January 1, 1900

By Paul P. Josephson and Christina L. Saveriano

Recently, our appellate court decided in a published case of first impression that an attorney-client relationship does not exist between a trade association’s attorney and a member of a trade association simply by virtue of the attorney’s representation of the trade association. J.G. Ries & Sons, Inc. v. Spectraserv, Inc. This is the first time a New Jersey court reviewed whether a trade association member could disqualify the trade association’s attorney from representing another client against the member in a subsequent matter. This decision clarifies for businesses and individual members of trade and like associations the nature of their relationship with an attorney that represents their association.

Facts of the J.G. Ries Case

J.G. Ries and Spectraserv are both industrial property owners in Kearny and both members of a trade association formed by local businesses in the Lincoln North area of Kearny to advance and promote the business interests of its members and the area. In June 2004, J.G. Ries filed suit against Spectraserv contending that its property was adversely affected by Spectraserv’s business operations. J.G. Ries was represented in the suit by the law firm of the Lincoln North association. Subsequently, in December 2004 J.G. Reis’s lawyers filed suit on behalf of the Lincoln North association challenging a Kearny zoning ordinance.

As a result of the law firm’s representation of Lincoln North, Spectraserv moved to disqualify the trade association’s attorney from representing J.G. Ries in the J.G. Ries-Spectraserv litigation, contending that the trade association’s attorney also represented Spectraserv as a member of the Lincoln North associ­ation. The trial court agreed and disqualified the trade association’s attorney from continuing to represent J.G. Ries against Spectraserv. J.G. Ries appealed. The appellate court reversed, holding that the attorney’s representation of the trade association did not bar the attorney from representing one member against another in unrelated litigation.

No Conflict of Interest Here

The court declined to find mere membership in the association sufficient to create an attorney-client relationship, and thus a disqualifying conflict of interest. Under the Rules of Professional Conduct governing attorneys, an attorney cannot represent a client if the representation raises a “concurrent conflict of interest.” A concurrent conflict of interest exists when, for example, the representation of one client is directly adverse to another client, or where there is a significant risk that the representation of one client will be limited by the attorney’s responsibilities to another client.

Whether a trade association’s lawyer will be disqualified from appearing in a matter adverse to one of the association’s members depends on whether that member formed an attorney-client relationship with the trade association’s attorney. An attorney-client relationship can be formed through an agreement between the attorney and client setting forth the representation, or through actions of the parties demonstrating an attorney-client relationship, such as the disclosure of confidential information.

In this case, the court held that Spectraserv’s contacts with the trade association attorney were too attenuated to disqualify the trade association’s attorney. While Spectraserv provided information used by the trade associa­tion attorney in support of the trade association’s zoning challenge, Spectraserv never met with the trade association attorney and did not provide the information directly to the attorney. Rather, Spectraserv provided informa­tion to another member of Lincoln North, who in turn communicated with the trade association attorney. Second, the trade association attorney never represented that information received from association members would be treated as confidential, and Spectraserv never requested that the information it provided be held confidential. Third, much of the information that Spectraserv did provide was not only confidential, but information that was publicly available. Fourth, Spectraserv could not reasonably expect that the information it supplied to the trade association would not be disclosed, as disclosure was necessary to advance the purposes of the Lincoln North litigation.

The court also held that the two litigations were unrelated. That is, there was no “substantial relationship” between the litigations that would require disqualification if Spectraserv was found to be a client of the trade association’s attorney. Accordingly, the court declined to disqualify the trade association attorney from representing a party adverse to an association member.

What It Means

Simply being a member of a trade association does not create an attorney-­client relationship between the member and an attorney that represents the trade association. Rather, there must be more—such as an exchange of confidential information disclosed with the intent that the information would be held confidential, or a specific agreement between the trade association member and the attorney where the attorney is acting as counsel to the individual member, as well as to the trade association. In addition, there must be a “substantial relationship” between the trade association attorney’s work for the association and the matter in which the attorney is adverse to the association member.

Thus, members of a trade association should not consider themselves the client of the trade association’s attorney where the attorney-client relationship has not been explicitly established. This may also mean that communications with the trade association attorney may not be privileged, and thus care should be taken when discussing sensitive business or legal matters with the trade association’s attorney. Likewise, the trade association’s attorney should take care when requesting confidential information from trade association members lest they inadvertently create an attorney-client relationship.

We at Hill Wallack LLP stand ready to assist trade associations and their members in evaluating and resolv­ing potential conflict of interest issues.

Paul P. Josephson is partner-in-charge of the firm’s Regulatory and Government Affairs Practice Group and former member of the New Jersey Executive Commission on Ethical Standards. He has counseled public and private companies, and political candidates and committees, on legal compliance, government ethics and campaign finance issues for over fifteen years.

Christina L. Saveriano is an associate in the Regulatory and Government Affairs and Complex Litigation Practice Group