Fiduciary Duty and the Former Partner
Richard A. Booth, 48(1): 315–33 (Nov. 1992)
Law firms and accounting firms have become a target of regulators and other plaintiffs in litigation connected with the savings and loan crisis. As a matter of partnership law, all of the partners within a partnership, whether or not personally involved, may be held liable. Despite the lack of case law directly on point, there are convincing arguments that fiduciary duty comes to an end once the partner and partnership have agreed to a settlement with each other, particularly where the settlement offer has been disclosed to the former partner.
Third-Party Injunctions in Partnership Bankruptcy Cases
Paul R. Glassman, 49(3): 1081–1120 (May 1994)
Bankruptcy courts are increasingly exercising their equitable powers under section 105(a) of the Bankruptcy Code to protect the nondebtor general partners of a debtor- partnership from collection efforts and other proceedings that adversely would affect the debtor-partnership's ability to reorganize. This Article discusses the circumstances under which a bankruptcy court may grant temporary injunctive relief in favor of a nondebtor general partner and the rationales supporting such relief. It also analyzes whether and to what extent a bankruptcy court may grant permanent injunctive relief to a nondebtor general partner through the debtor-partnership's plan of reorganization.
Partnership Bankruptcy and Reorganization: Proposals for Reform
Morris W. Macey and Frank R. Kennedy, 50(3): 879–923 (May 1995)
This Article addresses partnership problems in reorganization in bankruptcy as well as solutions and proposed amendments to the Bankruptcy Code proposed by the Ad Hoc committee on Partnerships in Bankruptcy. The effect on a partnership of the filing of a Chapter 11 by or against a general partner in the partnership is among the issues considered. There are no provisions in Chapter 11 that deal with partnerships. The centerpiece of the proposals is the addition of Subchapter IV to Chapter 5 of the Bankruptcy Code, Cases of Partnerships and Partners, with new code sections which run from 561 to 570. Section 723 is to be repealed and sections 303 and 1111 amended. Five, noteworthy partnership Chapter 11 cases are discussed, and the techniques and procedures by which these cases were handled are analyzed. The amendments largely codify the practice developed in the professional partnership cases discussed in this Article.
Prototype Partnership Agreement for a Limited Liability Partnership formed under the Uniform Partnership Act (1997)
The Working Group on the Prototype Limited Liability Partnership Agreement formed under the Uniform Partnership Act (1997), committee on Partnerships and Unincorporated Business Organizations, Section of Business Law American Bar Association , 58(2): 689 (Feb. 2003)
Delaware Alternative Entities and the Implied Contractual Covenant of Good Faith and Fair Dealing Under Delaware Law
Paul M. Altman and Srinivas M. Raju, 60(4): 1469—1486 (August 2005)
The Delaware Alternative Entity Statutes (i.e., the Delaware Revised Uniform Limited Partnership Act and the Delaware Limited Liability Company Act) are based upon a policy of favoring freedom of contract. Consistent with this policy, the statutes have always permitted wide latitude to the parties to an alternative entity agreement to modify the fiduciary duties of persons controlling alternative entities. In 2002, the Delaware Supreme Court in Gotham Partners L.P. v. Hallwood Realty Partners, L.P. , 817 A.2d 160 (Del. 2002), noted that the Delaware Revised Uniform Limited Partnership Act does not state that fiduciary duties can be completely eliminated. The Gotham decision created uncertainty regarding the extent to which fiduciary duties could be modified. Recent amendments to the Alternative Entity Statutes clarified that the default fiduciary duties may be expanded, restricted or eliminated by provisions in a limited partnership agreement or limited liability company agreement, provided, however, that the implied contractual covenant of good faith and fair dealing may not be eliminated. Given that the implied contractual covenant of good faith and fair dealing is now a "floor" below which a partner's or member's duties cannot be contractually eliminated, the scope of the implied covenant is of great significance to the drafters of alternative entity agreements. This article discusses the parameters of implied contractual covenant of good faith and fair dealing and its anticipated application and impact in the alternative entity arena.
Model Limited Liability Company Membership Interest Redemption Agreement
By the Subcommittee on Limited Liability Companies of the committee on Partnerships and Unincorporated Business Organizations, ABA Section of Business Law, 61(3):1197—1234 (May 2006)
The Post Dodd-Frank Act Evolution of the Private Fund Industry: Comparative Evidence from 2012 and 2015
Wulf A. Kaal, 71(4): 1151-1206 (Fall 2016)
This comparative survey study examines the private fund industry’s reactions and adjustments to a rapidly evolving regulatory framework, three years after the first application of mandatory registration and disclosure rules for private fund advisers under the Dodd-Frank Act. Using two datasets (2012: N = 94; 2015: N = 69) for a population of 1267 registered investment advisers to add an historical time series perspective, the author analyzes and compares survey respondents’ short- and long-term estimations of industry effects. The data suggest that immediate and short-term concerns have given way to adaptation to the changes.
The Case Against Fiduciary Entity Veil Piercing
Mohsen Manesh; 72(1): 61-100 (Winter 2016/2017)
The doctrine of USACafes holds that whenever a business entity (a “fiduciary entity”) exercises control over and, therefore, stands in a fiduciary position to another business entity (the “beneficiary entity”), those persons exercising control, whether directly or indirectly, over the fiduciary entity (the “controller(s)”) owe a fiduciary duty to the beneficiary entity and its owners. Focusing on control as the defining element, courts have applied this far-reaching doctrine across all statutory business forms—including corporations, limited partnerships, and limited liability companies—and through successive tiers of parent-subsidiary entity structure to assign liability to the individuals who ultimately exercise control over an entity. In this respect, USACafes enables what two prominent business law jurists have aptly described as “a particularly odd pattern of routine veil piercing.”
This article argues that USACafes is a needless doctrine that stands in conflict with other, more fundamental precepts of law and equity. Accordingly, when presented with the opportunity, the courts of Delaware and other jurisdictions should reject its holding. Instead, the law ought to respect the fiduciary entity for what it is: a legal person separate and apart from its owners and controllers. If the limited liability veil of a fiduciary entity is to be pierced, then it should be under the more rigorous legal standard that courts have traditionally applied in veil-piercing cases.
Why Law Firms Collapse
John Morley; 75(1): 1399-1440 (Winter 2019-2020)
Law firms don’t just go bankrupt—they collapse. Like Dewey & LeBoeuf, Heller Ehrman, and Bingham McCutchen, law firms often go from apparent health to liquidation in a matter of months or even days. Almost no large law firm has ever managed to reorganize its debts in bankruptcy and survive. This pattern is puzzling, because it has no parallel among ordinary businesses. Many businesses go through long periods of financial distress and many even file for bankruptcy. But almost none collapse with the extraordinary force and finality of law firms. Why?
Third-Party Releases in Bankruptcy Cases: Should There Be Statutory Reform?
Richard L. Epling; 75(2): 1747-1768 (Spring 2020)
Third-party releases, which can function as de facto discharges of nondebtors, have become an increasingly common feature of reorganization plans. There is no definitive Supreme Court case dealing with the legality and scope of such plan provisions, and the seven circuit courts of appeals that have addressed release issues have either disagreed or posited various legal tests and standards to satisfy the “extraordinary circumstances” bar they set for approving such releases.
The Business Lawyer—Seventy-Five Years Covering the Rise of Alternative Entities
Donald F. Parsons, Jr., R. Jason Russell, and Koah M. Doud, 75(4): 2467-2490 (Fall 2020)
From its first article in 1946 through the emergence of LLCs in 1977 and on to the present day, The Business Lawyer has charted and helped foster the development of alternative entities and the increase in their complexity over time. This article follows the course of The Business Lawyer’s coverage of these entities, starting with a look at their history and then moving on to their continued development over the last thirty years. This article then briefly identifies a few important substantive issues in alternative entity law that have been covered by The Business Lawyer in recent decades, before considering some “hot topics” currently at issue.
LLC Default Rules Are Hazardous to Member Liquidity
Donald J. Weidner, 76(1): 151-182 (Winter 2020-2021)
Simply by forming LLCs, entrepreneurs now unwittingly lock themselves in to perpetual entities that offer them no liquidity and present them with costly procedural obstacles to enforcing both their agreement among themselves and their statutory rights. Even in atwill LLCs that are member-managed, recent LLC acts deny members both a right to dissolve and a right to be bought out. While thus locking members in, these acts deny them standing to bring many if not most of their claims among themselves or against the firm.