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Law School Case Brief

Bohatch v. Butler & Binion - 977 S.W.2d 543 (Tex. 1998)

Rule:

The relationship between partners is fiduciary in character, and imposes upon all the participants the obligation of loyalty to the joint concern and of the utmost good faith, fairness, and honesty in their dealings with each other with respect to matters pertaining to the enterprise. Yet, partners have no obligation to remain partners; at the heart of the partnership concept is the principle that partners may choose with whom they wish to be associated.

Facts:

Plaintiff attorney was a partner in Defendant law firm. Plaintiff was concerned that a senior partner was overbilling a major client. Plaintiff brought her concern to another partner in the office, together, they reviewed the senior partner's time diary. Plaintiff met with the firm’s managing partner, Louis Paine. Paine and other members of the law firm’s management committee investigated Plaintiff’s complaint and concluded that there was no basis for her allegations.
In August 1990, Plaintiff was notified that she was expelled from her employment with the law firm, that the firm would provide her with a monthly draw, insurance coverage, office space, and a secretary. The trial court found that defendant was liable for expelling plaintiff, but the appellate court reversed the decision.

Issue:

Did the fiduciary duty of a partnership create an exception to the at-will nature of partnerships where a law partner was expelled from a partnership for reporting suspected over billing by another partner?

Answer:

No

Conclusion:

The Supreme Court of Texas affirmed the appellate court's reversal of the trial court judgment. Neither statutory nor contract law principles answered the question of whether defendant had a duty not to expel plaintiff, and recent amendments to the law on partnerships did not have retroactive effect, and therefore, did not apply. The partnership agreement did not specify or limit the grounds for expulsion of partners. Although the relationship between partners was fiduciary in character, it did not give rise to a duty not to expel partners who reported suspected overbilling. Permitting law firms to retaliate against partners who in good faith reported might discourage compliance with the rules of professional conduct, but partnerships could expel partners for purely business reasons, and it would be impossible to maintain trust relationships if partners could not be expelled for making serious accusations against other partners.

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