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Gettinger v. Magnetic Services, Inc.

2008 WL 4559758 (U.S. Dist. Ct., D. N.J. 2008) (Unpublished)

PARTNERSHIPS; GOODWILL — In determining the value of a partnership’s goodwill, there is no specific rule and each case must be considered and decided in light of its own particular facts because goodwill constitutes “an accounting of the summation of all special advantages, not otherwise identifiable, related to a going concern; therefore, where a general partner continues the business of a limited partnership it is necessary to determine whether the general partner has appropriated the partnership’s goodwill in doing so.

A limited partnership’s agreement provided that the partnership was to dissolve on a given date, but that the partnership was not to terminate until all of its assets had been distributed to the limited partners. Although the business terminated on the given date, the partnership did not distribute any “goodwill” to the partners. Consequently, the limited partners sued the general partner, and in that suit claimed that the partnership had not terminated because the partnership’s goodwill had not been distributed. The general partner argued that “goodwill” was not a partnership asset.

The Court looked to the decisions of the United States Supreme Court where “goodwill” was defined as “the expectancy of continued patronage.” Further, the New Jersey Supreme Court treated “goodwill” as “an accounting of the ‘summation of all special advantages, not otherwise identifiable, related to a going concern.’” Additional case law pointed out that “[i]n determining the value of goodwill, there is no specific rule and each case must be considered and decided in light of its own particular facts.”

The partnership had been operating for ten years and, at the end of the ten years, the partnership sold all of its assets to its general partner who also acquired the leasehold interest where the business had been located. The general partner continued to provide the same services at the same location. In other words, on the given date, the general partner purchased the assets of the business and continued to operate the business as its own. For this reason, the Court would not decide the issue on a motion for summary judgment. Instead, it believed that a reasonable jury could either find that the general partner had taken the goodwill for itself rather than distribute it to the limited partners or, in the alternative, “a reasonable jury could find that no goodwill exist[ed], or that the Partnership’s goodwill [was] valueless because the Partnership Agreement [did] not stipulate that goodwill [was] an asset of the Partnership.”


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