Gelder Medical Group v. Webber

New York Court of Appeals · 1977 · Corporations

41 N.Y. 680 (1977)

Updated August 22, 2026

CorporationsPartnershipsRestrictive covenantsExpulsion of partnerspartnership agreementexpulsion without causerestrictive covenantphysician noncompete

Facts

Dr. Webber joined the Gelder Medical Group after a one-year trial period and agreed that for five years after any voluntary or involuntary termination of his association, he would not practice medicine or surgery within 30 miles of Sidney, New York, without the group's written consent. The partnership agreement also allowed a majority of the other partners to require a member to resign or withdraw immediately and to pay him his share of profits through the date of termination. After continued conflict over Dr. Webber's professional and personal conduct, the group unanimously terminated him, paid him $18,568.41 under the agreement, and he soon resumed surgical practice in Sidney in violation of the covenant. The group sought an injunction, while Dr. Webber argued the court should imply a good-faith limitation on expulsion and that the covenant was unreasonable.

Issue

Whether a partner expelled pursuant to a partnership agreement that permits involuntary withdrawal without cause may nonetheless be bound by a covenant not to compete within 30 miles for five years. Also, whether the court should impose a good-faith requirement that would defeat enforcement on this record.

Rule

Partners may by agreement provide for involuntary expulsion of a partner with or without cause, and courts will enforce such provisions according to their plain terms so long as they do not impose an undue penalty or unjust forfeiture, involve overreaching, or otherwise violate public policy. Restrictive covenants, including those applied to physicians, are enforceable when reasonable in time and area, necessary to protect legitimate interests, not harmful to the public, and not unduly burdensome. Even assuming an implied covenant of good faith limits an expulsion power, the expelled partner must allege and prove bad faith going to the essence; the remaining partners do not bear the burden of proving good faith under an agreement allowing expulsion without cause.

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One of 10 multiple-choice questions for this case. Pick an answer to see why.

A four-lawyer partnership in Albany has a written agreement stating that any partner may be required to withdraw immediately by majority vote of the other partners, with payment of the partner's share through the date of termination. After months of interpersonal conflict, the other three partners vote to remove Nina Shah and pay her exactly what the agreement requires.

If Nina sues claiming the expulsion was invalid solely because no cause was stated, how should a court likely rule?

Explanation. The majority opinion states that although there is no common-law or statutory right to expel a partner, partners may provide by agreement for involuntary dismissal with or without cause. Courts enforce the plain terms of such a clause unless it imposes an undue penalty or unjust forfeiture, involves overreaching, or otherwise violates public policy. (Derived from Gelder Medical Group v. Webber (1977).)