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Arrowhead Capital Finance, Ltd. v. Cheyne Specialty Finance Fund, L.P.: New York Court of Appeals speaks to N.Y. Judiciary Law § 470.

Photograph: Sneakered feet with toes touching a white painted borderline on the street.

Potential personal injury (and all other legal case) clients beware: lawyers who are admitted to practice law in New York State but who reside in another state must maintain a physical office in the State of New York to practice law here and conduct legal business in the New York State courts.  This is the rule contained in N.Y. Judiciary Law § 470 (first enacted in 1862), which may come as a surprise -- and a trap -- to many attorneys licensed in New York but residing outside of New York State.

For example, a lawyer licensed in New York who lives in Pennsylvania (“residing in another state,” per Judiciary Law § 470) cannot practice law in New York unless he or she maintains a physical office location in New York State! 

So if you have a claim arising out of New York State, subject to New York State jurisdiction, and you’re in Maryland and you talk to an attorney living there who says “Oh yes, I’m licensed to practice law in New York,” that attorney better have a physical office location in New York State to personally take your case and sue it in New York.

Just that problem recently arose in a case of first impression before the New York State Court of Appeals, Arrowhead Capital Finance, Ltd. v. Cheyne Specialty Finance Fund, L.P., 2019 N.Y. Slip Op. 01124, CtApp 2-14-19.

Here is a link to the case:


Arrowhead involved a Pennsylvania-resident attorney licensed to practice law in New York State – but who did not have a physical office in New York State – commencing an action in New York State Supreme Court on behalf of a lender doing business in New York.  The defendant borrower, Cheyne, moved to dismiss the entire action brought by plaintiff Arrowhead based upon the failure of Arrowhead’s New York-licensed, Pennsylvania-resident attorney to have a physical office in New York State, pursuant to the requirement of N.Y. Judiciary Law § 470.  The lower court agreed, and dismissed Arrowhead’s entire action from the start, and the Appellate Division, First Department, affirmed on appeal, stating “the commencement of the action in violation of Judiciary Law § 470 was a nullity.”

Not good.

Fortunately for Arrowhead, the very day the original motion to dismiss came in, it retained the services of New York attorneys with offices located in New York State, who entered the case to represent the company.  Arrowhead argued throughout that this was sufficient, as the original filing was by a New York State-licensed attorney in good standing whose only error was residing in Pennsylvania and not having an office in New York.  Arrowhead asserted that such a draconian result -- dismissal of the entire action -- should be reserved for truly egregious, unlawful behavior, such as the continued practice of law by a disbarred attorney.

The N.Y. Court of Appeals agreed and found Arrowhead’s immediate substitution of counsel in New York State with New York offices the company’s saving grace.  The Court of Appeals reversed the dismissal of the action and remanded the case back to the trial court, with Judge Garcia writing in a unanimous opinion:

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 (see Stegemann, 153 AD3d at 1055). Where further relief is warranted, the trial court has discretion to consider any resulting prejudice and fashion an appropriate remedy (see Dunn, 35 NY2d at 699 [noting that plaintiffs did not assert any prejudice as a result of their attorney's disbarment]; cf. CPLR 321 [c] [detailing procedure for cure when attorney is disbarred or otherwise disabled any time before judgment]) and the individual attorney may face disciplinary action for failure to comply with the statute (see e.g. Matter of Marin, 250 AD2d 997, 998 [3d Dept 1998]; Matter of Larsen, 182 AD2d 149, 155 [2d Dept 1992]; 22 NYCRR 130-1.1 [a], [c] [3] [permitting the court to impose sanctions if it finds counsel made a false material statement]). This approach ensures that violations are appropriately addressed without disproportionately punishing an unwitting client for an attorney's failure to comply with section 470.

It is interesting to note that the Court of Appeals in Arrowhead focused on the right of the client not to be hurt by an otherwise-compliant New York State-licensed attorney’s failure to comply with the residency law.  This decision adds considerable clarity to the law and resolves a split between the New York State Appellate Divisions on the issue.

The Lesson:  Non-resident New York State-licensed attorneys who do not have a physical office here but who want to practice law in New York from outside the state are on actual notice of the professional, axle-busting ramifications of doing so without taking the proper steps to obtain local New York counsel with a New York office.   

James Snyder