Meehan v. Shaughnessy

Brief Fact Summary.

Plaintiffs, James Meehan and Leo Boyle, left the law firm of the Defendants, Maurice Shaughnessy et al. Plaintiffs wanted money they believed was owed to them under their partnership agreement, and Defendants countered that Plaintiffs violated their fiduciary duty and interfered with Defendants’ business.

Synopsis of Rule of Law.

A partner has the obligation to render a true and full accounting of business affecting the partnership.

Facts.

Plaintiffs were long-time partners at Defendants’ firm. Both were very successful lawyers within the firm but became dissatisfied. Once Plaintiffs decided to leave, they gave thirty days notice (instead of the agreed upon three months – but this was waived by a partner in the firm), took other attorneys from the firm with them and contacted referring attorneys and clients about their imminent departure and provided forms to clients to switch to Plaintiffs’ new firm. Plaintiffs denied their intentions to leave on several occasions. However, Plaintiffs maintained their usual standard of performance during their entire association with the firm. When Plaintiffs left, they took 142 of the 350 pending contingent fee cases.

The partnership agreement provided rights for each of the parties after dissolution that resolved the allocation of business immediately. Departing attorneys were entitled to receive their share of capital contribution and net income currently entitled, as well as a right to a portion of the firm’s unfinished business.

Issue.

The issue is whether the conduct of Plaintiffs violated a fiduciary duty owed to the remaining partners of the firm.

Held.

Plaintiffs conduct regarding their secret planning for their new venture after their departure from the firm was not completely unacceptable. Plaintiffs would have to engage in some initial planning for the new firm to ensure that they would have the necessary resources and know-how to start their own firm. Pre-departure planning would also be required to ensure that the needs of clients were met with their new firm. However, Plaintiffs’ conduct went too far concerning their retention of former clients. Plaintiffs left Defendants at a disadvantage when they denied they were leaving and when they secured clients while Defendants were initially trying to game-plan for Plaintiffs’ departure.

Plaintiffs conduct regarding their secret planning for their new venture after their departure from the firm was not completely unacceptable. Plaintiffs would have to engage in some initial planning for the new firm to ensure that they would have the necessary resources and know-how to start their own firm. Pre-departure planning would also be required to ensure that the needs of clients were met with their new firm. However, Plaintiffs’ conduct went too far concerning their retention of former clients. Plaintiffs left Defendants at a disadvantage when they denied they were leaving and when they secured clients while Defendants were initially trying to game-plan for Plaintiffs’ departure.

Although Plaintiffs violated the partnership agreement by violating their fiduciary duties, they will only be held responsible for damages arising from their conduct. Therefore Plaintiffs are still entitled to their share of capital contribution and compensation.

Discussion.

The court noted that the rules agreed to by the partners through the partnership agreement will be upheld when possible. Therefore, partners can agree on a different set of rules versus what is required under statutory or common law.