I have clients that own a paving company Ohio. One of them is taking smaller jobs on the side and not giving it to the partnership. There is an operating agreement between the parties and it just says that partners have a duty of loyalty to each other.

Other than forcing a dissolution of the company (because there are financing and contract issues) what recourse does the non-breaching partner have?

Can we order an accounting of the side jobs and take half profit? Can we charge a penalty to the breaching partners? Can we force a sale of the breaching parties intererst? I appreciate any assistance.

You could sue for breach. But much of your case will likely depend on the parties course of dealings with one another is in the past. In the face of an ambiguous agreement parol evidence is going to have to be introduced and it could get complicated and messy. But, based on what you are saying, this is what you are likely facing in a nutshell.

Brian:

Does the Op Ag have a buy sell feature? Or is there language on what happens if someone is in breach? Sometimes an agreement will state that if one partner is in breach then he automatically offers he share for sale to the other owners.

So, if there is such language in the governing instruments, then that language controls. If the docs are silent then Ohio law will control. I beleive that Ohio has adopted the Model Business Act. In such a case the non-breaching partner could sue the breaching partner for damages (determine lost profit to the partnership), and/or force the breaching partner to sell his interest.

Let me know if there is a buy/sell agreement.