SW Legal Educational Publishing

Partnership Forfeiture Clause Not Enforceable
Description Law partnership agreement that required partners to forfeit any ownership value claims in the partnership, when a partner voluntarily withdrew to go into competition with the partnership, declared void as harmful to clients' interests.
Topic Business Organizations
Key Words Partnerships, Forfeiture, Noncompetition Agreement
C A S E   S U M M A R Y
Facts Pettingill was a partner in a law firm for several years when he signed a partnership agreement that was in effect when he later withdrew from the firm. The agreement stated that if a partner voluntarily withdraws and "engages in any activities which are in competition with the then current activities of the firm, he shall forfeit all of the benefits" that would have been due had he not gone into competition with his former firm. Pettingill's firm refused to pay him the value of his partnership share. The issue before the Massachusetts high court was if the forfeiture clause is enforceable.
Supreme Judicial Court Decision The forfeiture clause is not enforceable; Pettingill will be paid the value of his partnership share. The clause violates the ethical canons of the bar as is void as against public policy. "We generally enforce noncompetition agreements between employers and former employees to the extent they are reasonable." Most states do not permit noncompetition agreements among lawyers. Massachusetts does not permit such agreements among physicians either. "The concern here is to protect the clients and potential clients of the withdrawing lawyer and the law firm." Such clauses "would tend to restrict a client or potential client's choice of counsel."
Citation Pettingill v. Morrison, Mahoney & Miller, ---N.E.2d--- (1977 WL 757883, Sup. Jud. Ct., Mass.)
687 N. E. 2d 1237 (Sup. Jud. Ct., Mass., 1997)

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