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Thompson Hine LLP, a full-service business law firm with approximately 400 lawyers in 11 offices, was ranked number 1 in the category “Most innovative North American law firms: New working models” by The Financial Times and was 1 of 7 firms shortlisted for The American Lawyer’s inaugural Legal Services Innovation Award. The firm has been recognized by the National Law Journal as a Legal Technology Trailblazer and featured by Bloomberg for its innovative service delivery models, which drive accuracy and predictability. The firm’s commitment to innovation is embodied in Thompson Hine SmartPaTHTM – a smarter way to work – predictable, efficient and aligned with client goals. For more information, please visit ThompsonHine.com and ThompsonHine.com/SmartPaTH.

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<img style="max-width: 100%;height: auto;max-width: 100%;height: auto" loading="lazy" class="alignright size-medium wp-image-4577" src="https://www.thelawforlawyerstoday.com/wp-content/uploads/sites/754/2019/09/Wedding-rings-gavel-2-201x300.jpg" alt="" width="201" height="300">If you and your spouse are both lawyers, you know that you potentially face a few unique ethics issues &mdash; conflicts and confidentiality are the most obvious ones.&nbsp; (We&rsquo;ve considered some of the ins and outs <a href="https://www.thelawforlawyerstoday.com/2015/02/judge-not-dqd-by-appearance-of-former-spouses-former-law-partner/">here</a> and <a href="https://www.thelawforlawyerstoday.com/2018/08/4009/">here</a>.)
But what if your nearest and dearest is also your law partner &mdash; or what if it maybe&nbsp;only looks that way?
The Third Circuit Court of Appeals held last month in a non-precedential <a href="http://filehost.thompsonhine.com/uploads/Messler_v._Cotz_834a.pdf">opinion</a> that a New Jersey lawyer couldn&rsquo;t be held liable for her husband&rsquo;s alleged legal malpractice because the client&nbsp;hadn&rsquo;t relied on the existence of an apparent partnership.
The opinion spotlights some interesting law/spouse partnership issues.
&ldquo;No legal entity&rdquo;
As set out in the court of appeals opinion, the client contacted George Cotz to discuss an anticipated action against her employer.&nbsp; Later, at an in-person meeting, the client signed a retainer agreement.
The retainer agreement had several significant features:&nbsp; it&nbsp;was on letterhead reading&nbsp;&ldquo;Cotz &amp; Cotz Attorneys at Law;&rdquo;&nbsp;at the side, the &ldquo;members&rdquo; were listed as George Cotz and Lydia Cotz; and&nbsp;George Cotz signed the retainer agreement&nbsp;on behalf of &ldquo;Cotz &amp; Cotz.&rdquo;
But &ldquo;notwithstanding this document,&rdquo; the court said, &ldquo;no legal entity named &lsquo;Cotz &amp; Cotz&rsquo; existed and the Cotz&rsquo;s had never entered into a partnership.&rdquo;&nbsp; (It would be interesting to know more of the underlying facts &mdash; like whether there had ever been such a partnership, and why this letterhead was used &mdash; but&nbsp;the opinion does not provide them.)
As the Third Circuit opinion describes, George Cotz filed the client&rsquo;s employment action in state court, but he later failed to oppose the defendant-employer&rsquo;s summary judgment motion, and it was granted.
The client filed a legal malpractice suit against George Cotz and &ldquo;Cotz &amp; Cotz,&rdquo; and later amended her complaint to also name George Cotz&rsquo;s wife, Lydia Cotz.
A divided&nbsp;appellate panel upheld the district court&rsquo;s ruling:&nbsp; no actual law partnership existed between&nbsp;George and Lydia Cotz, and the client lacked evidence that she relied on the appearance held out in the retainer agreement &mdash; namely, that there was such a partnership.
Partnership-by-Estoppel
Interpreting New Jersey&rsquo;s partnership statute, the Third Circuit said that in order to impose liability on someone who has purported to be a partner, the complaining party is &ldquo;require[ed] in all cases&rdquo; to have &ldquo;acted in reliance on the representation.&rdquo;
Here, Lydia Cotz escaped liability as a partner-by-estoppel for her husband&rsquo;s alleged malpractice because there was no evidence that the client &ldquo;transacted with [George Cotz] in whole or in part because of&rdquo; the various representations that he was in a partnership.
For instance, said the court, the client testified that she had been referred to &ldquo;the law office of Cotz &amp; Cotz,&rdquo; but not that &ldquo;she called him because she thought he was in a partnership.&rdquo;&nbsp; Hence, the panel majority held, no partnership-by-estoppel was raised.
Need for magic words?
The dissenting judge wrote that there was at least a fact issue on whether the client relied on the existence of the Cotz &amp; Cotz firm in making her hiring decision.
&ldquo;What reasonable person would be referred to a law firm, go to the office of the law firm, and sign a retainer agreement with the law firm, only to think that they were hiring an individual attorney, rather than a law firm?&rdquo; asked the dissenting judge.
The majority, said the dissenter, essentially established a requirement that under New Jersey law, &ldquo;to establish a partnership by estoppel,&rdquo; a plaintiff &ldquo;must use the magic word &lsquo;rely&rsquo; in their testimony.&rdquo;
Partner, partner, who&rsquo;s got a partner?
Of course, as in other state-law-based contexts, results may vary.&nbsp; And the opinion is a federal court&rsquo;s interpretation of New Jersey state law &mdash; and a non-precedential interpretation at that.
But the Third&nbsp; Circuit&rsquo;s grant of a litigation off-ramp to an alleged partner-by-estoppel is worth noting for its close reading of the reliance requirement when it comes to holding a purported partner liable.

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Ethics

Legal Ethics, Professional Responsibility and the Business of Law

Wife not liable for husband’s alleged malpractice; no partnership-by-estoppel, Third Circuit holds