9 N.Y.3d 514 (2007)
Partnership Law § 26(b) does not shield a general partner in a registered limited liability partnership from personal liability for breaches of the partnership’s or partners’ obligations to each other.
Summary
Ederer, a partner, withdrew from the law firm Gursky & Ederer, LLP, a registered limited liability partnership (LLP). He sued the LLP and its partners, including Gursky, for an accounting and breach of their withdrawal agreement. The defendants argued that Partnership Law § 26(b) shielded the individual partners from personal liability. The New York Court of Appeals held that § 26(b) protects partners from liability for the debts of the LLP to third parties, not from their obligations to each other as partners. Thus, Ederer could pursue his claims against the individual partners.
Facts
Louis Ederer joined the law firm Gursky & Associates, P.C., which became Gursky & Ederer, P.C. (the PC). Ederer became a 30% shareholder in the PC. The PC later became a registered limited liability partnership, Gursky & Ederer, LLP (the LLP). Ederer withdrew from the LLP and sought an accounting and asserted breach of the withdrawal agreement. The PC was dissolved on June 30, 2003. Ederer withdrew from the LLP on or about July 4, 2003.
Procedural History
Ederer sued the PC, the LLP, and individual partners, including Gursky, for an accounting and breach of contract. The defendants moved to dismiss the claims against the individual partners, arguing that Partnership Law § 26(b) shielded them from personal liability. Supreme Court denied the motion. The Appellate Division affirmed. The Court of Appeals granted leave to appeal.
Issue(s)
Whether Partnership Law § 26(b) shields a general partner in a registered limited liability partnership from personal liability for breaches of the partnership’s or partners’ obligations to each other.
Holding
Yes, because Partnership Law § 26(b) only protects partners from vicarious liability for the debts of the partnership to third parties, not from their obligations to each other as partners.
Court’s Reasoning
The Court of Appeals reasoned that the purpose of Partnership Law § 26(b) was to provide limited liability for partners in LLPs similar to that enjoyed by shareholders in professional corporations. The court emphasized that the phrase “any debts” in § 26(b) must be interpreted in the context of the entire section, which governs a partner’s liability to third parties, not to other partners. The court stated, “[t]his argument ignores, however, that the phrase ‘any debts’ is part of a provision (section 26) that has always governed only a partner’s liability to third parties, and, in fact, is part of article 3 of the Partnership Law (‘Relations of Partners to Persons Dealing with the Partnership’), not article 4 (‘Relations of Partners to One Another’).” The court also noted that Partnership Law § 74, which grants a partner the right to an accounting, was not made subject to § 26(b) or § 26(c), indicating that the legislature did not intend to qualify the right to an accounting in this manner. The court emphasized that the law of partnerships contemplates a written agreement among partners specifying the terms of their relationship. The Partnership Law’s provisions are, for the most part, default requirements that come into play in the absence of an agreement. The dissent argued that the text of Partnership Law § 26 (b) seemed clear and that a former partner is a third party where the partnership is concerned, and there is no good reason to treat him more favorably than any other third party.