Eric M. Berman, P.C. v. City of New York, 24 N.Y.3d 687 (2015)
A municipal law regulating debt collection practices is not preempted by state laws governing attorney conduct unless it directly conflicts with those state laws or attempts to regulate attorneys solely in their capacity as attorneys.
Summary
The New York Court of Appeals addressed whether New York City’s Local Law 15, which regulated debt collection agencies, was preempted by state laws governing attorney conduct. The court held that Local Law 15 was not preempted because it did not directly conflict with the state’s regulation of attorneys. The law expanded the definition of debt collection agencies and introduced required practices for these agencies. The court found that the law could be applied to attorneys engaged in activities traditionally performed by debt collectors, such as high-volume collection calls, without impermissibly regulating the practice of law. The decision emphasizes the distinction between legal practice and debt collection services and allows for the regulation of the latter by municipalities, even when performed by attorneys.
Facts
New York City enacted Local Law 15 in 2009, amending a previous law regarding debt collection agencies. Local Law 15 expanded the definition of a “debt collection agency” to include buyers of delinquent debt and imposed certain required practices, such as providing consumers with a call-back number answered by a person, the agency’s name, the original creditor’s name, and the amount of the outstanding debt. The law also restricted debt collection agencies from contacting consumers about a debt until they provided written documentation. Several law firms involved in debt collection sued, claiming the law was preempted by state laws regulating attorneys. They argued the law was in conflict with the Judiciary Law, which grants the courts broad authority over attorney conduct. The law included an exemption for attorneys collecting debt solely in their capacity as attorneys, but not for those performing activities traditionally done by debt collectors.
Procedural History
Law firms specializing in debt collection sued in federal district court, challenging Local Law 15. The district court granted summary judgment in part, holding that the local law was in conflict with the Judiciary Law and violated the City Charter. The Second Circuit certified two questions to the New York Court of Appeals: (1) whether Local Law 15 constituted an unlawful encroachment on the State’s authority to regulate attorneys and conflicted with the Judiciary Law, and (2) if not preempted, whether the law violated the New York City Charter. The New York Court of Appeals accepted certification.
Issue(s)
1. Whether Local Law 15, which regulates debt collection activities, is preempted by the state’s authority to regulate attorneys under the Judiciary Law, specifically sections 53 and 90.
2. If Local Law 15’s regulation of attorney conduct is not preempted, whether Local Law 15, as applied to attorneys, violates Section 2203(c) of the New York City Charter (This question was reformulated by the court).
Holding
1. No, because the local law does not directly conflict with state law and does not solely regulate attorneys in their practice of law.
2. (Unanswered; reformulated question) The court did not address this question, answering in the negative on question 1, the court found no preemption and therefore, the second question, restated by the City, was answered in accordance with the opinion.
Court’s Reasoning
The Court of Appeals stated, “Municipalities generally have the authority to adopt local laws to the extent that they are not inconsistent with either the State Constitution or any general law.” It held that the Judiciary Law grants broad authority to the courts to regulate the practice of law but the City’s local law does not purport to regulate attorneys as such. Local Law 15 governs the conduct of debt collection agencies; while attorneys may fall within its scope, the law clearly exempts attorneys acting in their capacity as attorneys. The court found no express conflict between the local law and the state’s regulation of attorneys. The court recognized a distinction between attorneys’ traditional practice of law and debt collection agency services. The court noted, “There is a significant and meaningful distinction between such conduct and conduct that is typical of a debt collection agency — making high volume collection calls at off-hours and sending boilerplate “dunning” letters demanding payment without details of the source of the debt or the actual amount due.” The court looked to federal case law regarding the Fair Debt Collection Practices Act (FDCPA) for guidance in determining where to draw the line between debt collection and the practice of law, specifically that attorneys who seek to recover debt on behalf of passive debt buyers are engaging in debt collection, not the practice of law. The court concluded that there was no conflict between the local law and the state’s authority to regulate attorneys and, in the absence of such conflict, the City could take permissible steps to curb abusive debt collection practices.
Practical Implications
This case provides a framework for analyzing the legality of municipal regulations affecting attorneys engaged in debt collection. It clarifies that municipalities can regulate the non-legal aspects of attorney conduct, such as debt collection activities, as long as these regulations do not directly conflict with state laws regulating the practice of law. The ruling highlights the importance of differentiating between conduct that constitutes legal representation versus debt collection services. Attorneys and debt collection agencies must be aware of local regulations in the jurisdictions in which they operate, particularly when determining whether their actions fall under attorney conduct or debt collection practices. Debt collection practices of law firms, particularly high-volume or automated practices, are now more susceptible to local regulations. The court’s reliance on FDCPA case law suggests that federal standards can inform the interpretation of state and local laws regulating debt collection, including those affecting attorneys. Later cases may further refine the line between the practice of law and debt collection activities, especially when these activities are performed by attorneys.
Meta Description
This case clarifies the boundary between state regulation of attorneys and municipal regulation of debt collection. It allows cities to regulate debt collection even when performed by attorneys, as long as it doesn’t conflict with state law.
Tags
Eric M. Berman v. City of New York, New York Court of Appeals, 2015, Debt Collection, Attorney Regulation, Preemption