694 F.3d 145
1st Cir.2012Background
- LMG appeals a jury verdict awarding Reed $414,000 for breach of partnership duties.
- The case centers on whether Reed and LMG formed an express oral or implied partnership for loan modification services tied to HAMP.
- No written partnership agreement existed; initial funding came from Zak, Reed built the client base, and profits were split 50/50 with Reed later earning a bi-weekly salary.
- Reed was expelled from LMG in January 2010, after which the business continued and LMG retained profits; Reed claimed continued partnership duties and profits.
- Damages were awarded for the period after dissolution based on Reed’s share of profits and salary during an eighteen-month post-expulsion window; the district court instructed on wind-up duties and at-will partnership concepts.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether the oral partnership was barred by the Statute of Frauds. | LMG argues the four-year HAMP plan makes the agreement within Statute of Frauds. | Reed contends the agreement could be performed within a year; duration uncertain, not fixed. | Statute of Frauds not applicable; duration not fixed; jury could find no fixed term. |
| Whether a partnership by implication existed from conduct. | LMG asserts no express agreement, but implied at-will partnership. | Reed relies on conduct showing partnership relationship. | There was sufficient evidence to support an implied at-will partnership. |
| Whether an at-will partnership can support damages for post-dissolution profits. | LMG breached duties, but at-will dissolution does not end liabilities. | Damages must be limited because at-will partnerships can terminate; winding up required. | Dissolution requires winding up; continuation with partnership assets supports damages to expelled partner. |
| Whether the damages award is supported by the record. | LMG contends the $648k net profit figure is unsupported; only $367k net income shown. | Reed showed continued profits aided by partnership assets; $648k reasonable. | There was adequate evidentiary support for the $648k net profits and Reed's $324k share. |
Key Cases Cited
- Murray v. Bateman, 51 N.E.2d 954 (Mass. 1943) (expelled partner entitled to winding-up profits under Uniform Partnership Act)
- Shulkin v. Shulkin, 16 N.E.2d 644 (Mass. 1938) (compensation depends on express or implied agreement)
- Eddy v. Fogg, 78 N.E. 549 (Mass. 1906) (accounting upon dissolution of partnership)