New York County Supreme Court Allows Breach-of-Fiduciary-Duty Claim where Former Partner Solicited Partnership Clients

By Lewis Tesser, Partner, and Timothy Nolen, Associate

A decision out of the New York County Supreme Court demonstrates some of the difficulties which may arise when an individual partner leaves a partnership. The case involved issues of partnership law, breach of fiduciary duty, contract law, civil practice and torts.

The case, Phillips Gold & Company, LLP v. Speiser, 2011 N.Y. Misc. LEXIS 4668 (Sup. Ct. N.Y. County, September 28, 2011), concerned a partner at an accounting firm who left the firm upon reaching the age of retirement and started his own accounting practice. The remaining partners sued the partner who left, alleging that he failed to pay his “Withdrawal Obligation” and that he breached a fiduciary duty to the partnership by soliciting its clients. The Court declined to grant summary judgment or dismiss the claims, noting that there was a question of fact whether the partner had solicited business while he was with the partnership and whether the remaining partners had agreed to an offset of the Withdrawal Obligation for the exiting partner’s post-retirement payments.

Phillips Gold demonstrates how partners—upon leaving a partnership—can have conflicts with one another resulting in litigation. The attorneys at Tesser, Ryan & Rochman, LLP have represented numerous partners in order to resolve such disputes amicably.