977 S.W.2d 543 (1998)

Colette BOHATCH, Petitioner,
v.
BUTLER & BINION, et al., Respondents.

No. 95-0934.

Supreme Court of Texas.

Argued November 20, 1996. Decided January 22, 1998.

*544 H. Victor Thomas, Eliot P. Tucker, Houston, for petitioner.

Richard N. Countiss, David W. Holman, Larry D. Knippa, Houston, for respondents.

ENOCH, Justice, delivered the opinion of the Court, in which GONZALEZ, OWEN, BAKER, and HANKINSON, Justices, join.

Partnerships exist by the agreement of the partners; partners have no duty to remain partners. The issue in this case is whether we should create an exception to this rule by holding that a partnership has a duty not to expel a partner for reporting suspected overbilling by another partner. The trial court rendered judgment for Colette Bohatch on her breach of fiduciary duty claim against Butler & Binion and several of its partners (collectively, "the firm"). The court of appeals held that there was no evidence that the firm breached a fiduciary duty and reversed the trial court's tort judgment; however, the court of appeals found evidence of a breach of the partnership agreement and rendered judgment for Bohatch on this ground. 905 S.W.2d 597. We affirm the court of appeals' judgment.

I. FACTS

Bohatch became an associate in the Washington, D.C., office of Butler & Binion in 1986 after working for several years as Deputy Assistant General Counsel at the Federal Energy Regulatory Commission. John McDonald, the managing partner of the office, and Richard Powers, a partner, were the only other attorneys in the Washington office. The office did work for Pennzoil almost exclusively.

Bohatch was made partner in February 1990. She then began receiving internal firm reports showing the number of hours each attorney worked, billed, and collected. From her review of these reports, Bohatch became concerned that McDonald was overbilling Pennzoil and discussed the matter with Powers. Together they reviewed and copied portions of McDonald's time diary. Bohatch's review of McDonald's time entries increased her concern.

On July 15, 1990, Bohatch met with Louis Paine, the firm's managing partner, to report her concern that McDonald was overbilling Pennzoil. Paine said he would investigate. Later that day, Bohatch told Powers about her conversation with Paine.

The following day, McDonald met with Bohatch and informed her that Pennzoil was not satisfied with her work and wanted her work to be supervised. Bohatch testified that this was the first time she had ever heard criticism of her work for Pennzoil.

The next day, Bohatch repeated her concerns to Paine and to R. Hayden Burns and Marion E. McDaniel, two other members of the firm's management committee, in a telephone conversation. Over the next month, Paine and Burns investigated Bohatch's complaint. They reviewed the Pennzoil bills and supporting computer print-outs for those bills. They then discussed the allegations with Pennzoil in-house counsel John Chapman, the firm's primary contact with Pennzoil. Chapman, who had a long-standing relationship with McDonald, responded that Pennzoil was satisfied that the bills were reasonable.

In August, Paine met with Bohatch and told her that the firm's investigation revealed no basis for her contentions. He added that she should begin looking for other employment, but that the firm would continue to provide her a monthly draw, insurance coverage, office space, and a secretary. After this meeting, Bohatch received no further work assignments from the firm.

In January 1991, the firm denied Bohatch a year-end partnership distribution for 1990 and reduced her tentative distribution share for 1991 to zero. In June, the firm paid *545 Bohatch her monthly draw and told her that this draw would be her last. Finally, in August, the firm gave Bohatch until November to vacate her office.

By September, Bohatch had found new employment. She filed this suit on October 18, 1991, and the firm voted formally to expel her from the partnership three days later, October 21, 1991.

The trial court granted partial summary judgment for the firm on Bohatch's wrongful discharge claim, and also on her breach of fiduciary duty and breach of the duty of good faith and fair dealing claims for any conduct occurring after October 21, 1991 (the date Bohatch was formally expelled from the firm). The trial court denied the firm's summary judgment motion on Bohatch's breach of fiduciary duty and breach of the duty of good faith and fair dealing claims for conduct occurring before October 21, 1991. The breach of fiduciary duty claim and a breach of contract claim were tried to a jury. The jury found that the firm breached the partnership agreement and its fiduciary duty. It awarded Bohatch $57,000 for past lost wages, $250,000 for past mental anguish, $4,000,000 total in punitive damages (this amount was apportioned against several defendants), and attorney's fees. The trial court rendered judgment for Bohatch in the amounts found by the jury, except it disallowed attorney's fees because the judgment was based in tort. After suggesting remittitur, which Bohatch accepted, the trial court reduced the punitive damages to around $237,000.

All parties appealed. The court of appeals held that the firm's only duty to Bohatch was not to expel her in bad faith. 905 S.W.2d at 602. The court of appeals stated that "`[b]ad faith' in this context means only that partners cannot expel another partner for selfgain." Id. Finding no evidence that the firm expelled Bohatch for self-gain, the court concluded that Bohatch could not recover for breach of fiduciary duty. Id. at 604. However, the court concluded that the firm breached the partnership agreement when it reduced Bohatch's tentative partnership distribution for 1991 to zero without notice, and when it terminated her draw three months before she left. Id. at 606. The court concluded that Bohatch was entitled to recover $35,000 in lost earnings for 1991 but none for 1990, and no mental anguish damages. Id. at 606-07. Accordingly, the court rendered judgment for Bohatch for $35,000 plus $225,000 in attorney's fees. Id. at 608.

II. BREACH OF FIUCIARY DUTY

We have long recognized as a matter of common law that "[t]he relationship between ... partners ... is fiduciary in character, and imposes upon all the participants the obligation of loyalty to the joint concern and of the utmost good faith, fairness, and honesty in their dealings with each other with respect to matters pertaining to the enterprise." Fitz-Gerald v. Hull, 150 Tex. 39, 237 S.W.2d 256, 264 (1951) (quotation omitted). Yet, partners have no obligation to remain partners; "at the heart of the partnership concept is the principle that partners may choose with whom they wish to be associated." Gelder Med. Group v. Webber, 41 N.Y.2d 680, 394 N.Y.S.2d 867, 870-71, 363 N.E.2d 573, 577 (1977). The issue presented, one of first impression, is whether the fiduciary relationship between and among partners creates an exception to the at-will nature of partnerships; that is, in this case, whether it gives rise to a duty not to expel a partner who reports suspected overbilling by another partner.

At the outset, we note that no party questions that the obligations of lawyers licensed to practice in the District of Columbia— including McDonald and Bohatch—were prescribed by the District of Columbia Code of Professional Responsibility in effect in 1990, and that in all other respects Texas law applies. Further, neither statutory nor contract law principles answer the question of whether the firm owed Bohatch a duty not to expel her. The Texas Uniform Partnership Act, TEX.REV.CIV. STAT. ANN. art. 6701b, addresses expulsion of a partner only in the context of dissolution of the partnership. See id. §§ 31, 38. In this case, as provided by the partnership agreement, Bohatch's expulsion did not dissolve the partnership. Additionally, the new Texas Revised Partnership Act, TEX.REV.CIV. STAT. ANN. art. 6701b-1.01 to -11.04, does not have retroactive effect *546 and thus does not apply. See id. art. 6701b-11.03. Finally, the partnership agreement contemplates expulsion of a partner and prescribes procedures to be followed, but it does not specify or limit the grounds for expulsion. Thus, while Bohatch's claim that she was expelled in an improper way is governed by the partnership agreement, her claim that she was expelled for an improper reason is not. Therefore, we look to the common law to find the principles governing Bohatch's claim that the firm breached a duty when it expelled her.

Courts in other states have held that a partnership may expel a partner for purely business reasons. See St. Joseph's Reg'l Health Ctr. v. Munos, 326 Ark. 605, 934 S.W.2d 192, 197 (1996) (holding that partner's termination of another partner's contract to manage services performed by medical partnership was not breach of fiduciary duty because termination was for business purpose); Waite v. Sylvester, 131 N.H. 663, 560 A.2d 619, 622-23 (1989) (holding that removal of partner as managing partner of limited partnership was not breach of fiduciary duty because it was based on legitimate business purpose); Leigh v. Crescent Square, Ltd., 80 Ohio App.3d 231, 608 N.E.2d 1166, 1170 (1992) ("Taking into account the general partners' past problems and the previous litigation wherein Leigh was found to have acted in contravention of the partnership's best interests, the ouster was instituted in good faith and for legitimate business purposes."). Further, courts recognize that a law firm can expel a partner to protect relationships both within the firm and with clients. See Lawlis v. Kightlinger & Gray, 562 N.E.2d 435, 442 (Ind.App.1990) (holding that law firm did not breach fiduciary duty by expelling partner after partner's successful struggle against alcoholism because "if a partner's propensity toward alcohol has the potential to damage his firm's good will or reputation for astuteness in the practice of law, simple prudence dictates the exercise of corrective action ... since the survival of the partnership itself potentially is at stake"); Holman v. Coie, 11 Wash.App. 195, 522 P.2d 515, 523 (1974) (finding no breach of fiduciary duty where law firm expelled two partners because of their contentious behavior during executive committee meetings and because one, as state senator, made speech offensive to major client). Finally, many courts have held that a partnership can expel a partner without breaching any duty in order to resolve a "fundamental schism." See Waite, 560 A.2d at 623 (concluding that in removing partner as managing partner "the partners acted in good faith to resolve the `fundamental schism' between them"); Heller v. Pillsbury Madison & Sutro, 50 Cal.App.4th 1367, 58 Cal.Rptr.2d 336, 348 (1996) (holding that law firm did not breach fiduciary duty when it expelled partner who was not as productive as firm expected and who was offensive to some of firm's major clients); Levy v. Nassau Queens Med. Group, 102 A.D.2d 845, 476 N.Y.S.2d 613, 614 (1984) (concluding that expelling partner because of "[p]olicy disagreements" is not "bad faith").

The fiduciary duty that partners owe one another does not encompass a duty to remain partners or else answer in tort damages. Nonetheless, Bohatch and several distinguished legal scholars urge this Court to recognize that public policy requires a limited duty to remain partners—i.e., a partnership must retain a whistleblower partner. They argue that such an extension of a partner's fiduciary duty is necessary because permitting a law firm to retaliate against a partner who in good faith reports suspected overbilling would discourage compliance with rules of professional conduct and thereby hurt clients.

While this argument is not without some force, we must reject it. A partnership exists solely because the partners choose to place personal confidence and trust in one another. See Holman, 522 P.2d at 524 ("The foundation of a professional relationship is personal confidence and trust."). Just as a partner can be expelled, without a breach of any common law duty, over disagreements about firm policy or to resolve some other "fundamental schism," a partner can be expelled for accusing another partner of overbilling without subjecting the partnership to tort damages. Such charges, whether true or not, may have a profound effect on the personal confidence and trust essential to the *547 partner relationship. Once such charges are made, partners may find it impossible to continue to work together to their mutual benefit and the benefit of their clients.

We are sensitive to the concern expressed by the dissenting Justices that "retaliation against a partner who tries in good faith to correct or report perceived misconduct virtually assures that others will not take these appropriate steps in the future." 977 S.W.2d at 561 (Spector, J., dissenting). However, the dissenting Justices do not explain how the trust relationship necessary both for the firm's existence and for representing clients can survive such serious accusations by one partner against another. The threat of tort liability for expulsion would tend to force partners to remain in untenable circumstance—suspicious of and angry with each other—to their own detriment and that of their clients whose matters are neglected by lawyers distracted with intra-firm frictions.

Although concurring in the Court's judgment, Justice Hecht criticizes the Court for failing to "address amici's concerns that failing to impose liability will discourage attorneys from reporting unethical conduct." 977 S.W.2d at 556 (Hecht, J., concurring). To address the scholars' concerns, he proposes that a whistleblower be protected from expulsion, but only if the report, irrespective of being made in good faith, is proved to be correct. We fail to see how such an approach encourages compliance with ethical rules more than the approach we adopt today. Furthermore, the amici's position is that a reporting attorney must be in good faith, not that the attorney must be right. In short, Justice Hecht's approach ignores the question Bohatch presents, the amici write about, and the firm challenges—whether a partnership violates a fiduciary duty when it expels a partner who in good faith reports suspected ethical violations. The concerns of the amici are best addressed by a rule that clearly demarcates an attorney's ethical duties and the parameters of tort liability, rather than redefining "whistleblower."

We emphasize that our refusal to create an exception to the at-will nature of partnerships in no way obviates the ethical duties of lawyers. Such duties sometimes necessitate difficult decisions, as when a lawyer suspects overbilling by a colleague. The fact that the ethical duty to report may create an irreparable schism between partners neither excuses failure to report nor transforms expulsion as a means of resolving that schism into a tort.

We hold that the firm did not owe Bohatch a duty not to expel her for reporting suspected overbilling by another partner.

III. BREACH OF THE PARTNERSHIP AGREEMENT

The court of appeals concluded that the firm breached the partnership agreement by reducing Bohatch's tentative distribution for 1991 to zero without the requisite notice. 905 S.W.2d at 606. The firm contests this finding on the ground that the management committee had the right to set tentative and year-end bonuses. However, the partnership agreement guarantees a monthly draw of $7,500 per month regardless of the tentative distribution. Moreover, the firm's right to reduce the bonus was contingent upon providing proper notice to Bohatch. The firm does not dispute that it did not give Bohatch notice that the firm was reducing her tentative distribution. Accordingly, the court of appeals did not err in finding the firm liable for breach of the partnership agreement. Moreover, because Bohatch's damages sound in contract, and because she sought attorney's fees at trial under section 38.001(8) of the Texas Civil Practice and Remedies Code, we affirm the court of appeals' award of Bohatch's attorney's fees.

* * * * *

We affirm the court of appeals' judgment.

HECHT, Justice, filed a concurring opinion.

SPECTOR, Justice, filed a dissenting opinion, in which PHILLIPS, Chief Justice, joined.

HECHT, Justice, concurring in the judgment.

The Court holds that partners in a law firm have no common-law liability for expelling *548 one of their number for accusing another of unethical conduct. The dissent argues that partners in a law firm are liable for such conduct. Both views are unqualified; neither concedes or even considers whether "always" and "never" are separated by any distance. I think they must be. The Court's position is directly contrary to that of some of the leading scholars on the subject who have appeared here as amici curiae. The Court finds amici's arguments "not without some force", but rejects them completely. Ante at 546. I do not believe amici's arguments can be rejected out of hand. The dissent, on the other hand, refuses even to acknowledge the serious impracticalities involved in maintaining the trust necessary between partners when one has accused another of unethical conduct. In the dissent's view, partners who would expel another for such accusations must simply either get over it or respond in damages. The dissent's view blinks reality.

The issue is not well developed; in fact, to our knowledge we are the first court to address it. It seems to me there must be some circumstances when expulsion for reporting an ethical violation is culpable and other circumstances when it is not. I have trouble justifying a 500-partner firm's expulsion of a partner for reporting overbilling of a client that saves the firm not only from ethical complaints but from liability to the client. But I cannot see how a five-partner firm can legitimately survive one partner's accusations that another is unethical. Between two such extreme examples I see a lot of ground.

This case does not force a choice between diametrically opposite views. Here, the report of unethical conduct, though made in good faith, was incorrect. That fact is significant to me because I think a law firm can always expel a partner for bad judgment, whether it relates to the representation of clients or the relationships with other partners, and whether it is in good faith. I would hold that Butler & Binion did not breach its fiduciary duty by expelling Colette Bohatch because she made a good-faith but nevertheless extremely serious charge against a senior partner that threatened the firm's relationship with an important client, her charge proved groundless, and her relationship with her partners was destroyed in the process. I cannot, however, extrapolate from this case, as the Court does, that no law firm can ever be liable for expelling a partner for reporting unethical conduct. Accordingly, I concur only in the Court's judgment.

I

I would ordinarily leave the recitation of relevant facts to the Court's opinion and not reiterate them in a separate opinion. But the fine points in this case are important to me, and rather than point out my differences with the Court, it is more convenient simply to say what I think the facts are. The evidence must, of course, be reviewed in light of the verdict and judgment favorable to Bohatch, although the reader should keep in mind that in many instances, the facts are disputed.

John McDonald, an attorney licensed to practice in the District of Columbia and managing partner of the Washington, D.C. office of Butler & Binion, a Houston-based law firm, hired Colette Bohatch, also a D.C. lawyer, as a senior associate in January 1986. The firm's Washington office had only one other lawyer—Richard Powers, also a partner in the firm—and represented essentially one client—Pennzoil—before the Federal Energy Regulatory Commission. Bohatch, who had been deputy assistant general counsel of the FERC when she left to join Butler & Binion, worked for McDonald and Powers on Pennzoil matters.

In January 1989, Bohatch was made a partner in the firm on McDonald's recommendation, and as a partner she began receiving internal firm reports showing the number of hours each attorney worked, billed, and collected for. Reviewing these reports, Bohatch questioned how McDonald could bill as many hours as he reported, given her personal observations of his work habits. She and Powers discussed the subject on several occasions and even went so far as to look through McDonald's daily time diary surreptitiously and make a copy of it.

Bohatch never saw the bills to Pennzoil, which McDonald prepared and sent, so she did not know what fees Pennzoil was actually *549 charged, or even what Butler & Binion's fee arrangement was with Pennzoil. Nevertheless, from monthly internal reports consistently showing that McDonald billed far more hours than she saw him working, Bohatch concluded that McDonald was overbilling Pennzoil. Convinced that she was obliged by the District of Columbia Code of Professional Responsibility governing lawyer conduct to report her concerns to the firm's management, she discussed them with Butler & Binion's managing partner, Louis Paine, on July 15, 1990. Paine assured her that he would look into the matter.

Bohatch told Powers of her meeting with Paine, and Powers told McDonald. The next day, McDonald informed Bohatch that Pennzoil was dissatisfied with her work. Bohatch feared that McDonald was retaliating against her, and in fact, from that point forward neither McDonald nor Powers assigned Bohatch any other work for Pennzoil. McDonald also insinuated to other partners that Bohatch had complained of him because Pennzoil found her work unacceptable, even though Bohatch had contacted Paine before she was aware of any criticism of her work.

Bohatch called Paine to tell him of McDonald's retaliation, and Paine assured her that he was still investigating. Paine reviewed the firm's bills to Pennzoil and found that in all but one instance fewer hours were billed than were shown on internal computer printouts as having been worked. However, since the printouts merely reflected the time reported by attorneys, and Bohatch was claiming that McDonald reported more time than he actually worked, Paine determined that Pennzoil must be told of Bohatch's assertions so that it could itself evaluate the amounts charged.

Robert Burns, a member of Butler & Binion's management committee, told John Chapman, the Pennzoil in-house attorney who dealt most directly with Butler & Binion's Washington office, of Bohatch's assertions and asked him to review the firm's bills. Chapman confirmed to Burns that he had complained to McDonald several months earlier about the quality of Bohatch's work, and Burns intimated that Bohatch's assertions might have been in response to such complaints. Chapman discussed the matter with his immediate superior and with Pennzoil's general counsel. The three of them reviewed Butler & Binion's bills for the preceding year and concluded that they were reasonable. After Chapman's superior discussed their conclusions with Pennzoil's president and chief executive officer, Chapman told Burns that Pennzoil was satisfied that the firm's bills were reasonable.

Bohatch expected that Paine would ask her for additional information, and when he did not do so, she wrote him that she believed McDonald had overcharged Pennzoil $20,000 to $25,000 per month for his work. In fact, in the preceding six months McDonald had billed Pennzoil on average less than $24,000 per month for his work, so that if Bohatch had been correct, McDonald should have billed Pennzoil almost nothing. On August 23, 1990, a few weeks after their initial meeting, Paine told Bohatch that he had found no evidence of overbilling. Since he did not see how Bohatch could continue to work for McDonald or Pennzoil under the circumstances, given the rifts her allegations had caused, Paine suggested that she begin to look for other employment.

For more than nine months Butler & Binion continued to pay Bohatch a partner's monthly draw of $7,500 and allowed her to keep her office and benefits while she sought other employment. So as not to impair her prospects, the firm did not immediately expel her as a partner, but it did not pay her any partnership distribution other than her draw. Bohatch contends that when the firm reduced her tentative distribution for 1991 to zero in January of that year, it effectively expelled her from the firm, although she continued to accept a partner's monthly draw. In April 1991, Paine told Bohatch that her draw would be discontinued in June, and in August he told her that she must vacate her office by November. Bohatch left to join another firm in September, and Butler & Binion formally expelled her as a partner in October.

Bohatch sued Butler & Binion, Paine, Burns, and McDonald for breach of the firm partnership agreement and breach of fiduciary duty. A jury found both a breach of *550 contract and a breach of fiduciary duty, found Bohatch's actual damages to be $57,000 in lost earnings and $250,000 in past mental anguish, assessed $4,000,000 punitive damages against the three individual defendants, and found Bohatch's reasonable attorney fees to be $225,000. Bohatch accepted the district court's suggestion that punitive damages be remitted to $237,141, and judgment was rendered awarding Bohatch actual and punitive damages.

All parties appealed. The court of appeals held that defendants' only duty to Bohatch was not to expel her in bad faith. 905 S.W.2d 597, 602. "`Bad faith' in this context," the court of appeals wrote, "means only that partners cannot expel another partner for self-gain." Id. Finding no evidence that defendants expelled Bohatch for self-gain, the court concluded that Bohatch could not recover for breach of fiduciary duty. Id. at 604. However, the court found that Bohatch's tentative partnership distribution for 1991 had been reduced to zero without notice to her, and that her draw had been terminated three months before she left. Id. at 605-06. For these breaches of the partnership agreement the court concluded that Bohatch was entitled to recover $35,000 lost earnings for 1991 but none for 1990, and no mental anguish damages. Id. at 606-07. Accordingly, the court rendered judgment for Bohatch for $35,000 plus $246,000 attorney fees.

Bohatch applied to this Court for writ of error, and defendants, to whom I shall refer collectively hereafter as "Butler & Binion", filed a conditional application. We denied Bohatch's application and dismissed Butler & Binion's, 39 TEX. SUP.CT. J. 725 (June 14, 1996), but on Bohatch's motion for rehearing, we granted both, 40 TEX. SUP.CT. J. 14 (Oct. 18, 1996).

II

A

Butler & Binion argues that its expulsion of Bohatch did not breach its fiduciary duty. No one questions that the obligations of the lawyers licensed to practice in the District of Columbia—including McDonald and Bohatch—were prescribed by the District of Columbia Code of Professional Responsibility in effect in 1990, and that in all other respects Texas law applies.

Of the three possible sources of governing Texas law—statute, contract, and common law—only one applies here. Butler & Binion argues that it did not violate the Texas Uniform Partnership Act in effect throughout the events of this case (but since repealed), Law of May 9, 1961, 57th Leg., R.S., ch. 158, 1961 Tex. Gen. Laws 289, formerly TEX.REV. CIV. STAT. ANN. art. 6132b (Vernon 1970).^[1] But Bohatch responds that TUPA does not determine her claims because it spoke to expulsion of a partner only in the context of a partnership's dissolution. See id. art. 6132b, §§ 31 & 38. In this case, as provided by the partnership agreement, Bohatch's expulsion did not dissolve the partnership, and thus the statute does not directly answer Bohatch's claims. The partnership agreement contemplates expulsion of a partner and prescribes procedures to be followed, but it does not specify or limit the grounds for expulsion. Bohatch's claim that she was expelled in an improper way is governed by the partnership agreement, but her claim that she was expelled for an improper reason is not. Thus, the principles governing Bohatch's claim that her expulsion was a breach of fiduciary duty must be found in the common law.

We have long recognized that "`[t]he relationship between joint adventurers, like that existing between partners, is fiduciary in character, and imposes upon all the participants the obligation of loyalty to the joint concern and of the utmost good faith, fairness, and honesty in their dealings with each other with respect to matters pertaining to the enterprise.'" Fitz-Gerald v. Hull, 150 Tex. 39, 237 S.W.2d 256, 264 (Tex.1951) (quoting 30 Am.Jur. Joint Adventures § 34 (___)). But we have never had occasion to apply this duty in the situation of a partner's expulsion. A few other appellate courts have done so. Gelder Medical Group v. Webber, *551 41 N.Y.2d 680, 394 N.Y.S.2d 867, 363 N.E.2d 573 (1977); Heller v. Pillsbury Madison & Sutro, 50 Cal.App.4th 1367, 58 Cal.Rptr.2d 336 (1996); Winston & Strawn v. Nosal, 279 Ill.App.3d 231, 215 Ill.Dec. 842, 664 N.E.2d 239 (1996); Lawlis v. Kightlinger & Gray, 562 N.E.2d 435 (Ind.Ct.App.1990); Levy v. Nassau Queens Medical Group, 102 A.D.2d 845, 476 N.Y.S.2d 613 (1984); Leigh v. Crescent Square, Ltd., 80 Ohio App.3d 231, 608 N.E.2d 1166 (1992); Holman v. Coie, 11 Wash.App. 195, 522 P.2d 515, review denied, 84 Wash.2d 1011 (1974), cert. denied, 420 U.S. 984, 95 S.Ct. 1415, 43 L.Ed.2d 666 (1975). None has held that a partnership breached its fiduciary duty to a partner by expelling the partner. Gelder, 394 N.Y.S.2d at 869-871, 363 N.E.2d at 576-577; Heller, 58 Cal.Rptr.2d at 348; Lawlis, 562 N.E.2d at 439-443; Levy, 476 N.Y.S.2d at 614; Leigh, 608 N.E.2d at 1169-1171; Holman, 522 P.2d at 523-524. Only one has held that an expelled partner stated a claim for breach of fiduciary duty. Nosal, 215 Ill.Dec. at 847-849, 664 N.E.2d at 244-246.

The courts have not had much difficulty holding that a partnership may expel a partner for purely business reasons. In Leigh, for example, a limited partnership formed to rehabilitate an apartment complex expelled a general partner, one Leigh, for misconduct in connection with the partnership's affairs. The court held that the partnership's failure to give Leigh notice of his impending ouster was not a breach of fiduciary duty. The court explained:

We find that a general partner's fiduciary duty applies only to activities where a partner will take advantage of his position in the partnership for his own profit or gain. Taking into account the general partners' past problems and the previous litigation wherein Leigh was found to have acted in contravention of the partnership's best interests, the ouster was instituted in good faith and for legitimate business purposes.

608 N.E.2d at 1170. Cf. Waite v. Sylvester, 131 N.H. 663, 560 A.2d 619, 622-623 (1989) (holding that removal of a partner as managing partner of a limited partnership formed to own and operate a resort was not a breach of fiduciary duty because there was a legitimate business purpose); St. Joseph's Regional Health Center v. Munos, 326 Ark. 605, 934 S.W.2d 192, 197 (1996) (holding that a partner's termination of another partner's contract to manage services performed by their medical partnership was not a breach of fiduciary duty because there was a business purpose).

At least in the context of professional partnerships, the courts have uniformly recognized that a partner can be expelled to protect relationships both inside the firm and with clients. In Holman, a law firm expelled two partners, both sons of a retired partner, because they had been contentious members of the executive committee, and because one of them, as a state senator, had made a speech offensive to a major client. The court held that while the partners remaining in the firm owed the expelled partners a fiduciary duty,

the personal relationships between partners to which the terms `bona fide' and `good faith' relate are those which have a bearing upon the business aspects or property of the partnership and prohibit a partner, to-wit, a fiduciary, from taking any personal advantage touching those subjects. Plaintiffs' claims do not relate to the business aspects or property rights of this partnership. There is no evidence the purpose of the severance was to gain any business or property advantage to the remaining partners. Consequently, in that context, there has been no showing of breach of the duty of good faith toward plaintiffs.

522 P.2d at 523 (citations omitted). Cf. Waite, 560 A.2d at 623 (concluding that in removing a partner as managing partner "the partners acted in good faith to resolve the `fundamental schism' between them").

Likewise, in Heller, the court held that a law firm was not liable for expelling Heller, a partner, who was not as productive as the firm expected and who was offensive to some of the firm's major clients. The court wrote: "Although partners owe each other and the partnership a fiduciary duty, this duty `applies only to situations where one partner could take advantage of his position to reap *552 personal profit or act to the partnership's detriment.'" Heller, 58 Cal.Rptr.2d at 348 (quoting Leigh, 608 N.E.2d at 1170). The court added:

More importantly, even with evaluating the evidence in the light most favorable to Heller, the evidence shows that the Executive Committee expelled Heller because of a loss of trust in him. "The foundation of a professional relationship is personal confidence and trust. Once a schism develops, its magnitude may be exaggerated rightfully or wrongfully to the point of destroying a harmonious accord. When such occurs, an expeditious severance is desirable...."

Id. (quoting Holman, 522 P.2d at 524).

In Lawlis, the court stressed the importance of a law firm's reputation in holding that the firm was not liable for expelling a partner, one Lawlis, following his successful struggle against alcoholism. The court observed that had the firm acted in bad faith or with a predatory purpose, it would have violated both the partnership agreement and its fiduciary duty, but the court limited actionable conduct to partners' attempting to obtain a personal financial advantage from the expulsion. The court explained:

The lifeblood of any partnership contains two essential ingredients, cash flow and profit, and the prime generators of that lifeblood are "good will" and a favorable reputation. The term "good will" generally is defined as the probability that old customers of the firm will resort to the old place of business where it is well-established, well known, and enjoys the fixed and favorable consideration of its customers. An equally important business adjunct of a partnership engaged in the practice of law is a favorable reputation for ability and competence in the practice of that profession. A favorable reputation not only is involved in the retention of old clients, it is an essential ingredient in the acquisition of new ones. Any condition which