Overland v. Scheper Kim & Harris LLP

Former partner Mark Overland (plaintiff) sued law firm Scheper Kim & Harris LLP (defendant) claiming he was entitled to a payout of 25 percent of the firm’s value upon leaving the firm. Overland was one of four partners who originally formed the partnership as Overland Borenstein Scheper & Kim LLP. The firm never had a written partnership agreement or even a comprehensive oral agreement. The partners made decisions by consensus, giving each partner an equal say. The firm did not require capital contributions or retain working capital from year to year and always distributed profits to each partner at the end of the year. The partners agreed on their shares based on merit, giving heavy weight to earnings each partner brought into the firm. The partners received roughly equal shares only in the first year, then vastly different shares thereafter. Over five years, Overland’s share dropped such that his profit share for the year ending four months before his departure was only 4 percent. When Overland announced his resignation and requested a buyout of his partnership interest, partner Diann Kim said she had consulted a partnership lawyer who said it was unlikely a buyout was due because the firm’s liabilities outweighed its assets. However, that partnership lawyer testified he did not recall any discussion with Kim and denied giving her that advice. Meanwhile, the partners stipulated that when Overland left, the firm’s equity totaled $2,850,000, and Overland owed the firm $21,084 for insurance premiums. The firm refused to pay Overland anything, demanded reimbursement for the insurance premiums, and did not give Overland any profit share for the year in which he left. The court concluded that Overland was entitled to a 4 percent share of the firm’s equity as of the date he left. After subtracting the insurance premiums, that share translated to a buyout of $91,916. In addition, the court awarded Overland attorney fees and costs of $97,146. Overland appealed, claiming entitlement to 25 percent.