John Haymond (plaintiff), Robert Hochberg, and Marvin Lundy (defendant) founded the law firm partnership Haymond & Lundy (H&L) in October 1997. The partnership agreement provided that a partner must get the approval of a majority of the partners before purchasing or disposing of a material asset exceeding $10,000 in value. John Kelly was injured in an accident. He initially retained attorney Emmett Fitzpatrick to represent him in a personal injury action. After Fitzpatrick filed the complaint, Kelly said he no longer wanted Fitzpatrick’s services and turned to Lundy and H&L instead. Without consulting the other partners, Lundy contacted Fitzpatrick and promised to pay a referral fee out of any trial proceeds. The case settled for nearly $2.5 million, including attorney’s fees of $996,500. In satisfaction of their referral agreement, Lundy paid Fitzpatrick $150,000. H&L dissolved in October 1999. The partners’ various liabilities regarding partnership business were ultimately sorted out in court. Haymond and Hochberg alleged that the referral fee was not a liability of the partnership because Lundy lacked authority to pay it without majority approval. Lundy countered that the referral fee was not a material asset. No evidence of the firm’s prior treatment of referral fees was presented.