Minority Partners Risk Huge Losses When Wrongfully Dissolving A Partnership

On May 18, 2016, in Congel v. Malfitano, the New York State Appellate Division, Second Department held that a minority discount could be applied to the value of a minority partner's interest after he dissolved a partnership, in violation of a written partnership agreement.

This decision, which effectively reduced the value of his interest by hundreds of thousands of dollars, serves as a cautionary tale to minority partners in joint ventures who attempt to cash out their interests by wrongfully dissolving the partnership, when the remaining partners wish to continue the venture.

Background

In 2006, Marc A. Malfitano, a 3.08% partner in a partnership formed pursuant to a 1985 written agreement, for the purpose of owning and operating the Poughkeepsie Galleria Shopping Center, advised his partners that he had elected to dissolve the partnership. He based his unilateral decision on an alleged "fundamental breakdown in the relationship between and among us as