Brennan v. Brennan Associates
977 A.2d 107, 2009 Conn. LEXIS 281, 293 Conn. 60 (2009)
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Rule of Law:
A partner's conduct, including past criminal acts unrelated to the partnership, may constitute grounds for judicial expulsion if it currently causes an irreparable deterioration of the relationship between partners, creating such distrust and animosity that it is no longer reasonably practicable to carry on the business with that partner.
Facts:
- In 1984, Thomas Brennan, Richard Aiello (decedent), Alexander Aiello, and Serge Mihaly formed a partnership, Brennan Associates, to manage a shopping center.
- The decedent managed the partnership's daily operations and held significant voting power until his death in December 2004.
- Following the decedent's death, significant disputes arose among the surviving partners over check-signing authority, access to records, and management decisions.
- Brennan sought to maintain sole check-signing authority and engaged in a campaign of obstructing the wishes of the other partners.
- Brennan accused partner Alexander Aiello and an administrator of the decedent's estate of committing insurance fraud, but never produced any evidence to support the accusation.
- During the dispute, partners Aiello and Mihaly learned the true nature of Brennan's 1989 federal felony conviction for tax fraud, which involved keeping a double set of books and failing to report $1 million in income.
- Brennan had previously misrepresented the severity of this conviction to his partners and continued to downplay its significance during the present litigation.
- The relationship between Brennan and the other partners deteriorated into one of mutual distrust and acrimony, leading to an impasse on important business issues.
Procedural Posture:
- Thomas Brennan sued Brennan Associates, the other surviving partners (Alexander Aiello and Serge Mihaly), and the administrators of a deceased partner's estate in a Connecticut trial court.
- Brennan sought, among other things, a declaratory judgment regarding the deceased partner's interest and an injunction granting him access to partnership records.
- Defendant partners Aiello and Mihaly filed a counterclaim seeking a judicial determination to expel Brennan from the partnership pursuant to General Statutes § 34-355 (5).
- Following a bench trial, the trial court granted the counterclaim to expel Brennan and denied his request for an injunction.
- The trial court later ruled that it could not conduct a valuation proceeding for Brennan's interest, concluding that statutory law grants that right of action only to the dissociated partner.
- Brennan, as appellant, appealed the judgment expelling him and denying the injunction to the Connecticut Supreme Court.
- The defendants, as cross-appellants, cross-appealed the trial court's refusal to conduct the valuation proceeding.
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Issue:
Does a partner's past felony conviction, combined with current acrimonious behavior and causing distrust among partners, constitute 'conduct relating to the partnership business which makes it not reasonably practicable to carry on the business in partnership with the partner' under General Statutes § 34-355 (5) (C), thereby justifying judicial expulsion?
Opinions:
Majority - Katz, J.
Yes. A partner's past felony conviction, combined with current acrimonious behavior and causing distrust among partners, constitutes 'conduct relating to the partnership business which makes it not reasonably practicable to carry on the business in partnership with the partner' and justifies judicial expulsion. The court reasoned that while Brennan's 1989 conviction, standing alone, might not be conduct 'relating to the partnership,' it became highly relevant when viewed in the context of his current conduct. Brennan's present adversarial actions, including making baseless fraud accusations against a partner and obstructing business, created an atmosphere of pervasive mistrust. His lack of candor about the past conviction, which concerned financial honesty, reasonably caused his partners to lose all trust in him, particularly now that he was in a position to exercise more control over the partnership's finances. The court concluded that an irreparable deterioration of the relationship between partners is a valid basis for the remedy of dissociation, just as it is for dissolution, as it makes it 'not reasonably practicable' to continue the business together.
Analysis:
This decision clarifies the scope of conduct that can justify the judicial expulsion of a partner, establishing that past, unrelated misconduct can become relevant if it directly contributes to a current, irreparable breakdown of trust. By equating the standard for judicial dissociation ('not reasonably practicable') with the identical standard for judicial dissolution, the court affirms that dissociation is a viable alternative to dissolving an otherwise healthy business. This precedent allows remaining partners to expel a member whose behavior has destroyed the essential foundation of trust, thereby preserving the partnership entity. It signals that courts will look at the totality of circumstances, including a partner's character and honesty as it affects the present business relationship, rather than narrowly focusing only on conduct that occurs within the partnership's direct operations.
