By Richard E. Weltman
New York State’s highest court recently agreed to consider whether New York City's effort to limit law firms’ ability to collect debts violates the state's exclusive power to regulate attorney conduct.
The Court of Appeals will take up two certified questions from the United States Court of Appeals for the Second Circuit, which ruled that the case — in which Eric Berman PC and Lacy Katzen LLP contest the legality of Local Law 15 — raises unresolved and significant issues about the scope of New York State’s exclusive authority to regulate attorney activities. Berman v. City of New York, 2014 WL 5463299 (Oct. 29, 2014).
The debt collection law, enforced by New York City’s consumer affairs department, is an amendment to the city's original regulations compelling a broad category of debt collectors to obtain city licenses. It prohibits certain conduct by debt buyers and attorneys engaging in a wide variety of debt collection activities.
A federal district judge partially granted the law firm plaintiffs' motion for summary judgment in February 2013, determining the municipal law impermissibly conflicted with the state's authority to regulate attorneys. The district court ruled the law violated New York City’s Charter by allowing New York City to grant or withhold licenses to practice law, which only New York State can do. See Berman v. City of New York, 895 F. Supp. 2d 453 (E.D.N.Y. 2013).
In late October, the Second Circuit held that Local Law 15 did so much as regulate attorney debt collection as it appeared to regulate attorney conduct. Such conduct includes telephone calls to a debtor when such activity is not performed in the name of a client and in a manner typically reserved only to licensed attorneys within the state. Berman v. City of New York, 2014 WL 5463299 (Oct. 29, 2014).
The Second Circuit was clearly grappling with whether the city’s effort to approve or withhold licenses to practice law under the aegis of the New York City Charter — while such power is vested exclusively with the state — was “substantially intertwined” with the issues over the scope of state authority to regulate lawyers.
In particular, the Second Circuit certified two questions to New York’s Court of Appeals: “Does Local Law 15, insofar as it regulates attorney conduct, constitute an unlawful encroachment on the state's authority to regulate attorneys, and is there a conflict between Local Law 15 and Sections 53 and 90 of the New York Judiciary Law?”; and, “If Local Law 15's regulation of attorney conduct is not preempted, does Local Law 15, as applied to attorneys, violate Section 2203(c) of the New York City Charter?”
The case, Berman, et al. v. City of New York, et al., Case Number 13‐0598, in the U.S. Court of Appeals for the Second Circuit is being followed by attorneys, debt collection agencies, and consumers nationwide. Weltman & Moskowitz, LLP will continue to watch this case and report back on further developments.
About Weltman & Moskowitz, LLP, A New York and New Jersey Bankruptcy, Business and Creditors’ Rights Law Firm:
Richard E. Weltman and Michael L. Moskowitz Moskowitz co-founded Weltman & Moskowitz, LLP, in 1987. Weltman & Moskowitz, a business, creditor’s rights and bankruptcy law firm, Weltman & Moskowitz serves clients throughout New York, Long Island, New Jersey, and beyond. The firm concentrates on creditor’s rights, corporate reorganization, resolution of commercial disputes, loan workouts and modifications, shareholder and partnership disputes, business divorce, dissolution, business and bankruptcy litigation, arbitration, and mediation of all types. The firm also focuses on corporation, partnership, and limited liability company governance, and preparing and negotiating many types of secured lending, leasing, shareholder, partnership, buy-sell, consulting, technology, and joint venture agreements. Michael and Richard may be reached at (212)684-7800, (201)794-7500, or at mlm@weltmosk.com or rew@weltmosk.com. Melissa A. Guseynov, an associate with the firm, assisted with the preparation of this article.
