Steven Schwartz, Ken Epstein, and Peter Munk enter into a partnership agreement. All are dentists by profession.

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Steven Schwartz, Ken Epstein, and Peter Munk enter into a partnership agreement. All are dentists by profession. Under the partnership agreement, they form Family Dental Group Clinton Associates. Their partnership agreement provides the following: 

"The partnership is to continue until the year of 2051, unless the partners agree to an early dissolution. The partners are to devote full professional attention to the partnership during the first five years of its inception. The two practicing partners, are to receive 35 percent of their collections from patients. Additionally, any profit beyond expenses is to be put into a profit pool of which the first 20 percent is to be divided equally between all three partners and the remaining divided equally between Schwartz and Munk."

Schwartz reduces his workload while Munk maintains a consistent, full-time work schedule. When Munk becomes aware of Schwartz’s schedule change, he becomes upset. Munk is dissatisfied with Schwartz’s management style and the way he conducts his practice. Munk is also displeased with both his compensation and Schwartz’s refusal to expand the partnership’s dental facilities. Munk wants to change the agreement to alter his compensation or alternatively terminate Schwartz as a partner. Schwartz rejects this proposal and insists that the parties submit to mediation pursuant to the agreement. The mediation results in an award of a management fee for Munk in the amount of two-thirds of 1 percent of the gross revenue. Epstein and Munk then offer to buy out Schwartz’s interest in the practice, or alternatively, to keep him as a partner while eliminating his management responsibilities and his share of the profits. Schwartz rejects the offer. Shortly after, at a special meeting of the partners, Epstein and Munk vote to terminate Schwartz from the practice “without cause” and provide him with 90 days’ notice pursuant to §12(a)(i) in the partnership agreement. Section 12 of the partnership agreement is titled “Other withdrawal from practice.” Section 12(a)(i) states: 

"In the event that any Partner’s association with the Partnership is terminated for any reason other than death or total disability, either party shall give the other not less than ninety (90) days written notice of such termination and the Partnership shall have the first option to retire the interest of the departing Partner by paying the departing Partner deferred compensation at the Formula Amount."

As a result of the termination, Schwartz has sued Munk and Epstein seeking restoration of his partnership status. Is the court likely to restore Schwartz’s partnership status?

Partnership
A legal form of business operation between two or more individuals who share management and profits. A Written agreement between two or more individuals who join as partners to form and carry on a for-profit business. Among other things, it states...
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Business Law The Ethical Global and E-Commerce Environment

ISBN: 978-1259917110

17th edition

Authors: Arlen Langvardt, A. James Barnes, Jamie Darin Prenkert, Martin A. McCrory

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