Three Indianapolis accounting firm principals who left the company to start a rival practice are only entitled to part of their ownership shares in the firm, a Marion County judge has ruled.
In addition, Thomas Sponsel, who was a name partner in the former Greenwalt Sponsel & Co. Inc., cannot recover any retirement benefits from the firm.
Judge Michael Keele’s June 9 decision stems from a lawsuit Sponsel filed in December 2009. Two other former partners, Lisa Purichia and Jason Thompson, joined him in the complaint.
The suit claimed that Greenwalt Sponsel, now known as Greenwalt CPAs Inc., breached both its fiduciary duty and its contract with the three partners after they left the firm in September 2009 to launch Sponsel CPA Group.
They alleged Greenwalt Sponsel failed to pay money it owes them pursuant to the firm’s shareholder agreement and instead offered a discounted value for their stock ownership because they did not give 18 months' notice before they left.
Sponsel and the others, though, argued they were due the full amount because the firm granted a waiver to another partner who left without giving the proper notice. They also contended the firm and its managing partner, Larry Greenwalt, forced them to leave early by creating a hostile working environment.
The judge disagreed, granting Greenwalt’s motion to dismiss the claims.
“The contracts in this case are unambiguous,” Keele wrote. “They make clear what the parties intended in the event that a shareholder chose to leave [Greenwalt Sponsel], whether by resignation, retirement, or otherwise.”
Given the former partners' failure to give 18 months’ notice and their failure to abide by a non-compete clause, the judge reduced the value of their shares in Greenwalt Sponsel by 40 percent.
Greenwalt’s lawyer, David Herzog of Baker & Daniels LLP, said his client is pleased with the decision from Keele, who “carefully analyzed the contract documents and applied the law.”
Greenwalt Sponsel’s non-compete clause remained in effect for three years and required shareholders who left to pay the firm the entire amount of their billings for the 12 months prior to their departure.
The three partners who left Greenwalt Sponsel admitted they violated that provision, according to court documents, making them liable for damages to be determined at a future date.
They also must pay damages for violating their shareholder agreement, which prohibited them from hiring Greenwalt Sponsel employees. All told, Sponsel took 18 Greenwalt Sponsel staffers with him.
Under the shareholder agreement, the three are liable for damages equal to 25 percent of the annual salaries of the employees that left to join Sponsel.
In an e-mailed statement, Sponsel said the ongoing litigation only involves the three partners and not his new firm, Sponsel CPA Group.
“I will not be able to offer comments on the outcome to date until we have final resolution,” he said. “In the meantime, we are focusing our entire energies on providing excellent client service, something Sponsel CPA Group has done for the past two years.”
The judge ruled that Sponsel cannot collect retirement benefits from his former firm because he started Sponsel CPA Group the day after he left Greenwalt Sponsel on Sept. 1, 2009.
“The claim fails as a matter of law for the simple and obvious reason that Tom did not retire under the plain English meaning of the term,” the judge wrote.