A former equity partner withdrew from an accounting partnership and joined a competing firm, triggering a liquidated damages clause requiring payment equal to two times the partner’s “permanent capital.” The dispute concerned whether shareholder loans made through a related corporation formed part of “permanent capital” under the partnership agreement.
The court interpreted the agreement according to its plain language and held that permanent capital was equivalent to the partner’s capital account in the partnership, which had been equalized to $10,000 and did not include shareholder loans.
The plaintiff was therefore liable for $20,000 in liquidated damages but was entitled to repayment of capital, profit share, shareholder loan amounts, and related payments.
Allegations of fiduciary misconduct and various counterclaims by the partnership, including claims for suppressed work‑in‑progress and loss of opportunity damages, were rejected.
