Brief Fact Summary. Plaintiff, Charles Bane, retired and collected a pension from a law firm that was then run by Defendants, Richard Ferguson et al. Defendants dissolved the firm and the pension.
Synopsis of Rule of Law. Partners do not owe a duty to partners that retire from the partnership.
For the purposes of determining whether the complaint states a claim, the facts alleged, plus reasonable inferences therefrom, are taken as true, and the question is then whether on those assumptions plaintiff would have a right to legal relief.View Full Point of Law
Issue. The issue is whether a retired partner in a firm can claim that the other partners violated a duty to the retired partner by negligent management of the firm.
Held. There is no common law duty to retired partners. Further, the pension agreement does not establish a duty, and they would not have breached the duty nonetheless because Defendants never intended to dissolve the firm. Defendants are also protected under the business judgment rule from claims of negligent management. Public policy also dictates that members of a firm should not be held liable under a tort claim of negligent mismanagement because the result would enable a multitude of people to state claims against any failing business.
Discussion. Former partners need to establish a duty through contract if they want to ensure that ongoing partners meet any duty that the retiring partners wants to rely upon, because common law will not protect them.