11-4283-cv Schoenefeld v. State of New York, et al.

UNITED STATES COURT OF APPEALS F OR THE S ECOND C IRCUIT

__________ ___________ August Term, 2012 (Argued: October 3, 2012 D ecided: April 8, 2014)
Docket No. 11-4283-cv

__________ ___________ E KATERINA S CHOENEFELD , Plaintiff-Appellee ,

- v .- S TATE OF N EW Y ORK , N EW Y ORK S UPREME C OURT , A PPELLATE D IVISION , T HIRD J UDICIAL D EPARTMENT , C OMMITTEE ON P ROFESSIONAL S TANDARDS OF N EW Y ORK S UPREME C OURT , A PPELLATE D IVISION , T HIRD J UDICIAL D EPARTMENT AND ITS M EMBERS , Defendants , E RIC T. S CHNEIDERMAN , IN HIS OFFICIAL CAPACITY AS A TTORNEY G ENERAL FOR THE S TATE OF N EW Y ORK , A LL J USTICES OF N EW Y ORK S UPREME C OURT , A PPELLATE D IVISION , T HIRD J UDICIAL D EPARTMENT , R OBERT D. M AYBERGER , IN HIS OFFICIAL CAPACITY AS C LERK OF N EW Y ORK S UPREME C OURT , A PPELLATE D IVISION , T HIRD J UDICIAL D EPARTMENT , M ONICA D UFFY , C HAIRMAN OF THE C OMMITTEE ON P ROFESSIONAL S TANDARDS “COPS” OTHER T HOMAS C. E MERSON , Defendants-Appellants

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_____________ __________ Before: R AGGI , H ALL and C ARNEY , Circuit Judges

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_____________ __________ On appeal from a judgment of the United States District Court for the Northern District of New York (Lawrence E. Kahn, J. ), entered on September 7, 2011, granting summary judgment in favor of Plaintiff-Appe llee, declaring New York Judiciary Law § 4702 unconstitutional as violative of the Privileges and Immunities Cl ause because it implicates the fundamental right to practice law and the stat e failed to establish either a substantial state interest advanced by the statute, or a substa ntial relationship between the statute and that interest. We believe that the question surro unding the constitutionality of New York Judiciary Law § 470 implicates significant New York state interests an d is determinative of this appeal. We therefore reserve decision and certify a controlling question of state law to the New York Court of Appeals. Q UESTION C ERTIFIED

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_____________ __________ E KATERINA S CHOENEFELD , E SQ ., Princeton, NJ, for Plaintiff-Appellee

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AURA E TLINGER , Assistant Solicitor General (B ARBARA D. U NDERWOOD , Solicitor General, A NDREA O SER , Deputy Solicitor General, on the brief ) for E RIC T. S CHNEIDERMAN , Attorney General of the State of New York, Albany, NY, for Defendants-Appellants

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_____________ __________ H ALL , Circuit Judge : Defendants-Appellants appeal from the Se ptember 7, 2011 judgment of the United
States District Court for the Northern Di strict of New York (Lawrence E. Kahn, J. ) granting Plaintiff-Appellee’s cross-moti on for summary judgment and declaring New York Judiciary Law § 470 (“Section 470”) unconstitutional as violative of the Privileges and Immunities Clause of Article IV, section 2 of the Constituti on. Specifically, the district court held that Section 470, which requires nonresident attorneys to maintain an “office for the transaction
of law business” within the state of New York in order to practice in New York courts, places an impermissible burden on Plaintiff- Appellee’s fundamental right to practice law and
that the state “failed to establish either a substa ntial state interest advanced by [the statute], or a substantial relationship between the statute and that interest.” Schoenefeld v. New York , 907 F. Supp. 2d 252, 266 (N.D.N.Y. 2011).3 For the reasons that follow, we respectfully certify a controlling question of state law to the New York Court of Appeals.
B ACKGROUND Plaintiff-Appellee Ekaterina Schoenefeld (“Schoenefeld”) is a solo practitioner licensed to practice law in the states of New Yo rk, New Jersey, and California. She is also admitted to practice in a number of federal co urts including the Northern District of New York. Schoenefeld graduated from Rutger s University School of Law in 2005. She maintains her residence and law office in Princeton, New Jersey. Section 470, entitled “Attorneys having offices in this st ate may reside in adjoining state,” provides that “[a] person, regularly ad mitted to practice as an attorney and counsellor, in the courts of record of this state, whose office for the transaction of law business is within the state, may practice as such attorney or coun sellor, although he resides in an adjoining state.” N.Y. Judiciary Law § 470 (McKinney 201 4). Schoenefeld asserts that she has “never advertised [herself] as practicing law in th e state courts of New York and [has] never represented any clients in New York state courts.” J.A. at 55. In fact, she states that she has refused occasional requests to represent clients in New York state courts because “accepting
these matters would have violated § 470 of the Judiciary Law.” Id. Schoenefeld initially brought this action in the Southern District of New York, challenging the constitutionality of Section 470, both facially and as applied, under the Privileges and Immunities Clause of Article IV , section 2 of the Constitution (“P&I Clause” or the “Clause”), the Equal Protection Clau se of the Fourteenth Amendment to the Constitution (“Equal Protection Clause”), and the Commerce Clause of Article 1, section 84 of the Constitution (“Commerce Clause”). On Defendants’ motion, the action was subsequently transferred to the Northern Dist rict of New York. Th e district court then dismissed Schoenefeld’s Equal Protection Clause and Commerce Clause claims as well as her claims against the State of New York, the Ne w York Supreme Court, Appellate Division, Third Judicial Department (“Third Depart ment”), and the Committee on Professional Standards of the Third Department (“Committee on Professional Standards”). 1 It permitted Schoenefeld, however, to proceed against the re maining Defendants (a ll individuals serving in their official capacity) on her claim that S ection 470 violates the Pr ivileges and Immunities Clause. Following discovery, the parties cross-moved for summary judgment.
The district court determined that Secti on 470 infringes on one of the fundamental rights protected by the Privileges and Immuniti es Clause; the right to practice law. The
court further concluded that the state failed to demonstrate a “substantial state interest justifying Section 470” as well as a “substantia l relationship between Section 470 and the
interests that Defendants claim it advances.” Schoenefeld , 907 F. Supp. 2d at 264. The district
court therefore held the statute unconstitu tional and granted Scho enefeld’s motion for summary judgment. Because the question of th e constitutionality of New York Judiciary Law § 470 turns on the interpretation of a provisi on of the statute that implicates significant
New York state interests and is determinative of this appeal, we reserve decision and certify a controlling question of state law to the New York Court of Appeals.

1 The complaint named as Defendants the State of Ne w York; Andrew Cuomo, then Attorney General for the State of New York; the Third Depa rtment; All Justices of the Third Department; Michael J. Novack, then Clerk of the Third Department; the Committee on Professional Standards and its members; as well as Thomas C. Emerson, then Chairperson of th e Committee on Professional Standards.5 D ISCUSSION The Privileges and Immunities Clause provide s that “[c]itizens of each State shall be entitled to all Privileges and Immunities of Citize ns in the several States.” U.S. Const. art. IV, § 2. The Clause’s purpose is to “fuse into one Nation a collection of independent, sovereign States.” Toomer v. Witsell , 334 U.S. 385, 395 (1948) . “[I]t is ‘[o]nl y with respect to those ‘privileges’ and ‘immunities’ bearing on the vitality of the Nation as a single entity’ that
a State must accord residents an d nonresidents equal treatment.” Supreme Court of N.H. v. Piper , 470 U.S. 274, 2 79 (1985) (quoting Baldwin v. Montana Fish & Game Comm’n , 436 U.S. 371, 383 (1978)). While “[t]he Privileges and Immunities Clause does not promise nonresidents that it will be as easy for [nonresi dents] as for residents to comply with a state’s law; it . . . protects nonresidents from legal classifications that treat them more harshly (without justification).” Kleinsmith v. Shurtleff , 571 F.3d 1033, 1045 (10th Cir. 2009). To prevail on a P&I Clause claim, “a plaintiff mu st demonstrate that the ‘State has, in fact, discriminated against out-of-state rs with regard to the privileges and immunities it accords its
own citizens.’” Bach v. Pataki , 408 F.3d 75, 88 (2d Cir. 2005), overruled on other grounds by McDonald v. Chicago , 561 U.S. 2---, 130 S. Ct. 3020 (2010) (quoting Conn. ex rel Blumenthal v. Crotty , 346 F.3d 84, 94 (2d Cir. 200 3)). “Where a protected privilege or immunity is implicated, the State may defeat the challenge . . . by demonstrating: ‘(a) a substantial reason for the discrimination, and (b) a reasona ble relationship between the degree of discrimination exacted and the danger soug ht to be averted by enactment of the discriminatory statute.’” Id. (citations omitted)

.6 The right to practice law has long been held to be one of the privileges and
immunities within the Clause. Piper , 470 U.S. at 281 (“[T]he prac tice of law falls within the ambit of the Privileges and Immunities Clause.” ). Appellants do not argue to the contrary on appeal but instead contend that the office requirement impose d by Section 470 can be read in a manner that does not implicate the P&I Clause, that is, an “office for the transaction of law business” requires only an address for accepting personal service, which “might” be satisfied by designating an agent for the service of legal papers. See Appellants’ Br. at 25. Alternatively, Appellants contend, if this Court does determine that the statute discriminates against nonresident attorneys, the office requirement still does not violate the Clause as it imposes an “inciden tal burden on the ability of nonr esident attorneys to practice in New York courts” substantially related to su fficient state interests—service of legal papers and “enabling the New York courts to adjudicate [service related] disputes.” Appellants’ Br.
at 20-21. Preliminarily, we note that with respect to New York residents the Judiciary Law does not impose a specific obligation on an attorney to maintain an office for the transaction of
law business in New York. See Lichtenstein v. Emerson , 656 N.Y.S.2d 180, 182 (N.Y. Sup. Ct. 1997), affirmed , 674 N.Y.S.2d 298 (1st Dep’t 1998) (uph olding constitutionality of Section 470 but noting that a resident attorney may utilize her home as an office). The New York Civil
Practice Law and Rules of Professional Conduc t require, of course, that an attorney be adequately equipped to maintain a certain le vel of accessibility and communication with clients, but a review of those laws yields no authority specifically requiring New York7 residents to maintain any office at all. 2 A New York attorney, therefore, may set up her
“office” on the kitchen table in her studio apartment and not run afoul of New York law. As to nonresident attorneys, however, S ection 470 mandates that they shoulder the additional obligation to maintain some sort of separate office premises within the state. In particular, the New York Supreme Court and it s Appellate Division courts—the New York Court of Appeals having yet to address this issue—have never interpreted Section 470’s office requirement to be satisfied by somethin g less that the maintenance of physical office space in New York state. See, e.g. , Kinder Morgan Energy Partners, LP v. Ace Am. Ins. Co. , 859 N.Y.S.2d 135, 135 (1st Dep’t 2008) (affirmin g lower court’s order dismissing without prejudice action commenced by non resident attorney who did not maintain a “local office”); Elm Mgmt. Corp. v. Sprung , 823 N.Y.S.2d 187, 188 (2d Dep’ t 2006) (noting that failure to maintain a bona fide office is “noncomp liance by the plaintiff’s counsel”); Keenan v. Mitsubishi Estate, N.Y., Inc. , 644 N.Y.S.2d 241, 242 (1 st Dep’t 1996) (reversing a dismissal under Section 470 where a New Jersey law firm had “entered into a reciprocal satellite office sharing agreement with a firm locate d” in New York County); In re Larsen , 587 N.Y.S.2d 39, 43 (2d Dep’t 1992) (post office box is insu fficient to satisfy Section 470); Application of Tang , 333 N.Y.S.2d 964, 966 (1st Dep’t 1972) (“[T]o practice here an attorney must be resident here or a resident of an adjoining State who commutes to his office here .” (emphasis added)); Lichtenstein , 656 N.Y.S.2d at 181 (interpreting Section 470 as requiring a “bona fide office” and finding that counsel had failed to comply with Secti on 470 where he maintained as an office a room in the basement of a restaurant owned by a corporation in which he was a shareholder);

2 Rule of Professional Conduct 1.15 requires an attorney to maintain complete and accurate books and records, but nothing in that Rule requires an attorney to maintain an “office.”8 Rosenberg v. Johns-Manville Sales Corp. , 416 N.Y.S.2d 708, 711 (N.Y. Sup. Ct. 1979) (concluding that an “office” is established only where a pa rtner, rather than an associate, is admitted to the New York State Bar and practi cing out of a New York office); see also Brennan, Repeal Judiciary Law § 470 , 62 N.Y.S.B.J. 20, 21 (Jan. 1990) (not ing that Section 470’s predecessor, chapter 43, “can be viewed, essentially, as an accommodation of ‘commuters’”). This additional obligation carries with it significan t expense—rents, insurance, staff, equipment
inter alia —all of which is in addition to the expens e of the attorney’s out-of-state office, assuming she has one. 3 In the face of the prevailing authority from New York’s lower courts and for the reasons explained below, there is no question that resolution of this appeal turns on the meaning of “office for the transac tion of law business” as used in N.Y. Judiciary Law § 470. Appellants, seeking to persuade us that the statute is not so onerous as to be unconstitutional, argue that this Court need no t read the phrase to require a physical office space with a desk, a telephone, and staff, but rather may hold that the language can permissibly be read to require merely an a ddress at which a nonresident attorney may be served legal papers. Alternatively, Appellants maintain that the designation of an agent in New York to receive service of papers “might even suffice.” These arguments, however, are not supported by the New York precedent disc ussed above. Moreover, the absence of authority from New York’s highest court does not provide us license to disregard lower court rulings nor to analyze the question as though we were presented with a blank slate. See

3 Although a nonresident attorney could also potentially fulfill the requirement via an “of counsel” arrangement, such an arrangement is nearly equally as burdensome in that it carries with it additional malpractice exposure for the New York firm, which may demand compensation from the nonresident attorney in exchange for establishing an “of counsel” relationship. This is assuming, of course, that a nonresident attorney can find a local firm willing to commit to such a relationship.9 Statharos v. N.Y. City Taxi & Limousine Comm’n , 198 F.3d 317, 321 (2d Ci r. 1999) (“While we are not strictly bound by the decision of the Appellate Division, it is nevertheless a wellestablished principle that the ru ling of ‘an intermediate appellate state court . . . is a datum for ascertaining state law which is not to be disregarded by a federal court unless it is convinced by other persuasive data that th e highest court of the state would decide otherwise.’” (quoting West v. Am. Tel. & Tel. Co. , 311 U.S. 223, 237 (1940)); see also Windsor v.
United States , 699 F.3d 169, 177 (2d Cir. 2012). We also note that the term “office,” by itse lf, although not exactly pellucid, implies more than just an address or an agent appointed to receive process. 4 And the statutory language that modifies “office”—“for the tr ansaction of law business”—may further narrow the scope of permissible construc tions. In light of New York’s existing jurisprudence, for a
federal court to construe the statute such that the word “office” mean s either an in-state agent authorized to receive process or simply an address for service of papers will take us far beyond the limits of statutory construction that would comfortably apply here. In sum, as it stands, it appears that Section 470 discriminate s against nonresident attorneys with respect to their fundamental right to practice law in the stat e and, by virtue of that fact, its limitations on non-resident attorneys implicate the Priv ileges and Immunities Clause. Absent a controlling interpretation of S ection 470 by the New York Cour t of Appeals, this Court is left to predict how that court would construe the critical language in Section 470—a task, under the circumstances, we prefer to avoid un til it becomes necessary for us to undertake it.

4 In its definition most relevant to th ese circumstances, the Oxford English Dictionary defines “office” as “[a] room, set of rooms, or building used as a place of business for non-manual work; a room or department for clerical or administrative work.” “Office, n.” Definition , OED Online (3d ed. Mar. 2014) (Apr. 3, 2014), http://www.oed.com/view/Entry/130640?rs key=pvVa8b&result=2&isAdvanced=false

.10 “[T]he Supreme Court in Arizonans for Official English v. Arizona , 520 U.S. 43, 117 S. Ct. 1055, 137 L.Ed.2d 170 (1997), urged the federal courts of appeals to use certification in order to avoid deciding constitutional que stions unnecessarily or prematurely.” Tunick v. Safir , 209 F.3d 67, 72 (2d Cir. 2000). We shou ld, therefore, “consider certifying in more instances than had previously been thought a ppropriate, and do so even when the federal courts might think that the meaning of a state law is ‘plain.’” Id. at 73. We have also previously made clear that “[w]hether our Co urt agrees or disagrees with the Court of Appeals’ construction of New York law is of no moment.” Portalatin v. Graham , 624 F.3d 69, 89 (2d Cir. 2010). “Neither th is Court nor any other federal tribunal has any authority to place a construction on a state statute different from the one rendered by the highest court
of the State.” Johnson v. Fankell , 520 U.S. 911, 916 (1997). “More, it would be perverse for a federal court to discourage a state court from searching for ‘every reasonable construction’ of a state statute to ‘save [the] statute from unconstitutionality.’” Portalatin , 624 F.3d at 90 (quoting Skilling v. United States , 561 U.S. 358, 130 S. Ct. 28 96, 2929-30 & n.41 (2010)).
“Under Second Circuit Local Rule 27.2, we may certify to the New York Court of Appeals determinative questions of New York law [that] are involved in a case pending before [us] for which no controlling preced ent of the Court of Appeals exists.” Osterweil v.
Bartlett , 706 F.3d 139, 142 (2d Cir. 201 3) (internal quotation marks omitted). Prior to doing so, we must first determine “(1) whether the New York Court of Appe als has addressed the issue and, if not, whether the decisions of othe r New York courts permit us to predict how the Court of Appeals would resolve it; (2) whet her the question is of importance to the state and may require value judgments and public policy choices; and (3) whether the certified11 question is determinative of a claim before us.” Id. (quoting Barenboim v. Starbucks Corp. , 698 F.3d 104, 109 (2d Cir. 2012)) (i nternal quotation marks omitted). 5 Applying the factors noted above, we de termine that the Court of Appeals has not issued any opinion addressing the constitutionali ty of Section 470, nor has it specifically
construed the term “office for the transaction of law business.” Moreover, in light of the potential that the requirements in Section 470 violate the P&I Clause, we cannot predict at this time, based on the current decisions of other New York courts, how the New York Court of Appeals will interpret the statute. We next consider “the importance of the issue to the state,” Runner v. N.Y. Stock Exchange , 568 F.3d 383, 388 (2d Cir. 2009) (quotati on and internal quota tion marks omitted), and “whether it is the kind of question that ‘may require value judg ments and public policy choices,’” Osterweil , 706 F.3d at 143 (quoting Barenboim , 698 F.3d at 109). The requirements imposed on a nonresident attorney to be able to practice law in New York are important to the state and clearly implicate value judgments and policy choices—ones that should not be ceded to a federal court of appeals when it is unnecessary to do so in the first instance. Additionally, remedies imposed for an attorney’s failure to comply with Section 470 will have a serious impact on both lawyers and litigants themselves. For example, noncompliance with Section 470’s requirements may result in dismissal of a complaint filed by the noncompliant nonresident attorney, see Lichtenstein v. Emerson , 674 N.Y.S.2d 298, 298 (1st Dep’t 1998), or disciplinary charges against that attorney, see In re Larsen , 587 N.Y.S.2d at 43.

5 We have noted, however, that “[c]ertification . . . is not proper where the question does not present a complex issue, there is no split of authority and sufficie nt precedents exist for us to make [a] determination.” Tinelli v. Redl , 199 F.3d 603, 606 n.5 (2d Cir. 1999) (quoting McCarthy v. Olin Corp. , 119 F.3d 148, 153-54 (2d Cir. 1997)) (internal quotati on marks omitted).12 Given the gravity of these penalties and the many thousands of attorneys licensed to practice
in New York courts who stand to be affected by a decision concerning the constitutionality of Section 470, the issue meets the second requirement for certification. Finally, we consider “the capacity of certification to reso lve the litigation.” Runner , 568 F.3d at 388. As this c ase now stands, whether Secti on 470 survives constitutional scrutiny depends on the construction of th e in-state office requirement imposed on nonresident attorneys. If the New York Court of Appeals accepts and answers our certified question(s), that answer, in all likelihood, dictates the outcome of the constitutional privileges and immunities analysis we have commenced and must complete as we decide the appeal before us.
C ONCLUSION Because it is “our preference that states de termine the meaning of their own laws in the first instance,” Joseph v. Athanasopoulos , 648 F.3d 58, 68 (2d Cir. 2011), we respectfully certify the following question to the New York Court of Appeals: Under New York Judiciary Law § 470, which mandates that a nonresident attorney maintain an “office for the transaction of law business” within the state of New York, what are the minimum requirements necessary to satisfy that mandate? The New York Court of Appeals may, of co urse, expand, alter, or reformulate this question as it deems appropriate. See Kirschner v. KPMG LLP , 590 F.3d 186, 195 (2d Cir. 2009). It is hereby ORDERED that the Clerk of th e Court transmit to the Clerk of the New York Court of Appeals a certificate in the fo rm attached, together with a copy of this opinion and a complete set of th e briefs, appendices, and record filed by the parties in this13 Court. This panel will retain jurisdiction to decide the case once we have the benefit of the
views of the New York Court of Appeals or once that court dec lines to accept certification.
It is further ORDERED that the parties bear equally any fees and costs that may be imposed by the New York Court of Appeals.14 C ERTIFICATE The following question is hereby certifi ed to the New York Court of Appeals pursuant to Second Circuit Local Rule 27.2 an d New York Compilation of Codes, Rules, and Regulations, title 22, section 500.27(a), as orde red by the United States Court of Appeals for
the Second Circuit: Under New York Judiciary Law § 470, which mandates that a nonresident attorney maintain an “office for the transaction of law business” within the state of New York, what are the minimum requirements necessary to satisfy that mandate?