Opinion ID: 2602361
Heading Depth: 3
Heading Rank: 1

Heading: The Test for an Implied Attorney-Client Relationship

Text: ¶ 39 A trial court is justified in granting a directed verdict only if, examining all evidence in a light most favorable to the non-moving party, there is no competent evidence that would support a verdict in the non-moving party's favor. Merino v. Albertsons, Inc., 1999 UT 14, ¶ 3, 975 P.2d 467. In reviewing a trial court's decision to grant a motion for a partial directed verdict, we apply the same standard `as that imposed upon a trial court.' Id. (quoting Mgmt. Comm. of Graystone Pines Homeowners Ass'n v. Graystone Pines, Inc., 652 P.2d 896, 898 (Utah 1982)). Accordingly, we can only affirm a trial court's grant of a motion for a partial directed verdict if `the moving party is entitled to judgment as a matter of law.' Id. (quoting Cornia v. Wilcox, 898 P.2d 1379, 1383 (Utah 1995)). ¶ 40 After reviewing the trial court's ruling under this standard, we conclude the trial court misinterpreted our case law and, thus, erroneously granted plaintiffs' motion for a partial directed verdict on this issue. The trial court concluded that defendants had an implied attorney-client relationship with the MWT, Ltd., limited partners, who are all plaintiffs in this action, based on defendants' direct involvement with those plaintiffs' legal interests. However, the proper determination of whether an implied attorney-client relationship exists hinges on whether the party had a reasonable belief that it was represented. That an attorney is directly involved in that party's legal interests is but one factor to consider in making this determination. ¶ 41 This issue is governed by our earlier opinion in Margulies v. Upchurch, 696 P.2d 1195 (Utah 1985). In that case we found improper a law firm's representation of several plaintiffs in a lawsuit against three doctors, where the law firm had an implied attorney-client relationship with those doctors stemming from a separate pending lawsuit. ¶ 42 In Margulies, the law firm Jones, Waldo, Holbrook & McDonough represented the Margulies family as plaintiffs in a medical malpractice action filed in the Third District Court. Id. at 1198. The defendants in that action included three doctors. These doctors were also limited partners in Diversified Energies/Intermountain Capital Private Drilling Fund 1981-A, a Utah limited partnership. Id. ¶ 43 At the same time the Margulies' medical malpractice action was pending, the Diversified Energies limited partnership was involved in unrelated litigation in federal court with Jones, Waldo serving as its counsel. Id. In order to become limited partners in Diversified Energy, the three doctors had been required, among other things, to purchase units in Diversified Energy by paying twenty percent of the value of the units in cash and financing the remaining eighty percent by obtaining individual, personal letters of credit. Id. Jones, Waldo's representation of Diversified Energies in the federal case was aimed at preventing foreclosure on the individual letters of credit. Id. ¶ 44 In light of these facts, the defendant doctors in the Margulies' medical malpractice case attested that . . . their impression and belief was that Jones, Waldo represented them individually in the Diversified Energies federal case. Id. at 1200. Accordingly, the three doctors moved to have Jones, Waldo disqualified as plaintiffs' counsel. Id. at 1199. The trial court concluded that Jones, Waldo must either withdraw from the Margulies' action or withdraw from the Diversified Energies' action and not use any information gained or available in connection with the federal court action. Id. (internal quotations omitted). Jones, Waldo elected to withdraw from its representation of Diversified Energies in the federal action. Id. ¶ 45 The defendants in the Margulies' medical malpractice case appealed the trial court's order allowing Jones, Waldo to continue as the plaintiffs' counsel in that action. Id. at 1198. We agreed and reversed the trial court and ordered that Jones, Waldo be disqualified from serving as the Margulies' counsel in their medical malpractice action. Id. at 1205. ¶ 46 Our conclusion was based, in large part, on our determination that Jones, Waldo not only represented Diversified Energies in the federal case, but, under the circumstances of that case, also had an implied attorney-client relationship with the three doctor defendants in the Margulies' action who were also limited partners in Diversified Energies. See id. at 1200-02. In reaching this conclusion, we reiterated the general rule that an attorney who represents a limited partnership represents only the entity itself, not the individual limited partners. See id. at 1200 (stating that representation of a limited partnership does not of itself require allegiance to the interests of the limited partners). ¶ 47 We also recognized in Margulies that there could be exceptions to this general rule, however, holding that an implied attorney-client relationship with the individual limited partners may arise under certain circumstances. Id. at 1200-01. Specifically, we concluded that such a situation may arise when the individual limited partners reasonably believe they are individually represented by the limited partnership's legal counsel. See id. at 1200. We went on to state that [w]hen . . . the individual interests of the limited partners are directly involved, . . . there may be sufficient grounds for implying the existence of an attorney-client relationship. Id. at 1201 (emphasis added). Under the circumstances of Margulies, we concluded that the three doctors' impression and belief, id. at 1200, that they were individually represented by Jones, Waldo was reasonable in light of the fact that Jones, Waldo's representation of Diversified Energies directly benefitted the three doctors. See id. at 1200-01. ¶ 48 The trial court here found an implied attorney-client relationship based solely on its conclusion that Wiley Rein was directly involved with the interests of the individual limited partners of MWT, Ltd. However, the court did not then go on to conclude that the individual limited partners reasonably believed Wiley Rein represented their individual interests from May 1988 through December 1991. Indeed, in evaluating the existence of an express attorney-client relationship, the court indicated that it had reached the opposite conclusion. Specifically, the court rejected as [un]warranted the plaintiffs' asserted belief that Wiley Rein continued to represent them after the departure of Barry Wood. In support of this conclusion, the court noted that Wood sent Joseph Lee several letters indicating he had left Wiley Rein to join plaintiff David Lee at Jones, Waldo's Washington, D.C. law office, and taken plaintiff's files with him. We conclude the trial court's ruling misinterpreted Margulies. ¶ 49 Margulies did not, as the trial court interpreted it, create two separate tests to determine whether an implied attorney-client relationship exists. Under the trial court's reading of Margulies, an attorney-client relationship may exist where either the limited partners reasonably believe the limited partnership's counsel represents them individually, or where the limited partnership's legal counsel does work that directly involves the limited partners' interests. However, Margulies adopted only one test to determine whether an implied attorney-client relationship exists, i.e., whether the individual limited partners reasonably believed that the limited partnership's legal counsel represented their interests. In resolving this question, a court looks at the totality of the circumstances, see, e.g., Rhode Island Depositors Economic Protection Corp. v. Hayes, 64 F.3d 22, 24-26 (1st Cir.1995), including whether the limited partnership's legal counsel was directly involved with the individual interests of the limited partners. [10] Thus, direct involvement is not a separate test, but only one factor to consider in determining whether the specific circumstances of the case demonstrate the individual limited partners' belief concerning representation is reasonable.