January 22, 2007
A Modern Day Meinhard?
Posted by Lisa Fairfax

I start off teaching my Business Associations class with a focus on partnerships and thus I am always looking for interesting partnership stories. I ran across one in the Chicago Tribune that seemed really intriguing. Rush Simonson brought suit against Kenneth Griffin, hedge fund manager of Citadel Investment Group—one of the biggest hedge funds in the country. Simonson’s suit indicated that he and Griffin were former partners, and that Griffin essentially breached their partnership agreement, continuing their “business” in Chicago and cutting him out of their profits. Simonson has abruptly dropped his suit claiming that while he was not being compensated for his action, it was the “right thing to do.” Nevertheless, the charges make for an interesting tale.

Apparently Griffin and Simonson had formed two partnerships while Griffin was in college at Harvard. Simonson claimed that he left a position in a brokerage firm to participate in their partnership businesses and provide Griffin with operational expertise. After graduation Griffin moved to Chicago and founded Citadel. Simonson also claimed that Griffin left with the secret intention of continuing their business in a different structure, and running the business without Simonson. Buttressing his claim, Simonson came across an article (while at the dentist) indicating that Griffin had started Citadel while in his college dorm. This kind of claim involves, among other things, a current day and interesting version of the Meinhard duty. In addition, assuming there was some violation of Griffin’s fiduciary duty, it raises some rather thorny issues of how one goes about parceling out the profits associated with a business that according to Bloomberg News made a trading profit of about $5 billion last year. Of course Griffin claimed all along that he properly ended the partnerships after graduation and Simonson’s suit was without merit. In dropping the suit, Simonson appears to validate that claim. But it still makes for good classroom discussion.

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