Expelling Law Firm Partners

Law firm partners may be de-equitized or expelled by their firms in good times as well as lean. Such actions appear to be on the upswing. There are, however, relatively few cases on these subjects. The leading case, Holman v. Coie, is dated; the practice of law, at least in large law firms, has changed considerably in the thirty plus years since Holman was decided.

Looking ahead, courts must carefully reanalyze the intra-firm duty of good faith and fair dealing. Rather than confining liability to cases of economic predation, courts should review partner de-equitizations and expulsions under either excluder or cost-of-contracting analysis. The fact that de-equitization and expulsion are not equivalents does not exempt the former from judicial scrutiny because partners' duty of good faith and fair dealing attaches to all matters relating to partnership business.