Class Action Lawsuit & Commercial Litigation
Business Litigation
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Partnership Liability

A partnership is an association of two or more persons to carry on as co-owners a business for profit.   Partnerships are general, limited, or limited liability, exposing their members to a range of liabilities. Partnership members owe each other fiduciary duties of good faith and loyalty.  Generally, parameters  of loyalty require that a partner may not transact business to obtain a secret financial benefit and cannot use partnership assets to finance investments for herself, or otherwise profit at the expense of or to the detriment to the partnership.  Subject to any partnership agreement, partners are entitled to: (i) be repaid her contribution to the partnership, (ii) to share equally in the firm’s profits, (iii) be indemnified for payments made and liabilities incurred in the normal course of business, and (iv) have equal rights in management of the partnership.  Each partner in the partnership is an agent for purposes of binding the partnership to the agent’s action.  Generally, an agent’s acts will bind the partnership unless the agent lacked authority to so bind the partnership, and the party with whom the unauthorized partner was dealing had notice of that fact.

Disputes among partners themselves are typically for equitable relief, e.g., an action seeing an accounting or an injunction against a partner to prevent her from diverting partnership assets before an accounting is sought or obtained.  Partners have the right to a formal accounting for: (i) wrongful exclusion from the partnership business or possession of partnership property by her copartners, (ii) a breach of fiduciary duty by her copartners, (iii) matters provided for in the partnership agreement, or (iv) other circumstances that are just and reasonable.

Actions by third parties against the partnership are either for breach of contract, or for tortious acts of the partnership (e.g., fraud).  A partnership and its partners are jointly and severally liable for tortious conduct committed by a partner in the course of partnership business, and are jointly liable in breach of contract.  If the partnership is a registered Limited Liability Partnership, the general rule of personal nonliability controls.  If the partnership is a registered Limited Partnership, the rights and liabilities of the general partners differ significantly from those of limited partners (e.g., limited partners are not personally liable for partnership obligations).