Citation. Lawlis v. Kightlinger & Gray, 562 N.E.2d 435, 1990)
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Brief Fact Summary.
Plaintiff, Gerald Lawlis, was a partner of Defendant firm, Kightlinger &Gray. Plaintiff was expelled from the firm after a long battle with alcoholism.
Synopsis of Rule of Law.
The remaining partners must act in good faith, which would prohibit the wrongful withholding of money or property, when expelling a partner,
Plaintiff was a long-time member of Defendant firm, but after time he suffered from alcoholism. After concealing his problem for several months, Plaintiff missed several months of work to seek treatment. Defendant firm outlined conditions for his return. The agreement outlining his return did not provide any second chances, but when Plaintiff continued to have problems Defendant firm gave him a second chance. Defendant lightened Plaintiff’s workload and kept him as a senior partner. Three years after Plaintiff first came to Defendant with his alcohol problem, once he made a complete recovery, Plaintiff asked for his shares to be increased dramatically. Defendant responded by recommending his senior partner status be severed, and he was eventually expelled from the firm per the procedures outlined in the partnership agreement.
The issue is whether Defendant firm acted in good faith when they expelled Plaintiff from the firm.
Defendant firm did act in good faith during the expulsion of Plaintiff. Defendant followed the procedures of the agreed-upon partnership agreement when they voted to expel Plaintiff from the firm. There was no proof that Defendants were acting fraudulently or with a deceitful intent in expelling Plaintiff. The facts indicated that there was sufficient reason for expelling Plaintiff, namely to protect Defendant’s good will. Further, motivation for Plaintiff’s expulsion is not at issue when there is a no cause expulsion clause in the partnership agreement and there was no wrongful withholding of any money or property of Plaintiff’s.
The court will uphold clause of a partnership agreement as long as they are consistent with statutory protections. There is a benefit to provisions such as the no cause expulsion clause, and the parties were in a position to understand what they agreed to.