Why was Rose’s work for Right Away Foods considered a violation of the partnership agreement?
FACTS Veal Sr., Beale Jr., Gibson, Parker, and Rose were partners in an accounting firm. The partnership agreement permitted partners to pursue other business interests so long as doing so did not conflict with the partnership practice. Rose performed accounting work for Right Away Foods and Payne, receiving the compensation personally. Rose’s partners claimed that he owed them a share in that he had competed with the firm in violation of the partnership agreement. The jury held for Rose. The partners appealed. Chief Justice Nye The partnership agreement between Rose and the appellants provided in part: Except with the expressed approval of the other partners as to each specific instance, no partner shall perform any public accounting services . . . other than . . . on behalf of this partnership. Partners . . . occupy a fiduciary relationship towards one another which requires of them the utmost degree of good faith and honesty in dealing with one another. . . . It is undisputed that while a partner . . . Rose rendered accounting services for Right Away Foods for which he billed and received payment personally. [The] partnership did not share in the proceeds. . . . There was some testimony from which the jury could have inferred that the work which Rose did for Right Away Foods . . . was of the type which did not require the services of a CPA. However, Rose . . . admitted that there was no reason why he could not have rendered [those services] as a partner in the accounting firm. . . . In fact in regard to services in connection with mergers and acquisitions, [Parker testified] that he was unaware of any [such work that was not] prepared by public accounting firms. The preponderance of all the evidence clearly establishes that Rose . . . performed accounting services for Right Away Foods . . . in competition with the partnership. The [jury] was in error. . . . Rose also admitted that he performed accounting services for [Payne] for which he billed and received payment personally. There is no question that those services were public accounting services. His later testimony that he performed the services, in effect, after hours, or in addition to his duties to the partnership, is of no value in light of the obligations imposed by the partnership agreement and by the common understanding of the term “competition.” [Reversed and remanded.] Questions 1. a. Why was Rose’s work for Right Away Foods considered a violation of the partnership agreement? b. Why did Rose’s “after-hours” argument fail? 2. Could Rose operate a gas station without violating the partnership agreement?
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