Day v. Sidley & Austin

Brief Fact Summary. Plaintiff J. Edward Day, a Washington attorney, worked as a senior partner for Defendant Sidley & Austin, a Chicago-based firm. Defendant forced Plaintiff to share the chairmanship position of the Washington office after they merged with a second firm.

Synopsis of Rule of Law. The fiduciary duty in a partnership ensures that a partner does not profit for themselves at the expense of the partnership.

Facts. Plaintiff was a senior partner with a long, distinguished career. Plaintiff worked for Defendant out of Washington, D.C. Defendant’s executive committee inquired into merging with another firm, but partners not on the committee were not aware of the deliberations. However, once the firm decided to merge, the proposed merger was brought to a vote for the partners at Defendant firm. Plaintiff voted in favor of the merger but was not aware that the firm intended on merging the Washington offices wherein he would share the chairmanship title with the former chair of the other firm. Plaintiff argued that he had a contractual right to the title of chair of the Washington office, and that the title change was intentionally kept from him when he voted in favor of the merger. If he would have known of the change, Plaintiff would not have voted in favor of the merger – and therefore there would not have been a unanimous vote to merge – and no merger would have taken place. Plaintiff argued that he was professionally humiliated by the title change.

Issue. The issue is whether Defendant violated a fiduciary duty by changing Plaintiff’s title without his consent.

Held.Defendant did not violate a fiduciary duty to Plaintiff by their merger and subsequent title change for Plaintiff. The partnership agreement that Plaintiff signed authorized the executive committee to appoint members and chairpersons, so Plaintiff was aware of the possibility of a co-chair. Also, Defendants decisions were not made to personally profit at the expense of the firm, and their fiduciary duty does not extend to what Plaintiff proposes. Finally, even if Plaintiff was aware of the title change, his vote against the merger would not have affected anything because a proposed merger only requires a majority vote unless specifically stated otherwise in the partnership agreement.

Discussion. Members of a partnership do not violate a fiduciary duty to one partner simply because that partner believes that their position was de-valued in any manner. If the other partners are following the agreement provisions and they are exercising their rights in a manner that is beneficial for the partnership over their personal interests, then they are meeting their duty.