Jessica Jackson Hill v. Steven Hill ( 2014 )

COURT OF APPEALS
SECOND DISTRICT OF TEXAS
FORT WORTH
NO. 02-12-00332-CV
JESSICA JACKSON HILL APPELLANT
V.
STEVEN HILL APPELLEE
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FROM THE 393RD DISTRICT COURT OF DENTON COUNTY
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MEMORANDUM OPINION1
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I. Introduction
In two issues, Appellant Jessica Jackson Hill appeals the property division
in the trial court’s divorce decree, arguing that the trial court applied the wrong
standard to value Appellee Steven Hill’s partnership interest in KPMG, LLP
(KPMG) by failing to account for commercial goodwill and for a guaranteed
1
See Tex. R. App. P. 47.4.
income component included in the partnership agreement, leading to an unfair
and unjust property division.
Steven concedes that while KPMG may have commercial goodwill, the
community estate is not entitled to share in it because he has no equity or
ownership interest in KPMG and his ability to share in its profits is limited and
governed by the partnership agreement, which also defines ―guaranteed
compensation‖ and sets out a computation that equates to his earned income.
We affirm.
II. Factual and Procedural Background
Steven became a Class B principal in KPMG, a public accounting firm with
approximately 1,900 partners and principals in the U.S. division, shortly after he
married Jessica. At the final divorce hearing, Steven, Jessica, and their experts
testified about Steven’s interest in KPMG, and in the divorce decree, the trial
court awarded to Steven ―[a]ll interest he may own in the partnership known as
KPMG, LLP., including his capital account with KPMG, LLP.‖ It also allocated to
Steven ―[t]he loan against his KPMG, LLP[.], Partnership capital account.‖ The
nature of Steven’s interest in KPMG determines the outcome of this appeal.2
2
At oral argument, Jessica characterized Steven’s interest in KPMG as an
interest in an ongoing Delaware limited partnership, while Steven described it as
an interest in a ―faux‖ partnership in which Steven paid for the nontransferable
right to a percentage of the firm’s capital account.
2
A. 2008 Partnership Agreement
The trial court admitted the 2008 Partnership Agreement (the Agreement)
into evidence. The Agreement sets out that ―members‖ are its partners and
principals and distinguishes between ―partners,‖ which it defines as ―other than
Principals,‖ and ―principals,‖ which it defines as parties ―who are not Certified
Public Accountants.‖ The Agreement also indicates that notwithstanding the
different nomenclature, each principal’s relationship to the firm ―is intended to be
that of a partner in a partnership,‖ with the same rights, privileges, and liabilities
of partners, with some limitations.
One of the Agreement’s limitations in the definition of ―principals‖ is that
principals ―shall not contribute to or have any interest in the capital of the Firm
other than their contributions to their Deposit Accounts, which shall constitute
loans to the Firm that shall be subordinated to other debts of the Firm as and to
the extent provided in the By-laws.‖ Notwithstanding this definition, section 15.1
of the Agreement states that each member agrees that the relationship created
between each member and the firm and between the firm’s members ―is intended
to be that of a partner in a partnership,‖ governed by the law, ―both statutory and
common law, respecting partners and partnerships.‖
The Agreement provides for the disposition of the deposit account in the
event of death. It also provides for disposition of the deposit account on
withdrawal and retirement and the effect of separation in the event of death,
retirement, any nontemporary type of withdrawal, or bankruptcy. When a
3
member is ―separated,‖ the balance of his capital or deposit account, drawing
account, and subordinated loan account ―shall be liquidated and distributed to‖
him in exchange for his interest in the firm, and any amounts that he owes the
firm at the time of separation ―shall be paid prior to or simultaneously with
payment‖ for the above accounts. The Agreement also provides, ―Except as
specifically provided for herein or in the By-laws, no Member shall . . . mortgage,
assign[,] or incorporate his or her interest in the capital, goodwill[,] or profits of
the Firm or any part thereof.‖
B. Jessica’s Expert
Jessica’s valuation expert Mike Hill testified that the fair market value of
Steven’s KPMG partnership interest was $2.4 million3 and that KPMG had
goodwill ―in excess of just the individual partners.‖ Hill agreed that his August 23,
2011 valuation report stated, ―This letter does not constitute a valuation report as
defined by the Uniform Standards of Professional Appraisal Practices,‖ and that it
3
Hill stated that Steven owned a 0.124414 percent (essentially, a tenth of
one percent) partnership interest in KPMG and that based on his compensation
comparison for similar positions, Steven’s reasonable compensation was
$700,000, making $800,000 of Steven’s $1.5 million average income attributable
to the KPMG ownership interest. Applying a discount rate of around 33.3%, he
arrived at the $2.4 million figure. Hill explained that a discount rate was the rate
that he thought a willing buyer would expect to receive as a rate of return, and
because this was excess income, ―it requires a higher rate of return than, say,
normal income-based salary and so forth.‖ He also described the market for the
share as ―a specific type of buyer that would have the skill set to be able to step
in and receive the salary plus the excess income.‖ Hill also explained that he did
not adjust for present value because the valuation covered a single period
instead of a long-period discounted cash flow ―out a number of years.‖
4
was not a complete valuation report. He also acknowledged that his valuation
report did not mention the Agreement and that his valuation report referred to
tangible value but did not use the words ―good will‖ or make a distinction between
commercial goodwill and personal goodwill. He agreed that his valuation result
ignored the language in KPMG’s offer letter that stated, ―If you cease to be a
member of KPMG, you will be entitled only to the compensation that has been
earned and accrued through the date you cease to be a member of the firm.‖ Hill
also acknowledged that he never spoke to Steven.
C. Steven’s Testimony
Steven testified that the capital account was actually a deposit account. At
the time of the divorce hearing, Steven listed the value of his KPMG capital
account at $715,000, with a loan amount of $700,900 to fund it, for a net
community interest of $14,100, and he testified that his interest in KPMG should
be the net value of his capital account less the outstanding loan balance.
D. Lauri Morrison’s Testimony
Lauri Morrison, KPMG’s national director in charge of partner care, gave
the following testimony during her direct examination:
Q. Jessica Hill, Steve Hill’s wife, has a financial expert James
M. Hill who stated that Steven Hill has a partnership interest of
0.124414 percent which is about one-tenth of one percent.
What does that percentage number mean?
A. That’s the percentage of Steve’s capital or deposit
account; overall, the sum of all partners’ capital deposit accounts as
of 12/31/2010.
5
Q. And when you say ―his capital account,‖ are you talking
about the gross number as opposed to the number after you
subtract the loan?
A. Yes.
....
Q. What is your understanding – does that percent – as to
ownership interest, what does that percentage mean?
A. It doesn’t represent any equity or ownership interest in the
partnership.
Morrison said that under the Agreement, Steven did not have any
ownership interest that could be sold, transferred, or given away by him or that
could be inherited from him and that the Agreement defined his rights and the
limitations on those rights. Morrison said that to enter KPMG as a principal,
Steven had to pay into the capital account, that he had secured the loan through
a third-party lender to fund the $715,000 in the capital account, and that his loan
balance for the account was $700,900, for a difference of $14,100.4 She
explained that the loan’s purpose was ―[t]o help a partner or principal to fund their
capital or deposit retirement‖ and that when a person entered KPMG as a partner
or principal, he or she was required to pay a certain amount into the capital
account.
4
An August 18, 2011 letter from the KPMG partner in charge stated that if
Steven voluntarily withdrew in August 2011 from KPMG, his principal deposit
balance of $715,000 would be applied to pay off the outstanding principal
balance (which at the time was $714,400), and Steven would receive a $600
payment in settlement of his deposit account balance.
6
E. Steven’s Expert
Steven’s expert Bryan Rice testified that one of the most important issues
involving valuation in connection with a divorce was ―[u]nderstanding if there can
be—if there is any goodwill associated with an interest in a professional practice;
and if so, is the goodwill attributed to what we commonly call personal goodwill or
whether it’s commercial goodwill.‖ Rice gave two definitions of goodwill: the
excess of a business’s purchase price over the fair market value of its net assets
and the present value of the economic benefits that accrue to a business interest
or the owner of a business interest that is represented by returns on the business
interest in excess of normal expectations. He also divided goodwill into separate
categories: tangible value (patents, trademarks, copyrights, processes, location),
commercial (the excess of value that someone would pay for the business
without the seller signing a covenant not to compete), and personal (value that is
attributable to the time, toil, talent, skills, efforts, and reputation of the owner-
employee).
Rice testified that the value of Steven’s interest was $14,100, the value of
the capital account less the loan against it, and in his report, he stated, ―I
understand that the partnership interest and the income from it serves as
collateral for the debt.‖ In his report, he also stated:
A multi-owner professional practice may possess commercial
goodwill when the firm is marketed and operated as a collection of
individuals as opposed to a group of individual practices and/or has
reached a critical mass of employees, market reach, shared
knowledge, and business infrastructure. Owners of such a practice
7
often own small minority interests in the firm and the impact of the
departure of one minority partner from such a firm is generally not
devastating to the entirety of the firm.
In his report, Rice opined that corporate governance is an extremely important
factor in the valuation of interests in professional practices such as the KPMG
interest.
Rice said that in making his valuation determination, he focused on the
Agreement and the offer letter that Steven signed when he rejoined KPMG, and
he stated,
[T]he only way to obtain value for your partnership interest is to sell it
back to the firm. If it’s a partnership interest; a member’s interest; a
principal’s interest, you sell it back to the firm. You get the capital
account, you pay off the debt[,] and that’s what you get.
Rice had reviewed Hill’s report and expressed that Hill’s report was
erroneous because ―[h]e appraised what he concludes to be a minority interest,
about one-tenth of one percent interest; but he did not apply or did not justify why
he did not apply any discount for lack of control or discount for lack of
marketability which, of course, are extremely standard.‖ He further stated that
the essence of Hill’s valuation was to normalize Steven’s compensation but that
based on his own education and experience, ―you do not make normalizing
adjustments when you are appraising a minority interest because the owner of
the minority interest has no power to enforce those types of normalizing
adjustments.‖ Rice also criticized Hill’s report for failing to set forth a
8
methodology and for overstating value by applying the typical 33% cost of capital
applicable to post tax benefit streams to Steven’s pretax benefit stream.
Finally, Rice pointed out that Hill had not addressed the outstanding debt
against the partnership interest and that Steven’s August 13, 2003 offer letter
stated,
Your continuation as a member of the partnership and payment of
compensation as described above is conditioned upon your
satisfactory performance. For this purpose, your performance will be
deemed satisfactory if you meet mutually agreed upon goals. If you
cease to be a member of KPMG, you will be entitled only to
compensation that has been earned and accrued through the date
you cease to be a member of the firm.
Rice stated that he interpreted this to mean that Steven’s performance is what
drove his compensation.
Rice classified Steven’s compensation as ―his distributive share of the
earnings of the firm, and most of that is reported as self-employment income
which connotes effort in exchange for the earning of the compensation.‖ Rice
acknowledged that another component of Steven’s compensation was
―guaranteed payments which are also payments to a partner from—for services
rendered. So it’s all—he does receive some interest on his drawing account or
capital account, as we call it, but that’s minimal.‖ Rice said that Steven was paid
for his services, not for simply owning an interest in the entity, that Steven’s
performance ―is what drives his compensation,‖ and that based on his own
compensation comparison and Steven’s responsibilities, he had concluded that
Steven’s $1.5 million compensation was reasonable.
9
F. Closing Arguments
During closing arguments, Jessica argued that KPMG was a partnership,
not a corporation, that fair market value was the proper valuation, and that
Mandell v. Mandell, 310 S.W.3d 531 (Tex. App.—Fort Worth 2010, pet. denied),
Von Hohn v. Von Hohn, 260 S.W.3d 631 (Tex. App.—Tyler 2008, no pet.), and
Keith v. Keith, 763 S.W.2d 950 (Tex. App.—Fort Worth 1989, no writ), were the
cases that applied to determine her share of the community property with regard
to Steven’s partnership interest. Steven argued that Hill’s valuation report was
incomplete and nonstandard; that the ―partnership interest‖ was really a set of
contractual rights defined and limited by the Agreement; that those rights were
not salable, transferable, or assignable; and that the amount in the capital
account under the Agreement was $14,100.
G. Trial Court’s Rulings
The trial court found that ―the partnership has a value of $14,000,‖ and
stated,
Now, a couple of points just defined on the partnership valuation
issue. I don’t find that the contract controls. But what I do find is
that the value attributable is all due to professional good will. I didn’t
see any commercial good will in this matter. Logic tells me there is
some, but it’s probably impossible to quantify. And even if there
was, his ability to access it under the Frank Finn[5] decision, he
couldn’t except by being employed in the future. Such as if this firm
were to liquidate at some point in the future, he might get some
piece of the—of the value. I note in particular that the concurring
opinion of Ann Stewart [in Finn] . . . .
5
Finn v. Finn, 658 S.W.2d 735 (Tex. App.—Dallas 1983, writ ref’d n.r.e.).
10
She specifically noted you had to value the going concern of
the partnership and then determine—which there was none of that
here today, and then you have to determine whether there were
conditions to getting it.
In the hearing on Jessica’s motion for reconsideration, the trial court added
that it did not find the methodology used by Jessica’s expert appropriate for
determining fair market value. In its findings of fact, the trial court stated that it
had divided the community estate by allocating ―approximately 50%‖ to each
party.
III. Marital Property
A. Standard of Review
The trial court is charged with dividing the community estate in a ―just and
right‖ manner, considering the rights of both parties. Tex. Fam. Code Ann.
§ 7.001 (West 2006); Watson v. Watson, 286 S.W.3d 519, 522 (Tex. App.—Fort
Worth 2009, no pet.). It has broad discretion in making a just and right division,
and absent a clear abuse of discretion, we will not disturb that division. Halleman
v. Halleman, 379 S.W.3d 443, 452 (Tex. App.—Fort Worth 2012, no pet.).
B. Valuation Standard
Jessica argues in part that the trial court incorrectly relied on Mandell
instead of Keith to value the partnership interest because the Agreement
addresses only when a member is leaving KPMG and does not purport to
address the value of a member’s interest on divorce or any other situation in
which the member remains at KPMG. Jessica also argues that Steven’s
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valuation expert did not correctly apply the valuation method he urged the trial
court to adopt because it ignored goodwill.
In Mandell, we contrasted earlier property division cases—Von Hohn,
Keith, and Finn, which were cases in which partnership agreements did not
address what would happen to a partnership interest in the event of divorce—
with the valuation of a closely held corporation’s stock. 310 S.W.3d at 540. The
corporation’s shareholder agreement contained a specific contractual provision
addressing stock ownership and value in the event of a shareholder’s divorce
and restrictions on who could own and purchase the stock as well as the price at
which it could be sold. Id. While we agree that the older partnership-related
cases appear more similar to the matter at hand,6 we also note that the trial court
expressly stated that with regard to the partnership valuation issue, ―I don’t find
that the contract controls.‖
Jessica contends that goodwill is the key factor in valuing Steven’s
partnership interest and that the Agreement’s restrictions should not be the sole
method of establishing the value of his KPMG interest. In terms of valuation,
there is a distinction between the goodwill that attaches to a professional person
because of confidence in that individual’s skill and ability and the commercial
6
We noted in Mandell that stock in a closely held corporation is not the
same as an interest in an ongoing partnership and that increases in a
partnership’s value that accrue during the marriage may be a community asset
while increases in a corporation’s net worth generally are not an asset of the
community estate of each of the corporation’s shareholders. 310 S.W.3d at 539–
40.
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goodwill of a business that arises from its location, its well-established and well-
recognized name, or something that otherwise separates it ―from the skills or
attributes of an individual member.‖ Salinas v. Rafati, 948 S.W.2d 286, 290–91
(Tex. 1997).7 ―Good will that exists separate and apart from a professional’s
personal skills, ability, and reputation is divisible upon divorce.‖ Keith, 763
S.W.2d at 952.
To determine whether goodwill that is subject to division upon divorce
attaches to a professional practice, first, goodwill must be determined to exist
independently of the personal ability of the professional spouse, and then if such
goodwill is found to exist, the court must determine whether that goodwill has a
commercial value in which the community estate is entitled to share. Von Hohn,
260 S.W.3d at 638; see also Finn, 658 S.W.2d at 741 (noting that it is ―[w]ithout
question [that] the goodwill of a long established firm has commercial value‖).
Steven testified that KPMG had approximately 1,900 partners and
principals. This is similar, on a much grander scale, to the firm in Finn, in which
there were twenty senior partners, twenty-two junior partners, and forty-three
7
The supreme court cited Geesbreght v. Geesbreght, 570 S.W.2d 427
(Tex. Civ. App.—Fort Worth 1978, writ dism’d), as such an example. Salinas,
948 S.W.2d at 291. In Geesbreght, a doctor owned shares in a professional
corporation that employed fifty to 100 other doctors on a part-time basis to satisfy
the corporation’s contracts with hospitals—accruing commercial goodwill—in
addition to the professional goodwill that he accrued by providing medical
services himself. 570 S.W.2d at 435–36. We concluded that when the contract
relative to the sale or transfer of the owner-doctor’s stock set its price at $50,000,
the trial court abused its discretion by taking the stock’s ―book value‖ of $16,000.
Id. at 436.
13
associates, and the firm itself, operating under the names of two founding
partners no longer with the firm, had been providing legal services for over ninety
years; the husband-lawyer had been practicing at the firm for around twenty-five
years. 658 S.W.2d at 741 (noting that a large part of the firm’s reputation for
providing services was built upon the professional abilities of the husband’s
predecessors in the firm as well as the abilities of his present partners and
professional employees). As here, the firm partnership agreement in Finn made
no provision for compensating a senior partner for the firm’s goodwill in the event
of his death or withdrawal. Id. at 740, 742.
In contrast to the instant case, however, while the Finn court noted that the
evidence in the case indicated that the husband’s law firm had goodwill
independent of his professional abilities, see id. at 741, the trial court here heard
vague and conflicting evidence about the existence and availability of commercial
goodwill with regard to Steven’s interest in the firm. Specifically, Jessica’s expert
Hill testified that he did not make a distinction between personal and commercial
goodwill in his valuation report. Steven’s expert Rice defined the different types
of goodwill and acknowledged that commercial goodwill could exist in a multi-
owner professional practice but opined that corporate governance, i.e., the
Agreement, was an ―extremely important‖ factor in valuing a minority interest.
Rice also stated that while Steven received ―some interest‖ on his capital account
outside of his guaranteed payments for services rendered, it was minimal, and
had to be offset against the outstanding debt for the partnership interest. Rice
14
considered Steven’s $1.5 million in compensation as reasonable, in comparison
to Hill’s testimony that $800,000 of Steven’s compensation could be attributed to
the ownership interest because his reasonable compensation was $700,000. To
the extent, however, that the trial court had sufficient evidence upon which to
conclude that commercial goodwill existed in some form, we continue our
analysis to determine whether the trial court’s division of the community’s interest
was ―just and right.‖ See Tex. Fam. Code Ann. § 7.001.
In analyzing whether the community estate was entitled to share in the
value of the law firm’s commercial goodwill, the majority in the Finn opinion
stated that the extent of the husband’s interest was governed by the partnership
agreement. 658 S.W.2d at 741. The partnership agreement’s terms did not
provide for any compensation for accrued goodwill to a partner who ceased to
practice law with the firm or any mechanism for him to realize the value of the
firm’s goodwill. Id. at 741–42. Instead, it provided only that if he died or
withdrew, he (or his heir) was entitled only to the amount contained in his capital
account, any earned income that had not been distributed, and his interest in the
firm’s reserve account, less 10% of his proportionate share in the accounts
receivable for clients’ disbursement. Id.
The majority concluded that the husband’s lack of any legal right to realize
the value of the firm’s goodwill ―is a decisive factor,‖ making the case
distinguishable from Geesbreght, ―wherein the corporate structure provided a
mechanism which enabled Dr. Geesbreght to realize the value of accrued
15
goodwill by enhancing the value of his stock.‖ Id. at 742. The husband in Finn
could only realize the value of accrued goodwill in the partnership by continuing
to practice law as a member of the firm, ―a circumstance depending not only on
his own individual capacity, but also on the uncontrolled discretion of his
partners.‖ Id. The majority held that such realization in the future was ―no more
than an expectancy entirely dependent on the husband’s continued participation
in the firm, and therefore, [was] not property in the community estate.‖ Id.
(comparing husband’s position to the physician-spouse in Nail v. Nail, 486
S.W.2d 761, 764 (Tex. 1972), in which the supreme court concluded that the
goodwill that the medical practice might have accrued at the time of the divorce
was not property in the parties’ estate).
However, in a concurring opinion, Justice Stewart disagreed that the value
of the law firm’s goodwill should not be considered in evaluating the community’s
partnership interest because the goodwill enhanced the value of the community
partnership interest. Id. at 749 (Stewart, J., concurring). Justice Stewart found
Geesbreght more analogous than Nail because the goodwill did not belong to the
individual partners, and she disagreed that the partnership agreement controlled
the value of individual partnership interests because ―[t]he asset being divided is
the husband’s interest in the partnership as a going business, not his contractual
death benefits or withdrawal rights.‖ Id. She therefore concluded that while the
formula in the partnership agreement might represent the present value of the
husband’s interest, it should not preclude a consideration of other facts, including
16
consideration of partnership goodwill, if any. Id. (noting that whether the law firm
possessed goodwill, and if so, its value were fact questions for the trier of fact).
We have previously followed Justice Stewart’s concurring opinion. Keith,
763 S.W.2d at 953 (citing 658 S.W.2d at 749 (Stewart, J., concurring)). In Keith,
the partnership agreement provided a method for determining the value of the
business in the event that it was terminated due to withdrawal, other act, or death
of one of the partners. Id. We concluded that because the partnership was not
being terminated, ―the formula set forth in the partnership agreement with respect
to death or withdrawal of the partner is not necessarily determinative of the value
of a spouse’s interest in the ongoing partnership as of the time of divorce.‖ Id.
(emphasis added); see also Von Hohn, 260 S.W.3d at 634, 640 (following Finn
concurrence in holding that husband’s law firm partnership agreement did not
control value of individual partnership interests in divorce).
But while the Agreement is only a factor to consider in the present value of
the partnership interest here, see Keith, 763 S.W.2d at 953; Finn, 658 S.W.2d at
749 (Stewart, J., concurring), as noted by Justice Stewart, the questions of
whether a business possesses goodwill and if so, what the value of that goodwill
consists of, are fact questions for the trier of fact—in this case, the trial court.
See Finn, 658 S.W.2d at 749 (Stewart, J., concurring). Based on the evidence
presented to the trial court, if it determined that Jessica’s expert lacked credibility
and chose to believe the testimony of Steven’s expert and the testimony of
Morrison, the KPMG national director in charge of partner care, about the status
17
of the partnership interest,8 then it could have reasonably reached the conclusion
that it did—that the partnership interest had the lower value testified about by
Steven and his expert, and that commercial goodwill, if any, was presently
inaccessible based on, among other things, the status of the loan that Steven
had taken out to buy into the firm, but that it might have value someday, in the
post divorce future.9 Therefore, we overrule this portion of Jessica’s two issues.
Jessica further argues that by failing to account for the ―guaranteed
compensation component‖ in the partnership agreement, the trial court
incorrectly reduced the community estate by $336,985 and reduced her interest
by $168,492, resulting in an unjust and unfair property division. However, as
pointed out by Steven during oral argument and based on our review of the
record, Jessica did not raise this argument in the trial court below. Therefore, it
8
The divorce decree specifically awarded to Steven ―[a]ll interest he may
own in the partnership known as KPMG, LLP., including his capital account with
KPMG, LLP.,‖ along with the loan against that capital account. [Emphasis
added.]
9
The trial court also noted, and the record supports, that neither of the
parties nor their witnesses testified about the value of the partnership itself as a
going concern. In Von Hohn, the wife’s expert valued the husband’s interest in
the firm using an income approach, including the firm’s commercial goodwill but
excluding personal goodwill and future time, toil, and labor, and the jury valued
the husband’s interest at $4.5 million. 260 S.W.3d at 641. The Tyler court
nonetheless reversed the portion of the divorce decree pertaining to the division
of the marital estate because the jury’s goodwill finding included pending, future
earnings post divorce, which were the husband’s separate property. Id. at 641–
43.
18
is unpreserved.10 See Tex. R. App. P. 33.1; Banda v. Garcia, 955 S.W.2d 270,
272 (Tex. 1997). We overrule the remainder of her two issues.
IV. Conclusion
Having overruled both of Jessica’s issues, we affirm the trial court’s
judgment.
BOB MCCOY
JUSTICE
PANEL: DAUPHINOT, MCCOY, AND MEIER, JJ.
DELIVERED: January 9, 2014
10
We also note that Steven’s expert Rice explained that Steven was paid
for his services and that his compensation came in the ―form of his distributive
share of the earnings of the firm,‖ most of which was reported as ―self-
employment income‖ and another component of which involved ―guaranteed
payments which are payments to a partner from – for services rendered,‖ in the
form of minimal interest on his capital account. The Agreement defined
―guaranteed compensation‖ as ―a payment or payments made to a Member,
without regard to the income of the Firm, for services rendered to the Firm.‖
[Emphasis added.]
19