Court Issues Opinion in Texas Business Law Case Involving "Imploding Partnership" | The Law Offices of Gregory D. Jordan

Court Issues Opinion in Texas Business Law Case Involving “Imploding Partnership”

Earlier this month, a state appellate court issued an opinion in a Texas business law case discussing a partner’s claims against a former partner. The case is a good illustration of how business relationships can sour and what can be done to minimize the chances of a dramatic ending.

The Facts of the Case

According to the court’s opinion, four architects formed a partnership in 2000. Years later, two of the founding members retired and, in 2005, the firm was reorganized into a professional limited liability corporation (PLLC).

By 2014, the relationship between the remaining two partners, Boucher and Thacker, began to sour. The firm was heavily in debt and Thacker accused Boucher of “not pulling his weight.” Boucher refused to inject additional capital into the company and, in late 2014 or early 2015, the two began talking about dissolving the company.

In early February 2010, the two went over the firm’s debts and discussed how to dissolve the firm. Boucher explained that he intended to retire and, under the terms of the agreement, would receive $300,000 upon his retirement. Thatcher responded that the firm did not have the money to pay this lump-sum amount, and the two should focus on shutting down the firm instead.

By February 16, the two had agreed to dissolve the firm, with both partners splitting the firm’s debt evenly. However, later that day, Boucher sent Thatcher a notice of his intent to retire on February 20. In response, Thatcher immediately withdrew from the firm. Both parties continued to conduct business individually after the dissolution of the firm.

Thacker subsequently sued Boucher for breach of contract, arguing that he had abandoned “the firm at the time of dissolution and fail[ed] to pay all obligations, losses and debts of the firm.” Thacker claimed that Boucher’s actions resulted in the unnecessary accrual of interest and also sought attorney’s fees. Boucher filed a counterclaim, seeking the $300,000 in retirement compensation.

The trial court determined that Boucher breached the agreement, by not paying his share of the debts and by not participating in the winding down of the business. The court also found that Boucher violated his fiduciary duty to the firm. Finally, the court ruled against Boucher in his counterclaim for retirement compensation. The court awarded Thacker the full amount of attorney’s fees he requested.

The Court’s Opinion

The court reviewed the evidence presented below and largely affirmed the lower court’s decision. The appellate court explained that the evidence suggested that the firm had been dissolved upon Thacker’s withdrawal. Thus, because the firm was no longer in existence at the time Boucher retired, the court explained that Thacker did not breach any duty owed to the firm or Boucher, and that Boucher was not entitled to the retirement compensation.

However, the court disagreed with the lower court regarding the award of attorney’s fees. The court explained that to obtain attorney’s fees, “a party must 1.) prevail on a cause of action for which attorney’s fees are recoverable, and 2.) recover damages.”

Here, the court held that because Thacker did not recover any economic damages as a result of Boucher’s conduct, he was not entitled to an award of attorney’s fees. The court acknowledged that there were exceptions to this general rule but found that neither applied in this case. One exception is when the agreement between the parties provides for an award of attorney’s fees absent an award of damages. However, the partnership agreement between the parties did not provide for such an award. Thus, the court reversed the award of attorney’s fees to Thacker.

Are You Dealing With a Texas Business Dispute?

When success matters, every decision you make for your business is essential. Choosing which Austin partnership dissolution attorney or contract dispute attorney to handle the unique issues your business faces is no exception. At the Law Offices of Gregory D. Jordan, we have over three decades of experience helping all types of businesses deal with the full range of legal issues they confront, including breach of contract claims and business fraud cases. We also routinely assist businesses through the dissolution process, reducing the chances of costly and time-consuming litigation. To learn more about how we can help your business through the issues it faces, call 512-419-0684 to schedule a consultation today.

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