Resnick v. Kaplan, 873

• Decision Date: 02 September 1981
• Docket Number: No. 873,873
• Citation: 49 Md.App. 499,434 A.2d 582
• Parties: Murray I. RESNICK v. Solomon KAPLAN et al., etc.
• Court: Court of Special Appeals of Maryland

Page 499

49 Md.App. 499

434 A.2d 582

Murray I. RESNICK v. Solomon KAPLAN et al., etc.

No. 873.

Court of Special Appeals of Maryland.

Sept. 2, 1981.

Benjamin Lipsitz, Baltimore, for appellant.

Edmund P. Dandridge, Jr., Baltimore, with whom were George C. Doub, Jr. and Venable, Baetjer & Howard, Baltimore, on the brief, for appellees.

Argued before MORTON, MOYLAN and MOORE, JJ.

MOORE, Judge.

This appeal represents only a part of the extensive litigation between former law partners which was spawned by the dissolution of their law firm in October, 1972. ¹ The action below was for an accounting by the appellees the four partners ("the Kaplan group") who continued in practice together against the appellant ("Resnick"), their erstwhile partner who left and opened his own office. The Circuit Court for Baltimore City (Karwacki, J.) granted the Kaplan group's motion for partial summary judgment, entering judgment for them in the amount of $207,871.94. ² Partial summary judgment was also entered in favor of Resnick for $29,861.56. ³ All other matters were ordered to be the subject of further proceedings. The court made a determination pursuant to Maryland Rule 605 that there was no just reason for delay and that the partial summary judgments were immediately appealable.

The primary dispute thus resolved by the lower court was the method of allocation of fees received by the parties after dissolution; and it was decided that the allocation should be made on the basis of their respective percentage interests in the partnership, not on the basis of the time spent on individual cases after dissolution. Resnick contends that summary judgment was improper. We affirm.

I

Early on, ⁴ the parties worked together as employees of Sol C. Berenholtz, Esq. in the practice of law in Baltimore. (Resnick is a son-in-law of Berenholtz.) By a written agreement dated December 31, 1968, Kaplan, Heyman, Engelman, and Resnick became his partners. The new firm, in its partnership document, agreed to employ Herbert J. Belgrad ("Belgrad") and Berenholtz's son, Carl, as associates; and provision was also made for Belgrad and Carl to be admitted later as partners. They did become partners on January 1, 1972, but Carl's partnership was short-lived; he soon left and a settlement was made with him. Sol Berenholtz ceased to be a partner on December 31, 1971, pursuant to the terms of the agreement. The partnership was dissolved on or about October 18, 1972. ⁵ The distribution of profits and losses provided for in the partnership agreement at the time of dissolution was as follows:

The parting between the Kaplan group (Kaplan, Heyman, Engelman, and Belgrad) and Resnick was not "sweet sorrow." Appellees contend that Resnick breached his fiduciary duties to his partners, before and after the termination of the partnership, in many respects. Similar counter-charges are made by Resnick who also accuses his former colleagues of "wrongfully firing Carl Berenholtz ⁷ and wrongfully firing me."

At all events, it is undisputed that after October 18, 1972, Resnick continued to represent clients of the former firm in connection with approximately 150 cases for which he had been responsible prior to October 18, 1972. These consisted primarily of maritime and other personal injury claims of clients who had retained the firm on a contingent fee basis. Following dissolution, Resnick secured from many of those clients written statements that they desired him, and not someone else in the firm, to complete their cases. He settled a large percentage of these matters and received legal fees in the sum of $385,160.

The Kaplan group also, of course, represented other clients of the firm in connection with matters approximately 600 in which the firm had been engaged prior to October 18, 1972. For legal services rendered in these cases, both before and after dissolution, Kaplan et al collected fees of $842,962.00. The combined total of the fees collected by both sides is $1,228,122.00. No part of the sum collected by the Kaplan group has been paid to Resnick, nor has he paid to the group any part of the sum collected by him.

In a separate category, held in an escrow account, are fees paid to the firm in the settlement of so-called "African Star" cases seamen's death cases in which the partnership had been retained several years prior to dissolution. Resnick also participated in these cases, securing execution of releases and local court approval of settlements negotiated by Philadelphia counsel. Fees aggregating $94,364.00 in these contingent fee cases were deposited in an interest-bearing escrow account, and the balance at the time of the order appealed from was $149,500. In awarding partial summary judgment, the court allocated $119,890.94 of the escrow funds to Kaplan et al and $28,861.56 to Resnick, and ordered that the latter's claimed additional one-half per cent interest (of $149,500. or $747.50) "be maintained by the parties in a joint escrow account, pending further proceedings herein." ⁸

Thus, the trial court held that distribution of the fees collected should be made among the partners in the same percentages applicable under the agreement in determining their respective distributive share in the partnership earnings. ⁹ Appellant vigorously challenged below, as he does here, the rule adopted by the court.

Resnick not only disagreed with the rule, but he also claimed that appellees were estopped to assert it. The Kaplan group, he argues, continually represented in its dealings with him from the time of dissolution in October, 1972 until the filing of its summary judgment motion in November, 1979 more than seven years later ¹⁰ that "fees from clients of the former partnership were to be allocated on the basis of work done, respectively, by him and his former partners before and after October 18, 1972."

Furthermore, he asserts that the case is replete with genuine issues of material fact, such as to preclude summary judgment. Those disputes, according to appellant, included:

1. The date of dissolution;

2. The wrongfulness vel non of the conduct causing the dissolution and the designation of the responsible party;

3. Whether Kaplan et al withheld the billing of $300,000 to $400,000 to deprive Resnick of his share;

4. The existence and appropriate valuation of former partnership assets;

5. The value of Resnick's capital account;

6. Whether he was wrongfully ousted from the firm and the effect thereof;

7. Whether the preconceived scheme and design of the Kaplan group in the formation of the partnership was to acquire the practice of Sol Berenholtz for themselves and to displace Resnick and Carl Berenholtz;

8. Whether clients of the former firm discharged the Kaplan group and engaged Resnick;

9. Whether either of the parties violated the terms of the partnership agreement and the effect thereof;

10. Whether the Kaplan group by its course of dealing from 1972 to 1979 "is bound by the basis for allocation of fees which it advanced continually during that period and on which Resnick relied in performing the work for former clients ... viz. that fees representing work done prior to dissolution were to be shared according to the partnership percentages ... while fees for work done after dissolution were to be allocated to the party doing the work...."

II

The partnership agreement in this case does not provide for the rights of the parties upon dissolution. It recites that the partnership "shall commence on January 1, 1969, and continue from year to year thereafter until it is dissolved in accordance with the terms hereof." Then, it simply states:

"To the extent that dissolution is not covered by the terms of this Agreement, it shall be in accordance with the laws of the State of Maryland."

The Uniform Partnership Act, Md.Code, Corp. & Ass'ns Art., § 9-101(e), defines dissolution as

"the change in the relation of the partners caused by any partner ceasing to be associated in the carrying on as distinguished from the winding up of the business." (Emphasis added.)

The statute also provides that the partnership is not terminated on dissolution "but continues until the winding up of partnership affairs is completed." (§ 9-601). (Emphasis added.)

Causes of dissolution are spelled out in § 9-602 and include those without violation of the agreement (§ 9-602(1)(i)-(iv)) and those in contravention of it. (§ 9-602(2)). Without violation of the agreement, dissolution is caused (i) by the termination of the prescribed term or undertaking, (ii) by the express will of any partner when no definite term or undertaking is specified, (iii) by the express will of all the partners who have not assigned their interests or permitted them to be charged for their separate debts, either before or after the termination of any specified term or undertaking, and (iv) by the expulsion of any partner from the business, "bona fide in accordance with such a power conferred by the agreement...." ¹¹

In contravention of the agreement, dissolution may occur "where the circumstances do not permit a dissolution under any other provision of this section, by the express will of any partner at any time." (§ 9-602(2)). ¹² (Emphasis added.)

The rights of partners as to application of partnership property upon dissolution are governed by § 9-609 of the Act which also follows the dichotomy of dissolution in contravention of the partnership agreement and dissolution which is not. Where it is not in contravention of the agreement, each partner may have the partnership property applied to discharge its liabilities and the surplus applied to pay in cash the net amount owing each partner. On the other hand, when dissolution is caused in contravention of the agreement, each partner who has not caused dissolution wrongfully is entitled not only to his net share of the surplus after liabilities, but also to damages for breach of the agreement against each partner who has caused the...