The D.C. Bar will be closed for the holidays December 24–January 1
 

Washington Lawyer

Legal Spectator: Cohan and Harris and the Law of Being on the Square

From Washington Lawyer, January 2002

By Jacob A. Stein

spectatorCome with me to an antique furniture store on University Place in Greenwich Village. As we enter we are greeted by the proprietor. We tell him we would like to see an old-fashioned partners desk. He just happens to have such a desk. They are very rare and very expensive when in good condition. The one he has is in excellent condition. He takes us to an ornate desk that is two desks in one. Each side is a complete desk with a kneehole for each partner and an identical stack of desk drawers on each side. He asks what we know about partners desks. Without waiting for an answer, he says that when this particular desk was in use, probably around 1910, the partners faced each other across the desk.

He asks whether we have ever heard of George M. Cohan. Of course we have heard of George M. Cohan. He was the Prince of the American Theater. He did everything. He wrote songs and plays. He wrote "Give My Regards to Broadway" and "Over There." He was a dancer. He was an accomplished actor. The movie Yankee Doodle Dandy is about him, with Jimmy Cagney playing George M.

He then says, "Did you know who his partner was?"

As a matter of fact, we do. His name was Sam Harris. "Why are you bringing up George M. Cohan’s name?"

"I have reason to believe this is the desk that Cohan and Harris used when they were partners."

I want proof. "What gives you reason to believe this was the Cohan and Harris desk?"

"In the desk drawers were letters addressed to Cohan and Harris. On this side there was a ledger book of accounts of the partnership and on the other side were notes—not promissory notes but musical notes. That was Cohan’s side. Harris, as the businessman, sat on the other side."

When partners conducted business face to face, they used a big book to record the letters received and a daily log of partnership affairs. A ledger recorded the disbursements and receipts. Cash, checks, and contracts were kept in a big safe in the corner of the room. Each partner’s name was written on the safe in bold fancy gold leaf, followed by the word partner.

Cohan, years after his retirement, reminisced with friends about his commencement of the Cohan and Harris handshake partnership: "This Harris man, by the way, is a very surprising person [pointing to Harris]. Full of surprises. I know he’s handed me many a surprise. I don’t mean by that that I didn’t know he was always a great showman—a great judge of plays, and all that sort of thing, but I mean really he’s a surprising man. I remember the first time he surprised me. Of course when Sam and I went into business together, I naturally thought he had a lot of money. We didn’t talk about that until we were in the middle of rehearsals for our first show, and then when he told me he was broke, that was my first surprise. And he seemed to be just as much surprised as I was when I told him I was broke too! And the members of the company were very much surprised when they found out we were both broke!"

Some law partnerships have a similar beginning. Each partner expected the other partner to bring in the business. On the recoil one partner returns to the government and the other joins up with a firm that has prospects.

Cohan liked to say that Harris and he were always on the square with each other. Judge (later Justice) Cardozo translated always on the square into baroque legalese: ". . . copartners, owe to one another, while the enterprise continues, the duty of the finest loyalty. Many forms of conduct permissible in a workaday world for those acting at arm’s length, are forbidden to those bound by fiduciary ties. A trustee is held to something stricter than the morals of the market place. Not honesty alone, but the punctilio of an honor the most sensitive, is then the standard of behavior. As to this there has developed a tradition that is unbending and inveterate. Uncompromising rigidity has been the attitude of courts of equity when petitioned to undermine the rule of undivided loyalty by the ’disintegrating erosion’ of particular exceptions. . . . Only thus has the level of conduct for fiduciaries been kept at a level higher than that trodden by the crowd. It will not consciously be lowered by any judgment of this court." Meinhard v. Salmon, 164 N.E. 545 (1928).

Cohan and Harris were successful in putting on George M.’s musical shows and in buying theater properties. Nevertheless, the partnership split up. Cohan objected to actors in his plays joining unions. Harris saw unions as inevitable. They ended the partnership but remained good friends. Not only did they want to, they had to. They married sisters.

What if Cohan and Harris had found themselves in litigation over the conduct of the partnership? If they had, they would get little help from the law as it then existed. Much of the uncertainty was due to a bitter conflict in legal theory between the entities and the aggregates. The entity true believers declared that a partnership was a transcendental entity with a soul and existence of its own independent of the partners of the moment. The aggregate true believers declared that a partnership was a snapshot of the partners at a given moment. Each time a new partner joins up or an old partner leaves there is, by law, a dissolution.

What was needed was an edict from an authoritative priesthood. The edict was delivered in 1914 by the Conference of Commissioners on Uniform State Laws. It was in the form of the Uniform Partnership Act and it declared the aggregates the winner. But like so many disputes with fanatics, the losers went to the hills and waged common law guerrilla warfare.

Jacob A. Stein is a senior partner with Stein, Mitchell & Mezines LLP.