Academic journal article Journal of Accountancy

Partnership Withdrawal

Academic journal article Journal of Accountancy

Partnership Withdrawal

Article excerpt

A California appellate court upheld a verdict in favor of the former accounting firm of Weber, Lipshie & Co., which had sought to enforce a partnership restrictive covenant against a departing partner, Paul Christian. When Christian became a partner, he agreed that if he withdrew or was expelled from the partnership he would not, for five years, service any of the firm's accounts. He also agreed that, if he did violate the agreement, he would pay damages to the firm equal to double the firm's charges for those clients for the 12 months immediately preceding its loss (the "liquidated damages" provision of the contract).

After Christian left, certain clients took their business to him. The firm sued Christian for liquidated damages in accordance with the contract and Christian cross-complained for breach of contract. The trial court concluded the liquidated damages provision was an invalid penalty and instructed a jury to determine whether the terms of the restrictive covenant were reasonable, whether Christian had breached the agreement and, if so, what damages flowed from this breach. The jury awarded Weber $447,136.75 -- exactly the adjusted net fees billed to the affected clients during the 12 months preceding Christian's departure. …

Search by... Author
Show... All Results Primary Sources Peer-reviewed

Oops!

An unknown error has occurred. Please click the button below to reload the page. If the problem persists, please try again in a little while.