Attorney associations are valuable means to reduce overhead and expenses, and provide support for sole practitioners. However, casually creating an association can give rise to issues, including increased exposure to vicarious liability and State Bar probes.
Recently, with the intention of reducing their business expenses, a group of three Tennessee lawyers formed a limited liability company, agreed to split rent on shared office space, and employed a receptionist who answered calls for all three lawyers. The lawyers did not share a bank account, did not file joint tax returns for business expenses, had no written partnership agreement, and were unable to bind the group to collective decisions. However, the three shared letterhead stating “Hiland, Urqhart, & Mathes: an Association of Attorneys” (“HUM”).
When Mathes was sued for negligence in her handling of an estate, Plaintiff argued that Hiland and Urqhart were vicariously liable for Mathes’ malpractice based on their association with Mathes. In support of its motion for summary judgment attempting to defeat vicarious liability, HUM argued that “an association of three attorneys does not constitute a partnership as defined by Tennessee law.” According to HUM, proving the existence of a partnership in Tennessee required a showing of shared profits, and a contract binding the parties to the partnership. The court, however, rejected HUM’s argument, finding that it failed to support its position that only a partnership, not an association of lawyers, could be held vicariously liable for a member’s tortious conduct. Although HUM cited a Tennessee Supreme Court ethics opinion, the court found it unavailing, as it merely stated that a group of attorneys may conduct business without forming a legal partnership.
In addition to inadvertently establishing grounds for vicarious liability, associations of attorneys, although well-intended, are a mine field of potential liability and ethical issues. In California, for example, associations of attorneys must be cognizant of the impact their communications have on the public. Although not mentioned in the HUM decision, HUM’s shared letterhead alone would create ethical and liability issues in California.
State Bar of California Ethics Opinion No. 1997-150 emphasizes that associated attorneys must avoid confusing, deceiving or misleading the public about the relationship between the associated attorneys. To avoid potential confusion often arising out of associations of attorneys, Rule 1-400(D)(2) of the California Rules of Professional Conduct expressly precludes attorney communications that “[c]ontain any matter, or present or arrange any matter in a manner or format which is false, deceptive, or which tends to confuse, deceive, or mislead the public.” In California, attorney communications include the firm name, written marketing material, and advertisements. Even assuming the associated attorneys’ practices were separate and unique, sending clients letterhead in California stating, for example, “Hiland, Urqhart, & Mathes: an Association of Attorneys,” increases the exposure of the associated attorneys to vicarious liability and ethics issues. Had HUM’s letterhead expressly stated that the individual attorneys are sole practitioners, they might have defeated vicarious liability.
