Meehan v. Shaughnessy
Facts
Meehan and Boyle were Parker Coulter partners who decided to leave and form a new firm with Cohen, later recruiting Schafer and others while keeping the plans confidential. Before notifying their partners, they prepared client and case lists, arranged financing and office space, drafted form letters and authorizations on Parker Coulter letterhead, and denied rumors that they were leaving. After giving notice, they immediately contacted clients and referring attorneys, delayed giving their partners a list of cases they intended to take, and obtained signed authorizations for many removed matters. The trial judge found they continued working full schedules and did not manipulate case handling, and that clients signed authorizations for removed cases.
Issue
Did departing partners and associated lawyers breach fiduciary duties to their former law partnership by the manner in which they prepared for departure and obtained client consent to remove cases, and if so, what remedy applies? Also, who bears the burden of proving whether the breach caused the loss of clients?
Rule
Partners owe one another a fiduciary duty of the utmost good faith and loyalty and must consider their partners' welfare, not merely their own. Departing partners may make logistical arrangements to establish a competing firm while still with the partnership, so long as they do not otherwise violate fiduciary duties; however, they may not use secrecy, misleading denials, delayed disclosure, or one-sided communications to clients to obtain an unfair advantage in securing consent to remove cases. When a breach consists of unfairly acquiring client consent, the departing partners bear the burden of proving that the clients would have consented to removal even absent the breach. If they fail to do so, they must account to the former partnership for profits from unfairly removed cases under a constructive trust, while still receiving their capital contributions and accrued profit shares.
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If the old firm sues solely on the ground that Nina and Owen secretly planned a competing practice before resigning, which is the strongest argument for the departing partners?