Collection Attorneys In New York Dealt A Blow

On August 5, 2016 the Second Circuit Court of Appeals ruled that a New York City law intended to prevent law firms that also work as debt collectors from engaging in abusive practices does not infringe on the state’s authority to regulate the legal profession.

The decision in Eric M. BERMAN, P.C., Lacy Katzen, LLP v. CITY OF NEW YORK, et al, United States Court of Appeals, Second Circuit, No. 13‐598‐cv, is the latest development in a long and convoluted legal journey. The case has bounced between US District Court, the U.S. Court of Appeals, the New York State Court of Appeals and back to the U.S. Court of Appeals. With this latest decision it has been remanded back to U.S. District Court “for further proceedings consistent with” the Court of Appeals opinion.

The primary issue in this case is a law (referenced throughout as Local Law 15) passed by the City of New York in 2009 that required debt buyers and collection attorneys to obtain licenses as collection agencies and adhere to new rules also laid out in the legislation. It was the position of the Berman and Katzen law firms that the City had no authority to regulate the practice of law in the state of New York.

insideARM has previously reported on developments in this case. In October of 2012, we reported an initial victory for Mr. Berman (a prior director of the National Association of Retail Collection Attorneys) and his co-plaintiffs. In that first stage of this marathon case a U.S. District Court judge ruled that the New York City Department of Consumer Affairs has no authority to regulate lawyers’ conduct.

In October of 2014 insideARM reported again on the latest development in the case. At that time the U.S. Court of Appeals for the Second Circuit ruled that New York’s highest court would need to resolve the legal questions in a case brought by a debt collection law firm challenging a New York City statute that regulates certain activities of collection attorneys.

The Court of Appeals panel certified two questions to be considered by the New York State 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?
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?

On June 30^th of this year the New York State Court of Appeals answered the questions posed above.

For question #1 the court answered in the negative. The court held that Local Law 15 is “not preempted” by New York State’s authority over attorney conduct.

For question #2, the State Court of Appeals reformulated the question as follows: “If Local Law 15’s regulation of attorney conduct is preempted, does Local Law 15, as applied to attorneys, also violate Section 2203(c) of the New York City Charter?” Having reformulated the second question as conditional on an affirmative answer to the first, the Court of Appeals declined to reach a decision on the issue. Rather, the Court of Appeals instructed that the second question “should be answered in accordance with [its] opinion.”

The Second Circuit reviewed the New York State Court of Appeals June 30^th decision and ruled accordingly in a per curiam decision. A per curiam decision (or opinion) is a ruling issued by an appellate court of multiple judges in which the decision rendered is made by the court acting collectively and unanimously. The Court of Appeals vacated the prior District Court Decision and remanded the case back to the District Court for further proceedings.

insideARM Perspective

From a procedural perspective this case could be on a law school Civil Procedure exam. How so many courts could be involved in a single issue is likely mind boggling to non-lawyers. However, the current (perhaps final?) result is that collection lawyers are subject to Local Law 15.