Appeals Court upholds attorney’s $309K debt to ex-law partner

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In brief

• Appeals Court affirmed a $308,824 judgment tied to a law firm side agreement
• Court found no valid amendment due to lack of “meeting of the minds”
• Defendant’s breach and good faith claims were rejected at summary judgment and trial
• Ruling emphasizes strict interpretation of partnership and contract terms

A lawyer who terminated a partnership could not avoid paying his former partner a $309,000 debt arising under a side agreement between the parties based on his claims that the ex-partner himself was in breach of agreements governing their Norwood firm, an Appeals Court panel has ruled in affirming a lower court judgment.

Plaintiff Richard L. Wulsin and defendant Mark F. Murphy were partners at Wulsin & Murphy, a firm formed in 2005. In 2015, Murphy invoked his right to terminate the partnership.

Wulsin responded with a suit alleging that Murphy was in breach of contract for failing to pay him a $308,824 debt that accrued in the early days of the firm’s formation under a side agreement addressing the terms of the defendant’s compensation.

The side agreement guaranteed the defendant a minimum income during the firm’s first two years of operation. But it also included a proviso that the defendant would repay the plaintiff the difference whenever the amount of his earned fees fell below his guaranteed minimum.

The defendant asserted various counterclaims, the gist of which alleged the plaintiff was in breach of contract himself, relieving the defendant of any obligation to pay the so-called “guaranteed payment amount” due under the side agreement.

In March 2023, Superior Court Judge Hélène Kazanjian granted the plaintiff summary judgment on his contract claim, concluding that he was owed $308,824.16. Following a bench trial, Kazanjian in November 2023 entered judgment for the plaintiff on the defendant’s counterclaims.

On appeal, the defendant argued that through a series of email exchanges discussing the “future” of the firm, the parties had amended the side agreement to extend the time for him to repay the debt, and the plaintiff had breached the amended agreement by demanding payment in January 2016.

In affirming the judgment below, the Appeals Court panel rejected that argument.

“In the ‘future’ e-mails, Richard [Wulsin] and Murphy began a series of negotiations about the future structure of the firm, but did not ‘reach a “meeting of the minds” as to the material terms of a modification,’” the panel wrote in an unpublished decision.

The panel further rejected the defendant’s argument that the plaintiff breached the partnership agreement by making a capital contribution in bringing his daughter, Rachel Wulsin, in as a partner and conspiring to reduce the defendant’s role at the firm.

“The partnership agreement makes no mention of capital contributions and does not set forth a procedure for adding new partners,” the panel wrote. “Unsurprisingly, then, Murphy has failed to identify the term or terms Richard has violated, and we are likewise unable to discern any violation.”

The 15-page decision is Wulsin v. Murphy, Lawyers Weekly No. 81-038-26.

‘Revisionism’ rejected

Plaintiff’s counsel Christian G. Samito of Boston said in an email the case confirms that, “just as in contract formation, contract amendment requires a meeting of the minds as to all material terms.”

Moreover, Samito wrote, “the court will not accept one party’s revisionism when it contradicts a clear written record.”

The dispute should be a reminder that small firms in particular are affected when a partner decides to retire, Samito said.

Just as in contract formation, contract amendment requires a meeting of the minds as to all material terms.

— Christian G. Samito, Boston

“My advice is having clear partnership documents in place in advance and, as we saw in this case, even that is no guarantee against litigation,” he wrote. “When a partnership dissolves, it’s helpful for the parties to create a written record of agreement as to each step along the dissolution process. That documentation proved key as I litigated this case.”

Defense counsel David C. Aisenberg of Boston did not respond to a request for comment.

But Boston civil litigator David R. Suny called the decision a “fair ruling.”

“It seems the Appeals Court wanted to defer to the extensive factual findings of the lower court,” Suny said. “From a high-level perspective, the court did not want to ‘rewrite’ provisions in the parties’ partnership agreement. And that’s why the plaintiff prevailed.”

Suny said he found noteworthy the manner in which the court addressed the defendant’s counterclaim for breach of an implied covenant of good faith and fair dealing.

“Oftentimes, attorneys use the covenant of good faith and fair dealing in an attempt to add rights and obligations into agreements,” Suny said. “But the way Massachusetts interprets the covenant of good faith and fair dealing is far narrower than that. The covenant really deals with how you perform existing, known rights and obligations rather than filling in a blank in an agreement and creating a right that doesn’t exist.”

Benjamin J. Wish, a business litigator in Boston, said the case seemed like an “unfortunately common scenario” in which a law firm partner, or a partner in any business for that matter, thinks they are going to succeed beyond the terms of the original agreement.

Oftentimes, attorneys use the covenant of good faith and fair dealing in an attempt to add rights and obligations into agreements. But the way Massachusetts interprets the covenant of good faith and fair dealing is far narrower than that.

— David R. Suny, Boston

“And then find that they don’t have the means to satisfy their obligations,” he said.

Wish called the Appeals Court’s ruling “a fairly good signpost for anyone” that even though you can get to a written agreement through emails, “you still need to be surgical about exactly what the terms are and about everyone being in agreement.”

End of partnership

According to court records, the parties launched their law firm in 2005 with the execution of a one-page partnership agreement. The agreement authorized either partner to terminate the partnership with 30 days’ written notice. A side agreement executed at the same time set forth the terms under which the defendant would owe the plaintiff a guaranteed payment amount. Under the terms of the side agreement, the defendant was required to repay accrued debt to the plaintiff “no later than” Dec. 31, 2015.

The defendant claimed that the side agreement was amended to extend the repayment date for five to 10 years through a series of e-mails with the subject line “RE: THE FUTURE” that the parties exchanged between June 19 and July 1, 2014.

In those emails, the plaintiff expressed his plans to wind down his practice and hand the firm over to the defendant, the plaintiff’s daughter, Rachel, and the plaintiff’s son, Seth.

The plaintiff also raised the subject of the guaranteed payment amount the defendant owed him. In response, the defendant suggested he be allowed to repay his debt to the plaintiff from the bonuses he would receive from a firm “bonus pool.”

The defendant invoked his right to terminate the partnership in the latter half of 2015.

In the parties’ subsequent litigation, while the defendant maintained he had no repayment obligation under the side agreement, the parties did agree that the guaranteed payment amount that accrued pursuant to the terms of the side agreement was $308,824.16.

Following Kazanjian’s entry of judgment for the plaintiff, Superior Court Judge Peter B. Krupp, sitting in the Business Litigation Session, denied the plaintiff’s request for an appeal bond as additional security for his money judgment against his former partner.

No breach of implied covenant

In addition to finding no merit to the defendant’s contention that he was not obligated to repay his debt because the plaintiff had breached the parties’ agreements, the panel rejected the defendant’s claim that the plaintiff had breached the covenant of good faith and fair dealing implied in those contracts.

Specifically, the defendant complained that the plaintiff deprived him of the opportunity to pay the guaranteed payment amount from his future bonuses. Further, the defendant claimed the plaintiff reneged on his alleged agreement to extend the repayment date in exchange for the defendant’s acceding to Rachel Wulsin becoming a partner at the firm.

The lower court granted the plaintiff’s motion for summary judgment on the basis that those claims failed in the absence of a showing that he had breached either the partnership agreement or the side agreement.

The panel found no reason to disturb the judgment below, pointing to the inability of the defendant to identify any provision in either agreement that the plaintiff breached.

“‘The implied covenant of good faith and fair dealing does not create rights and duties not otherwise provided for in the existing contractual relationship,’” the panel wrote. “While the parties could have included terms for making capital contributions or adding partners to the firm, they did not. And the summary judgment record does not support Murphy’s claim that he and Richard agreed to amend the side agreement to extend the due date of the guaranteed payment amount in exchange for Murphy’s vote to make Rachel a partner. In the absence of any such provision in either the partnership agreement or the side agreement, Murphy ‘may not insert these conditions … through the side door of the covenant of good faith and fair dealing.’”

Moreover, the panel found nothing in the summary judgment record suggesting the plaintiff interfered with the defendant’s performance under either of the agreements in question.

“To begin with, Murphy did not have a ‘reasonable expectation’ of continued access to the bonus pool, considering that the terms of the partnership agreement permitted either party to terminate the partnership at will with thirty days’ notice,” the panel wrote. “In any case, it was Murphy — not Richard — whose actions precluded using the bonus pool to cover the guaranteed payment amount when he elected to terminate the partnership.”