Partnership by Representation Concerns
It is not uncommon for attorneys to join forces to defray costs. This often means sharing office space, support staff, and equipment. Some attorneys take this a step further, advertising themselves as a partnership even if their practices remain separate. Such arrangements should be made with caution, however, as they may lead to vicarious liability among the so-called partners.
A New Jersey federal court recently addressed such a scenario for the first time, holding that the plaintiff in a malpractice case failed to support a claim of partnership-by-representation due to lack of reliance. In this case, a husband and wife were both attorneys who operated from the same space and used letterhead advertising them as partners. However, no formal partnership agreement existed, they did not share profits and losses, and separate accounts and tax returns were filed for each business. When a client brought a malpractice suit against the husband and discovered he lacked insurance coverage, the plaintiff joined the wife to the suit under a theory of partnership-by-representation.
The court ruled in favor of the attorney-wife, although the finding came on the slimmest of margins. The court concluded that the plaintiff failed to establish that she relied on the existence of a partnership at the time of retention. According to the court, the simple existence of a retainer agreement on partnership letterhead was insufficient – the plaintiff must have alleged that she relied on this representation in entering the agreement.
The husband-wife attorneys in this case escaped liability. While there was no evidence that a partnership actually existed, significant representations were made suggesting that one did. Furthermore, it would certainly be reasonable for a client to allege that she retained a firm with the understanding that it was a partnership. Attorneys must be careful in how they represent themselves to comply with ethical and civil obligations arising from partnerships.