1970 and 1972 S&A Partnership Agreements which implicitly authorized the Executive Committee to create, control or eliminate firm committees, plaintiff could not have reasonably believed that the status of the Washington Office Committee was inviolate and beyond the scope and operation of the Partnership Agreements. Thus, since plaintiff had no right to remain chairman of the Washington Office, a misrepresentation regarding his chairmanship does not form the basis for a cause of action in fraud.
Breach of Contract, Conspiracy and Wrongful Dissolution or Ouster of Partner
As shown above, plaintiff had no contractual right to maintain his authority over the Washington Office, and therefore he has not made out a case for breach of contract. Since he did not have a legal right to maintain his status in the firm, the conspiracy charge
amounts to no more than an internal power sweep, executed and permitted under the provisions of the partnership agreement for which there is no legal remedy.
Similarly, there was no wrongful dissolution or ouster of plaintiff from the partnership because the merger of the two firms was authorized under the terms of the S&A partnership agreement. By the terms of the agreement, the executive committee was entrusted with "all questions of Firm policy."
Additionally, partners could be admitted and severed from the firm and the partnership agreement could be amended by majority approval by the partners.
The merger of S&A with the Liebman firm could be considered either as the admission of new partners or the making of a new or amended agreement, and thus majority approval was all that was required, and a post facto change in plaintiff's vote would be of no effect.
Plaintiff contends that the merger was such a fundamental change in the nature of the partnership that unanimous approval was required and that had he known the personal consequences of the merger, he would have exercised a "veto" and the events which forced him to resign would not have occurred. This theory, however, runs counter to the prevailing law of partnership. Generally, common law and statutory standards concerning relationships between partners can be overridden by an agreement reached by the parties themselves.
The Uniform Partnership Act (adopted both in Illinois and the District of Columbia)
specifically provides that statutory rules governing the rights and duties of the partners are "subject to any agreement between them."
Nor do the cases cited by plaintiff support the proposition that unanimous consent is needed for the merger of partnerships. In McCallum v. Asbury, 238 Or. 257, 393 P.2d 774 (1964), a partner sued to dissolve a partnership of medical doctors. Plaintiff challenged the amendment of the agreement by majority vote which provided for management by an executive committee. The court held that a majority could approve this change, even though the agreement provided that all partners were to have an equal share in management. Likewise, Fortugno v. Hudson Manure Co., 51 N.J. Super. 482, 144 A.2d 207 (1958), affords little support.
Fortugno basically held that a partner could not be effectively changed into a stockholder in a corporation without his consent. In that case, there had been no prior contract that the partnership agreement could be amended by majority vote. The S&A Agreement, however, dealt specifically with incorporation of the firm, providing that incorporation would be effective if approved by three-fourths of the partners. Merger was a less dramatic change than incorporation, which would have eliminated the partnership entity. It cannot reasonably be argued, therefore, that the merger fell outside the purview of the Agreement, requiring unanimous consent for its approval. Amendments to the Agreement and admission of partners required only majority approval, and plaintiff's proposed "veto power" is nothing more than an expressed hope, incompatible with and contrary to the overall scheme and provisions of the S&A Agreement.
Breach of Fiduciary Duty
Plaintiff also alleges that defendants breached their fiduciary duty by beginning negotiations on a merger with the Liebman firm without consulting the other partners who were not on the Executive Committee and by not revealing information regarding changes that would occur as a result of the merger, such as the co-chairmen arrangement for the Washington office. An examination of the case law on a partner's fiduciary duties, however, reveals that courts have been primarily concerned with partners who make secret profits at the expense of the partnership.
Partners have a duty to make a full and fair disclosure to other partners of all information which may be of value to the partnership. 1 Rowley on Partnership § 20.2, at 512-13 (2d ed. 1960). The essence of a breach of fiduciary duty between partners is that one partner has advantaged himself at the expense of the firm. Id. The basic fiduciary duties are: 1) a partner must account for any profit acquired in a manner injurious to the interests of the partnership, such as commissions or purchases on the sale of partnership property; 2) a partner cannot without the consent of the other partners, acquire for himself a partnership asset, nor may he divert to his own use a partnership opportunity; and 3) he must not compete with the partnership within the scope of the business. See Crane & Bromberg, Law of Partnership, § 68, at 389-91 (1968).
A typical case of breach of fiduciary duty and fraud between partners cited by plaintiff is Bakalis v. Bressler, 1 Ill.2d 72, 115 N.E.2d 323 (1953). There, a defendant partner had surreptitiously purchased the building which housed the partnership's business and was collecting rents from the partnership for his own profit. What plaintiff is alleging in the instant case, however, concerns failure to reveal information regarding changes in the internal structure of the firm. No court has recognized a fiduciary duty to disclose this type of information, the concealment of which does not produce any profit for the offending partners nor any financial loss for the partnership as a whole. Not only was there no financial gain for defendants, but the remaining partners did not acquire any more power within the firm as the result of the alleged withholding of information from plaintiff. They were already members of the executive committee and as such had wideranging authority with regard to firm management. Thus plaintiff's claim of breach of fiduciary duty must fail.
What this Court perceives from Mr. Day's pleadings and affidavits is that he may be suffering from a bruised ego but that the facts fail to establish a legal cause of action. As an able and experienced attorney, it should have been clear that the differences and misunderstandings which developed with his former partners were business risks of the sort which cannot be resolved by judicial proceedings. Mr. Day, a knowledgeable, sophisticated and experienced businessman and a responsible member of a large law firm, bound himself to a well-defined contractual arrangement when he executed the 1970
Partnership Agreement. The contract clearly provided for management authority in the executive committee and for majority approval of the merger with the Liebman firm. Even if plaintiff had voted against the merger, he could not have stopped it. Furthermore, the Partnership Agreement, to which he freely consented denies the existence of a contractual right to any particular status within the firm for plaintiff. If plaintiff's partners did indeed combine against him, it is clear that their alleged activities did not amount to illegality, and that any personal humiliation or injury was a risk that he assumed when he joined with others in the partnership.
Accordingly it is this 29th of May, 1975
Ordered that defendants' motion for summary judgment is granted and the complaint in this proceeding is dismissed with prejudice.