Douglas E. Rosenthal and Constantine Cannon, LLP v. Sonnenschein Nath & Rosenthal, LLP

Summary

The District of Columbia Court of Appeals reviewed consolidated appeals arising from a law partner’s compensation dispute with his former firm concerning work related to the Libya litigation. The court held that the partner was barred from challenging his compensation for the 2003–2004 period, but that sufficient evidence supported his claim for breach of the implied covenant of good faith and fair dealing for 2005–2006. It also held that he could recover damages despite leaving the firm, ordered a new trial on damages or an election to accept the adjusted jury verdict, and reversed the judgment for tortious interference against him and his new firm.

Holdings

1. Rosenthal's execution of Schedule A incorporated and accepted the stated compensation number as a term of the partnership agreement, foreclosing his challenge to the 2003-2004 compensation period.
2. The evidence supported the jury's finding that SNR breached Delaware's implied covenant of good faith and fair dealing by applying its compensation criteria arbitrarily or unevenhandedly to Rosenthal.
3. Rosenthal's departure from SNR did not bar him from recovering damages for the 2005-2006 period after SNR breached the implied covenant, although damages had to be mitigated by compensation received from SNR and Constantine Cannon.
4. The trial court improperly excluded Rosenthal's lay opinion and accountant Napolitano's expert calculations concerning the compensation Rosenthal should have received; the error was not harmless and required a new trial on 2005-2006 compensatory damages.
5. The record did not support punitive damages because the evidence did not establish, by clear and convincing evidence, outrageous conduct accompanied by evil motive, actual malice, or willful disregard of Rosenthal's rights.
6. Summary judgment for SNR on Rosenthal's mandatory-retirement claim was proper because the equity partners validly changed the retirement age to 65 and the record did not show that the amendment was ineffective.
7. The agreement unambiguously barred Rosenthal from receiving retirement benefits while practicing law in New York, where SNR maintained an office, without the required partner consent.
8. Rosenthal could not pursue quantum meruit or unjust enrichment for his Libya-related work because the partnership agreement governed his compensation in its entirety.
9. SNR could not recover its attorney fees and expenses through a tortious-interference claim because the prior fee litigation was against Constantine Cannon and Rosenthal, defendants in the present action, and SNR did not satisfy the wrongful-involvement-in-litigation exception to the American Rule.

Questions Presented

1. Whether Rosenthal's execution of a Schedule A incorporated into the partnership agreement precluded him from challenging his compensation for the 2003-2004 period.
2. Whether sufficient evidence supported the jury's finding that SNR breached Delaware's implied covenant of good faith and fair dealing in setting Rosenthal's 2005-2006 compensation.
3. Whether Rosenthal's departure from SNR barred recovery of damages for the remainder of the 2005-2006 contract period.
4. Whether the trial court improperly excluded lay and expert testimony concerning the amount of compensation Rosenthal should have received, requiring a new trial on damages.
5. Whether the record supported punitive damages based on Rosenthal's fiduciary-duty claim.
6. Whether Rosenthal could obtain damages for alleged breach of the partnership agreement's mandatory-retirement provision or declaratory retirement benefits while practicing law for a competing firm.
7. Whether SNR's tortious-interference counterclaim was an impermissible attempt to recover attorney fees under the wrongful-involvement-in-litigation exception to the American Rule.
8. Whether Rosenthal could pursue quantum meruit or unjust enrichment despite the governing partnership agreement.

Disposition

reversed_and_remanded