Gibbs v. Breed, Abbott & Morgan

271 A.D.2d 180 (2000)

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Nature of the Case

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Facts

Gibbs (P) and Sheehan (P) were former partners in Breed Abbott & Morgan (D). Ps withdrew from D in July 1991 to join another firm. From January 1991 to July 1991 they were the only partners in the Trusts and Estates department of D. Both Ps informed D’s presiding partner on June 19, 1991, that they had accepted offers to join another firm. Ps were told not to discuss the departures with the other personnel in the department. On June 24, Ps sent a memo to their new firm giving all the details of D trust employees with respect to salaries, billable hours and the billing rates to clients. The memo included biographical information about the attorneys in the department as well. The memo had been prepared 6 months earlier and had been used by Ps to discuss potential arrangements with other firms. Employees of D were actually interviewed by the new firm. On June 27, Ps submitted their written resignations. Before Ps left they wrote letters to clients advising them of their departure and that other attorneys at D could serve them. The letters gave no mention of the new firm that Ps were moving to. Ps left in the first weeks of July and took various documents including chronology and desk files. They began to contact their former clients. They almost immediately made employment offers to four of the D employees with three accepting immediately. In the next few weeks, 92 of 201 D clients moved their trust and estate business to the new firm. Ps sued D for monies due under the D partnership agreement and D countersued for a breach of fiduciary duty. The trial court held that Gibbs’ action in persuading Sheehan to leave with him in order to cripple the D department was a breach of loyalty. The court also found that Ps had breached their fiduciary duties to D by giving their new firm personnel information about D employees, and by raiding the department for employee defectors, and by taking the chronology files. The court allowed Ps their share of the profits and that D was entitled to recover lost profits for a reasonable period following the departure of Ps. Ps were held jointly and severally liable for $1,861,045 in damages. This appeal resulted.