Day v. Sidley & Austin
394 F. Supp. 986 (1976)


Facts: Day (P) joined Sidley & Austin (D) in 1938. His legal career was interrupted by WWII and his appointment as Post Master General. P was never a member of the executive committee but was a senior underwriting partner that entitled him to a certain percentage of the firm's profits and the privilege to vote on certain matters specified in the partnership agreement. A voice tally indicated all were in favor of the merger including P with the understanding that any proposed agreement would be submitted to all partners for consideration before any binding agreements were made. The merger was approved and because of local changes in D.C., P resigned from the firm. According to P, the decision to appoint co chairman was made prior to the merger and D's concealment of that decision was a material omission. P also alleged that there were active misrepresentations regarding the merger in that; no D partner would be worse off, that two senior partners at Liebman would soon be leaving the law practice, that the merged firm would drop representation of a certain Liebman client that would conflict with D's clients, that all aspects of the merger had been exhaustively investigated, and that there were good sound and objective reasons for the merger. P sued and D moved for summary judgment.

Issue: Does a non-managing partner possess legal rights in a firm's management, entitling him or her to relief?

Rule: Yes, Partners have a fiduciary duty to make full disclosure of information of value to the partnership, and may not advantage themselves at the expense of the partnership.

Holding:Complaint dismissed.
On motion for summary judgment the District Court, held, that the plaintiff failed to show any cause of action for fraud as a result of merger pursuant to agreement to which he subscribed, that there was no showing of any breach of contract or of fiduciary duty by partners negotiating merger.

Analysis: While the Uniform Partnership Act generally requires complete disclosure of all information material to the partnership's business operations, the partnership agreement may temper this requirement. If a partner relinquishes his or her management rights in certain areas by executing the partnership agreement, the managing partners need not disclose information that does not affect that partner's interests. Under such circumstances, some partnership decisions are on a need-to-know basis.