Partnership Part 3 Flashcards
UPA ________ ______
§ 19: Access to Partnership Records
§ 20: Requires partners to render true and complete information
§ 21: Duty of loyalty (do not steal from partnership)
§ 22: Right to an accounting in certain circumstances
No Explicit duty of care (vs. agency law) – but UPA § 4(3) explicitly incorporates agency law.
Fiduciary Duties
+ Case: Meinhard v. Salmon
A trustee is held to something stricter than the ______ of the _________. Not honesty alone, but the punctilio of an honor of the most sensitive, is then the standard of behavior.
moral of the marketplace
+ Case: Meinhard v. Salmon
A trustee is held to something stricter than the morals of the marketplace. Not honesty alone, but the _______ of an honor of the most sensitive, is then the standard of behavior.
punctilio
Higher level of duty. Full disclosure and information in that context about a new lease option that would allow for an additional profit to be made. Court found it was a breach of the_____ __ ______ . Don’t keep secrets is the moral for the first case.
duty of loyalty
Every ________ must account to the ________ for any benefit and hold as trustee for it any profits derived by him without the consent of the other partners from any transaction connected with the formation, conduct, or liquidation of the partnership or from any use by him of its property. UPA § 21(1).
partner
partnership
Every partner must account to the partnership for_____ ________ and ______ __ _______ for it any profits derived by him without the consent of the other partners from any transaction connected with the formation, conduct, or liquidation of the partnership or from any use by him of its property. UPA § 21(1).
any benefit
hold as trustee
Every partner must account to the partnership for any benefit and hold as trustee for it ____ ________ derived by him without the consent of the other partners from any transaction connected with the formation, conduct, or liquidation of the partnership or from any use by him of its property. UPA § 21(1).
any profits
A partner owes to the partnership and the other partners the duties of _______ and _______ stated in subsections (b) and (c). (RUPA § 409(a)).
loyalty and care
______ ___ ______ RUPA §409(b)
*Account to partnership and hold property, profit or benefit for partnership.
*Refrain from acting with an adverse interest
*Refrain from competing with the partnership
Duty of Loyalty
Duty of Loyalty RUPA §409(b)
1. _______ ___ ______ and hold property, profit or benefit for partnership
2.
3.
account to partnership
Duty of Loyalty RUPA §409(b)
1. _______ ___ ______ and _____ _______, profit or benefit for partnership
2.
3.
account to partnership
hold property
Duty of Loyalty RUPA §409(b)
1. _______ ___ ______ and _____ _______, _____ ____ _______ for partnership
2.
3.
account to partnership
hold property
profit or benefit
Duty of Loyalty RUPA §409(b)
1. ?
2.
3.
Account to partnership and hold property, profit, or benefit for partnership
Duty of Loyalty RUPA §409(b)
1.
2. _______ from acting with an adverse interest.
3.
refrain
Duty of Loyalty RUPA §409(b)
1.
2. ______ ___ ____ with an adverse interest
3.
refrain from acting
Duty of Loyalty RUPA §409(b)
1.
2. Refrain from acting with an ______ ________
3.
adverse interest
Duty of Loyalty RUPA §409(b)
1.
2. ?
3.
- refrain from acting with an adverse interest
Duty of Loyalty RUPA §409(b)
1.
2.
3. _____ _____ competing with the partnership.
refrain from
Duty of Loyalty RUPA §409(b)
1.
2.
3. Refrain from _______ with the ______.
competing
partnership
Duty of Loyalty RUPA §409(b)
1.
2.
3. ?
- refrain from competing with the partnership
______ ___ ______ RUPA § 409(c)
A partner’s duty of care to the partnership and the other partners in the conduct and winding up of the partnership business is limited to refraining from engaging in grossly negligent or reckless conduct, intentional misconduct, or a knowing violation of law.
Duty of Care
Duty of Care
RUPA § 409(c)
A _______ ____ ___ _______ to the partnership and the other partners in the conduct and winding up of the partnership business is limited to refraining from engaging in grossly negligent or reckless conduct, intentional misconduct, or a knowing violation of law.
partner’s duty of care
Duty of Care
RUPA § 409(c)
A _______ ____ ___ _______ to the __________ and the other partners in the conduct and winding up of the partnership business is limited to refraining from engaging in grossly negligent or reckless conduct, intentional misconduct, or a knowing violation of law.
partner’s duty of care
partnership
Duty of Care
RUPA § 409(c)
A _______ ____ ___ _______ to the __________ and _______ ____ ______ in the conduct and winding up of the partnership business is limited to refraining from engaging in grossly negligent or reckless conduct, intentional misconduct, or a knowing violation of law.
partner’s duty of care
partnership
the other partners
Duty of Care
RUPA § 409(c)
A partner’s duty of care to the partnership and the other partners in the ________ and ______ _____ of the partnership business is limited to refraining from engaging in grossly negligent or reckless conduct, intentional misconduct, or a knowing violation of law.
conduct and winding up
Duty of Care
RUPA § 409(c)
A partner’s duty of care to the partnership and the other partners in the conduct and winding up of the partnership business is limited to refraining from engaging in _______ _________ or ______ ________, intentional misconduct, or a knowing violation of law.
grossly negligent or reckless conduct
Duty of Care
RUPA § 409(c)
A partner’s duty of care to the partnership and the other partners in the conduct and winding up of the partnership business is limited to refraining from engaging in grossly negligent or reckless conduct, _______ ______, or a _____ _____ _____ _____
intentional misconduct
knowing violation of law
A _________ can alter the duty of care or the duty of loyalty in some circumstances, if not manifestly unreasonable.
partnership
A partnership can alter the duty of care or the duty of loyalty in some circumstances, if not __________ _________.
manifestly unreasonable
If they are going to alter the duty of care and the duty of loyalty they would use the ________ ________ to do that.
partnership agreement
___________ of _____ ______ and _____ _______ RUPA § 409(d)
A partner shall discharge the duties to the partnership and the other partners under this [act] or under the partnership agreement and exercise any rights consistently with the contractual obligation of good faith and fair dealing.
obligations of good faith and fair dealing
Obligations of Good Faith and Fair Dealing RUPA § 409(d)
A partner shall _______ ___ ______ to the partnership and the other partners under this [act] or under the partnership agreement and exercise any rights consistently with the contractual obligation of good faith and fair dealing.
discharge the duties
Obligations of Good Faith and Fair Dealing RUPA § 409(d)
A partner shall discharge the duties to the partnership and the other partners under this [act] or under the partnership agreement and exercise any rights consistently with the contractual obligation of _____ ______ and _____ ______.
good faith and fair dealing
A partnership can ________ the obligation of good faith and fair dealing but cannot eliminate the duty of good faith and fair dealings. You do this in the contract you enter into the partnership at the beginning.
modify
A partnership can modify the obligation of good faith and fair dealing but cannot ________ the duty of good faith and fair dealings. You do this in the contract you enter into the partnership at the beginning.
eliminate
RUPA § 405(c)(5): The partnership agreement may not alter or eliminate the _____ ___ _____ or the _____ ___ ______, except as otherwise provided in subsection (d).
duty of loyalty
duty of care
RUPA § 405(c)(6) The partnership agreement may not eliminate the contractual obligation of good faith and fair dealing under Section 409(d) but the partnership agreement may prescribe the standards, if not ________ ________, by which the performance of the obligation is to be measured.
manifestly unreasonable
RUPA § 405(d)(3) If not ________ __________, the partnership agreement may:
(A) Alter or eliminate the aspects of the duty of loyalty stated in Section 409(b)
(B) Identify specific types of categories of activities that do not violate the duty of loyalty
(C) Alter the duty of care, but may not authorize conduct involving bad faith, willful or intentional misconduct, or knowing violation of law; and
(D) Alter of eliminate any other fiduciary duty.
manifestly unreasonable
RUPA § 405(d)(3) If not manifestly unreasonable, the partnership agreement may:
(A) Alter or eliminate the aspects of the _____ __ _______ stated in Section 409(b)
(B) Identify specific types of categories of activities that do not violate the duty of loyalty
(C) Alter the duty of care, but may not authorize conduct involving bad faith, willful or intentional misconduct, or knowing violation of law; and
(D) Alter of eliminate any other fiduciary duty.
duty of loyalty
RUPA § 405(d)(3) If not manifestly unreasonable, the partnership agreement may:
(A) Alter or eliminate the aspects of the duty of loyalty stated in Section 409(b)
(B) Identify specific types of categories of activities that do not violate the _____ __ _______
(C) Alter the duty of care, but may not authorize conduct involving bad faith, willful or intentional misconduct, or knowing violation of law; and
(D) Alter of eliminate any other fiduciary duty.
duty of loyalty
RUPA § 405(d)(3) If not manifestly unreasonable, the partnership agreement may:
(A) Alter or eliminate the aspects of the duty of loyalty stated in Section 409(b)
(B) Identify specific types of categories of activities that do not violate the duty of loyalty
(C) Alter the _____ ___ _____, but may not authorize conduct involving bad faith, willful or intentional misconduct, or knowing violation of law; and
(D) Alter of eliminate any other fiduciary duty.
duty of care
RUPA § 405(d)(3) If not manifestly unreasonable, the partnership agreement may:
(A) Alter or eliminate the aspects of the duty of loyalty stated in Section 409(b)
(B) Identify specific types of categories of activities that do not violate the duty of loyalty
(C) Alter the duty of care, but may not authorize conduct involving ____ _____ , willful or intentional misconduct, or knowing violation of law; and
(D) Alter of eliminate any other fiduciary duty.
bad faith
RUPA § 405(d)(3) If not manifestly unreasonable, the partnership agreement may:
(A) Alter or eliminate the aspects of the duty of loyalty stated in Section 409(b)
(B) Identify specific types of categories of activities that do not violate the duty of loyalty
(C) Alter the duty of care, but may not authorize conduct involving bad faith, _______ or _____ _______, or knowing violation of law; and
(D) Alter of eliminate any other fiduciary duty.
willful or intentional misconduct
RUPA § 405(d)(3) If not manifestly unreasonable, the partnership agreement may:
(A) Alter or eliminate the aspects of the duty of loyalty stated in Section 409(b)
(B) Identify specific types of categories of activities that do not violate the duty of loyalty
(C) Alter the duty of care, but may not authorize conduct involving bad faith, willful or intentional misconduct, or _______ _______ of _____; and
(D) Alter of eliminate any other fiduciary duty.
knowing violation of law
RUPA § 405(d)(3) If not manifestly unreasonable, the partnership agreement may:
(A) Alter or eliminate the aspects of the duty of loyalty stated in Section 409(b)
(B) Identify specific types of categories of activities that do not violate the duty of loyalty
(C) Alter the duty of care, but may not authorize conduct involving bad faith, willful or intentional misconduct, or knowing violation of law; and
(D) Alter of eliminate any other ______ ______.
fiduciary duty
If you modify it and then you breach it – my partnership agreement says this isn’t a breach – the court will say your ________ ______ ___ ____. We are not going to protect you. If you have a client that wants to modify you need to look at these duties.
partnership agreement is bad
+ Case: Gibbs v. Breed, Abbott & Morgan
The Trial Court found 3 breaches
1. Persuading the other partner to leave and the way in which the leave was orchestrated.
2. The memo about personnel
3. Chronology files
* They upheld only #2 because it gave an unfair advantage of recruiting employees.
* If you as fiduciary obtain something that nobody else could get or do not readily have publicly if you give that to somebody else, you breaching fiduciary duty.
!!
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Notice the role of good faith
In certain situations, a lawyer’s removal or copying, without the firm’s consent, of materials from a law firm that do not belong to the lawyer, that are property of the law firm, that are intended by the lawyer to be used in his new affiliation could constitute dishonesty, which is professional misconduct… Here, the partners took their desk copies of recent correspondence with the good faith belief that they were entitled to do so. The distinction between motive and process is critical to a realistic application of fiduciary duties !!
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Motive for providing memo was self-interested motive. Desk book – sometimes you should not be taking property of law firm with you – sometimes breach of good faith and fair dealing. Could constitute dishonesty however here they took desk books with the good faith belief they were entitled to do so. If doing something for motive that is self-dealing – increase chances of getting job, marketability – own profits that is different from doing something without the motives in play. Distinction between motive and process – good faith and fair dealing is broad category. Breach f good faith even though process looks good – the motive isn’t. Desk book was not at issue here. !!
!!
__________
The purpose of this type of action is not just to compensate the plaintiff for wrongs committed but also to prevent them by removing from agents and trustees all inducement to attempt dealing for their own benefit in matters which they have undertaken for others, or to which their agency or trust relates. However, the proponent of a claim for a breach of fiduciary duty must, at minimum, establish that the offending parties’ actions were a “substantial factor” in causing an identifiable loss.
Damages
Damages
The purpose of this type of action is not just to compensate the plaintiff for wrongs committed but also to prevent them by removing from agents and trustees all inducement to attempt ______ ___ ___ ____ _______ in matters which they have undertaken for others, or to which their agency or trust relates. However, the proponent of a claim for a breach of fiduciary duty must, at minimum, establish that the offending parties’ actions were a “substantial factor” in causing an identifiable loss.
dealing for their own benefit
Damages
The purpose of this type of action is not just to compensate the plaintiff for wrongs committed but also to prevent them by removing from agents and trustees all inducement to attempt dealing for their own benefit in matters which they have ______ ___ ______, or to which their agency or trust relates. However, the proponent of a claim for a breach of fiduciary duty must, at minimum, establish that the offending parties’ actions were a “substantial factor” in causing an identifiable loss.
undertaken for others
Damages
The purpose of this type of action is not just to compensate the plaintiff for wrongs committed but also to prevent them by removing from agents and trustees all inducement to attempt dealing for their own benefit in matters which they have undertaken for others, or to which their agency or trust relates. However, the proponent of a claim for a breach of fiduciary duty must, at minimum, establish that the offending parties’ actions were a “______ _______” in causing an identifiable loss.
substantial factor
Damages
The purpose of this type of action is not just to compensate the plaintiff for wrongs committed but also to prevent them by removing from agents and trustees all inducement to attempt dealing for their own benefit in matters which they have undertaken for others, or to which their agency or trust relates. However, the proponent of a claim for a breach of fiduciary duty must, at minimum, establish that the offending parties’ actions were a “substantial factor” in causing an _______ _______.
identifiable loss
The standard that must be proven for damages in a claim for breach of fiduciary duty against a partnership is to prove that the parties’ actions were a ______ ______ in the loss.
substantial factor
What is used in measuring losses?
substantial factor
