- 1

-

No. 4 Arrowhead Capital Finance, Ltd., Appellant, v. Cheyne Specialty Finance Fund L.P., et al., Respondents.

Barry L. Goldin, for appellant. Shaimaa Hussein , for respondent s .

GARCIA, J. :
Nonresident a ttorneys admitted in New York must maintain a physical office in the
State in order to practice law in New York ( see Judiciary Law § 470 ; Schoenefeld v State , 25 NY3d 22, 25 [2015] )

. However, f ailure by a nonresident attorney to comply with this- 2

- No. 4

- 2

- requirement at the time a complaint is filed does not render that filing a nullity and , therefore , dismissal of the action is not required. Accordingly, we reverse . In 2006, the predecessor in interest of p laintiff Arrowhead Capital Finance, Ltd. (“Arrowhead”) and d efendant Cheyne Specialty Finance Fund L

. P

. (“Cheyne LP”) entered
into a financing agreement with a group of borrowers

. Pursuant to th is agreement, Cheyne LP, as senior lender, held a secured term loan note and Arrow head held a subordinated
note, with bot h notes secured by certain collateral to be held in trust by C heyne LP. T he borrowers defaulted on the subordinated note and Arrowhead sued , eventually obtaining a judgment against the borrowers for approximately $2.5 million ( see Arrowhead Capital Finance, Ltd. v Seven Arts Pictures PLC , 36 Misc 3d 1205 [ A ] , Slip Op 51195 [ U ] [S up Ct, NY County 2012 ] , affd 110 AD3d 514 [ 1st Dept 2013] ).

U nable to recover on its judgment, Arrowhead brought this action against Cheyne LP and its general partner, defend ant Cheyne Specialty Finance General Partner , Inc. (“Cheyne GP”) , based on allegations that d efendants fail ed to protect the collateral securing Arrowhead’s subordinated note, thus depriving Arrowhead of its security for repayment

. The complaint was signe d and filed by Arrowhead’s counsel, an attorney admitted in New York , and listed business addresses in both Pennsylvania and Manhattan. D efendants moved to dismiss the complaint for , among other reasons, failure to state a claim

. Supreme
C ourt granted d efendants’ motion in part, dismissing all claims against Cheyne GP and certain claims against Cheyne LP

.- 3

- No. 4

- 3

- While this motion was pending , d efendants informed Supreme Court that it appeared plaintiff’s counsel did not maintain a physical office in New York i n violation of Judiciary Law § 470. Supreme Court permitted d efendants to file a second motion to dismiss based on the alleged section 470 violation. That same day, separate New York counsel entered a notice of appearance on Arrowhead’s behalf. Supreme Court granted the second motion and dismiss ed the remaining claims against Cheyne LP without prejudice , finding that plaintiff’s counsel resided in Pennsylvania and there was “no evidence that [ he ] maintained an office or a phone in New York when [the] ac tion was filed. ” 1 On appeal, the Appellate Division unanimously affirmed, holding that “the commencement of the action in violation of Judiciary Law § 470 was a nullity” and that “subsequent retention of co

- counsel with an in

- state office did not cure the violation” (154 AD3d 523, 523 [1st Dept 2017 ] ). The Appellate Division also
affirmed the dismissal of the complaint , with prejudice, as against Cheyne GP.

Arrowhead then sought “permission to appeal . . . to the extent that the Appellate Division failed to reverse and remand the Order and Judgment of the Supreme Court dismissing [its] Complaint as a ‘ nullity ’ for [the] purported failure of plaintiff’s attorney to satisfy the ‘ office ’ requirement of Judiciary Law § 470 and rejecting cure thereof ” (emphasis adde d). This Court granted leave to appeal ( 30 NY3d 909 [2018])

. Despite th e purported limitation in its motion papers, on appeal , Arrowhead also c hallenge s the dismissal of the complaint as against Cheyne GP

. Defe ndants filed a motion to str ike that

1 The factual determination made by Supreme Court is not at issue on appeal.- 4

- No. 4

- 4

- portion of Arrowhead’s brief, asserting that plaintiff only sought permission to appeal the
section 470 issue.

A n attorney who is “ regularly admitted to practice as an attorney and counsellor, in the courts of record of this state, whose office fo r the transaction of law business is within the state, may practice as such attorney or counsellor, although [ ] resid [ing] in an adjoining state” ( Judiciary Law § 470). This statute, first enacted in 1862, requires that n onre sident attorneys maintain a p hysical office in New York in order to practice law here ( Schoenefeld , 25 NY3d at 25 , 27 )

. Wh ether 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” is an issue of first impression for this Court. Arrowhead contends that this Court’s holding in Dunn v Eickhoff , th at “[t]he disbarment of a lawyer creates no ‘nullities , ’ the person involved simply loses all license to practice law , ” is dispositive ( 35 NY2d 698, 699 [1974] ). If an action of a disbarred lawyer is not a nullity, Arrowhead
argues, neither is an action taken by a duly admitted attorney who fails to maintain a physical office in New York. This is essentially the approach taken by the Second and Third Departments , which have expressly reject ed the nullity rule ( see Elm Mtg. Corp. v Sprung , 33 AD3d 753, 754 [2d Dept 2006] ; Steg e mann v Rensselaer County Sheriff’s Off. , 153 AD3d 1053, 1055 [3d Dept 2017]). These courts, relying on our holding in Dunn , have extrapolated “a general rule,” namely, given that representation of a party “by a person who was not authorized or admitted to practice law under the Judiciary Law

– whether a disbarred attorney or a person practicing law without a license

– doe s not create a ‘nullity’- 5

- No. 4

- 5

- or render all prior proceedings void per se , ” then “[t]he same principle should apply when a party is represented by an attorney who, although a member in good standing of the Bar of State of New York, has failed to demonstrate com pliance with Judiciary Law § 470” ( Elm Mtg. Corp. , 33 AD3d at 754 )

. Instead, these courts have held that a party may cure

a section 470 violation with the appearance of compliant counsel or an application for admission pro hac vice by appropriate counsel ( see Steg e mann , 153 AD3d at 1055).

Defendant s counter that Dunn involved plaintiff s’ affirmative use of the disbarment of their own attorney for strategic reasons and should therefore not control the present case

. Instead, defendants urge us to adopt the First Department’s approach , which requires that
a court dismiss the complaint without prejudice after finding a section 470 violation ( see Webb v Greater NY Auto. Dealers Assn., Inc. , 93 AD3d 561, 561 [1st Dept 2012]; Neal v Energy T ransp. Group , 296 AD2d 339, 339 [1st Dept 2002]; Lichtenstein v Emerson , 251 AD2d 64 , 64 [ 1st Dept 1998] ). Without such a deterrent, defendants argue, Judiciary Law § 470 would itself be a nullity. We agree with the Second and Third Departments that, g iven our holding in Dunn , it would be incongruous to conclude that , unlike the acts of a disbar red attorney , actions taken by an attorney duly admitted to the New York bar who has not satisfied Judiciary Law § 470’s office requirement are a nullity

. W e 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 Steg e mann , 153- 6

- No. 4

- 6

- AD3d at 1055 ). Where further relief is warranted, the trial court has discretion to consider
any res ulting prejudice and fashion an appropriate remedy ( see Dunn , 35 NY2d at 699 [ n oting that plaintiffs d id not assert any prejudice as a result of the ir attorney’s disbarment] ; cf. CPLR 321 [c] [detailing procedure for cure when attorney is disbarred or otherwise
disabled any time before judgment] ) and t he 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 i mpose sanctions if it finds counsel made a false material statement] ). This approach ensures that violations are appropriately addressed without disproportionately punishing a n unwitting client for an attorney’s failure to comply
with section 470

.
Arrowhead ’ s remaining challenge to the dismissal of the claims against Cheyne GP is beyond the scope of this appeal

. In th e notice of motion, Arrowhead sought “ permission to appeal . . . to the extent that the Appellate Division failed to reverse and remand the Order and Judgm ent of the Supreme Court dismissing [its] Complaint as a ‘ nullity ’ for [the] purported failure of plaintiff’s attorney to satisfy the ‘ office ’ requirement of Judiciary Law § 470 and rejecting cure thereof” (emphasis added ). The issue was similarly limited
i n the papers accompanying its motion for leave to appeal

. “Ordinarily when the court grants a motion for leave to appeal all issues of which the court may take cognizance may be addressed by the parties ” ( Quain v Buzzetta Constr. Corp

. , 69 NY2d 376 , 380 [1987] )

. H owever, where “ the party seeking leave specifically- 7

- No. 4

- 7

- limits the issues to be raised, it is bound thereby and may not thereafter raise other questions” because “[t]o permit otherwise necessarily disadvantages the opposing parties, who might ha ve joined issue or even cross

- moved for leave to appeal as to additional issues had adequate notice been given” ( id. ). H aving limited the issue to be raised in its notice of motion for leave to appeal, Arrowhead may not now challenge the dismissal of clai ms as against Cheyne GP. Accordingly, this C ourt has granted the motion to strike that portion
of A rro whead’s br ief ( Motion No. 379 [ decided t o day ] )

. Accordingly, the o rder, insofar as appealed from, should be reversed, with costs, and the ca se remitted to Supreme Court for further proceedings in accordance with th is opinion.

* * * * * * * * * * * * * * * * * Order, insofar as appealed from, reversed, with costs, and case remitted to Supreme Court, New York County, for fu rther proceedings in accordance with the opinion herein. Opinion by Judge Garcia. Chief Judge DiFiore and Judges Rivera, Stein, Fahey, Wilson and Feinman concur.
Decided February 14, 2019