Kevin Clark v. Cotten Schmidt, L.L.P. F/K/A Kirkley Schmidt & Cotten, L.L.P.

CourtCourt of Appeals of Texas
DecidedOctober 7, 2010
Docket02-09-00400-CV
StatusPublished

This text of Kevin Clark v. Cotten Schmidt, L.L.P. F/K/A Kirkley Schmidt & Cotten, L.L.P. (Kevin Clark v. Cotten Schmidt, L.L.P. F/K/A Kirkley Schmidt & Cotten, L.L.P.) is published on Counsel Stack Legal Research, covering Court of Appeals of Texas primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Kevin Clark v. Cotten Schmidt, L.L.P. F/K/A Kirkley Schmidt & Cotten, L.L.P., (Tex. Ct. App. 2010).

Opinion

02-09-400-CV

COURT OF APPEALS

SECOND DISTRICT OF TEXAS

FORT WORTH

NO. 2-09-400-CV

KEVIN CLARK                                                                                    APPELLANT

V.

COTTEN SCHMIDT, L.L.P. F/K/A                                                         APPELLEE                                                                                                                                                        

KIRKLEY SCHMIDT & COTTEN, L.L.P.

------------

FROM THE 48TH DISTRICT COURT OF TARRANT COUNTY

OPINION

          In two issues, appellant Kevin Clark appeals the trial court’s decision to deny his motion for summary judgment and grant the motion for summary judgment of appellee Cotten Schmidt, L.L.P. f/k/a Kirkley Schmidt & Cotten, L.L.P. (Cotten Schmidt).  We affirm in part and reverse and remand in part.

Background Facts

          This appeal concerns the amount of money that Clark was entitled to receive as a repayment of his capital investment under Cotten Schmidt’s partnership agreement upon his leaving the law firm.  Clark joined the firm in the fall of 2001 as a non-equity partner.  In 2003, Clark became an equity partner, and he contributed $25,000 to the firm as capital.

          The partnership agreement contains the following relevant provisions:

          1.04.  Classes of Partners.  There shall be four (4) classes of partners.

          a.       “Equity Partners” are those partners who (i) have contributed to the capital of the partnership, (ii) own an interest in the capital and in the profits and losses of the partnership, (iii) have a vote in partnership matters, and (iv) participate in the distribution of partnership profits as defined in Article VIII.

          . . . .

          3.02.  Assets.  The assets of the partnership are:

          a.       Cash balances in partnership accounts other than any trust accounts maintained by the partnership;

          b.       The physical assets and personal property as reflected on the partnership’s books, records, and financial statements;

          c.       The notes and accounts receivable of the partnership; and

          d.       Work in process and contingent-fee interests.

          5.01.  Books.  The partnership shall maintain books and records to reflect all business and financial transactions using the cash basis of accounting unless otherwise agreed.

          6.01.  Equity Partners.  All Equity Partners . . . shall have an equal ownership interest in the assets of the partnership . . . .

          6.04.  Capital Contributions By New Equity Partners.  All Equity Partners to be admitted to the partnership shall be required to make a capital contribution to the partnership as determined by the partnership.  The amount of capital contribution credited to the capital account of the new Equity Partner shall be designated by the partnership with the prior concurrence of the new Equity Partner.

          6.07.  Capital Accounts on Termination.  . . .  [A]n Equity Partner’s interest in the partnership on termination of the partnership shall not be determined by his or her capital account.  All Equity Partners shall have an equal interest in the value of partnership assets . . . .

          12.03. Withdrawal of Equity (including Senior) Partner.  An Equity Partner who withdraws from the partnership, and who is not then in substantial breach of his or her duties to the partnership, shall be entitled to the following:

          a.       To payment . . . of his or her percentage of fees collected for noncontingent work performed by the partnership prior to the effective date of withdrawal and collected by the partnership within twenty-four (24) months after the effective date of withdrawal;

          b.       To payment . . . of his or her percentage of fees collected for work performed by the partnership prior to the effective date of withdrawal on contingent-fee or bonus-fee cases, regardless of how long after the date of withdrawal those fees are collected by the partnership. . . .;[[1]] and

          c.       To repayment of his or her capital investment in the partnership calculated as an equal interest in the depreciated book value of all partnership assets less an equal proportion of the partnership long term and capital debt.  If negative, this liability will offset amounts under subsections (a) or (b).[[2]]  [Emphasis added.]

          Clark voluntarily left the firm in May 2005, at which time it had eleven equity partners.  After consulting with accountants, the firm paid $4,640.36 to Clark as his capital investment repayment under section 12.03(c) of the partnership agreement; the firm said that this amount reflected “one-eleventh of the Total Partners’ Equity reflected on the May 31, 2005 balance sheet.”  Clark contended that the firm incorrectly valued his capital investment repayment.  

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Bluebook (online)
Kevin Clark v. Cotten Schmidt, L.L.P. F/K/A Kirkley Schmidt & Cotten, L.L.P., Counsel Stack Legal Research, https://law.counselstack.com/opinion/kevin-clark-v-cotten-schmidt-llp-fka-kirkley-schmi-texapp-2010.