A basic and well-known principle of partnership law is that, absent an agreement to the contrary, general partners have authority to unilaterally bind the partnership to contracts with third parties.

In New York, the rule is codified in Section 20 (1) of the Partnership Law, which states:

Every partner is an agent of the partnership for the purpose of its business, and the act of every partner, including the execution in the partnership name of any instrument, for apparently carrying on in the usual way the business of the partnership of which he is a member binds the partnership . . .

Generally speaking, partners also have the power to unilaterally convey partnership real property, as codified in Section 21 of the Partnership Law which states, “Where title to real property is in the partnership name, any partner may convey title to such property by a conveyance executed in the partnership name . . .”

Important restrictions exist, though – statutory and potentially contractual – on general partners’ ability to bind the partnership to transactions which may, in effect, cause the dissolution of the business. These restrictions can be a trap for the ill-informed, as emphasized by a recent Brooklyn appeals court decision in Camuso v Brooklyn Portfolio, LLC, 164 AD3d 739 [2d Dept 2018]. Camuso is a reminder that careful due diligence is vital when buying partnership real property. Continue Reading When Dealing in Partnership Owned Real Property, Caveat Emptor

Lawyers are famous for arguing seemingly inconsistent positions at the same time. We practitioners lovingly refer to the technique as “arguing in the alternative.” The famous Texas trial lawyer, Richard “Racehorse” Haynes, gave a vivid example:

Say you sue me because you say my dog bit you. Well, this is my defense: My dog doesn’t bite. And second, in the alternative, my dog was tied up that night. And third, I don’t believe you really got bit. And fourth, I don’t have a dog.

A litigator’s stock in trade, arguing multiple positions at once can be vital to advance the client’s interests and to preserve arguments for later appellate review. Sometimes, though, one comes across arguments so seemingly in tension that they don’t quite seem able to coexist. A recent appellate decision, Alam v Uddin, 2018 NY Slip Op 02763 [2d Dept Apr. 25, 2018], involved a rather odd array of apparently conflicting arguments on both sides. Continue Reading Corporate Frankenstein “Partnership to Form a Corporation” Lives Another Day

As LLCs have become the dominant form of closely-held business in New York, cases involving dissolution of partnerships have become more and more rare. Section 63 of the Partnership Law is the statute governing judicial dissolution of New York general partnerships. The last time this blog wrote about a general partnership dissolution under Partnership Law § 63 was Summer 2015, a testimonial to how uncommon they have become.

After a lengthy interlude, along comes Magid v Magid, 2017 NY Slip Op 32603(U) [Sup Ct NY County Dec. 14, 2017].

Magid involved a fact pattern familiar to this blog’s regular readers – an entity owned by siblings, an income-producing property, a rising real estate market, some family members who want to sell, others who do not. Litigation ensues. Usually, the various dissolution statutes under the Business Corporation Law (BCL) or the Limited Liability Company Law (LLC Law) provide the standards to resolve the dispute.

In Magid, Manhattan Commercial Division Justice Eileen Bransten considered the applicable standards for judicial dissolution – particularly based on deadlock – under Partnership Law § 63. Magid raises the question – is the standard for judicial dissolution based on deadlock under Partnership Law § 63 any different than under BCL § 1104, the deadlock statute for corporation dissolutions? Continue Reading Rare Partnership Dissolution Decision Applies Deadlock Standard to Dissolution Under Partnership Law

Goodwill

This is a story about a recent case involving a fight over the inclusion or exclusion of goodwill in valuing the interest of a retired partner in a medical practice organized as a limited liability partnership, and how it easily could have been avoided. But first, it helps to understand the legal framework for valuing such an interest and the type of goodwill at issue.

The limited liability partnership or LLP is a highly popular form of business association for professional practices including law firms and medical groups. As its name suggests, the LLP combines the attributes of a partnership with the limited liability traditionally associated with corporations, except that professionals in LLPs generally remain personally liable for their own misconduct or negligence.

In New York, the formation and registration of LLPs is governed by Article 8-B of the Partnership Law. In all other respects, as to both their internal and external affairs, the New York LLP is governed by the same provisions governing general partnerships codified in Sections 1 through 82 of the Partnership Law based on the ancient Uniform Partnership Act promulgated in 1914. Continue Reading How to Avoid Bad Blood Over Goodwill in Professional Partnership Valuations