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Gibbs v. Breed, Abbott & Morgan - 271 A.D.2d 180, 710 N.Y.S.2d 578 (App. Div. 2000)

Rule:

The members of a partnership owe each other a duty of loyalty and good faith, and as a fiduciary, a partner must consider his or her partners' welfare, and refrain from acting for purely private gain. Partners are constrained by such duties throughout the life of the partnership and the manner in which partners plan for and implement withdrawals is still subject to the constraints imposed on them by virtue of their status as fiduciaries.

Facts:

Plaintiffs Charles Gibbs and Robert Sheehan were former partners of Breed, Abbott & Morgan (BAM), who specialized in trust and estate law. Plaintiffs withdrew from BAM in July 1991 to join Chadbourne & Parke (Chadbourne). The plaintiffs supplied confidential employee information to Chadbourne while they were still partners of BAM. Plaintiffs brought the present action for monies due to them under their BAM partnership agreement. Defendants asserted various counterclaims alleging that plaintiffs breached their fiduciary duty to BAM. The counterclaims were severed and tried without a jury. Plaintiffs appealed from the trial court's determination that, in the course of both partners' planning and eventually implementing their withdrawal from BAM, they breached their fiduciary duty to the partnership, thereby resulting to the financial losses of BAM.

Issue:

Under the circumstances of the case at hand, did the plaintiff attorneys breach their fiduciary duty to the partnership to which they had previously belonged? If so, did the breach result to BAM’s financial loss, thereby entitling BAM for recovery of lost profits?

Answer:

1) Qualified yes. 2) No.

Conclusion:

The Court held that plaintiffs breached their fiduciary duty as partners of BAM when they supplied confidential information to the firm they were joining while still partners with BAM. However, the Court found no other substantial breach of the plaintiffs’ fiduciary duty to the partnership. Furthermore, the Court held that BAM was not able to sufficiently establish how the plaintiffs’ act of supplying confidential information to Chadbourne resulted to BAM’s financial loss.

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