The Risks of Sharing Office Space: You Are What You Appear To Be

The Risks of Sharing Office Space: You Are What You Appear To Be

On March 16, 2001 the United States Court of Appeals for the First Circuit (Massachusetts) decided a case that might have (and I stress “might have”) far-reaching implications for New Jersey mental health professionals. The case of Gosselin v. Webb, et al.¹ involves a group of attorneys being sued by a client. The client’s legal theory of liability is grounded in partnership law where partners can be held legally liable for each other’s actions, commitments, misdeeds, etc. Here, the defendant attorneys were an unaffiliated group who shared space and some expenses, not a partnership.

The Circuit Court used the construct of “partnership by estoppel” to reach the conclusion that the defendant attorneys were liable for one another as if they were a partnership. The elements of partnership by estoppel are (1) the would-be partner holds him- or herself out as a partner, (2) that such holding out is by the would be partner directly or with his or her knowledge, (3) that the plaintiff had knowledge of such holding out and (4) that the plaintiff relied upon the ostensible partnership to his or her detriment.

The meaning of “holding out” as a partnership is critical. What does it mean? The Court parses this term and develops several guideposts. First, in conversation with the client, the word “with”, as in, “I am in business with these others,” was used, implying membership in some kind of group. The ambiguity of this term was not enough to provide the defendant with protection. Second, there was a lobby directory (i.e., a sign) that listed names in a “partnership-like arrangement.” Third, one defendant directed the client to go to the group of unaffiliated lawyers to transact some legal business with another member. Fourth, there was communication between attorneys in the group about the client’s legal business. Fifth, another attorney in the group agreed to represent the client on another matter.

This analysis is very fact driven and there is no immediate generalization from space/expense sharing unaffiliated attorneys in Massachusetts and an unaffiliated group of space/expense sharing professionals in New Jersey. However, the occurrence of sharing office space and office expenses and of having signs, advertisements, and other displays is not uncommon among mental health professionals in New Jersey. In light of the Gosselin decision, the risk-averse practitioner who is sharing space and expenses with others, should consider taking certain precautions. These range from placing a disclaimer in the waiting room and at the bottom of bills stating that “the professionals in this office are independent practitioners and are not affiliated with one another,” to formalizing the group arrangement into a business entity such as the Limited Liability Company.

1) Gosselin v. Webb, Sullivan, Hurley and Field a/b/a Field, Hurley, Webb & Sullivan. 242 F.3d. 412 (1st Circuit, 2001).