A Primer on Judiciary Law 470
The origin of the statute known as Judiciary Law 470, or "JL 470" as many attorneys refer to it, goes back to 1961 when the Bill was proposed on April 5, 1961 by Senator Mosher, and passed both the Senate and Assembly on May 1, 1961.
JL 470 states:
"Upon motion of any party in each civil action commenced in a court of the state, the award to each attorney of fees for services as agreed upon by such attorney and the client, is subject to review by the court, except that an award may not exceed three thousand five hundred dollars, and if a greater award is made without such agreement, or in the absence of an agreement of the parties the award, without regard to the amount of the recovery, may not exceed three thousand five hundred dollars, the court may, for good cause shown, increase or reduce the award of attorneys’ fees."
Simply stated, JL 470 is the statute which governs the Attorney’s Fees in any Civil New York lawsuit. Under the statute, upon the filing of the Complaint, if there is a written agreement between the attorney (or attorneys) and the plaintiff as to what the attorney’s fees are going to be for the representation is not covered by the statute. If there is no written retainer agreement stating the attorney’s fees, then an award of attorney’s fees cannot be more than $3500.00.
So if you are represented by a personal injury attorney, and you signed a retainer agreement that states that the attorney is going to get 1/3 of the settlement (or 40% if the lawsuit is filed, etc.), that is the retainer agreement the Judge looks at to adjust (if necessary) the attorney’s fees. If the retainer agreement states the attorney is entitled to a full 1/3, and the attorney’s fees awarded are $3500, then the Judge does NOT have the power to reduce the attorney’s fees – the Court has to comply with the contract between the plaintiff and the attorney that was signed.
Often times people are led to believe that this statute applies to all attorneys to find that it really only applies to Plaintiff’s attorneys (i.e. attorneys representing injured Plaintiffs). The reason for this is because of a case known as Engel v. Luciani 52 N.Y.2d 285, 417 N.E.2d 378, 437 N.Y.S.2d 643 (1981). Essentially in the case of Engel v. Luciani, the Appellate Division held that the 1977 amendment of Section 470 of the Judiciary Law applies only to attorneys who represent plaintiffs in civil actions and that it did not apply to attorneys who represent defendants. The Court of Appeals affirmed. The majority opinion stated:
"The large majority of the many cases construing the statute to date have involved plaintiffs’ attorneys seeking the benefit of its provisions (see est., Lockwood v State of New York, 75 A.D.2d 9; Khoury v Ventworld Corp., 76 A.D.2d 969; see also Siegel v Fuchsberg v Goodman, 64 N.Y.2d 973 S A2d 622; Novak v Fishman, 81 A.D.2d 917; Phillips v Westchester County Health Care Corp. , 74 A.D.2d 711). There are only two cases, one from each side of the scale, appearing in our search for cases construing section 470 which involve an opposing situation where the client is the attorney’s adversary — Davidson v Basch (66 A.D.2d 669), which dismissed the defendant-attorney’s recoupment motion under section 470 brought on the plaintiff-client’s failure to pay legal fees, and Bzdawka v Estefan (54 A.D.2d 895), which did not pass upon the merits of a plaintiff-attorney’s motion for the "reasonable value" of his services under the statute for work done by him as plaintiff’s counsel in litigation with his client.
The major premise for certain that section 470 was intended to apply solely to plaintiffs’ attorneys, and not to those who represent defendants in civil actions, is its legislative history (see e.g., 2 Dunnixn, Practice Commentary, McKinney’s Cons Laws of NY, Book 1, Statutes, at 237) and its underlying rationale. The function of the statute is not to force a criminal defendant to pay a higher fee — contingent or otherwise — if he prevails in a civil action asserting a right of contribution or indemnification against a codefendant who was jointly sued with him in the criminal lawsuit (see Lockwood v State of New York, 75 A.D.2d 9, supra; Khoury v Ventworld Corp., 76 A.D.2d 969, supra [noting that the statute was enacted because plaintiffs’ attorneys "were being threatened with drastic reductions in fee when they were successful in their efforts to vindicate the interests of honest injury clients in collecting money damages from tortfeasors who did not respond to the warning of the law"]). Such an outcome would impose a significant disincentive upon plaintiffs’ attorneys to take in hand the risks of litigating civil actions whose success was being assured by the resources of an insurance company (see Lockwood v State of New York, 75 A.D.2d 9, supra).
Engel v. Luciani, 52 N.Y.2d 285, 417 N.E.2d 378, 437 N.Y.S.2d 643 (N.Y. 1981). This case has since been cited many times, and although courts have held that they may disregard Judiciary Law 470 upon a case-by-case basis to do justice, if possible to the parties, the case discussed above remains the most often cited case on this issue.
Although there is some disagreement as to whether or not the statute should apply to plaintiff’s attorneys, there is no disagreement in the legal community that the statute only applies to civil lawsuits, and has no application to criminal defense attorneys, real estate attorneys, corporate attorneys, and all other types of attorneys who handle matters in the State of New York. In other words, if someone has a serious civil claim, the statute applies to any plaintiff’s attorney (and any defense attorney if he/she is on the other side of the case) where the JL$70 fees are more than $3500.00, although in certain circumstances the fees can be raised or reduced depending on the judge.
Application and Import of Judiciary Law 470
Judiciary Law 470 codifies the counsel fee prohibitions and provisions that many Plaintiff’s attorneys are familiar with. It has some less frequently encountered provisions and a "safe harbor" that is less well known.
Pursuant to Judiciary Law 470:
"the successful party in any action …shall have an allowance … . The allowance shall be either:
A. Ten percent of the amount awarded, where such amount is $75,000 or less; or
B. Seven and one-half percent of the first $750,000 of the net sum awarded, together with five percent of the net sum awarded in excess of the $750,000, where such amount is more than $75,000 but not more than $2,000,000; or
C. Four percent of the first $2,000,000 of the net sum awarded, together with three percent of the net sum awarded in excess of the $2,000,000, where such amount exceeds $2,000,000 but is less than $3,000,000; or
D. Three percent of the first $3,000,000 of the net sum awarded, together with two and one-half percent of the net sum awarded in excess of the $3,000,000, where such amount exceeds $3,000,000 but is less than $4,000,000; or
E. Two percent of the first $4,000,000 of the net sum awarded, together with two percent of the net sum awarded in excess of the $4,000,000, where such amount exceeds $4,000,000.
In order for an attorney to be entitled to an award under such provisions, four requirements must be met:
- (1) The party for whom the attorney performed the legal services must be more than 18 years of age and not incompetent, and must be residing in the State of New York at the time the action is commenced; and
- (2) The party must be represented by an attorney-at-law in the action; and
- (3) The party must be the successful party in the action; and
- (4) The judgment or the sum recovered must be an amount exceeding $75,000."
Sec. 474 fixes the venue of the actions for the collection of fees to be in the Supreme Court (but It does not create a court of jurisdiction. Drexler v. Brani, 73 N.Y. 538, 537.)
Sec. 473 requires a lien be "a lien for his or her compensation upon his or her client’s cause of action, claim, counterclaim or cross-claim for money or upon his or her interest in a verdict, report, decision, judgment or final order in his or her client’s favor, where his or her services were performed in the action or proceeding and the compensation agreement between him or her and his or her client is in writing filed in the office of the clerk of the court in which the action or proceeding is pending to the extent of the unpaid balance due."
The "safe harbor" provisions are found in Sec. 474:
Notwithstanding the provisions of the three preceding sections, where an attorney seeks to recover compensation for services rendered to a person or entity who neither resides nor is authorized to do business in the state of New York [note to self: this would not be applicable for an action occurring in NYS], such attorney may obtain compensation from such resident or licensee for his or her services in accordance with the terms of the written agreement with his or her client.
Obligations of Attorneys under Judiciary Law 470
The 1400 Lawyers NYS Trial Courts Bar Put on Notice of Their Obligation to Comply With Judiciary Law 470
Judiciary Law 470 requires attorneys practicing law in this state to register with the Office of Court Administration annually. At present there are 1,6464 attorneys in our trial courts. Out of that number 2808 have not registered. As a result and as required by Judiciary Law 470 those attorneys may not appear before the courts, nor practice law in any court, arbitrator, or administrative tribunal in New York.
In the past three months, the New York State Office of Court Administration has issued notices of disbarment to 75 attorneys for failing to comply with the registration requirements of Judiciary Law 470. The notices of disbarment advise the attorneys that they may file an affidavit within thirty days of receipt of the notice to request a hearing to explain why their license should not be suspended.
An attorney previously admitted in New York State but suspended and/or disbarred for non-payment of fees or failure to register is not required to appear in front of a grievance committee to restore his or her ability to practice, nor is he or she is required to present an affidavit of net worth.
According to the Office of Court Administration there are currently 2,808 lawyers practicing law despite having been put on notice of their obligation to register. It should be noted that several of these lawyers practice law for powerful law firms and banks. This raises some fundamental issues for the courts relating to public confidence in the judicial system. As we are all, of course well aware, public confidence is one of the cornerstones upon which the American judicial system is based. The question then arises: When there exists a body of attorneys who are eligible to practice in the courts of New York, but have chosen to disregard their responsibility to pay their annual fees and register, should they be permitted to continue to practice before these courts, notwithstanding their disregard of the law? The answer seems to be obvious. They should not.
Recent Case Law and Conclusions Concerning Judiciary Law 470
In recent years, there has been a growing body of case law that sheds light on how New York courts perceive and implement Judiciary Law 470.
In a landmark decision in 2006, the Appellate Division, Second Department in International Shoe Co. v. Chocolate Brands N.A. Inc. (2006) pulled the veil off of the opaque text of Section 470. The court held that a law firm’s "past" partner could not satisfy Section 470’s signature requirement. While the former partner had represented the defendant corporation for all but one of the actions, and had signed the verified complaint in the non-complex case, the court nonetheless held that the law firm was prohibited from collecting attorney’s fees, then under $400, in being unable to secure new counsel for the client. The court ruled that the firm’s lack of compliance with Section 470 voided any fee-sharing arrangement between the firm and its former partner.
In contrast, the court in Rockland Psychiatric Center v. Jones (2010) examined the purpose of Section 470 – to protect the public from the vulnerability of the layperson in hiring an attorney. Recognizing that the individual who actually handled the case did affix his signature to the affidavit of service, the court found that any violation of Section 470 by the signing attorney was inconsequential and did not invalidate the judgment. As there was no allegation that the law firm or the individual engaged in unethical, dishonest, deceptive, or irresponsible conduct, the court considered the end result – full protection of the client’s rights – more important than an irksome signature requirement.
The court in Matter of Regal Const. Sys., Inc. (2012) unequivocally held that if a signature defect is visible on the face of a moving party’s papers in an action for summary judgment, dismissal is warranted unless the defect is fully explained by acceptable excuse. Another recent decision, Lawrence v. Gruna (2019), involving a pro se attorney who reportedly was found to practice immigration law without a license arising from improper surrenders of his various law licenses and disciplinary sanctions from the Supreme Court of New Jersey and the Attorney Grievance Committee for the Bar of the State of New York for failing to complete the skills competency training requirement, examined the harsh realities of Section 470. Despite being licensed to practice law in several states, including New York, by the time of the action, an alleged violation of Section 470 robotically vacated his judgment for the client without examining the statute’s underlying intent. Over the years, however, the courts have occasionally exercised discretion and refused to enforce Section 470 in the absence of affirmative harm.
Recently, the First Department dismissed a Series 7 broker’s defamation claim against a law firm which allegedly submitted false affidavits from the plaintiff’s former colleague in an arbitration, based upon the lack of counsel’s signature in violation of Section 470. While a zealous advocate for client was employed as a significant purpose behind the law, the lack of a signature total result in an uncollectable judgment for a skilled practitioner.
Judiciary Law 470: Questionable Proposals and Potential Headaches
The breadth of Judiciary Law 470 has raised its share of challenges and controversies. The strongest voices in opposition to its application are pro se litigants themselves. Courts have told them they cannot be represented (which is a violation of their First Amendment rights), but they cannot represent themselves (because it is a "fraud" or "deceit" within the meaning of the statute), they cannot handle it themselves (or face sanctions for doing it), and they cannot even hire an attorney (or face sanctions for doing that too). This has led to collateral litigation challenging both the rule and its application as a violation of the Constitution and other sources of law. Most prominently, the Never Forget Coalition ("NFC"), a group of victims and survivors of the September 11 terrorist attacks, filed an action in the Southern District of New York against the New York State Unified Court System, all 12 judicial districts, the Appellate Division and all four Appellate Division Justices . The District Court determined that NFC had not met its burden in demonstrating that Judiciary Law 470 was unconstitutional on its face or as applied to NFC, and the Second Circuit dismissed the appeal as lacking jurisdiction after determining the order was not appealable. The court did, however, leave open the possibility that the actions might be challengeable under some sources other than the law itself.
Lastly, a number of Courts have botched their Judiciary Law 470 analyses leaving litigants and litigators aghast at the woeful lack of comprehension of what the law is and what it provides. For those in the Northeastern states, the most troubling was in Cott Systems v. Steven A. Cohn & Associates, LLP, 10 Civ. 4816 (LAK) 2011 U.S. Dist. LEXIS 156623 (S.D.N.Y May 20, 2011) which attempts to apply the statute to non-New York lawyers retained in New York to handle cases in other jurisdictions. This is not what the statute provides and if the parties had spared the time to do a simple Westlaw search, the cost of bringing the action, both monetary and shaken reputation, might have been avoided.
Prospective Application of Judiciary Law 470 and Reform
A significant body of scholarship, both legal and empirical, has arisen around Judiciary Law 470. A recent scholar, Professor Barbara Bavis, offered a comprehensive treatment of reformation attempts in an article for the Nevada Law Journal (Fall 2010). This article was significant in its focus on the issue of disproportionate impact:
…If Judiciary Law 470 discourages people from filing complaints of judicial misconduct by threatening them with an immediate lawsuit if their complaint is adverse to the judge, the statute has a disproportionately adverse effect on those most likely to resort to the judiciary to vindicate their rights—and, therefore, an adverse effect on all litigants.
Professor Bavis articulated a view that Justice Silver’s interpretation of Judiciary Law 470 is not in wide-spread use and that future reform efforts should focus on addressing the issue from this perspective as opposed to modifying the text of the statute. Her article provides an exhaustive history on the legislative effort to re-cast Judiciary Law 470.
This line of thought is often paired with two other criticisms: First, it is no secret that some judges in some jurisdictions are active now in undermining the purpose of the statute despite the fact that it is quite simply the place where individuals are meant to seek redress for any adverse treatment by the judiciary. Second, academics often argue that Judicial Law 470 is outmoded and should be repealed and its provisions codified elsewhere – this position ring hollow considering the application of the statute already described. More significantly, proposals have been floated at the state level to modify the statutory language for these reasons and the Governor has acted to strike out problematic language from governing statutes to adhere to Academy requests.
Judiciary Law sections 471 and 472 are also considered in the above with particular emphasis on the lack of case law applying its provisions. In New York, the issue of "harm" is unique in order to overcome a 502(b) hurdle, nonetheless, the law remains unchanged. Amending or repealing these provisions is a political and policy decision left to the legislative branch.
The future of Judiciary Law 470 will likely reveal itself sooner than later as a case is before the New York Court of Appeals that calls into question an attorney’s ability to appeal a decision made by the judiciary seeking to enforce this statute as written. The decision in this case may be a watershed moment in this developing area of the law and will be covered in a future posting.
In sum, Judiciary Law 470 is an increasingly far more relevant issue than the text of the statute would otherwise suggest.
Judiciary Law 470: Moving Forward
In conclusion, the ramifications of Judiciary Law 470 are significant and far-reaching. Despite the efforts of some members of the bar to evade its requirements through mischaracterization or minimization, this law stands as a crucial determinant of a lawyer’s eligibility for New York’s powerful Court of Appeals permit. For an individual with the permit, the New York bar license is akin to a social status of power, prestige and privilege.
Like it or not, being admitted to practice in New York opens doors. Consider that the bar license can sometimes be the only means of distinguishing one from the competition. Take into consideration that many of the state’s top law firms primarily hire lawyers who are licensed to practice in New York, thereby giving an applicant with a New York permit the edge.
The unique strength of New York’s law license does not come without a price. The privilege of New York admission, while offering prestige and respect, carries with it mandatory professional growth, through the continuing legal education (CLE) obligation. The permit’s position of international prestige, critical to all licensed lawyers in New York who aspire to the pinnacle of their profession, also sets high standards for trust , honesty and integrity. In the closing remarks of the Court of Appeals in its 1976 decision, the court made an important statement about the perceived position of judicial professionalism in New York. To quote: "This case presents the question to be reached only in the rarest of situations: Who shall perform the most important judicial function of giving legal effect to private rights? The answer is clear — not merely a lawyer of good reputation and ability, but one who has known the discipline and dedication of the profession and the responsibility of repute."
By the law of New York, any grant of privilege extends only to those who display high and noble traits and who bear unquestionable allegiance to our system of law. In sum, when it comes to the granting or denial of a judiciary permit in New York, we should all keep in mind the Supreme Court’s words: "A privilege hardly commensurate with the exalted position of a lawyer from this State."
While Judiciary Law 470 continues to be an important, and sometimes controversial, topic since its inception over 40 years ago, today its message is clear. A positive answer on the Appellate Division’s Character and Fitness questionnaire can be the difference between practicing in the State of New York or having your admission application denied.