Collection Attorneys Battle for Rights in NYC

Posted By Law Office of Simon Goldenberg, PLLC || 1-Sep-2015

On occasion, laws created by a state's different governing bodies will overlap and cause mass confusion. Deciphering the law in these bizarre occasions can be like battle between an immovable object and unstoppable force. Neither governing body has true power over the other, as a result the interpretation is in the hands of the courts What follows usually follows is a shift in the interpretation of the law in different jurisdictions over time. One such lawsuit is the 4 year battle that is the case of Eric M. BERMAN, P.C., Lacy Katzen, LLP v. CITY OF NEW YORK, et al.

This lawsuit has been a war waged over the overlap of Local Law 15 and Sections 53 and 90 of the New York Judiciary Law. Local law 15 of New York City requires debt buyers and collection attorneys to obtain collection licences from the Department of Consumer Affairs (DCA) and adhere to New York City rules and regulations. Sections 53 and 90 of the New York State Judiciary lay out the the standards for regulating attorneys and the rules that they must follow.

The chief argument of the case made by Eric Berman’s team has been that attorneys are already held to a higher standard of scrutiny under the state judiciary and that to force them to adhere to the additional regulations of Local Law 15 was unnecessary, excessive and unconstitutional. The case argued that the law created dual regulation of attorneys. In the initial trial judge Eric Vitaliano agreed stating “It is simply not within the DCA’s power to license attorneys or regulate their professional conduct,”

However, Judge Vitaliano’s ruling was just the beginning. After his ruling came in favor of New York attorneys, the case was brought into the Second Circuit Court of appeals in 2014. The continued hearings in the court of appeals partially agreed with Judge Vitaliano’s original judgment stating that the Department of Consumer Affairs has no right to regulate over the conduct of attorneys. However, they went on to say that the conduct being regulated under Local law 15 is not considered to be regulating attorneys who are acting as legal agents of debt collectors, but rather those who are collecting on debts themselves and as such should be held to the same standards as all debt collectors. Furthermore the appellate panel of judges ruled that the case be heard by the New York State Court of Appeals to have two questions answered:

  1. 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?

  2. 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?

Proceedings on this case have continued through 2015 as the New York State Court of Appeals handed down their answers to the Circuit Court’s questions. With regard to the first question the court stated that Local Law 15 is not preemptive of the State's’ power to regulate attorneys, as the rule has no effect on attorney’s ability to practice law, it only affects them in their capacity to act as debt collection entities.

In regards to the second question, the court declined to answer and ruled that the Second circuit court of appeals answer with their opinion. This past June, the Second Circuit court came to their consensus and vacated the original ruling of the case and sent the case back to the District Court.

As of now, it seems further rulings are likely to go in favor of the City of New York. However, when it comes to cases with conflicts such as these, nothing is certain.

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