SW Legal studies in Business

Majority Partner Can, Given Partnership Terms, Force Sale of Partnership
Description Washington high court held that a majority partner did not violate its duty of loyalty to minority partners by forcing them to accept market price for their interest in the sale of the partnership’s assets.
Topic Business Organization
Key Words Partnership; Duty of Loyalty; Minority Rights
C A S E   S U M M A R Y
Facts

Nine minority partners each owned about one-half a percent each of J&J Celcom, a partnership with AT&T, which owned the rest. AT&T invoked its majority right and voted to buy out the minority partners. It offered each partner a price a bit higher than the price provided by a third party appraisal. Some partners accepted, others did not. AT&T then voted to dissolve the partnership, forcing the remaining minority partners to accept the appraised price. Those minority partners sued. The district court held for AT&T; the minority partners appealed. The appeals court held that the price offered was the fair market price, but certified a question to the Washington state high court: “Does a controlling partner violate the duty of loyalty to the partnership or to dissenting minority partners where the controlling partner causes the partnership to sell all its assets” to another party?

Decision Question answered. The majority partner did not violate the duty of loyalty by causing the partnership to sell its assets to an affiliated party at the appraised value. The partnership agreement permitted sale of partnership assets by majority vote, and the majority partner disclosed material information, paid fair consideration, and acted in good faith.
Citation J&J Celcom v. AT&T Wireless Services, Inc., 169 P.3d 823 (Sup. Ct., Wash., 2007)

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