Partners as Fiduciaries. In 1974, Dunay, Weisglass, and Koenig formed a partnership to engage in the brokerage business. They made no capital contributions to the partnership and agreed to share all revenue and expenses on an equal basis. The

Question

partnership entered into an agreement with Ladenburg, Thalmann & Co to manage the latter's institutional investors services. The agreement did not provide any specific time limit. Each partner was appointed vice president of Ladenburg. Later, Dunay was appointed president of Ladenburg and was promised an additional share of profits for additional work on a year-to-year basis. Dunay contributed his salary as Ladenburg president and his additional share of profits to the partnership. On April 2, 1979, Weisglass and Koenig told Dunay that they wished to dissolve the partnership and did so immediately, forming their own partnership, W.K. Associates, the same day. Dunay received from the original partnership $15,044, the amount reflected on the partnership's records as his unpaid share of partnership income. Dunay remained with Ladenburg for a short period of time, leaving when the Ladenburg board of directors removed him as president and appointed in his place Weisglass on May 10. Dunay then filed a lawsuit, alleging, among other things, that Weisglass and Koenig had breached their fiduciary duty in dissolving the partnership and forming a new partnership. As part of the suit, Dunay sought some of the profits earned by Weisglass and Koenig after the dissolution. The defendants filed a motion to dismiss Dunay's complaint. In whose favor did the court rule and why? Discuss fully.

Answer 1

Partners as fiduciaries
The court found nothing tortious in the actions of Weisglass and Koenig in dissolving the at-will partnership and forming a new partnership. The court recognized that Dunay was entitled to his share of income and assets of the partnership but found that there were no partnership assets to be distributed. On dissolution of the partnership, any fiduciary duty that Weisglass and Koening owed to Dunay ceased. The court ruled that Dunay was not entitled to any of the profits earned by Weisglass and Koenig after the date of dissolution based on their personal ability and services, independent of the dissolved partnership's assets.