New York Federal Judge Strikes Down NYC Regulation of Collection Attorneys

Amid an aggressive challenge by Lacy Katzen, LLP and Eric Berman, P.C., Eastern District Judge Eric Vitaliano has ruled that NYC's Local Law 15 (2009) trespasses on the state's oversight of the conduct of attorneys.

New York State, via Judiciary Law §§53 and 90, retains the "power and control" over the professional activities of lawyers. "Consequently, the regulation of attorneys' conduct is not within the police power of municipalities," J. Vitaliano held in Berman v. City of New York, 09-CV-3017.

Local Law 15 was added in 2009 to include collection lawyers and debt buyers to address increasingly aggressive litigation-based collection methods. The laws themselves impose additional consumer protection measures, including licensure requirements, with resultant penalties for non-compliance.

Judge Vitaliano found that Local Law 15 as applied to attorneys "directly regulates core aspects of the practice of law" in conflict with NY Judiciary Law.

The court also found that the "extensive and burdensome regulations" imposed on out-of-state debt buyers and third-party debt buyers violates the commerce clause of the U.S. Constitution. "This extension of the DCA's authority to those out-of-state debt buyers, based on contracts formed outside the state, has the practical effect of exporting New York's domestic policies into other states."

The court did not, however, agree with Plaintiffs' contention that state law (General Business Law) pre-empts the entirety of the NYC Administrative Code. The court found a lack of "preemptory intent" and took no issue with the local amendments and expansion of the state's regulatory power that merely "touch on the same area."

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