Discussion Forum: Partnerships/Nature, Formation, and Operation--Bonus Points

Floyd Finch v. Bruce Wayne Campbell pg. 853

Ethical Decision Making-pg. 855

CASE 36-2 FLOYD FINCH v. BRUCE WAYNE CAMPBELL COURT OF APPEALS OF MISSOURI, WESTERN DISTRICT (2017) WD 80283 Cons WD 80317 Floyd Finch and Bruce Campbell were partners in a law firm fiduciary duty to him as a partner. Campbell filed a counter- starting in September 2009. After several years, relations between claim, alleging Finch had failed to bill time for legal services the two became strained and Campbell sought to dissolve the rendered therefore breaching his fiduciary duty. In addition, partnership. The negotiations to dissolve the partnership fell Campbell asserted breach of contract, implied duty of good faith through and Campbell locked Finch out of the law firm's office and fair dealing, and unjust enrichment. with only his laptop; the partnership was thus effectively dissolved The case was submitted to the jury in 2016. The jury returned in August 2012. Although the partnership had been effectively dis- with several verdicts, ruling in both Finch's and Campbell's favor solved, Campbell continued to receive all of the profits, expenses, for their respective breach of fiduciary duty claim. Both parties and losses of the partnership as it wrapped up. appealed after the trial court denied their respective motions for In February 2013, Finch filed a lawsuit against Campbell judgment notwithstanding the verdict. and Campbell's newly formed law firm, The Bruce Campbell Law Firm LLP. In the suit, Finch asserted that Campbell had JUDGE HOWARD In his first point in appeal, Finch says inappropriately expelled him from the previous partnership the trial court erred in denying his motions for directed ver- and its profits. Finch also alleged Campbell had breached his dict and judgment notwithstanding the verdict and in awarding[continued] judgment against Finch for breach of fiduciary duty. He claims in the accounting phase, as Campbell's damages were not he had no fiduciary duty: to record his time in a particular accounted for in the accounting. These claims were for losses manner, to bill clients on the schedule demanded by his part- caused by Finch's actions in the form of lost revenues. The ner, or to cooperate in billing in ways demanded by his partner. jury found for Campbell on these claims and awarded Camp- Finch argues that his billing or non-billing of partnership cli- bell $100,000. Finch, as a partner in a law firm, had a duty ents did not breach a fiduciary duty Finch owed to Campbell. to record and to facilitate Finch & Campbell's collection of . When reviewing a circuit court's denial of a judge fees for billable hours for work performed by Finch and oth- ment notwithstanding the verdict, this Court must determine ers while a partner at Finch & Campbell, particularly where, whether the plaintiff presented a submissive case by offer- as here, Finch's partner and clients were demanding bills and ing evidence to support every element necessary for liability. Finch disregarded such demands. Evidence is viewed in the light most favorable to the jury's Finch had a fiduciary duty to Campbell. "A partner in a law verdict, giving the plaintiff all reasonable inferences and dis firm . . . has duties to the other partners in the firm." "A part- regarding all conflicting evidence and inferences. This Court ner's fiduciary duty includes the duty to be candid concerning will reverse the jury's verdict for insufficient evidence only business opportunities, the duty to be fair, the duty not to put where there is a complete absence of probative fact to sup- self-interests before the interests of the partnership, and the port the jury's conclusion. duty not to compete with the partnership in the business of the The jury found that Finch violated his fiduciary duty. partnership." "Prior to withdrawal, lawyers within a firm have Finch and Campbell did not have a written partnership a duty to treat each other fairly and honestly and to put the agreement about anything, including about billing practices. interests of the law firm regarding firm business before their Because of this, Finch argues in his brief that he "had the right individual interests." "Each lawyer has a duty to the firm to to record his time and to bill his clients as he thought best." represent firm clients diligently, competently, and zealously." Finch says in his brief: Evidence was presented at trial that Finch did not bill Nothing in Missouri law authorizes Campbell to claim his clients in a timely manner, that his clients and Campbell damages for breach of fiduciary duty because Finch was (in were upset about this, and that not all amounts billed were Campbell's view) slow or inefficient in recording his time or actually paid in part because of Finch's actions. Evidence in generating his bills, or because Finch didn't bill clients on was presented that Finch's actions hurt the partnership, both the schedule Campbell thought best, because that was a mat in the form of decreased revenue and unhappy clients. ter of management and partnership operation reserved to the Evidence was presented at trial that Finch claimed to be best judgment of each partner. If Campbell did not approve "broke" prior to his marriage dissolution proceeding. Camp- of Finch's billing practices, then his remedy was to dissolve bell argued that Finch intentionally failed to bill his clients the partnership, which was his right at any time. appropriately because he wanted to lower his income for his Finch also says there is no evidence he profited by being marriage dissolution proceedings. In his appeal from his dis slow at billing. He claims there must be self-dealing for billing solution judgment, this court stated: "Such failure to seek for practices to be a breach of fiduciary duty. better employment and his argument that his gross monthly Campbell phrases the issue this way: "[W]hether a part- income on his Form 14 should be zero provides further evi- ner in a for profit law firm breaches his or her fiduciary dence that Husband is intentionally under-employed by deliber- duties to his/her partners by refusing to record or bill time ately and voluntarily reducing his income." Finch's income was worked for the law firm's clients when demands have been $269,000 in 2010, $411,456 in 2011, and just $47,500 in 2012. made to that partner by his/her partners and that partner's [Fliduciary duties may be breached in a number of clients." This precise question is one of first impression in ways." "These do not necessarily turn on whether the officer Missouri. The trial court found the following: obtained secret profits as a result of the breach." "An action As to Verdict B, Finch filed a motion for JNOV based for damages for breach of fiduciary duty does not depend on on his theory that a partner in a for profit law firm has no whether or not the officer or director realized a monetary fiduciary duty to his firm or partners, even when under profit." Evidence was presented at trial that Finch put his demands by his partners and clients, to record or bill his time personal interests above those of the partnership. This sup- for legal services performed in a timely manner. Campbell's ports the jury's finding of breach of fiduciary duty. evidence established that he and several clients repeatedly Finch cites Thomas v. Milfelt for the proposition that he was made demands on Finch to record and bill his time and allowed to decide whether to bill and how to bill clients. In that clients were disgruntled and unhappy when they finally Thomas, the court noted: "There is no evidence whatsoever to received invoices for Finch work that dated back in some show that plaintiff, during the period when these transactions cases over three years. The evidence established that Camp- . . . were happening, made any objections concerning defen- bell was directly damaged by Finch's actions in the form of dant's method of keeping account of the partnership affairs, lost revenues caused by Finch's dilatory behavior. Unlike and it was not until after the dissolution of the partnership Finch's claims, Campbell's claims were not tried to the Court that plaintiff made any complaint." In contrast, evidence was 354[continued] presented that Campbell and Finch's clients objected numer- This was a violation of Finch's fiduciary duty to the partner- ous times to Finch's failure to bill his clients in a timely manner. ship. The point is denied. Evidence was presented that Finch failed to timely bill his Finch's Motion for a Directed clients, possibly to lower his income for his divorce proceedings. Verdict Denied. CRITICAL THINKING ETHICAL DECISION MAKING Think about the judge's reasoning holding that the jury had Do you agree with the judge's interpretation of Finch's deci- correctly made its verdict that Finch had breached his fidu- sion to fail to timely bill his clients? Can Finch's failure to ciary duty and was thus not improperly excluded from the timely bill his clients be attributed to negligence? 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