DETROIT – Even though two attorneys never formally entered into a business partnership, they can be sued as a law firm because they held themselves out to the courts and the community as partners in the practice of law, a federal judge in Michigan has ruled.
The plaintiffs sued Paw Paw attorneys Kelly L. Page and Gary A. Stewart Jr. individually, and also the entity of “Page & Stewart,” over their involvement in an underlying debt-collection action.
According to the plaintiffs, Page and Stewart had an “amorphous” partnership that included positions with the Village of Paw Paw and as private defense attorneys. Specifically, the plaintiffs claimed they could sue Page and Stewart as a business partnership because they:
• submitted documents in the debt-collection suit that suggested “Page & Stewart” was indeed a law firm;
• sponsored a golf fundraiser as a law firm;
• represented to a township board that they were partners;
• allowed listings as a law firm in Martindale Hubbell, Lawyer Central, Laweet.com, Lawyer Compass and Lawyers.com; and
• represented to clients that they are law firm partners.
Also, the plaintiffs noted that Stewart wrote on a personal website that he is a member of “Page and Stewart, attorneys at law.”
But Page and Stewart argued the plaintiffs could not sue them as a business entity because a partnership by estoppel or a partnership in fact was not established. They asserted that “Page & Stewart” has never been organized in Michigan and does not own or use joint bank accounts, insurance and letterhead. They also argued that, although they share office space, they do not have a receptionist who announces “Page & Stewart” to callers.
U.S. District Chief Judge Paul L. Maloney disagreed and held that Page and Stewart may be sued as business partners.
“Plaintiffs have provided relevant evidence that suggests Page and Stewart have held themselves out to the community and the courts as partners carrying on a business together for profit,” Maloney said.
Pat Yevics, the Maryland State Bar Association’s director of law office management assistance, said she hasn’t heard of any similar situations in Maryland, but cautioned that solo attorneys who do not heed the Maryland Lawyers’ Rules of Professional Conduct could face disciplinary action.
The rules prohibit attorneys from stating or implying that they are part of a partnership if that is not the case.
“Don’t be deceptive. If you’re not in a partnership, you can’t say that you are. Don’t give the perception that you’re part of a firm if you’re not,” Yevics said.
Yevics said she frequently warns solo and small-firm practitioners to ensure that all forms of communication with clients accurately represent the nature of their law practice — including the firm’s name.
“I tell them over and over: Don’t pretend you have associates if it’s just you. Don’t say ‘John Smith and Associates’ if you don’t have them,” she said. “If you don’t have more than one office, you can’t say ‘law offices.’”
In the Michigan case, the plaintiffs a state law that says a partnership “is an association of 2 or more persons … to carry on as co-owners a business for profit.”
The plaintiffs also cited a state Supreme Court case that held a business partnership existed even though there was no legal agreement or intent to create a partnership. Whether a partnership exists depends on “an examination of all the parties’ acts and conduct” and the parties’ subjective intent to become a partnership is irrelevant, the court held.
Page and Stewart argued the evidence of a partnership was insufficient because it was based on third-party sources.
But Maloney rejected this claim, finding the third-party evidence had “probative value” to show how Page and Stewart conduct business and how they are perceived.
“The nature of the third-party statements suggests that Page and Stewart conveyed that Page & Stewart is a partnership to those third parties,” Maloney wrote.
While it is possible that the third parties were mistaken about the parties’ relationship, “if the allegations in the complaint are taken as true the complaint raises a plausible claim that Page and Stewart carried on as co-owners of a firm/business,” Maloney said.
Derek S. Witte, a lawyer for the plaintiffs said the ruling is noteworthy because Maloney agreed a law firm may exist, even if its partners never intended to create a partnership.
Maloney’s opinion is a “call to action’ to the state and federal prosecutors as, well as the Attorney Grievance Commission,” he said.
Colleen H. Burke, a lawyer for Page and Stewart, did not respond to a request for comment.
Daily Record Legal Affairs Writer Lauren Kirkwood contributed to this story.