Opinion ID: 396498
Heading Depth: 1
Heading Rank: 1

Heading: summary of the facts found by the trial court

Text: 3 After a bench trial, District Judge Harold Greene found the following: 1 In 1971 appellants Cahill and Kaswell joined an Oakland, California, law firm owned by appellee Farrow for the purpose of opening a Washington, D. C., branch office. Cahill and Kaswell joined the firm, not as partners, 2 but as employees who were paid a share of the net profits of the firm. They then opened and operated a Washington branch office, but over time, as sometimes happens when a branch office is located far from the home office, friction developed between the Washington and Oakland offices. Finally, in 1974 Cahill and Kaswell decided it was time to break away from Farrow, to form their own partnership, and to strike out on their own in Washington. To this end they flew to Oakland in November 1974 to negotiate the terms of the break and to buy the Washington practice from Farrow. In Oakland, after a meeting at which Kaswell, Cahill, Farrow and another member of the Oakland office, Dent, were in attendance, an arrangement was worked out and a handwritten Memorandum Agreement drawn up. This agreement, 3 which contained a clause specifying that its effectiveness depended on the consent of all present members of the firm, was not executed before Cahill had to leave the meeting to return to Washington. As a result, only Kaswell, Farrow and Dent signed it. The agreement provided that Cahill and Kaswell would take over the Washington practice, assume the assets and liabilities of the Washington office, and operate it as a separate entity; in return they would pay Farrow a percentage of their gross receipts. 4 Cahill never did get around to signing the document, although, as Judge Greene found, he consented to it by acting in all respects as if the agreement were in effect 4 by, for example, accepting the benefit of the Washington assets, billing Farrow for charges for which Farrow was responsible under the agreement, permitting another member of the Oakland firm, Schildhause, to retain certain furnishings and equipment that, under the agreement, were not to be transferred to the new Washington partnership, and even making an initial payment to Farrow as required by the agreement. 5 5 Soon, however, the payments due Farrow stopped coming. Farrow then brought this action in the United States District Court for the District of Columbia to enforce the agreement, or alternatively, to obtain compensation for the conversion of his interest in the Washington practice. Cahill and Kaswell counterclaimed on the theory that they had been partners in Farrow's firm, not his employees, and that Farrow had breached his fiduciary duty to them as the partnership's principal administrator. They sought an accounting of receipts and expenses of the firm from 1971 through 1974. 6 After trial, Judge Greene dismissed the counterclaim, 6 finding that since Farrow owned the firm he did not owe to the defendants the fiduciary duty of a partner, 7 and moreover that, in any event, the defendants (had) failed to meet their burden of establishing injury due to Farrow's handling of the firm during the four years they were associated. 8 Judge Greene decided the contract claim in Farrow's favor, 9 holding that Cahill had consented to the agreement by his subsequent conduct despite his failure to sign it and that enforcement of the agreement was not barred by the Statute of Frauds. Judge Greene then went on to rule in the alternative that even if the contract had been unenforceable the result of the case would be unchanged because Cahill and Kaswell, by assuming exclusive operation of the Washington office, would then have converted Farrow's property interest in it. By an order dated 30 April 1979 10 Farrow was awarded $44,380 in damages, and by a further order dated 4 June 1979, 11 an additional $6,766.32 in interest to cover the period between November 1974 and the date of judgment. Farrow was also awarded any interest at 6% per year accruing between the date of judgment and payment. 7 Cahill and Kaswell now appeal to this court. They reiterate their affirmative claim to an accounting, based on their assertion that Farrow owed them the fiduciary duties due partners. 12 In defense against Farrow's claims, they argue that an accounting should be ordered to determine whether their agreement with Farrow should be set aside because his conduct did not comport with the high standards imposed on partners. 13 In addition, they argue for the first time on appeal that because Farrow failed to show at trial that the other members of the Oakland office consented in 1974 to the terms of the Memorandum Agreement as required by the clause requiring the consent of all present members of the firm, he failed to establish that it had ever become effective. 14 They further argue both (1) that even if Farrow had proven that the agreement had become effective it could not be enforced because of the bar presented by the Statute of Frauds; 15 and (2) that if the agreement could not be enforced, Farrow failed not only to make out a prima facie case of conversion but also to prove tort damages, so the trial court's alternative finding that damages could be awarded for conversion was also erroneous. 16 8