We frequently see a partner’s “fiduciary duties” expressed as the union of the duty of loyalty and the duty of care.  The duty of loyalty requires fiduciaries to avoid elevating the interests of any other person or entity (including their own) above the interests entrusted to their care.  The duty of care requires fiduciaries to exercise their authority with reasonable diligence and prudence.  

Though stated with disarming simplicity, business divorce litigation has a way of exploiting the often-blurry edges of those duties.  Consider the “quiet quitting” phenomenon, where an employee does their job, but gives no more effort or enthusiasm than is absolutely necessary.  If a partner or LLC manager did the same thing, how long before it rises to a breach of fiduciary duty? 

That’s one of several difficult questions that New York County Commercial Division Justice Margaret Chan was called to answer in Metcalf v Safirstein Metcalf, LLP, 2024 NY Slip Op 34380 (NY County 2024), an early-stage summary judgment decision amid (another!) law firm breakup that highlights just how messy—and fact dependent—breach of fiduciary duty claims asserted between business owners can get.  

Safirstein Metcalf LLP.

Peter Safirstein and Elizabeth Metcalf formed Safirstein Metcalf LLP in 2016.  The Firm’s ownership and operation checked nearly every box in my list (here) of all the factors that make law firm divorces so complicated: partnership subject to the antiquated New York Partnership Law?  Check.  Made-for-deadlock 50/50 ownership?  Check.  No written partnership agreement?  Check.  Represent clients in high-upside, contingency-fee litigation?  Check.

After years of the Firm’s apparently successful operation, Safirstein and Metcalf’s relationship began to fracture in 2020.  In November of 2020, Safirstein sent Metcalf a letter advising that he would dissolve the Firm as of December 31, 2020.  After some discussions, Safirstein retracted his dissolution letter and the parties agreed to continue working together.

The Dissolution.

Their reconciliation was short lived.  Less than a year later, Safirstein accused Metcalf of dropping the ball on assignments and failing to pull her weight, and Metcalf suspected that Safirstein was conspiring to steal clients.  So in December 2021, Metcalf sent a notice of dissolution to Safirstein dissolving the Firm as of year-end.  The dissolution notice stated that “[a]ll SM LLP Matters worked on . . . before 12/31/21 are assets of SM LLP.”

Over the next several days, the parties fenced over document demands.  Metcalf demanded access to bank statements, tax returns, and case files.  She also demanded that she receive 90% of the Firm’s “bonuses and distributions,” paid within 10 days of any receipt.  Safirstein responded to some demands, but not others.  

Meanwhile, Safirstein on December 23 and 31 sent the firm’s clients letters advising them that the Firm was dissolving, that Safirstein would be practicing law at his new firm, Safirstein Law, and that Metcalf would also be continuing to practice law (the Client Letter).  The letters also prompted clients to choose—on forms intended to be mailed back to the Firm—who they would like to continue representing them: Safirstein, Metcalf, or another attorney. 

Metcalf demanded that Safirstein retract the Client Letter.  She apparently believed that despite its dissolution, the Firm would not terminate until the Firm litigated all of its matters to conclusion.  Safirstein refused to retract the letter, and all of the Firm’s clients elected to have Safirstein Law continue representing them.

After the clients switched their files to Safirstein’s new firm, Safirstein prohibited Metcalf from participating in the cases.  At one point, Metcalf sought to attend a settlement mediation in one of the Firm’s former cases, and Safirstein refused to tell her where it was, telling Metcalf she had “no personal right or reason to attend.”

Allegations of Stealing Clients, Quiet Quitting Abound.

Metcalf sued Safirstein in February 2024, alleging that Safirstein had engaged in a broad scheme to cut Metcalf out by unlawfully transferring the Firm’s valuable caseload to his own firm.  The Client Letter, Metcalf alleged, was the coup de grâce.

Safirstein shot back with counterclaims alleging that Metcalf had essentially abandoned the Firm.  According to Safirstein, Metcalf had formed the mistaken belief that—pursuant to the so-called “unfinished business doctrine”—every case in which the Firm was retained must be prosecuted to its final conclusion by the Firm, and for the benefit of the Firm.  Based on that belief, Safirstein alleges, Metcalf “quiet quit” from her position—doing the bare minimum and trusting that Safirstein would litigate the cases to conclusion but nonetheless remit Metcalf’s half of the profits to her. 

At the same time as he filed his answer and counterclaims, Safirstein moved for partial summary judgment on Metcalf’s claim for breach of fiduciary duty to the extent it arose from the Client Letter.

Metcalf cross-moved for summary judgment on her claim for an accounting of the partnership’s assets. She also moved to dismiss Safirstein’s counterclaims for breach of fiduciary duty.

New York County Commercial Division Justice Chan’s December 11 decision denies both parties’ bids for early summary judgment and highlights the “thorny” factual issues that permeate this messy business divorce.  It also tackles some interesting questions about the scope of a partner’s fiduciary duties, especially when dissolution looms over the partnership. 

Do Safirstein’s Fiduciary Duties End at Dissolution of the Partnership? 

Safirstein sought to dismiss Metcalf’s breach of fiduciary duty claim to the extent it was based on the Client Letter.  His argument was straightforward: after Metcalf served her notice of dissolution, Safirstein no longer owed fiduciary duties to Metcalf, and the Client Letter could not therefore be a breach of fiduciary duty.  Safirstein would not have had to look far to find cases holding that a partner’s fiduciary duties cease once a business is dissolved (6D Farm Corp. v Carr, 63 AD3d 903, 906 [2d Dept 2009], citing Matter of Silverberg (Schwartz), 81 AD2d 640, 641 [2d Dept 1981]), or once business partners become adversaries (Eastbrook Caribe, A.V.V. v Fresh Del Monte Produce, Inc., 11 AD3d 296, 297 [1st Dept 2004]). 

Metcalf countered that focusing only on the Client Letter was reading her claims too rigidly.  According to Metcalf, the Client Letter was simply the last step in a broad scheme, hatched long before she sent her notice of dissolution, to divert clients and new business opportunities from the Firm.

Justice Chan found Metcalf’s allegations, at this early stage, sufficient: “Metcalf has alleged a scheme by Safirstein that began prior to [the Firm’s] dissolution and purportedly continued during the dissolution process.  As a result, Safirstein’s attempt to dismiss only certain portions of Metcalf’s claim entirely misses the mark.”

The lesson from this portion of the motion is simple: while it is true that dissolution may terminate an owner’s fiduciary duties to his co-owners, post-dissolution conduct might still form the basis of a breach of fiduciary duty claim where the conduct is one link in a broader scheme. 

Does a Partner’s “Quiet Quitting” Violate Her Fiduciary Duties? 

Metcalf moved for summary judgment on Safirstein’s breach of fiduciary duty claim. She argued that all of Safirstein’s gripes with her performance (communication lapses, low productivity, consistent failures to perform assigned work) were run-of-the mill complaints about the adequacy of her performance that do not amount to a breach of fiduciary duty.

The Court saw something more in Safirstein’s allegations: “Safirstein’s counterclaim paints a picture of a partner who intentionally and improperly shirked her agreed-upon obligations and duties to her firm and her partner and did so for purely personal pecuniary gain.”   

That decision sheds some welcome insight on when “quiet quitting” rises to a breach of fiduciary duty. 

As I see it, it’s all about intent.  It wasn’t that Safirstein’s specific allegations of Metcalf’s quiet quitting—billing only 643 hours in 2020 and failing to prepare at least three motions—were so egregious that they independently rose to a breach of fiduciary duty.  Rather, it was Safirstein’s allegations (presumed true at this stage) that Metcalf was quiet quitting in a deliberate attempt to hoist 100% of the work onto Safirstein and still get paid. 

And because questions of intent are notoriously difficult to prove, we are left with a somewhat unsatisfying answer: quiet quitting can constitute a breach of fiduciary duty where the finder of fact says so. 

We’ll be closely watching the proofs in Metcalf for more guidance, mostly because the dynamic between Safirstein and Metcalf is not unique in the law firm context; human nature tells every oarsman that they are pulling the hardest.  And it’s easy to imagine performance-related complaints like Safirstein’s festering in many law offices across the city.  It’s up to the courts, with guidance from counsel, to determine when those complaints rise to an actionable claim.     

Think Twice About a Summary Accounting Claim.

Metcalf also touches on a pet topic of mine: the claim for an accounting between business owners.  In my years of closely following business divorce caselaw, the evolution of the accounting claim has been most erratic—from confusing judges and litigants (read here), to approaching impotence (read here), to a later resurgence (read here). 

Upon her dissolving the Firm, Metcalf demanded an accounting of the Firm’s finances, which were in Safirstein’s exclusive control.  In response, Safirstein produced bank statements, and he also suggested that the Firm retain an independent expert to perform the accounting.  Metcalf, in turn, found Safirstein’s production incomplete and his offered independent expert inadequate.  She moved for summary judgment on her accounting claim.

While recognizing Metcalf’s right to an accounting upon dissolution of the Firm, Justice Chan nonetheless denied Metcalf’s motion for summary judgment, on creative grounds.  The Court found issues of fact surrounding whether Safirstein had refused Metcalf’s demand for an accounting.  With inferences drawn in his favor, the Court noted, Safirstein’s providing bank statements and suggesting an independent expert make it “unclear how, if at all, Safirstein rejected Metcalf’s demand for an accounting—as opposed to Metcalf merely being unsatisfied.”

The Court clearly was troubled by the factual disputes over what Metcalf demanded, what Safirstein provided, and what else (if anything) remained outstanding.  Discovery, said the Court, would answer those questions before the accounting would proceed.