4 Takeaways From the TDM-Birch Dispute

Partners in situations like TDM’s have always been able to sue or bring an arbitration. The outcome depends on the facts of the case and the language of their contracts. Partners have prevailed in settlements and in similar court cases or arbitrations even if their contracts did not have the “automatically assigned” language. In addition, in some states, purchasers of a group of assets are also required as a matter of law to take any liabilities associated with those assets.

The jury verdict does not set any legal precedent. The case turned on specific facts, such as the language of the TDM-Navigator and Navigator-Birch contracts, and the conduct of the parties. These will be different in every other case.

The judges order denying Birchs request to dismiss the case before trial and allowing the case to go to the jury does set a precedent that is helpful to channel partners, but it only serves as direct precedent in the U.S. District Court in Kentucky. On the bright side, even if it doesnt create any legal precedent elsewhere, the order has persuasive force and creates a roadmap for partners in crafting potentially stronger contract language.

Partner contracts do not have to have automatically assigned” language to be enforceable against purchasers, but such a clause definitely strengthens the agents position. Such clauses have not traditionally been a point of contention. Ive only run into the situation once in almost a decade of representing partners. Much more common is a situation where the original service provider or a successor firm either deliberately underpays the amount of commission due, or simply stops paying at all. In those situations, there is no question about assignment of the partners contract.