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48 Bus. Law. 315 (1992-1993)
Fiduciary Duty and the Former Partner

handle is hein.journals/busl48 and id is 351 raw text is: Fiduciary Duty and the Former Partner By Richard A. Booth* In the flood of litigation that has flowed from the savings and loan crisis, one common strategy on the part of regulators has been to seek recovery for losses from lawyers and accountants involved in making problem loans.I The motivation for suing such secondary parties is clear. Because the primarily responsible parties, the officers and directors of the financial institution, are probably unable to pay for all the losses, the regulators pursue lawyers and accountants to gain access to their assets and to what- ever malpractice insurance coverage they have.2 There are, however, additional reasons for suing such professionals. First, lawyers and accountants often are organized in partnerships, and, as a matter of partnership law, all of the partners within a partnership, *Richard A. Booth, a member of the New York and Texas bars, is a professor at the University of Maryland School of Law. Editor's note: Alan R. Bromberg, University Distinguished Professor of Law, Southern Meth- odist University, and Allan G. Donn, a partner of Willcox & Savage, P.C., in Norfolk, Virginia, served as reviewers for this article. 1. See FDIC Will Target Attorney Malpractice; Agency Counsel Cautions Banking Lawyers, 54 Banking Rep. (BNA) 545 (Mar. 26, 1990); see also Paulette Thomas, Kaye Scholer Faces Civil Liability Suit for Losses at Lincoln; Assets Are Frozen, Wall St. J., Mar. 3, 1992, at A3; Stephen J. Adler, Kaye Scholer Settles Charges in Lincoln Case, Wall St. J., Mar. 9, 1992, at A3; Linda Himmelstein, How Thrift Agency Brought Kaye, Scholer to Its Knees, Legal Times, Mar. 9, 1992, at 1; Amy Stevens & Paulette Thomas, How a Big Law Firm Was Brought to Knees by Zealous Regulators, Wall St. J., Mar. 13, 1992, at Al; Rita Henley Jensen, Kaye Scholer's Lincoln Woes, Nat'l. L.J., Mar. 16, 1992, at 1; David J. Jefferson & Lee Berton, Accounting Firm to Settle Suit on Thrift, Wall St. J., Mar. 17, 1992, at A4; Gail Diane Cox, In Lincoln S&L Case, Just Why Did Jones Day Settle?, Nat'l L.J., Apr. 13, 1992, at 3; Marianne Lavelle, Firm, FDIC Settle, Nat'l L.J., May 11, 1992, at 2 (reporting settlement by Eckert Seamans Cherin & Mellott of Pittsburgh). 2. In some cases officers and directors may not be liable, though their lawyers or ac- countants are. Officers and directors are protected by the business judgment rule, which incorporates a standard of gross negligence, from most errors that they make. See Dennis J. Block, et al., The Business Judgment Rule: Fiduciary Duties of Corporate Directors 8-12 (3d ed. 1991). Moreover, the protection of the business judgment rule is enhanced when the officer or director relies on professional advice. See Diamond v. Davis, 62 N.Y.S.2d 181, 191 (N.Y. Sup. Ct. 1945). Lawyers and accountants, on the other hand, may be held liable for mere negligence. See Rogers v. Hurt, Richardson, Garner, Todd & Cadenhead, 417 S.E.2d 29, 33 (Ga. Ct. App. 1992).

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