Legal Question in Business Law in New Jersey
breaking a contract based on deceptive practices
1. I took early retirement from a career in daily newspapers to entered a partnership to acquire a weekly newspaper. I now own 25 percent of the company. The paper aquired was low quality and nonprofessional.
2. Real estate ad revenue is key to its success. Although reader response has been exceptional, no real estate agencies will do business with the paper. Meanwhile, I have invested (literally) all I have in the paper (more than three times that of my partner so far).
3. I discovered after several months that my partner is a convicted felon (whoi had served 7 years). He was convicted on federal racketeering charges concerning real estate fraud, conspiracy to commit fraud, and bilking goernment of more than $1 million through falsified insurance applications for properties, etc. He was found guilty of at least 57 of 60 charges.
Question: I must leave the arrangement. I need to know if I can take the product I created (I designed an entirely new product and features) with me (via downloading formats, layout and design, etc. on discs.) Also, how to walk away without being liable for possible future problems associated with product.
2 Answers from Attorneys
Re: breaking a contract based on deceptive practices
The critical question here is whether you have a written partnership agreement that provides for a method of dissolving the partnership. In the absence of a written partnership agreement, you will have to resort to New Jersey statutory remedies governing the dissolution of corporations and partnerships. You should approach your partner and try to work out a voluntary agreement for dissolution. If that doesn't work, you can resort to filing a court action to dissolve the partnership.
Depending upon the type of partnership that you formed, you may certainly have personal exposure to the partnership creditors. Unlike corporations and limited liability companies, partnerships do not insulate partners from personal liabilty. A general partner, for instance, is liable for all of the partnership debts whereas a limited partner is generally liable to creditors to the extent of his partnership contribution.
As for your taking records and other items of your creation, those assets likely belong to the partnership in the absence of any express agreement between you and your partner. Practically speaking, however, it is not uncommon for there to back-up computer files and the like that is stored in an off facility in the event of a fire or other casualty.
If you would like to meet to discuss the matter, please contact me at (201) 498-0400. Otherwise, good luck in ending this relationship.
Re: breaking a contract based on deceptive practices
This raises intellectual property and partnership issues. You are going to need to take a look at the partnership agreement and look for provisions on "withdrawal" and "dissolution". They probably describe what happens to partnership assets - in any event you can reach an agreement for dissolution with your partner. As far as the intellectual property (copyrights, trademarks, etc.), they are very fact-specific. For example, under the Copyright Act of 1976, as amended, works made by employees within the scope of their employment are considered "works made for hire" and initial authorship vests in the employer and not the employee. So it is very likely that the partnership owns what you have created and that they are partnership assets.
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