Virtual Law Offices: A New and Lasting Frontier? By Devika Kewalramani

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1 Virtual Law Offices: A New and Lasting Frontier? By Devika Kewalramani The lawyering landscape is changing dramatically with the advent of the virtual law office (VLO): a secure Internet portal on a law firm website that utilizes cloud technology to deliver legal services online. The structure of VLOs may vary from firm to firm. Some firms and lawyers use aspects of VLO technology to augment their traditional physical offices, while others have completely abandoned their brick-and-mortar presence by embracing the VLO model. These lawyers and firms may have clients they may never meet in offices they really don't have. Physical to Virtual Space As one writer has asked, "What is the purpose of an office? Is it just an anachronistic throwback to an era when electronic communication did not exist? If I can handle most of my business online, do I need a physical office at all?" 1 A key issue for lawyers and firms today is whether VLOs offer the same level of services that most traditional brick-and-mortar law offices provide for competent legal representation: a place for meeting or communicating with clients, opposing counsel and the court system; mail and delivery service; phone service; file storage; and service of process. In a May 2011 report, the American Bar Association Commission on Ethics 20/20 concluded that the Model Rules of Professional Conduct are largely inadequate to address the interplay of technology and competency, and recommended that Comment 6 of Model Rule 1.1 (competence) should be updated to add an explicit duty of technological competence. State bar association ethics committees are increasingly recognizing that the goals of reliable and prompt communication and lawyer accessibility may still be met even as lawyers forgo a physical location and instead opt for a virtual legal practice. 2 Opponents of state office requirements argue that these rules are relics from a bygone era and are incompatible with current legal trends. Even so, the evolution of VLOs as a viable alternative to physical offices should be analyzed against the backdrop of long-established state rules that require physical offices for the practice of law in those jurisdictions. However, emerging case law and state bar ethics opinions are beginning to examine the relevance of those age-old office rules to the effective delivery of legal services in the digital era. New York Office Requirement Since its adoption in 1909 and amendment in 1945, New York's in-state office rule, Judiciary Law 470, has remained largely unchallenged. However in September 2011, a New York-

2 admitted, New Jersey-resident solo practitioner filed a federal action attacking Section 470 on constitutional grounds. Judiciary Law 470 Burden on Nonresidents? New York's Judiciary Law 470 requires, "A person, regularly admitted to practice as an attorney and counselor, 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 counselor, although he resides in an adjoining state." Notably, this statute requires no office (in state or outside) to be maintained by resident New York-admitted lawyers but imposes an in-state office requirement on nonresident New York-licensed lawyers. 'Schoenefeld v. New York': 3 a Breakthrough? The U.S. District Court for the Northern District of New York observed that Judiciary Law 470's in-state office requirement does not serve any of the interests advanced by New York State, such as service of process or availability for court appearances, and held: Section 470 discriminates against nonresident attorneys by requiring them to maintain offices instate even though resident attorneys are not required to do the same. Most importantly, under Section 470, nonresident attorneys bear a significant competitive cost that resident attorneys do not: whereas "New York resident attorneys may practice law out of their basements," "nonresidents are required to rent offices in New York (no matter how few in number their New York clients may be) in addition to maintaining offices and residences in their home states." Based on this analysis, the Court concludes that Section 470's requirement that nonresident attorneys maintain an office in-state implicates the fundamental right to practice law under the Privileges and Immunities Clause. While Schoenefeld may have paved the way for nonresident New York lawyers to practice in New York without an in-state office, the case is being appealed to the U.S. Court of Appeals for the Second Circuit. In the meantime, nonresident New York attorneys should be advised to follow the case, current New York Judiciary Law and the New York Rules of Professional Conduct to ensure compliance with applicable laws and rules until a decision is reached on the Schoenefeld appeal. Despite an appeal, nonresident New York attorneys may be required to take further steps, such as designating agents for service of process, purchasing malpractice insurance and complying with new disclosure rules. While the District Court did not compare Section 470 to a "residency requirement" (which the U.S. Supreme Court has held unconstitutional 4 ), the fact that a lawyer's physical location captured the spotlight and is being re-examined as a requirement for law practice might prompt other states to revisit their attorney office rules, regardless of the VLO trend. State Bar Report: Many Benefits. In April 2011, the New York State Bar Association published its Report on the Task Force on the Future of the Legal Profession, which recognized that VLOs are being used in representing clients across a broad spectrum of practice areas, including intellectual property, tax, commercial law, energy and employment. The opinion called VLOs a "viable option" for legal services for a number of reasons: low overhead, improved encryption systems, pervasive web usage, and the ease of digital document and information transmissions. The report noted, "Using the latest technology, virtual law firms can gather and share information online through secure sites or platforms that reside on the Internet Clients and

3 potential clients may register with a law firm site, log in, fill out questionnaires, check work, and make payments." In addition, lawyers can focus their marketing and networking efforts solely online by utilizing search engine optimization tools. 5 N.J.'s 'Bona Fide Office' Rule New Jersey law requires that an attorney seeking to practice law in New Jersey must have a license to practice in the state and must maintain "a bona fide office for the practice of law." R. 1:21-1(a). A bona fide office is defined as "a place where clients are met, files are kept, the telephone is answered, mail is received and the attorney or a responsible person acting on the attorney's behalf can be reached in person and by telephone during normal business hours to answer questions posed by the courts, clients or adversaries and to ensure that competent advice from the attorney can be obtained within a reasonable period of time." 6 Note, the statute allows resident or nonresident New Jersey lawyers to maintain a bona fide office in New Jersey, "or any other state or the District of Columbia." R.1:21-1(a). Ethics Opinion: VLOs Inadequate. In March 2010, New Jersey's Advisory Committee on Professional Ethics Opinion 718/Committee on Attorney Advertising Opinion 41, observed that VLOs "a type of time-share arrangement whereby one leases the right to reserve space in an office building on an hourly or daily basis" fail to qualify as a bona fide law office in New Jersey because an attorney will only be present when he or she has reserved space, and because a receptionist at a VLO does not qualify as a "responsible person acting on the attorney's behalf" who can "answer questions posed by courts, clients or adversaries." The opinion concluded that the VLO lawyer must list a bona fide street address on all advertising and communications, including websites, letterhead and business cards, which must be accurate and not misleading. Proposed Amendment: Relaxing the 'Bona Fide Office' Rules? In January 2012, the New Jersey Supreme Court's Professional Responsibility Rules Committee issued its Rules Cycle Report recommending a proposed amendment to the bona fide office rule to permit the use of a VLO. The Notice to the Bar indicated the rule change would bring the underlying purpose of the rule ensuring "that attorneys are available and can be found by clients, courts, and adversaries" up to date with the way lawyers currently use and rely on technology to provide efficient services. 7 Opponents of the amendment argue that the only way clients can be assured that their attorneys will be accessible is if the attorneys maintain "a real office with a known street address" that is accessible "during normal business hours." The proposed amendment seeks to ameliorate the lawyer accessibility concern by requiring New Jersey practitioners to designate a "fixed, physical location" in New Jersey for file inspection on short notice by regulatory authorities, mail and hand deliveries, and process service. In addition, they must structure their practices to assure prompt and reliable communication and accessibility by clients, other counsel and courts. If the amendments are adopted, New Jersey lawyers would no longer be required to maintain a fixed, physical location in any state, but must instead designate a physical location in New Jersey. Also, a non-resident New Jersey lawyer who did not maintain a bona fide office in New Jersey would need to designate the Clerk of the Supreme Court as agent for service of process. Despite the perceived benefits, the proposed amendment may likely increase the burden on nonresident New Jersey attorneys who satisfy the bona fide office rule by requiring designation of a

4 New Jersey location. But this burden may be distinguishable from New York's Judiciary Law 470 which requires nonresident New York attorneys to maintain fixed in-state offices for practice without requiring the same for resident lawyers. Other States Other state bar associations have addressed how technology is reshaping the way lawyers work. The opinions generally permit VLOs on condition that lawyers observe applicable state ethics rules, including those on attorney advertising and unauthorized practice of law. 8 California. In November 2011, the State Bar of California found that the California Business and Professions Code and the California Rules of Professional Conduct do not explicitly impose greater or different duties upon a VLO than they do upon a traditional non-vlo. However, lawyers practicing via VLOs may need to take further steps to confirm ethical compliance. California State Bar Standing Committee on Professional Responsibility and Conduct, Draft Formal Opinion Interim No (2010). Illinois. The Illinois State Bar Association concluded that where VLOs involve lawyers from different jurisdictions, each lawyer should ensure that any out-of-state practice is not "systematic and continuous" to avoid violating any other states' rules on unauthorized practice of law. Interestingly, the opinion noted that "systematic and continuous" presence can be established by both physical and virtual offices. Il. Adv. Op (2009). North Carolina. North Carolina State Bar 2005 Formal Ethics Opinion 10 (2005) explored the use of VLOs as an exclusive means of delivering legal services where all communications are via , regular mail and telephone, no face-to-face client consultations are held, and no office exists. The opinion concluded that while the state's ethics rules do not prohibit VLO use, cyber lawyers should avoid creating unintended client-lawyer relationships, protect client confidences, check for conflicts, provide competent representation, comply with the advertising rules by including a physical office address on its website and the names of lawyers primarily responsible for the website (see Rule 7.2(c)), and indicate the jurisdictional limitations of their practice. In addition, cyber lawyers should avoid engaging in unauthorized practice in other states and violating other states' advertising rules. Pennsylvania. The Pennsylvania State Bar Association Committee on Legal Ethics and Professional Responsibility published Formal Opinion , "Ethical Obligations on Maintaining a Virtual Office for the Practice of Law in Pennsylvania." It defined a VLO as "a law office that exists without a traditional physical counterpart, in which attorneys primarily or exclusively access client and other information online, and where most client communications are conducted electronically, e.g., by , etc." The opinion permits VLOs to operate from a home office, which can be located out of state. The opinion concluded that VLO lawyers (1) must disclose information specifying where advertised services will be performed, but need not disclose the physical address where each attorney is located in advertisements or letterheads; (2) may state, if accurate, that the firm's overhead may be lower than traditional brick-and-mortar offices, thereby possibly reducing the fees the firm charges clients, but may not state that his fees are lower than those of brick-andmortar offices; and (3) must take proper safeguards to confirm the identity of clients and third parties if the clients and lawyers do not meet face to face. The opinion stated that no additional

5 precautions are necessary for an attorney practicing in a VLO to comply with his duty of confidentiality beyond those required of all attorneys. VLOs: Viable Legal Option? Lawyers without offices? Practicing outside the box? Fixed physical offices have always been there to assure communication, availability and accessibility. Not any more. VLOs may be taking law practice to a new space. Devika Kewalramani is a partner at Moses & Singer and co-chair of its legal ethics and law firm practice group. Lauren A. Rieders, an associate at the firm, assisted in the preparation of the article. Endnotes 1. Gary Munneke, The Mobile Law Office From Lincoln to the Lincoln Lawyer, NYSBA Journal, Sept. 2011, at See Stephanie L. Kimbro, "Practicing Law Without an Office Address: How the Bona Fide Office Requirement Affects Virtual Law Practice," 36 U. DAYTON L. REV. 1 (2010). 3. Schoenefeld v. New York, No. 1:09-CV-00504, 2011 WL (N.D.N.Y. Sept. 7, 2011). 4. See Supreme Court of New Hampshire v. Piper, 470 U.S. 274 (1985). 5. See also N.Y. State Bar Association Op /16/1998 (55-97) which concluded that New York attorneys may practice law over the Internet as long as they comply with the ethics rules. 6. Cf. Florida's Rule 4-7.2(a)(2) which defines a "bona fide office" as "a physical location maintained by the law firm or lawyer where the firm or lawyer furnishes or reasonably expects to furnish legal services in a substantial way on a regular and continuing basis." Florida's Standing Committee on Advertising established the following criteria to determine whether an advertised location is a bona fide office: firm name on office signs, full time non-legal staff, phone service, on-site furnishing of legal services and regular presence of a lawyer. Additionally, a VLO lawyer may advertise he is "available for consultation" or "available by appointment." 7. Notice to the Bar, Rules Cycle Report of the Supreme Court Professional Responsibility Rules Committee, New Jersey Law Journal, Feb. 10, N.Y. City Bar Op (2001). 9. Delaware, Florida, Louisiana, Michigan, Missouri and Texas also place office location restrictions on members of their bar associations. Devika Kewalramani New York, N.Y. Reprinted with permission from the July 18, 2012 edition of the New York Law Journal 2012 ALM Media Properties, LLC. All rights reserved. Further duplication without permission is prohibited. For information, contact , reprints@alm.com or visit

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