Philadelphia Commerce Court Addresses Partnership at Will Law

In October 2018, the Commerce Court had an opportunity to address the law on partnerships at will. In HB Litigation Conferences, LLC v. NetDiligence, Judge Wright Padilla set out the following guidelines:

  1. “A partnership in which the partners have not agreed to remain partners for a definite term or the completion of a particular undertaking is known as a partnership at will.”
  2. A “particular undertaking” requires either a minimum or maximum duration, or an agreement to terminate the partnership “at the conclusion of a particular venture whose time is indefinite but certain to occur.”
  3. Partnerships at will “may be dissolved at any time, by the express will of any partners, without violating the partnership agreement.”
  4. The dissolution does not require a justification.
  5. In determining the time of dissolution, the partnership at will “is dissolved and its business shall be wound up when the partnership knows or has notice of a person’s express will to withdraw as a partner.”

In this case, the parties entered an agreement to create cyber risk and privacy liability programs, with bi-annual conferences to market their work.  A term sheet generally outlined their responsibilities and profit sharing, but there was neither a fixed term nor a particular undertaking set forth in the term sheet. Judge Wright Padilla concluded this created a partnership at will.

The facts showed that on October 13, 2017, defendant informed plaintiff that it wanted a clean break, was pursuing its own conference facility for a future event, and would be willing to take over plaintiff’s upcoming facility contract.

Two months later, plaintiff sued for breach of contract, breach of fiduciary duty, usurpation of corporate opportunity and conversion/misappropriation of partnership property, seeking lost profits.

The court deemed October 13, 2017, the dissolution date because plaintiff had notice of dissolution on that date, and thus the partnership had notice on that date.  Judge Wright Padilla further ruled that plaintiff could not recover lost profits after October 13th as the partnership was dissolved on that date.  Once dissolved, defendant’s only duty was to wind up the partnership’s pre-October 13th affairs.

Thus, Judge Wright Padilla granted summary judgment to the defendant.

Date of Decision: October 31, 2018

HB Litigation Conferences, LLC v. NetDiligence, December Term 2017, No. 2017 (Phila. Ct. C. P. Oct. 31, 2018) (Wright Padilla, J.)

Posted by Lee Applebaum