Opinion ID: 754135
Heading Depth: 2
Heading Rank: 1

Heading: Partnership Books and Records

Text: 5 For over a decade, both these partnerships functioned without major incident, but then problems surfaced that ultimately led to this litigation. Relations began to sour in August 1994 when the National Partnership thought the quality of management and financial reporting for the Academy and Buckingham projects was unsatisfactory. Although the partnerships at that time employed the accounting services of J.H. Cohn & Company, the National Partnership decided to engage the accounting firm of Deloitte & Touche, L.L.P. (Deloitte) to audit the projects' 1993 books and records. 6 On August 24, 1994 Deloitte reported that in its opinion, plaintiff had calculated its management fee in violation of HUD regulations, used identity-of-interest firms without authorization, and neglected to include in the records all HUD-required financial statements and schedules. The National Partnership thereafter named Deloitte as the new auditor for both housing projects, asserting authority to do so under § 5.08(b) in each partnership agreement. It notified plaintiff of this change by letter dated October 28, 1994. The magistrate judge found that plaintiff made no timely objection pursuant to the terms of the partnership agreements. 7 When defendants made a further request to review the books and records of the partnerships, plaintiff refused to give defendants access to those records and commenced the instant litigation on January 26, 1995 in state court. After removing plaintiff's suit to the Southern District of New York, defendants filed an order to show cause on March 10, 1995 seeking a temporary restraining order and preliminary injunction that would allow its chosen auditor to review the books and records so that the year-end 1994 financial statements could be prepared. District Court Judge Barrington D. Parker, Jr. held a conference on March 10, at which time plaintiff agreed to permit access to defendants and its representatives. The parties also agreed that Goldenberg, Rosenthal & Friedlander (Goldenberg) would conduct the year-end audit. When on March 22 plaintiff failed to abide by this agreement and afford defendants access, Judge Parker later issued an injunction granting defendants permanent access to the partnership books and records.