## Facts

- In 1985, the parties formed the Poughkeepsie Galleria Company, a general partnership to own and operate a shopping mall in Poughkeepsie, New York.
- The written partnership agreement stated the partnership would continue until terminated as provided in the agreement.
- The agreement provided for dissolution only upon (1) election by the partners, or (2) an event making the business unlawful.
- Partner decisions required approval by at least 51% of partnership interests; day-to-day operations were managed by a three-member executive committee, subject to majority control.
- Marc A. Malfitano held a small minority general partner interest (about 3.08% by the mid-2000s); a majority owner held slightly more than 56%.
- After disputes with management and failed buyout negotiations, Malfitano sent notice in 2006 purporting to dissolve the partnership under Partnership Law § 62(1)(b) (dissolution of an at-will partnership).
- Malfitano also filed a notice of pendency against the mall property, interfering with refinancing.
- The remaining partners rejected the dissolution as unauthorized under the agreement, treated it as wrongful, and continued the business.
- The trial court declared wrongful dissolution and breach of contract; after a bench trial on damages, it valued Malfitano’s interest as a going concern, applied discounts, deducted damages, and also awarded attorneys’ fees as damages.
- The Appellate Division affirmed wrongful dissolution and upheld application of minority and marketability discounts under Partnership Law § 69(2)(c), with certain valuation and damages modifications.

## Issues

1. Whether the partnership was at will and unilaterally dissolvable under Partnership Law § 62(1)(b), or instead governed by the agreement’s dissolution provisions requiring majority approval.
2. Under Partnership Law § 69(2)(c), whether “value” of a wrongfully dissolving partner’s interest may include minority/marketability discounts when the business continues.
3. Whether attorneys’ fees and litigation expenses may be recovered as “damages” against the wrongfully dissolving partner absent contractual or statutory authorization.

## Decision

- The Court of Appeals held the partnership was not at will; the agreement’s dissolution provisions controlled, and Malfitano’s unilateral notice constituted wrongful dissolution and breach of contract.
- The Court upheld valuing Malfitano’s interest under Partnership Law § 69(2)(c) using a minority discount (and associated marketability considerations) given his noncontrolling stake in a continuing enterprise.
- The Court held it was error to include the remaining partners’ attorneys’ fees as damages, applying the American Rule and finding no contractual or statutory basis for fee shifting.
- The Appellate Division order was modified to remove attorneys’ fees from damages and, as modified, affirmed.

## Legal Principles

- Partnership agreements govern dissolution when they clearly prescribe how dissolution occurs; statutory default rules do not override unambiguous contractual terms.
- A partnership may avoid at-will dissolution under Partnership Law § 62(1)(b) when the partners’ agreement requires specified procedures (including majority approval) to dissolve.
- Under Partnership Law § 69(2)(c), a partner who wrongfully causes dissolution is entitled to the value of the partner’s interest (less damages caused), and “value” may reflect appropriate discounts for a minority, noncontrolling interest when the business continues.
- Attorneys’ fees are not recoverable as damages under the American Rule absent an applicable statute, court rule, or contractual fee-shifting provision.

## Conclusion

The court enforced the partnership agreement’s dissolution mechanism over the statutory at-will default, treated the attempted unilateral dissolution as wrongful, approved discounted valuation of the wrongdoer’s minority interest under Partnership Law § 69(2)(c), and barred recovery of the other partners’ litigation fees absent express authorization.


Congel v. Malfitano, 31 N.Y.3d 272 (N.Y. 2018)