Day v. Sidley & Austin
394 F. Supp. 986 (D.D.C. 1975)

Facts:
Day was a partner at Sidley & Austin. He was entitled to a certain percentage of the firm’s profits, and was also privileged to vote on certain matters which were specified in the partnership agreement. However, he was never a member of the executive committee, which managed the firm’s day-to-day business. The firm eventually merged with another law firm and then relocated. Day had a problem with that, as well as the fact that he would no longer be the sole chairman, so he resigned and then sued, arguing:

(1) Misrepresentation

  • Day relied on a provision that “no Sidley partner would be worse off in any way as a result of the merger.”

(2) Breach of fiduciary duty

  • Day alleges this was breached by beginning negotiations on a merger without consulting the other partners who were not on the Executive Committee and by not revealing information regarding changes that would occur as a result of the merger.

Issues:
(1) Were there any misrepresentations?
(2) Was there a breach of fiduciary duty?

Holding:
No.

Reasoning:
(1) Day could not have reasonably believed that no changes would’ve been made – he read and signed the Partnership Agreements which gave the Executive Committee the authority to decide policy questions.

  • Furthermore, nothing in the agreement mentioned anything about the Washington office or his status as chairman.

(2) Courts have been primarily concerned with partners who make secret profits at the expense of the partnership.

  • Here, failure to reveal information regarding changes in the internal structure of the firm does not produce any profit for the offending partners nor any financial loss for the partnership as a whole.

“What this Court perceives from Mr. Day’s pleadings and affidavits is that he may be suffering from a bruised ego but that the facts fail to establish a legal cause of action.”