Parker Waichman is a New York–based law firm. In November 2007, Parker Waichman hired Jordan Chaikin, a lawyer licensed and based in Florida, as an associate attorney to assist in screening Florida cases. In 2010, the firm’s managing partner, Jerrold Parker, received a letter from the Florida Bar concluding that Parker Waichman was engaging in the unlicensed practice of law by operating a Florida office without having a licensed partner in the state. Parker Waichman subsequently named Chaikin as a partner in its Florida office. In fact, Chaikin remained the only lawyer in the firm’s Florida office. Although Chaikin’s agreement with the firm described him as both a “profit partner” and “supervisory partner,” Chaikin was not allowed access to the financial information or capital of the partnership and could not vote in partnership matters. Despite being described as a “profit partner,” Chaikin did not share in the firm’s profits. In the meantime, Chaikin took on several cases, including one against RJ Reynold on behalf of Linda Purdo with a contingency fee agreement.
Toward the end of 2015, Chaikin resigned from Parker Waichman to start his own firm. Thus, as Parker Waichman alleges, a dissolution occurred between Chaikin and Parker Waichman. Chaikin managed to keep Purdo as a client; her case went to trial in 2016 and resulted in a $33.5 million verdict and a $4.2 million fee for Chaikin. Parker Waichman put a lien on Chaikin’s fee, arguing that the winding up of its partnership with Chaikin had not yet finished and that it was entitled to a portion of Chaikin’s fee.
JUDGE KLINGENSMITH In 2005, Florida adopted the Revised Uniform Limited Partnership Act. The Act states that limited liability partnerships are composed of members who are either general partners or limited partners. General partners manage the operations and activities of a limited liability partnership.
General partners can also bind the partnership by any actions that they take on behalf and in furtherance of the partnership. Because their actions can cause the partnership great potential liability, general partners must abide by stringent standards of conduct. For instance, a general partner has a duty of loyalty to the partnership which it must follow even during the process of winding up the partnership’s activities. Though a partnership agreement may specify the duties and responsibilities of a general partner, no agreement may eliminate a general partner’s duty of loyalty, obligation of good faith and fair dealing, or duty of care.
In contrast, “[a] limited partner does not have any fiduciary duty to the limited [liability] partnership” but must discharge its duties “consistently with the obligation of good faith and fair dealing.” A limited partner is not prohibited from taking an action merely because that action “furthers the limited partner’s own interest.” Additionally, to withdraw from a limited partnership, a limited partner need only give notice of its “express will to withdraw as a limited partner.”
Here, the evidence shows Parker Waichman LLP was created and organized in New York, thus it is a foreign limited liability partnership under Florida law.
There was no evidence that Chaikin was ever a general partner or had equity ownership in the firm. The evidence before the trial court was that Parker Waichman initially hired Chaikin as an associate attorney, but in the wake of the Florida Bar investigation, later named him a partner. While Chaikin’s title may have changed, his duties, responsibilities, and compensation did not. Chaikin did not enjoy the benefits of general partnership status, namely access to the firm’s financial information, the ability to withdraw from capital accounts, or a right to vote on the firm’s affairs. Parker Waichman crafted this arrangement to obtain the benefit of getting clients in Florida without the obligations commensurate with making Chaikin a general partner or providing him equity ownership. Calling Chaikin a “partner” may have satisfied the firm’s obligations under Florida Bar rules, but mere labels do not control the outcome here. Although Buckley did not expressly define what a partner is for the purposes of fee sharing, we find that the relationship requires more than simply a change of title.
For all practical purposes, Chaikin’s position never changed vis-à-vis the firm. Assuming Chaikin was a partner of Parker Waichman, he would be more aptly characterized as a limited partner and not a general partner. As a limited partner, Chaikin would have had no duty to wind up Parker Waichman’s affairs relating to the Purdo case after he left the firm and breached no duties to Parker Waichman by signing her as a client with his new firm. Since Chaikin owed no fiduciary duty to the firm, Parker Waichman was not entitled to the full proceeds of Chaikin’s share of the Purdo contingency fee. As such, the division of fees resulting from Chaikin’s disassociation from the firm should be treated like that involving the departure of an associate.
In sum, for the purposes of dividing the contingency fee in a case involving the departure of a limited partner from a firm, the framework should mirror the one used when an associate attorney leaves a firm rather than when a general partner, equity holding attorney, or shareholder departs.
CRITICAL THINKING:
What is especially important for the reasoning of the court that “mere labels do not control the outcome”?
ETHICAL DECISION MAKING:
What role did the value of transparency play in shaping the outcome of this case?