Procedural Posture

Procedural Posture

Plaintiffs appealed from a judgment of the Superior Court of Los Angeles County, California, granting a motion for judgment on the pleadings in favor of the defendants in an action following a dissolution of a partnership.

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Overview

Two partners withdrew from a law partnership and took the firm’s largest client with them. Plaintiffs, the remaining partners, dissolved the firm and sued defendants, the departing partners and their new firm, for declaratory relief, accounting, breach of fiduciary duty, and breach of contract. The trial court found that plaintiffs had a fiduciary duty to complete some of the unfinished business but had failed to do so, and therefore had failed to “do equity.” On appeal, the court reversed the trial court’s decision barring plaintiffs recovery. The equitable maxim to “do equity” was not a complete defense in an accounting action and did not preclude the recovery of damages. The trial court made no effort to quantify the damages caused by the plaintiffs’ inequitable conduct, as the “do equity” doctrine required. There was no legal basis to deny all relief under the “do equity” doctrine, and the trial court had no discretion to do so.

Outcome

Judgment was reversed and remanded. The equitable maxim to “do equity” was not a complete defense in plaintiffs’ accounting action and did not preclude the recovery of damages.