provided advice about Lebanese law by telephone, never setting foot in New York except to return the client's personal items and discuss his legal fee. The lawyer prevailed on his fee claim, with the Court of Appeals holding that he did not "practice law" in New York, and thus did not run afoul of N.Y. Jud. Law §478, because his physical presence in New York was "incidental and innocuous." 72 N.Y.2d at 707.

Birbrower Case

But the real wake-up call, both in New York and nationally, came with Birbrower, a case which in some ways was the mirror image of Spivak. Birbrower, a Rockland County law firm, undertook to represent a California-based software company, Tandem, in a California arbitration arising out of a contract containing a California choice of law clause. (The dispute had its genesis in New York, which is why the Birbrower firm got involved in the first place, but was soon moved to California.) The Birbrower lawyers did not associate with California counsel; instead, they traveled to California on several occasions to interview potential arbitrators and negotiate settlement with the other side. When the case finally settled, Birbrower presented Tandem with a bill for $1 million in fees, consistent with their fee agreement. Tandem refused to pay, saying the fee agreement was unenforceable because it violated California Business and Professions Code §6125, which prohibited out-of-state lawyers from practicing law "in" California. The California Supreme Court ruled in favor of Tandem, noting that the Birbrower lawyers, by representing a California client on a California matter, had violated the statute by repeatedly traveling to California and practicing law there. Id. at Birbrower, 17 Cal.4th at 131–32.

This basic holding of Birbrower was neither surprising nor long-lasting. The case involved a perfect storm of unauthorized practice: a New York lawyer working for a California resident, in a California arbitration, involving a California contract governed by California law — and then traveling to California and performing legal services there. Even then, the Court allowed Birbrower to recover under its fee agreement for legal services it performed in New York and, more importantly, allowed the firm's quantum meruit claim to survive for the remainder of its fees. Id. at 135–36.

Several subsequent cases, even in California, quickly limited the scope of Birbrower's holding. See, e.g., Estate of Condon, 65 Cal. App. 4th 1138 (1st Dist. 1998) (Colorado estate lawyer could expect a fee in California estate proceeding for advising Colorado resident who was a party to that proceeding); Fought & Co., Inc. v. Steel Engineering and Erection Co., 951 P.2d 487, 496 (Hawaii 1998) (Oregon counsel may be paid for work performed assisting client's Hawaii counsel in Hawaii lawsuit); but see Z.A. v. San Bruno Park School Dist., 165 F.3d 1273 (1999) (denying fees to out-of-state lawyer who appeared in California administrative proceedings). The California legislature amended Section 1282.4 of the California Civil Procedure Code to permit out-of-state lawyers to be admitted pro hac vice in California arbitration procedures, a legislative change which was soon implemented by the California courts. And the California Supreme Court six years later adopted a temporary practice rule much like Section 523 to allow out-of-state lawyers to practice in California in certain circumstances. Simon at 1372.

It was not so much Birbrower's holding that struck terror in the hearts of lawyers everywhere — though the prospect of not getting paid for their work had its effect on out-of-state lawyers, such as entertainment lawyers, who regularly traveled to California. Rather, two pieces of dicta in the Court's decision caused the greatest stir. The first was that associating with local counsel was not sufficient to avoid a claim of unauthorized practice, dispelling a long-held belief among lawyers. Birbrower, 17 Cal.4th at 126 n.3. The second, and more important, pronouncement from the Court was that physical presence in the state, while constituting "one factor" in determining whether unauthorized practice had occurred, was "by no means exclusive":

For example, one may practice law in the state in violation of section 6125 although not physically present here by advising a California client on California law in connection with a California legal dispute by telephone, fax, computer or other modern technological means. Id. at 128–29 (emphasis added).

The Court clarified that the use of these electronic communications did not "automatically" constitute unauthorized practice, but that "we must decide each case on its individual facts." Id. at 129. Still, in one fell swoop the Court vastly expanded the definition of unauthorized practice and created uncertainty as to the limits of that definition.

Model Rule 5.5

As the implications of Birbrower became clear, a state close to panic set in among academicians, practitioners, and the ABA Center for Professional Responsibility. Under the leadership of two Fordham Law School professors, the late Mary Daly (later Dean of St. John's University School of Law) and Bruce Green, a symposium was held at Fordham in late 1999 to address the problem and brainstorm ideas. This soon led to the creation of the ABA Commission on Multijurisdictional Practice, with Professor Green as its reporter. In 2002, the ABA Commission presented its report and nine separate recommendations to the ABA House of Delegates, which overwhelmingly approved them. Many of these were encapsulated in Model Rule 5.5(c) and (d), which were approved as part of the Ethics 2000 rule changes in 2003. Simon at 1369–70.

Model Rule 5.5(c), which applied only to out-of-state lawyers admitted in other U.S. jurisdictions (not foreign lawyers), contains virtually word-for-word the same safe harbors as are in Section 523, and we will not repeat them here. But Model Rule 5.5(d) introduced another concept: allowing in-house lawyers admitted in other states to cross state lines to practice for their employers. Specifically, it allows such lawyers to provide legal services without any time restriction (not just temporary practice) if the services "are provided to the lawyer's employer or its organizational affiliates and are not services for which the forum requires pro hac vice admission." The rationale: corporate clients often have operations national in scope, and their lawyers to travel to other states to perform the corporation's work; and the need for public protection is lessened in the in-house corporate context, where the lawyer represents only a single, often sophisticated client.

Model Rule 5.5 was among the most popular of the Ethics 2000 Rule changes. Between 2003 and the beginning of 2015, it had been adopted by 46 U.S. jurisdictions. New York remained stubbornly in the minority.

Struggle to Adopt Rule 5.5 in New York

In the beginning, it did not appear that New York, the nation's commercial capital, would resist Model Rule 5.5. The New York State Bar Association (NYSBA) formed a special task force to amend then DR 3-101(B), the predecessor to RPC 5.5, to conform to most of the amendments to Model Rule 5.5. Simon at 1371. The NYSBA formally transmitted those proposals to the OCA on July 1, 2003. Neither the OCA nor the Administrative Board acted on the proposals. Id. After three years of silence, the courts informally let it be known that some of the Presiding Justices, particularly those from the Third and Fourth Departments, were concerned that the rule would allow lawyers from surrounding states to poach clients from lawyers in their jurisdictions.

The NYSBA did not give up. In March 2006, the NYSBA President formally requested that OCA defer further consideration of the proposals until the Bar had time to review and reconsider them. Id. A year later, in March 2007, the NYSBA House of Delegates approved a revised proposal "to adopt ABA Model Rule 5.5 almost verbatim." Id. This proposal was delivered to the OCA and Administrative Board as part of the NYSBA's comprehensive proposals to change the old New York Code to the new Rules of Professional Conduct. Id. Though many of those proposals were accepted, and the new Rules were implemented, the proposals regarding Rule 5.5 were rejected without any formal explanation.

From April 2009, when the new RPCs were implemented, and mid-2015, little changed with regard to temporary practice. In-house lawyers fared better. In 2012, the Court of Appeals implemented 22 NYCRR §522, which allowed in-house lawyers admitted in other states, but not New York, to practice for their employers here as long as they formally registered with the OCA. (This rule gave such lawyers already practicing in New York, or who would later move to New York, just 90 days to register. This deadline is often missed, creating cruel dilemmas for lawyers who later seek registration.) The rule was predicated on the out-of-state in-house lawyer working for only one client, his or her employer. Later, the Court expanded the rule to allow registered in-house lawyers to perform pro bono services for members of the public. See 22 NYCRR §522.8.

Otherwise, the Court rejected proposal after proposal to expand multijurisdictional practice. For example, in 2012 the New York State Board of Bar Examiners, speaking also for the Court of Appeals, rejected a proposal by military spouses for a rule reducing licensing barriers for active attorneys in good standing in other U.S. jurisdictions who are required to live and work in New York due to their own or their spouse's military orders. (To be fair, in rejecting this proposal the Board noted that court rules permitted a waiver of existing bar admission rules "that would cause undue hardship to the applicant," and might even grant a late application to sit for the Bar examination. In other words, the rules already gave the Court discretion to address this problem.) The Court also rejected an ABA-proposed rule (again supported by the NYSBA) that would allow lawyers moving to New York to practice pending admission to the Bar, with the Court noting that the rule would be inconsistent with N.Y. Jud. Law. §478 and §484, and would encroach on the authority of the Board of Bar Examiners and the Departmental Character and Fitness Committees to determine who may practice in this State See Simon at 1367.

Perhaps most distressingly, in 2012 the Court again failed to act on a NYSBA proposal to allow temporary practice in New York, this time through the use of a new court rule rather than a change in the Rules of Professional Conduct. The situation had deteriorated to the point where, in the 2015 edition of his treatise, Professor Simon despaired of this rule ever being adopted. Id.

Thus it came as a complete and happy surprise when Judge Lippman proposed Section 523 in the late summer of 2015. All the major Bar Associations quickly appointed Committees to review the proposed Rule, and all supported it with only minor changes. The promulgation of the final Rule 523 marks the end of a long and torturous chapter in New York attorney regulation, and a great leap forward for our State. After so many years of rejection, it felt like a Christmas miracle.

Amendment to Rule 522

Judge Lippman's proposal contained one more important change. It amended Section 522, the in-house registration rule, to allow registration not just by lawyers admitted to practice in other states and the District of Columbia, but also to those who are "member[s] in good standing of a recognized legal profession in a foreign non-United States jurisdiction, the members of which are admitted to practice as lawyers or counselors at law or the equivalent and subject to effective regulation by a duly constituted professional body or public authority." 22 NYCRR §522.1(b)(ii). This change was consistent with a recommendation by the Conference of Chief Justices, as well as with 15 other U.S. jurisdictions that have similarly expansive in-house counsel registration rules. See NYSBA Comments on Proposed Changes to the Rules of the Court of Appeals, Nov. 9, 2015 (NYSBA Comments) at 15. The language used was the same as that used to define those who can apply to be foreign legal consultants in New York. Id.

Nevertheless, the change was controversial, because at least some commentators felt the new rule did not go far enough. As the NYSBA Comments noted [at 16], "in-house counsel in many foreign jurisdictions, particularly in Europe, are not admitted to the bar and would apparently not qualify under this definition." The NYSBA proposed giving the Appellate Divisions discretion to allow these in-house lawyers to register, but this suggestion was rejected. Id. The ABA is also considering whether to amend its model in-house registration rule to address this issue. We hope this will result in an approach which the Court of Appeals is willing to adopt.

Still, the changes to Sections 522 and 523 were breathtaking in their speed and scope. We applaud Chief Judge Lippman and the others who made this happen after so many years.

Originally published by the New York Legal Ethics Reporter


This alert provides general coverage of its subject area. We provide it with the understanding that Frankfurt Kurnit Klein & Selz is not engaged herein in rendering legal advice, and shall not be liable for any damages resulting from any error, inaccuracy, or omission. Our attorneys practice law only in jurisdictions in which they are properly authorized to do so. We do not seek to represent clients in other jurisdictions.

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Ronald C. Minkoff
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