IN RE: ALTHEIMER & GRAY (April 15, 2010)
Mark Berens practiced law at Altheimer & Gray, a Chicago-based international law firm. He was a capital partner at the firm -- he invested capital, he voted, he was listed on the articles of partnership, and his compensation was based on the firm's profits. He qualified as a partner under the definition of the Uniform Partnership Act. In 1999, he withdrew from the partnership and signed a contract pursuant to which he gave up any right to the profits of the firm. In lieu, he agreed to a salary. Under the practice at the law firm at the time, he was still called a "partner." In 2003, the firm, which had been in existence for almost 100 years, entered involuntary bankruptcy. The firm and its creditors agreed to a liquidation plan under which any firm debt to a "partner" was subordinated to other debts. The plan defined "partner" to include both the firm's "unit partners" and the "non-unit partners." Within the firm, "unit partners" were those who shared in the profits. "Non-unit partners" were the salaried, or contract, partners. Berens filed a claim for over $300,000 that he claimed was owed to him by the firm. When the trustee failed to pay the claim, Berens filed a motion in the bankruptcy court for relief. The bankruptcy court denied the motion and the district court affirmed. Berens appeals.
In their opinion, Chief Judge Easterbrook and Judges Bauer and Hamilton affirmed. The question presented to the Court was whether Berens was a "partner" under the liquidation plan and therefore subordinate to other creditors. The Court agreed with Berens that his position with the firm after 1999 did not qualify as a "partner" under the Uniform Partnership Act. The plan of dissolution, however, had its own definition of "partner" and did not adopt or refer to the definition contained in the Uniform Partnership Act. There is nothing in the bankruptcy law that requires a dissolution plan to adopt any particular definition of a term. In fact, as Chief Judge Easterbrook pointed out in his opinion, the plan could have used a word from a nonsense poem (can you say “borogrove”?) instead of “partner” as long as it defined it properly. Berens was clearly a partner as that term is defined in the dissolution plan -- therefore his claim is subordinate to the claims of other creditors.