Law School Case Brief
Day v. Sidley & Austin - 394 F. Supp. 986 (D.D.C. 1975)
The basic fiduciary duties between partners are: 1) a partner must account for any profit acquired in a manner injurious to the interests of the partnership, such as commissions or purchases on the sale of partnership property; 2) a partner cannot without the consent of the other partners, acquire for himself a partnership asset, nor may he divert to his own use a partnership opportunity; and 3) he must not compete with the partnership within the scope of the business.
Day was a senior underwriting partner in a law firm. Mr. Day resigned from the firm, claiming that changes which occurred after the merger in the Washington Office -the appointment of co-chairmen and the relocation of the office - made continued service with the firm intolerable for him. He contended that he had a contractual right to remain the sole chairman of the Washington Office, and that the maintenance of this status was a condition precedent for his rejoining the firm in 1963 and opening the Washington office. According to plaintiff, the decision to appoint co-chairmen was made prior to the merger and defendants' concealment of that decision was a material omission and without that prior information his vote of approval for the merger would not have been given. Defendants filed for summary judgment asserting that plaintiff's factual allegations were not material because they failed to state a cause of action.
Should the court grant the defendants' motion for summary judgment?
The court held that based on Mr. Day's pleadings and affidavits, he may have been suffering from a bruised ego but that the facts failed to establish a legal cause of action. As an able and experienced attorney, it should have been clear that the differences and misunderstandings which developed with his former partners were business risks of the sort which could not be resolved by judicial proceedings. Mr. Day, a knowledgeable, sophisticated and experienced businessman and a responsible member of a large law firm, bound himself to a well-defined contractual arrangement when he executed the 1970 Partnership Agreement. The contract clearly provided for management authority in the executive committee and for majority approval of the merger with the Liebman firm. Even if plaintiff had voted against the merger, he could not have stopped it. Furthermore, the Partnership Agreement, to which he freely consented denies the existence of a contractual right to any particular status within the firm for plaintiff. If plaintiff's partners did indeed combine against him, it is clear that their alleged activities did not amount to illegality, and that any personal humiliation or injury was a risk that he assumed when he joined with others in the partnership.
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