Floyd Finch and Bruce Campbell were partners in a law firm starting in September 2009. After several years, relations between the two became strained, and Campbell sought to dissolve the partnership. The negotiations to dissolve the partnership fell through, and Campbell locked Finch out of the law firm’s office with only his laptop; the partnership was thus effectively dissolved in August 2012. Although the partnership had been effectively dissolved, Campbell continued to receive all of the profits, expenses, and losses of the partnership as it wrapped up.
In February 2013, Finch filed a lawsuit against Campbell and Campbell’s newly formed law firm, The Bruce Campbell Law Firm LLP. In the suit, Finch asserted that Campbell had inappropriately expelled him from the previous partnership and its profits. Finch also alleged Campbell had breached his fiduciary duty to him as a partner. Campbell filed a counterclaim, alleging Finch had failed to bill time for legal services rendered, therefore breaching his fiduciary duty.
In addition, Campbell asserted breach of contract, implied duty of good faith and fair dealing, and unjust enrichment.
The case was submitted to the jury in 2016. The jury returned with several verdicts, ruling in both Finch’s and Campbell’s favor for their respective breach of fiduciary duty claim. Both parties appealed after the trial court denied their respective motions for judgment notwithstanding the verdict.
JUDGE HOWARD In his first point in appeal, Finch says the trial court erred in denying his motions for directed verdict and judgment notwithstanding the verdict and in awarding judgment against Finch for breach of fiduciary duty. He claims he had no fiduciary duty: to record his time in a particular manner, to bill clients on the schedule demanded by his partner, or to cooperate in billing in ways demanded by his partner. Finch argues that his billing or non-billing of partnership clients did not breach a fiduciary duty Finch owed to Campbell.
… When reviewing a circuit court’s denial of a judgment notwithstanding the verdict, this Court must determine whether the plaintiff presented a submissible case by offering evidence to support every element necessary for liability. Evidence is viewed in the light most favorable to the jury’s verdict, giving the plaintiff all reasonable inferences and disregarding all conflicting evidence and inferences. This Court will reverse the jury’s verdict for insufficient evidence only where there is a complete absence of probative fact to support the jury’s conclusion.
The jury found that Finch violated his fiduciary duty. Finch and Campbell did not have a written partnership agreement about anything, including about billing practices. Because of this, Finch argues in his brief that he “had the right to record his time and to bill his clients as he thought best.”
Finch says in his brief:
Nothing in Missouri law authorizes Campbell to claim damages for breach of fiduciary duty because Finch was (in Campbell’s view) slow or inefficient in recording his time or in generating his bills, or because Finch didn’t bill clients on the schedule Campbell thought best, because that was a matter of management and partnership operation reserved to the best judgment of each partner. If Campbell did not approve of Finch’s billing practices, then his remedy was to dissolve the partnership, which was his right at any time.
Finch also says there is no evidence he profited by being slow at billing. He claims there must be self-dealing for billing practices to be a breach of fiduciary duty.
Campbell phrases the issue this way: “[W]hether a partner in a for profit law firm breaches his or her fiduciary duties to his/her partners by refusing to record or bill time worked for the law firm’s clients when demands have been made to that partner by his/her partners and that partner’s clients.” This precise question is one of first impression in Missouri. The trial court found the following:
As to Verdict B, Finch filed a motion for JNOV based on his theory that a partner in a for profit law firm has no fiduciary duty to his firm or partners, even when under demands by his partners and clients, to record or bill his time for legal services performed in a timely manner. Campbell’s evidence established that he and several clients repeatedly made demands on Finch to record and bill his time and that clients were disgruntled and unhappy when they finally received invoices for Finch work that dated back in some cases over three years. The evidence established that Campbell was directly damaged by Finch’s actions in the form of lost revenues caused by Finch’s dilatory behavior. Unlike Finch’s claims, Campbell’s claims were not tried to the Court in the accounting phase, as Campbell’s damages were not accounted for in the accounting. These claims were for losses caused by Finch’s actions in the form of lost revenues. The jury found for Campbell on these claims and awarded Campbell \($100,000.\) Finch, as a partner in a law firm, had a duty to record and to facilitate Finch & Campbell’s collection of fees for billable hours for work performed by Finch and others while a partner at Finch & Campbell, particularly where, as here, Finch’s partner and clients were demanding bills and Finch disregarded such demands.
Finch had a fiduciary duty to Campbell. “A partner in a law firm … has duties to the other partners in the firm.” “A partner’s fiduciary duty includes the duty to be candid concerning business opportunities, the duty to be fair, the duty not to put self-interests before the interests of the partnership, and the duty not to compete with the partnership in the business of the partnership.” “Prior to withdrawal, lawyers within a firm have a duty to treat each other fairly and honestly and to put the interests of the law firm regarding firm business before their individual interests.” “Each lawyer has a duty to the firm to represent firm clients diligently, competently, and zealously.”
Evidence was presented at trial that Finch did not bill his clients in a timely manner, that his clients and Campbell were upset about this, and that not all amounts billed were actually paid in part because of Finch’s actions. Evidence was presented that Finch’s actions hurt the partnership, both in the form of decreased revenue and unhappy clients.
Evidence was presented at trial that Finch claimed to be “broke” prior to his marriage dissolution proceeding. Campbell argued that Finch intentionally failed to bill his clients appropriately because he wanted to lower his income for his marriage dissolution proceedings. In his appeal from his dissolution judgment, this court stated: “Such failure to seek for better employment and his argument that his gross monthly income on his Form 14 should be zero provides further evidence that Husband is intentionally under-employed by deliberately and voluntarily reducing his income.” Finch’s income was \($269,000\) in 2010, \($411,456\) in 2011, and just \($47,500\) in 2012.
“[F]iduciary duties may be breached in a number of ways.” “These do not necessarily turn on whether the officer obtained secret profits as a result of the breach.” “An action for damages for breach of fiduciary duty does not depend on whether or not the officer or director realized a monetary profit.” Evidence was presented at trial that Finch put his personal interests above those of the partnership. This supports the jury’s finding of breach of fiduciary duty.
Finch cites Thomas v. Milfelt for the proposition that he was allowed to decide whether to bill and how to bill clients. In Thomas, the court noted: “There is no evidence whatsoever to show that plaintiff, during the period when these transactions … were happening, made any objections concerning defendant’s method of keeping account of the partnership affairs, and it was not until after the dissolution of the partnership that plaintiff made any complaint.” In contrast, evidence was presented that Campbell and Finch’s clients objected numerous times to Finch’s failure to bill his clients in a timely manner.
Evidence was presented that Finch failed to timely bill his clients, possibly to lower his income for his divorce proceedings. This was a violation of Finch’s fiduciary duty to the partnership. The point is denied.
Finch’s Motion for a Directed Verdict Denied.
CRITICAL THINKING:
Think about the judge’s reasoning holding that the jury had correctly made its verdict that Finch had breached his fiduciary duty and was thus not improperly excluded from the law firm. Do you think any of the terms or phrases the judge used in describing how fiduciary duties may be breached are questionable or ambiguous?
ETHICAL DECISION MAKING:
Do you agree with the judge’s interpretation of Finch’s decision to fail to timely bill his clients? Can Finch’s failure to timely bill his clients be attributed to negligence?