law firm dissolution

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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.  Continue Reading When Less Effort Leads to More Trouble: Quiet Quitting and Fiduciary Accountability

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Just a few weeks ago, I commented on a recent uptick in disputes centered on the breakup of professional services firms.  In those disputes, we expect that the demands of the legal, accounting, and medical professions draw individuals with keen attention to detail, focused on documentation, and prepared for all contingencies.  Less expected is the irony that many attorneys, accountants, and medical professionals fail to bring those attributes to the table when organizing their business relationships. 

The result of that failure is a tinderbox—poorly defined “partnership” relationships, mixed with high profit margins, difficult to value businesses, and type A owners willing to litigate their disputes.  The right spark triggers bitter and hotly contested litigation.  That part-legal, part-psychological phenomenon explains why business divorces of professional services corporations—especially law firms—can get complicated fast. 

Motivated by that uptick, Becky Baek and I were pleased to recently present a CLE on the complexities that arise in the dissolution or breakup of law firms.  Here are the highlights.Continue Reading Special Considerations for Law Firm Breakups