Court Opinion

ID: 9715644
Source: CourtListenerOpinion
Date Created: 2023-08-26 06:10:43.647346+00
Date Added: 2024-06-11T18:21:43.206948
License: Public Domain

JUSTICE HEIPLE, specially concurring: This is an accounting suit between two lawyers named Cohn and Flynn who, after 16 years of partnership, entered into a dissolution of the law firm. The majority opinion affirms the trial court’s adoption of attorney Flynn’s mathematical formula for allocating profits from fees earned during the wind-up period. The formula is defective and its application produces the wrong result. The application of a correct formula would increase the dollar figure payable to appellee Flynn and reduce the figure paid to appellant Cohn. Yet Cohn seeks reversal and Flynn seeks affirmance. In other words, if appellant Cohn were to win this appeal and a correct formula were to be applied, it would cost him a substantial amount of money in favor of his ex-partner, appellee Flynn. Neither Cohn nor Flynn, in my opinion, presented a correct formula to the trial court. The resulting error was thereby invited by the two of them. The fundamental problem with their suggested approaches, and the approach adopted by the trial court, is that they seek to distribute losses when in actuality there are profits to be divided. Since appellant Cohn would lose money by winning the reversal he seeks and since appellee Flynn, who would lose money by the affirmance, asks that the decision be affirmed, and since both invited the error, I concur in the result but not the rationale. Should anyone care for a further explanation, I begin with the most basic tenant of partnership law: absent an express agreement to the contrary, profits are shared equally. Such was the agreement of the parties. This principle is not altered during the wind-up period. Therefore, any formula used to allocate profits should result in equal treatment for both parties after dissolution. Such was not obtained in this case. The trial court found that 62.64% of gross income by the partnership was spent on overhead. Such finding was not against the manifest weight of the evidence, and should stand. The trial court then quite correctly multiplied this overhead factor times the gross profit generated by each case. So far so good. Then, however, the trial court fell into error when it began to allocate overhead between the partners. Since fees exceeded overhead, the only calculation that was needed was to deduct the overhead from the fees and then to divide the fees equally. Thus, it follows that the trial court also erred by taking into account the number of months that cases spent in each office. Overhead is overhead; when profit exceeds it, it does not matter where overhead is spent. A proper formula would just deduct total overhead expended from gross fees collected to determine the net fees collected by each partner. As noted in the majority opinion, during the wind-up of the partnership, Flynn handled 37 cases and generated $37,000 in fees. Cohn handled 140 cases and generated $531,233 in fees. Total gross fees of both partners amounted to $568,233. Had the overhead factor been simply applied to the gross fees to produce the total net fees and the total net fees then divided equally, the calculations would have been as follows: overhead applied to Flynn’s gross fees of $37,000 produces net fees of $13,823.20. Overhead applied to Cohn’s gross fees of $531,233 produces net fees of $198,468.65. Adding the two partners’ net fees together indicates total ° net fees subject to division of $212,291.85. Each partner was entitled to one-half of the total net fees for a net individual entitlement of $106,145.92. Since Cohn had retained net fees of $198,468.65 and Flynn had retained net fees of $13,823.20, Cohn owed Flynn $92,322.72. Such payment from Cohn to Flynn would result in equal net fees to each partner of $106,145.92. Under the formula approved by the trial and appellate courts and affirmed by this court, however, Flynn receives only $79,147.16 from Cohn, a shortfall of $13,175.56. So, we have a paradox. The appellant, Cohn, loses his appeal but comes out $13,175.56 better off than if he had won. The appellee, Flynn, wins the appeal but comes out with $13,175.56 less than if he had lost. That, at least, is the opinion of this writer with which, most likely, Messrs. Cohn and Flynn, if I judge them correctly, will not agree. As a final comment, I note that the majority opinion does not address Cohn’s contention that equity requires extra compensation for him since he did the lion’s share of the work. Suffice it to say that Cohn was correctly denied extra compensation. His claim is based on the substantial disparity of workload which he claims resulted from case-dodging by plaintiff. The trial court found that the disparity was not due to a lack of responsibility on Flynn’s behalf, but rather was consistent with the historical practices of the partnership. There is no reason to disturb that finding. Absent an agreement, courts will not attempt to equalize compensation between equal partners commensurate with services. For the above reasons, I specially concur.