CSG Law Alert: The Critical Nature of the Engagement Letter When Representing Corporate Clients

Identifying who your client is at the outset is one of the most important aspects of the attorney-client relationship. It governs who you can seek payment from and who can sue you for malpractice.  This is particularly important when your client is a limited liability company, general or limited partnership, or a closely held corporation.  Do you only represent the entity or do you also represent the individual cases of that entity?  Either may be appropriate and the engagement letter should make it explicitly clear what the answer is.

In a recent Appellate Division decision in Hedenberg v. Ciardi, 2019 WL 6248016, the defendant law firm represented an LLC.  Two members of that LLC, however, sued the law firm for malpractice for not advising them, individually, of the ramifications of having the entity declare bankruptcy.

In affirming the Court’s granting of defendants’ summary judgment motion dismissing the case, the Appellate Division first correctly found that there was no written engagement letter with the individual plaintiffs, only with the LLC.  With that as a starting point (and here ending too), the Court next addressed the legal question of whether there was an implied attorney-client relationship and found there was none.  The defendants were able to succeed on their summary judgment motion dismissing the case because it adequately drafted an engagement letter identifying its client as the LLC.