McKenzie v. BDO USA, P.C.

7. McKenzie v. BDO USA, P.C.

**Citation:** 2026 WL 191010 (Del. Ch. Jan. 26, 2026), C.A. No. 2025-0264-LWW

Relevant Facts

• Jason McKenzie is a former partner of BDO USA, P.C., a large accounting firm.

• McKenzie became a partner when his firm was acquired by BDO in November 2016.

• Upon joining, McKenzie signed an Amended and Restated Partnership Agreement governed by Delaware law.

• BDO's board had broad discretion to designate partners in two tiers: Variable Share Partners (VSPs, or equity partners) and Fixed Share Partners (FSPs, or non-equity partners).

• McKenzie was designated as a VSP upon admission.

• In March 2023, McKenzie notified BDO of his intent to resign at the end of the fiscal year in April 2024.

• Three weeks after announcing his resignation, BDO's Board reclassified McKenzie from VSP to FSP, reducing his payout.

Legal Issues

Whether BDO breached the Partnership Agreement by reclassifying McKenzie's equity interest from VSP to FSP upon notice of his resignation; whether BDO breached the implied covenant of good faith and fair dealing; whether the board members breached fiduciary duties owed to McKenzie individually.

Decision by the Court

The Court of Chancery granted defendants' motion to dismiss all three counts with prejudice under Rule 12(b)(6).

Reasons for the Decision

The Partnership Agreement's plain language granted the Board express authority to designate a partner's status "at any time thereafter" and in its "sole discretion." The implied covenant serves only as a gap-filler where a contract is silent; here, the Agreement expressly addressed reclassification authority. Under DRUPA, fiduciary duties run to the partnership and other partners collectively, not to individual partners.

Professional Liability

Trust Accounting & Distributions