U.S. Third Circuit Judge Thomas Ambro. Courtesy photo.

A lawyer who practices alongside her spouse is not liable for a legal malpractice lawsuit against him if there's no partnership agreement, the U.S. Court of Appeals for the Third Circuit has ruled.

While representations by attorney George Cotz might have given client Bonnie Messler the impression that she retained the law firm of Cotz & Cotz, Cotz's spouse is not vicariously liable to the client because Messler did not rely on those representations in choosing counsel, the appeals court said. The ruling affirmed a district court judge's decision dismissing the vicarious liability claim against Cotz's wife, Lydia.

Third Circuit Judges Thomas Ambro and Michael Chagares affirmed the district court ruling while Joseph Greenaway Jr. dissented in holding that Messler demonstrated she relied on the existence of a partnership.

The case stems from George Cotz's representation of Messler in a wrongful termination suit in Superior Court of New Jersey against her employer, Wakefern Food Corp. A judgment was entered for the defendant after Cotz failed to respond to its motion for summary judgment.

Messler signed a retainer agreement on letterhead with the heading Cotz & Cotz, under which was printed "Attorneys at Law" and which listed the names of George Cotz and Lydia Cotz.

But no legal entity named Cotz & Cotz existed, and the couple never entered into a partnership agreement. Through the course of representation, Messler never had contact with Lydia Cotz and received no work product from her.

Messler filed a legal malpractice suit in state Superior Court against George Cotz and Cotz & Cotz. The case was removed to federal court on diversity grounds because George Cotz is a New York resident. After the case was removed, Messler added Lydia Cotz as a defendant.

Lydia Cotz moved for summary judgment, arguing that Messler never established the elements necessary for partnership by estoppel under New Jersey law.

U.S. District Judge Freda Wolfson held that the retainer agreement in the name of Cotz & Cotz created the indicia of partnership, but Messler did not meet her burden to show she relied on that apparent representation, which is a necessary element to establish partnership by estoppel.

On appeal, Ambro and Chagares said George Cotz represented he was in a partnership but there was no evidence that Messler retained him because of those statements. And Messler admits she never asked about the involvement of Lydia Cotz in the employment matter.

"Why not, if she cared that Mr. Cotz had a law partner when hiring him? No reasonable factfinder could conclude from the summary judgment record that Messler was relying on the representation that Mr. Cotz was in partnership when she entered into a transaction with him," Chagares wrote for the court.

In his dissent, Greenaway said Messler offered sufficient evidence to create a factual dispute about her reliance on Cotz & Cotz in making her hiring decision, making summary judgment inappropriate.

Kenneth Thyne of Roper & Twardowsky in Totowa, who represented Messler, called the panel's approach "formalistic," and said "no one would ever say I retained Cotz & Cotz because it's a partnership."

Thyne said he wanted his client to be able to collect from an insurance policy in the name of Lydia Cotz. George Cotz agreed to settle the malpractice claim against him for $10,000 in September 2017 but he has not paid that amount yet, has no insurance and claims to have no assets, said Thyne.

George Cotz, who is self-represented, declined to comment. Mark Kundla and Patrick McCormick of Hardin Kundla McKeon & Poletto in Springfield, who represented Lydia Cotz, did not return calls seeking a comment.