Partnerships & Fiduciary Obligation of Agents

Monday, August 13, 2012 2:19 PM

Rash v. JV Intermediate, Ltd. Facts: Manager for a company [& agent] forms another company and then company B makes bids for company A ()which are accepted. Meanwhile company A () has their own scaffolding dep't that they never use. Issue: Did breach his fiduciary duty to , which turns on the scope of his duty Examples of fiduciary relationships: - Trustee to beneficiary - Executor to beneficiary of estates - Attorney to client - Partner to partner Conclusion: is an agent and has a fiduciary duty to principal; whatever gains from his position as agent ought to go to the principal (); should have fully disclosed the situation to Upshot: disclose or disgorge all gains (even though wouldn't have made that $ anyway)
1. Sole partnership a. Employees (only works because of notion of agency) also not necessary 2. Partnership (agreement) a. Employees {also partners are agents for each other} b. Limited partnership 3. Corporation a. Have to have agents to operate b. {treated as a separate entity}

Town & Country House v. Newbery Facts: works for house cleaning company () and then breaks off and uses 's customer list (see case brief) Fenwick v. Unemployment Commission Rule: sharing of profits is but one factor in determining whether a partnership exists. Look to other elements as well: a) Intention of the parties (what language did they use) b) Profit sharing (residual interest) c) Loss sharing (residual interest) d) Ownership & Control e) Rights in Dissolution f) Conduct toward third-parties g) Right of control Held: not partners; employee was getting the profits as wages from ; was solely in charge of covering losses; had exclusive control of management of business; Young v. Jones If can prove they are partners then both s are fully liable for the partnership; Partnership by estoppel: a person who represents himself, or permits another to represent him to anyone as a partner in an existing partnership, or with others not actual partners, is liable to any such person to whom the representations is made who has, onthe faith of the representation, given credit to the actual or apparent partnership. Held: no partnership by estoppel because there was no proof that relied upon any acts or statements by s that a partnership existed between PW-Bahamas and PW-US. never made any assertions that they extended the credit based upon a perceived partnership between s and therefore can not rely upon the doctrine of partnership by estoppel. Meinhard v. Salmon Facts: , a partner in a joint venture, took advantage of an opportunity that arose from the partnership without informing his partner, . was managing the business Rule: joint adventurers, like copartners, owe to one another, while the enterprise continues, the duty of the finest loyalty. Held: this came to in his capacity as a partner (and came to alone by virtue of his agency) and had the duty to disclose the opportunity that arose so that had an equal opportunity to seize it; if opportunity comes to you while in the partnership you have a duty to disclose; corporate opportunity breach of the duty = liable to disgorge the benefit of opportunity Dissent: enterprise ended at the end of the lease because venture 'had in view a limited object and was to end at a limited time' i.e. end of lease = had a right to go out and do something different {pursue another opportunity} Holzman v. De Escamilla Facts: The appointed trustee of a bankrupt estate brought this action to hold liable as general partners of the business at issue; they say they were limited partners but they exerted control over the business Rule: A limited partner will be held liable as a general partner if the limited partner acts to take part in the control of the business
Just because you call it a limited partnership doesn't matter-- if you aren't acting as limited partners; court will cut through the BS and look at what was really going on; advise corporations to take corporate formalities very seriously

UPSHOT: fiduciary obligations are a big deal; it's complete and very high duty in capacity as an agent or partner

Limited partnership: - 1 general partner (manages business & has unlimited liability -- you can go for all assets) Fiduciary duty to limited partners - Limited partners (merely contribute $ & are liable only to extent of their contribution/investment -- as long as they are actually only limited partners)

Class Notes Page 1