Partnership Agreements (Recent Development)

A law firm changed its partnership agreement by majority vote from accrual to cash basis. While state law provides that a unanimous vote is required to change any agreement between the partners, the provision of the partnership agreement trump the statute. The partnership agreement provided in general that majority vote governs, although several provisions provided for unanimous approval. The provision involved in the case did not provide for the higher standard. Bailey v. Fisch & Neave, 8 N.Y.3d 523 (5/8/07). Too often it’s only with hindsight that the implications of a provision are really understood. This case is a great caution to those rushing through governing documents and not giving them the care and thought needed.