Opinion ID: 2284361
Heading Depth: 3
Heading Rank: 3

Heading: Kirstein's Joint and Several Liability on the Accounting

Text: Judge Weisberg entered judgment against Kirstein for nearly the full amount found to be due Farmer in the accounting, [46] holding Kirstein jointly and severally liable to the extent of Farmer's injury. Because Kirstein assumed a relatively passive role in the conduct in derogation of Farmer's rights as a partner, however, the judge required Farmer to attempt to execute the judgment against Beckman before seeking to enforce it against Kirstein. Kirstein contends that he committed no acts amounting to a breach of trust which harmed Farmer, and thus cannot be held liable for the judgment on a theory of direct tort liability. We hold there was sufficient evidence to support a finding that Kirstein breached his fiduciary duties independently, and so reject this contention. While Kirstein's breach of duty clearly renders him liable for some part of the judgment, however, this conclusion does not answer the question framed by Judge Weisberg as one of first impression in this jurisdiction: whether both Kirstein and Beckman can be held jointly and severally liable to the full extent of Farmer's injury resulting from a concerted course of disloyal conduct, where Kirstein was a relatively passive participant in Beckman's scheme to prevent Farmer from collecting his share of the expected Laker fee. Kirstein reasons that the judge apparently concluded that Farmer was in the same position as a third party creditor in holding Kirstein jointly and severally liable. Farmer argues that, as an expelled partner, he had the status of a creditor against the partners continuing the business, see D.C.Code §§ 41-140(f), -141, allowing him to proceed against both of them. We agree with Kirstein that these sections are inapposite, and afford no basis for the imposition of joint and several liability in the circumstances of this case. As we have previously concluded, dissolution was not caused by Farmer's explusion within the meaning of the Partnership Act, id. § 41-130(1)(D), but rather by Beckman's exercise of his right to dissolve the partnership at will. Id. § 41-130(1)(C). The partnership agreement made no provision for expulsion of a partner, see § 41-137(a), nor for continuation of the business following dissolution. Thus, whether Farmer was a partnership creditor depends on whether he elected to allow Beckman's and Kirstein to continue the business, thereby invoking the scheme for compensating him for his interest set out in § 41-141. To the contrary, as we held in Section II(B)(3), supra, Farmer elected to compel liquidation, and the collection of the Laker fee was part of the winding up of unfinished partnership business. Indeed, Beckman's and Kirstein's fiduciary duties to Farmer in completing work on the Laker fee settlement continued after dissolution because their acts occurred in the legal context of winding up, as opposed to continuing, the partnership business. Thus, sections of the Act dealing with the continuation of the business following expulsion of a partner are inapplicable. As the trial court recognized, however, the fiduciary nature of Kirstein's relationship with Farmer, and the jury's finding that he abused his position of trust and confidence, provide an independent legal basis for holding him liable for Farmer's entire injury. [47] When two or more tortfeasors contribute to produce a single injury, each may be held severally liable for the full amount of the judgment. Leiken v. Wilson, 445 A.2d 993, 999 (D.C.1982). In this situation, compensatory damages in tort are non-apportionable, regardless of whether the tortfeasors act separately or in conjunction with one another. Hill v. McDonald, 442 A.2d 133, 137-38 & n. 3 (D.C. 1982); Remeikis v. Boss & Phelps, Inc., 419 A.2d 986, 991-92 note (D.C.1980). As Judge Rutledge stated in a seminal decision: [w]hether [joint tortfeasors] act independently or in concert, the nexus between them and the person their acts combine to injure is not and has not been entire. Each is bound to him separately and for the full injury.... It is no defense for wrongdoers that others aided in causing the harm. Each is responsible for the whole. McKenna v. Austin, 77 U.S. App.D.C. 228, 233, 134 F.2d 659, 664 (1943). Here, the jury concluded that Beckman and Kirstein breached a legal duty owed to Farmer, thereby causing him an injury compensable by damages which the judge established to be equal to the amount due in the accounting. In entering judgment following trial of the legal claims, the judge correctly refused to apportion the judgment between the defendants. Recognizing that Kirstein's conduct may have been less culpable than Beckman's, however, he exercised his equitable powers to subordinate Kirstein's liability to Beckman's. [48] Kirstein further argues that he should escape liability because Beckman, not he, controlled dealings with Farmer and the disposition of the Laker fee. The record, however, shows that Kirstein acquiesced in Beckman's actions with full knowledge of the latter's intentions toward Farmer, that Kirstein had direct dealings with Farmer in which Farmer's demands for an accounting and the financial status of the firm were discussed, [49] and that Kirstein participated in the collection of the Laker fee settlement and in acts necessary to complete the transfer of the bank accounts. Each partner, including Kirstein, had a right to jointly control the business, as well as to compel an accounting and force a winding up in court after Beckman refused Farmer's repeated demands to do so. Breaches of fiduciary duty are not limited to affirmative acts; a failure to exercise rights, where there is a duty to do so, can constitute a violation. See Stern v. Lucy Webb Hayes Training School, supra, 381 F.Supp at 1014 (corporate director breaches fiduciary duty by failing to inform himself sufficiently to permit exercise of management authority, and by permitting negligent mismanagement by others). Although developed in the context of other fiduciary relations, the rule that a fiduciary is liable for the wrongful acts or omissions of a co-fiduciary when he connives at, participates in, or is negligent in failing to act to prevent them is properly applied to partners, who also owe one another special duties of loyalty and care. See 3A S. FLANAGAN & C. KEATING, FLETCHER CYCLOPEDIA OF THE LAW OF PRIVATE CORPORATIONS § 1089, at 146 (rev. perm. ed. 1986) (liability of corporate directors); Ralston v. Easter, 43 App.D.C. 513, 522-23 (1915) (trustee jointly liable for negligently allowing another to dissipate assets of trust); Lansburgh v. Parker, 41 App.D.C. 549, 553 (1914), quoting Colburn v. Grant, 16 App. D.C. 107, 113, aff'd, 181 U.S. 601, 21 S.Ct. 737, 45 L.Ed. 1021 (1900) (trustees liable for act of another if they, by their own voluntary co-operation or connivance, enabled some one or more of them to violate the trust). Under these circumstances, the passive tortfeasor is directly liable, and not merely an accessory under an attenuated theory of respondent superior or constructive notice. Stern, supra, 381 F.Supp. at 1014. [50] Finally, relying principally on Langness v. O Street Carpet Shop, 217 Neb. 569, 353 N.W.2d 709 (1984), Kirstein contends that even if he is properly found severally liable, his liability should be limited to the amount that came into his hands in excess of the partnership share to which he was entitled. Because he received no more than the amount to which the partnership agreement entitled him, he argues, he should not be held liable for any of Farmer's damages. In Langness, the Supreme Court of Nebraska upheld the imposition of several liability against partners in a case involving a deficient distribution following winding up, but ruled that each partner's liability should be no more than the excess he received over his proper share. Id. at 575, 353 N.W.2d at 714. The court noted that while it is true that partners are in a fiduciary relationship ... that proposition does not lead to the imposition of automatic joint liability of the defendant partners to the plaintiff partner for debts owing by the partnership to the plaintiff partner. Construing the counterpart to our Partnership Act's § 41-120, the court held that upon dissolution, each partner impliedly consents that his copartners receive their appropriate shares of the partnership assets. Anything one partner receives over his appropriate share is obtained without the consent of the other partners. Id. While Langness recognized that full joint liability was not an automatic consequence of retention of excess profits by certain partners, it by no means forecloses that result in appropriate circumstances. The excess profits held by the defendant partners in Langness were the product of good faith errors in the out-of-court accounting duly conducted after the business was wound up. Unlike the present case, there was no allegation of a complete refusal to wind up or account, nor any suggestion of bad faith or a concerted effort to deprive one partner of his rights. Indeed, in limiting the liability of each partner, the court specifically noted that this is not a case where it was pled or proved that Friedman and `O' Street Carpet engaged in a concerted fraud upon their partner Langness. Id. Although Judge Weisberg directed a verdict in Beckman's and Kirstein's favor on the fraud and civil conspiracy counts, we do not read Langness, or any other decision, [51] to hold that joint and several liability is only appropriate in the narrow circumstances where a technical conspiracy to defraud a partner is proven. As the judge noted, the gravamen of Farmer's claim was that a pattern of conduct by [Beckman and Kirstein], including alleged acts of deceit and wrongful refusal to account to Farmer for his partnership share, constituted a breach of their fiduciary duty to him. Given the jury's finding of Kirstein's knowing acquiescence and participation in Beckman's campaign to thwart Farmer's partnership rights, we conclude that imposition of joint and several liability was appropriate as a matter of law.