Appellate Court Reverses Part of Trial Court Ruling on Partnership Dispute Case

Just like any relationship, the breakup of a law firm is complicated, especially when a partner start a new business of their own. In the case of Bernstein & Grazian, P.C. v. Grazian & Volpe, P.C., 402 Ill. App. 3d 961, 931 N.E.2d 810 (2010), the actions of the partners themselves throughout the dissolution of the firm and the fiduciary duty owed to one another play a large role in the division of fees once the firm has closed its doors.

Attorney and partner of Bernsterin and Grazain, Bernstein left the firm to open his own practice. Grazian complained that his former partner allegedly breached his fiduciary duty by opening up his own firm while still working for the current firm. Bernstein denied these claims and the trial court ruled in his favor. The Court determined that there was no breach of fiduciary duty by Bernsiten and that there he was entitled to 10% of the fees for all of the open cases at Bernstein and Grazian before he left.

On appeal, the Appellate Court made two determinations regarding the specific holding of the trial court. The first determination agreed with the trial court that there was no breach of fiduciary duty by Bernstiein. However, the Appellate Court overtunred the trial court’s decision regarding the division of fees between the former partners.

Grazian argued that his former partner, Bernstein, breached his fiduciary duty when he allegedly began to take his time and resources away from the Bernstein and Grazian firm while he created his own competing medical malpractice practice. These are the allegations that the trial court rejected.

The Appellate Court examined these claims rejected by the trial court. It reviewed evidence such as testimony that Bernstein allegedly was using resources such as staff and supplies to “promote and operate” his new firm. However, the Appellate Court rejected this second guessing of the trial court and concluded it could not “usurp” the fact finder function from the trial court.

Grazian also disputed the trial court’s holding giving Bernstein a 10% award of the fees on open cases. The Appellate Court tried to identify the evidence relied on by the trial court for this award. However, it concluded there was not sufficient evidence to support this award. It found that there was not enough evidence that demonstrated Bernstein furnished some sort of valuable service to Grazian regarding open cases at the firm.

The following lists some of the key factors to consider as you face business partnership litigation:

• Business Litigation Goals. It is important to consider what you hope to accomplish through partnership litigation. It is important to consider the ideal end result as you evaluate your options and litigation strategies. Unfortunately, the ideal end results often gets lost in the highly-charged emotions of litigation so it is important to set out your litigation goals at the outset and remind yourself of your optimal resolution through the partnership litigation process. Understanding your goals will also help you evaluate potential settlement offers.

• Litigation Strategy. It is important to know where you want to go so that you can then develop a litigation strategy, a legal map of sorts, on how you plan to reach your end goal. A business litigation strategy should be developed in close collaboration with your business litigation lawyer. At DiTommaso-Lubin, our knowledgeable Illinois business litigation attorneys can help you analyze complex legal issues, such as potential violations of fiduciary duties, alleged breach of contracts, available accounting information, and civil procedure requirements, in order to develop the appropriate business litigation game plan.

• Expense of Litigation. There are several factors that affect the cost of business litigation, but you will want to consider the potential legal expenses associated with partnership litigation so that you can evaluate your business litigation options.

At DiTommaso-Lubin, our Chicago business litigation lawyers focus on providing clients with sound business law advice and protecting our clients’ interests when they find themselves facing business litigation. (877) 990-4990 or (630) 333-0000