## Facts

- Storch Engineers (a/k/a Storch Associates) was a consulting engineering firm organized as a partnership with offices including Connecticut.
- Donald J. Vigneau joined Storch’s Hartford office in 1980 and became a partner in 1983 (initially with a small partnership interest that later increased).
- The partnership agreement required each partner to devote his “whole time and attention” to partnership business (unless authorized otherwise) and to provide the other partners “full information and truthful explanations” about partnership affairs.
- The agreement also required the partnership to purchase a retiring partner’s partnership interest under a valuation formula; the parties stipulated Vigneau’s interest was worth about $167,794.
- Vigneau financed his capital interest through promissory notes connected to the partnership; he later stopped making payments and an unpaid balance remained.
- In 1983, Vigneau and Joseph Merluzzo (who ran Storch’s Connecticut operations) formed a real-estate development partnership called Highview Condominium Associates (HCA).
- Vigneau held an ownership interest in HCA and did not disclose that interest to Storch.
- Without disclosing his dual role, Vigneau caused HCA to retain Storch for engineering/architectural services, and Vigneau served as the Storch professional in charge of the project.
- The court found Storch’s fee on the HCA work was reasonable and consistent with market rates, but Vigneau personally earned a profit of about $28,059 from his HCA investment.
- In 1984, Vigneau and Merluzzo participated in a second development venture, Granford (also spelled Grandford) Associates, again without disclosure to Storch.
- Granford likewise retained Storch for professional services; the fees charged were found reasonable and consistent with market rates.
- Granford failed financially. Storch had substantial unpaid bills (reported in case summaries as roughly $114,000), and Vigneau took part in Granford’s creditor-payment decisions while Storch remained unpaid.
- Merluzzo’s Granford involvement came to light and he resigned from Storch in 1986; Vigneau told Storch he would divest his Granford interest but did not do so.
- Vigneau resigned from Storch in 1987.
- Storch discovered Vigneau’s undisclosed interests in HCA and Granford in 1989.
- Vigneau sued to enforce the partnership agreement’s buyout provision and recover the stipulated value of his partnership interest.
- Storch defended and counterclaimed, alleging (among other theories) breach of fiduciary duty and seeking to recover profits/benefits tied to Vigneau’s conflicted ventures; Storch also sought recovery of the compensation Vigneau had been paid during the period of disloyalty (about $164,105, according to the Quimbee summary).

## Issues

1. Did Vigneau breach his fiduciary and contractual duties to Storch by secretly owning interests in HCA and Granford while causing those ventures to hire Storch for work he supervised?
2. If so, what remedies were available—specifically, could Storch recover Vigneau’s profits/benefits from the conflicted ventures, and could Storch also require forfeiture of all compensation paid to Vigneau during the breach?
3. Was Vigneau still entitled to enforce the partnership agreement’s buyout provision, and if so, could Storch offset amounts owed by Vigneau against the buyout price?

## Decision

- The court found that Vigneau owed fiduciary duties of loyalty and candor to the partnership and that the partnership agreement reinforced those obligations through express “whole time and attention” and “full information and truthful explanations” requirements.
- The court concluded that Vigneau’s undisclosed ownership interests in HCA and Granford—combined with his role in having those entities hire Storch and his participation on both sides of the transactions—constituted disloyal self-dealing and a breach of duty.
- The court treated the reasonableness of Storch’s fees as not excusing the nondisclosure; the breach was the undisclosed conflict and resulting personal gain or advantage.
- The court required Vigneau to account for and surrender the profit he earned from HCA (about $28,059) as a benefit obtained through the breach.
- The court rejected Storch’s request for a blanket forfeiture of all compensation paid to Vigneau during the period of misconduct, declining to require repayment of salary for services that were properly performed for the partnership.
- The court enforced Vigneau’s contractual right to be bought out for the value of his partnership interest but allowed Storch to reduce what it owed by setoff for amounts recoverable on the counterclaims (including the accounting for breach-related profits/benefits).

## Legal Principles

- Partners owe one another and the partnership duties of loyalty, good faith, and full disclosure, and partnership-agreement terms requiring faithful service and full information strengthen those duties.
- A partner breaches the duty of loyalty by secretly holding an ownership interest in an outside venture that hires the partnership and by participating in the transaction on both sides without informed consent.
- The fairness or market-level reasonableness of the partnership’s fee does not cure an undisclosed conflict; nondisclosure and divided loyalties are actionable even without proof of an inflated price.
- A common remedy for a partner’s disloyal self-dealing is an accounting and disgorgement of profits or other benefits obtained as a result of the breach.
- Forfeiture of compensation is an equitable remedy and is not automatic; a court may refuse total forfeiture where the partner also performed valuable, proper services for the firm.
- Contractual rights between partners (including a retirement/buyout provision) may be enforced while still preventing the wrongdoer from keeping gains from disloyal conduct, through offsets and setoffs against amounts otherwise due.

## Conclusion

The court held that Vigneau breached his fiduciary and contractual duties by concealing his ownership interests in HCA and Granford while having those ventures retain Storch and acting in a dual role on the projects. As a remedy, the court required him to account for and disgorge profits and benefits obtained through the breach (including his HCA profit) but declined to order forfeiture of all compensation paid for properly performed work. Vigneau remained entitled to payment for his partnership interest under the buyout clause, subject to offsets for the amounts Storch recovered on its counterclaims.


Vigneau v. Storch Engineers, 1995 WL 767984 (1995)