Courtesy of Professor Bainbridge, here is a scholarly discussion about whether a law firm partnership breaches its duty of loyalty to its partners by firing "less productive" partners in order to increase firm profitability. The discussion was prompted by the recent wholesale demotion or termination by the Mayer, Brown firm of 45 partners. Below is an excerpt from the post with reference to the classic and timeless prose of Judge Cardozo describing fiduciary duties of partners:
… suppose Mayer, Brown’s partnership agreement did not include "guillotine" expulsion provision [allowing for expulsion without cause by a 2/3 vote.] Would terminating or demoting partners for the sole purpose of making the firm more profitable be a breach of the duty of loyalty partners owe one another? Recall that in Meinhard v. Salmon … Judge Cardozo wrote that:
"Joint adventurers, like copartners, owe to one another, while the enterprise continues, the duty of the finest loyalty. Many forms of conduct permissible in a workaday world for those acting at arm’s length, are forbidden to those bound by fiduciary ties. A trustee is held to something stricter than the morals of the market place. Not honesty alone, but the punctilio of an honor the most sensitive, is then the standard of behavior."
Did Mayer, Brown comport itself with "the punctilio of an honor the most sensitive"? Is that really the relevant standard?
UPDATE: Prof. Larry Ribstein weighs in here with his prior scholarly writings on the topic.