Thursday, February 14, 2013

Ederer v. Gursky case brief

Ederer v. Gursky case brief summary
9 N.Y.3d 514

The New York Appellate Division of the Supreme Court certified a question to the court with regard to an order of a trial court.
The appellate division affirmed in favor of the plaintiff.
The plaintiff was a withdrawing partner.
The plaintiff was granted relief in his accounting and breach of contract suit.
Defendant partner's counterclaims for fraud and for other counts were dismissed.
Defendants sought leave to appeal the order.

-Louis Ederer (the plaintiff), an attorney, joined the law firm of Steven Gursky (the defendant).
-The firm eventually became a limited liability partnership called Gursky and Ederer, LLP (the LLP). -The LLP consisted of Gursky, Ederer, and three other attorneys. They did not create a written partnership agreement.
-During his time with the law firm, Ederer entered into various financial agreements with the PC and LLP.
-Among other arrangements, the LLP agreed to repay a personal loan Ederer made to the PC.
-When Ederer decided to leave the firm in June 2003, he entered into a withdrawal agreement, which promised him a set level of compensation for the rest of the year.
-During December 2003, Ederer sued the PC, the LLP, Gursky, and the three other partners for breach of contract relating to the withdrawal agreement and personal loan debt.
-The individual defendants moved to dismiss the complaint as to them, arguing that the limited liability partnership entity shielded partners from personal liability.
-The trial court had determined that plaintiff was entitled to an accounting against all defendants because Partnership Law § 26, which placed limits on the personal liability of partners in a LLP, applied to debts of the partnership or the partners to third parties and had nothing to do with a partner's fiduciary obligation to account to his partners for the assets of the partnership.
-Defendants essentially argued that § 26(b) eliminated the liability of a partner in a LLP for any debts without distinguishing between debts owed to a third party or to the partnership or each other. As a result, they contended that the New York Legislature did not leave open to conjecture whether § 26(b) was intended to cover debts owed between partners.

-The court rejected the defendants' argument.
-The court held that the phrase "any debts" in part of section 26 had always governed only a partner's liability to third parties.
-The court also held that §26(b) did not shield a general partner in a registered LLP from personal liability for breaches of the partnership's or partners' obligations to each other.

-Partners in a law firm organized as a limited liability partnership could be held personally liable for a withdrawing partner's share of partnership assets
-The court held that "any debts, obligations or liabilities" refers only to liabilities to third parties and not among the partners.

The order of the Appellate Division was affirmed.
The certified question was answered in the affirmative.

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