Who Is (And Is Not) The Client?

Who Is (And Is Not) The Client?

      This question was recently reviewed by the Sixth Circuit Court of Appeals, it considering the appeal of the jury verdict from Michigan. Having assessed the credibility of the witnesses, the jury found that certain business organizations affiliated with the plaintiffs were clients of the firm. Cohen v. Jaffe, Raitt, Heuer and Weiss, P.C., No. 18-1392, 1395, 2019 WL 1504393 (6th Cir. April 5, 2019).

      In this instance, Cohen et al. acquired distressed companies. A company under consideration, LSI Corporation, had multi-employer ERISA liability that Cohen was concerned could extend to other companies owned by Cohen and his group (“Control Group”). They contacted the Jaffe, Raitt firm to devise a structure that would somehow segregate LSI Corporation’s multi-employer ERISA liability. Specifically, Jaffe Raitt was advised that Cohen wanted to avoid personal liability or otherwise “put our other assets/companies at risk.” While Jaffe Raitt provided a proposed structure that would protect against that exposure, the proposed structure was ineffective, and upon its acquisition the multi-employer ERISA liability of LSI Corporation extended to the other companies owned by Cohen, including SL Assets, Inc.

      There was no written engagement letter specifying who was or was not the client of Jaffe Raitt. After a trial on the merits, the jury determined that SL Assets was a client of Jaffe Raitt notwithstanding the fact that Jaffe Raitt never came into actual knowledge of the existence of that company. Affirming the determination of the jury with respect to the attorney-client relationship, the Sixth Circuit wrote:

When there are two reasonable stories about the claimed attorney-client relationship and neither is blatantly contradicted by the record, a genuine dispute about the facts exists. As a result, the jury gets to decide – not the court. And here, the jury did.

      There are at least two lessons to be learned from this decision. First, it is important for attorneys to have written engagement letters specifying who is (and therefore by exclusion who is not) the client. Secondly, when the client emails about “our other assets/companies,’ it is incumbent upon the attorney to ask who they might be.