With Friends Like This

Posted by William J. Piercy on

In Asgharneya v. Hadavi, 298 Ga. App. 693 (2009), Mr. Asgharneya and Mr. Hadavi entered into a business partnership for the purpose of operating an El Exito check cashing stand within a convenience store.  The men had been friends for many years and based their relationship on an oral agreement.  They both put up the same amount of money to get the business started.  At first, they split the profits evenly.  Later, Mr. Asgharneya and Mr. Hadavi agreed to alternate months with one operating the business one month and the other operating it for the next month, each keeping 100% of the profits earned during his respective month of operation.  This worked for a period of time.  However, when Mr. Hadavi returned to the store to take over operation at the beginning of a new month, he discovered that Mr. Asgharneya and the owner of the convenience store, in which the El Exito was previously located, had opened a competing check cashing business.   Mr. Asgharneya and his new partner then prevented Mr. Hadavi from accessing or operating El Exito.

Mr. Hadavi filed suit for breach of the partnership agreement, among other claims.  The Court found in favor of Mr. Hadavi, finding that Mr. Asgharneya and the owner of the convenience store conspired together to deprive Mr. Hadavi of his rights under the partnership agreement.  While the Court recognized that Mr. Asgharneya had the right to terminate his oral partnership agreement with Mr. Hadavi, the Court further held that Mr. Asgharneya had deprived Mr. Hadavi of the rights that had vested in him under their partnership agreement up through the point of termination.  In so ruling, the Court held that:

The power of a partner to dissolve the partnership at will, like any other power held by a fiduciary, must be exercised in good faith.  A partner may not “freeze out” a co-partner and appropriate the business to his own use.  A partner may not dissolve a partnership to gain the benefits of the business for himself, unless he fully compensates his co-partner for his share of the prospective business opportunity.