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Shabbat Parashat Matot 5779

P'ninat Mishpat: A Disappointing Partnership part II

(based on ruling 70052 of the Eretz Hemdah-Gazit Rabbinical Courts)

Case: The plaintiff (=pl) was a consultant for the owner (=def3) of a company (=def2). They and two more partners decided to form a new LLC company (=def1), in America, providing the services def2 provides in Israel. The partners divided responsibilities; pl was responsible for financial planning. The principals first all worked from Israel, hiring workers for their Manhattan office. Because business was slower than expected, pl was sent with pay to run the company on site. Sales improved, but def1 remained unprofitable. Disagreements over how to proceed grew, and the other partners agreed to buy out pl’s share in def1 for $68,000. A few months later, they made def1’s operations off limits to pl; now, def1 is being closed. Pl demands to receive the $68,000 plus expenses, arguing that he worked harder than he should have (the others, especially def3, did not do their fair share) and almost succeeded in saving def1. The defendants respond that pl exaggerated his qualifications and was not capable of doing the job properly, did not work with the necessary diligence, and did not meet the earning targets. The internet site was unprofessional; he did not do the proper bookkeeping; he did not report records to the IRS, which caused a $7,000 fine. He also damaged relationships with some clients of def2. The partners excluded pl from def1 when pl threatened to join a competitor of def2. The $68,000 offer was never signed and was contingent on a signed agreement with a non-competition clause, which pl refused to sign. They also learned later about further damages done by pl. The defendants demand the return of $304,140 of salary and expenses.

 

Ruling: [Last time we saw that there was no binding agreement to buy out pl’s share and that pl cannot be blamed for the company’s overall failure.]

  Even if pl is not blamed for losses, does he receive less due to lack of revenues? On the one hand, the Tosefta (Bava Metzia 4:22) says that one cannot extract payment from someone who was supposed to have invested another’s money and did not. On the other hand, the gemara (Bava Metzia 73b) says that one who was supposed to have bought wine for his friend and did not (causing a lost opportunity to earn) must pay. The Chatam Sofer (Choshen Mishpat 178) says it depends how sure the earnings were. In this case, one cannot be at all confident that changing strategies would have had a serious impact. (We note that pl’s replacement claimed he made many improvements, and yet def1’s situation did not change much.)

Regarding the fine for not reporting to the IRS, pl’s claim that reporting is necessary only when there are net profits is unreasonable. However, since such matters were under another partner’s job description, even if he relied on pl to do it, he was required to ensure it occurred.

The defendants’ removing access to pl was an insult, but there were grounds for it, since there was great tension and fear of giving information to competitors. The majority of the partners have a right to do such a thing due to a real need (they would have had to give pl access to certain information because he was a partner).

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Dedication

We daven for a complete and speedy refuah for:

 

Nir Rephael ben Rachel Bracha
Refael Yitchak ben Chana

Netanel Ilan ben Sheina Tzipora

Netanel ben Sarah Zehava

Yehuda ben Chaya Esther

Meira bat Esther

Yair Menachem ben Yehudit Chana

Rivka Reena bat Gruna Natna

David Chaim ben Rassa

Lillian bat Fortune

Yafa bat Rachel Yente

Eliezer Yosef ben Chana Liba

Ro'i Moshe Elchanan ben Gina Devra

 

Together with all cholei Yisrael

 

Hemdat Yamim is dedicated

to the memory of:

those who fell in wars

for our homeland

Eretz Hemdah's beloved friends

and Members of

Eretz Hemdah's Amutah

Rav Shlomo Merzel z”l
Iyar
  10

Rav Reuven Aberman z"l

Tishrei 9 5776


Mr. Shmuel Shemesh  z"l
Sivan 17 5774

R' Eliyahu Carmel z"l

Rav Carmel's father

Iyar 8 5776


Mrs. Sara Wengrowsky

bat R’ Moshe Zev a”h.

Tamuz 10   5774


Rav Asher Wasserteil z"l

Kislev 9 5769

R'  Meir ben

Yechezkel Shraga Brachfeld z"l


R'  Yaakov ben Abraham & Aisha

and

Chana bat Yaish & Simcha

Sebbag, z"l


Rav Yisrael Rozen z"l
Cheshvan 13, 5778


Rav Benzion Grossman z"l
Tamuz 23 5777

 

Rav Moshe Zvi (Milton)

Polin z"l

Tammuz 19, 5778

 

Mina Presser bat Harav David and Bina

on the occasion of her yahrzeit, 24 Tammuz

and members of her family

who perished in the shoah

Al Kiddush Hashem.

 

R' Abraham Klein z"l

18 Iyar 5779

 

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in loving memory of
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