Uniform Limited Partnership Act

limited partnershipA post I wrote two years ago referred to the limited partnership as “the dinosaur of business forms in New York” destined for “virtual extinction” due to New York’s outmoded partnership laws coupled with the meteoric rise of the limited liability company. As the years roll by, the limited partnership’s obsolescence is especially pronounced for those governed by New York’s Uniform Limited Partnership Act of 1922 (“NYULPA”) codified in Article 8 of the New York Partnership Law, applicable to limited partnerships formed prior to, and exempted from, the New York Revised Uniform Limited Partnership Act of 1991 (“NYRULPA”) codified in Article 8-A of the Partnership Law.

The rarity of new business divorce cases involving NYULPA-governed limited partnerships makes it all the more intriguing when one comes along, as happened earlier this month in a case called Doppelt v. Smith, 2015 NY Slip Op 31861(U) [Sup Ct NY County Oct. 1, 2015], decided by Manhattan Commercial Division Justice Eileen Bransten.

Doppelt doesn’t disappoint, thanks to its holding that a provision in a limited partnership agreement, authorizing voluntary dissolution upon the majority vote of the limited partners, precluded the plaintiff’s claims seeking judicial (involuntary) dissolution. Although neither the court nor the parties labeled it as such, and while the defendant in his briefs referred to plaintiff’s lack of “capacity” to seek judicial dissolution, I believe a more apt description of the court’s holding is that, effectively, it enforced a contractual waiver of the limited partner’s statutory right to seek judicial dissolution. Continue Reading Court Enforces Waiver of Limited Partner’s Right to Seek Judicial Dissolution — Or Did It?

P'shipIn the early 1990’s New York enacted its version of the Revised Uniform Limited Partnership Act (NYRULPA), codified in Article 8-A of the New York Partnership Law §§ 121-101 et seq. The law’s modernized features include in §§ 121-1101 through 1105 provisions for the merger and consolidation of limited partnerships along with the right of dissenting limited partners to be paid “fair value” for their partnership interests as determined in an appraisal proceeding.

You can count on one hand the number of published New York court decisions over the last 25 years dealing with dissenting limited partners. In fact, until this year, it’s possible you could count the number on one finger, that being the Court of Appeals’ 2008 ruling in the Appleton Acquisition case which I wrote about here. Appleton held that a limited partner may not bring an action seeking damages or rescission based on allegations of fraud by the general partner in connection with a merger transaction, and that the statutory appraisal proceeding is the exclusive remedy for such claims. Appleton never reached the issue of appraisal.

It therefore appears that last month’s decision by Manhattan Supreme Court Justice Geoffrey D. Wright in Levine v Seven Pines Associates L.P., 2015 NY Slip Op 30138(U) [Sup Ct NY County Jan. 28, 2015], may be the first published ruling that addresses issues attendant to a fair value determination in a dissenting limited partner case under NYRULPA.

Now, if you’re hoping for a meaty decision that delves into the fine points of appraisal methodology, Levine is not your case. Rather, Levine was decided on pre-trial motions to fix a date for an appraisal hearing and to compel the respondent limited partnership to provide certain pre-trial disclosure. In addition, the procedural aspects of the dissenting limited partner provisions in § 121-1105 expressly piggyback on the well-established procedures set forth in § 623 of the Business Corporation Law dealing with dissenting shareholders. Still, the issues decided in Levine serve up some useful pointers for practitioners. Continue Reading Decision in Dissenting Limited Partner Case Directs Fair Value Hearing, Grants Discovery

The limited partnership is the dinosaur of business forms in New York, on its way to virtual extinction (outside of estate planning*) due to the availability since 1994 of the vastly superior LLC form and the inherent shortcomings of New York’s limited partnership statutes.

When New York finally enacted a Revised Uniform Limited Partnership Law in 1991 (NYRULPA), it exempted from its application all pre-existing limited partnerships which, unless the partnership later files an amended certificate, continue to be governed by the Uniform Limited Partnership Act of 1916 adopted by New York in 1922 (NYULPA). Meanwhile, there appears to be no interest or effort underway to modernize New York’s limited partnership laws, as almost 20 other states have done, by adopting the re-Revised Uniform Limited Partnership Law of 2001.

In its pre-LLC heyday, the limited partnership was a popular form of business association for real estate investments, and there remain some number of legacy limited partnerships that never filed a certificate of amendment and therefore remain subject to NYULPA’s antiquated provisions. One of the ways we know these dinosaurs are still roaming about is the occasional court decision, which invariably involves some of the messiest and most prolonged litigation you’re ever likely to come across.

Take, for example, Alizio v. Perpignano, pending in Nassau County Supreme Court for over ten years, involving multiple litigations over multiple real estate limited partnerships, in the course of which two of the five general partners died. By my count the case has generated at least 50 motions and 27 written decisions by the lower court, and another 17 appellate decisions on motions and appeals, which by any standard represents an extraordinary expenditure of judicial resources on one case. Continue Reading Equitable Dissolution of Limited Partnerships

It’s amazing how the antiquated provisions of New York’s original Uniform Limited Partnership Act (NYULPA), adopted in 1922, continue to bedevil some of the legacy real estate investment partnerships that pre-date New York’s enactment in 1991 of the Revised ULPA (NYRLPA).

Last April I wrote about a recent decision in the Poole case involving a thorny question under NYULPA whether a real estate limited partnership could be reconstituted with a new general partner following the death of the last remaining general partner (read here). Now along comes a decision in another real estate limited partnership dispute governed by NYULPA, this time raising the question, among others, whether limited partners have a statutory right to assign their economic interests notwithstanding provision in the partnership agreement requiring the advance consent of the general partner.

Earlier this month, in Eastwood Investors V, LLC v. Morrisania Associates, 2013 NY Slip Op 31921(U) (Sup Ct NY County Aug. 12, 2013), Manhattan Commercial Division Justice Barbara R. Kapnick refused to enforce assignments of limited partner profit interests, made without the general partner’s consent, based on a provision in the partnership agreement barring the assignment of a limited partnership interest “in whole or in part except with the prior written consent of the General Partner.”  In so ruling, the court rejected the putative assignee’s contention that the right to assign a profit interest is mandated by NYULPA § 108’s provisions stating that a “limited partner’s interest is assignable” and that an assignee who does not become a substitute partner is “entitled to receive” the assignor’s profit share. Continue Reading Do Not Pass Go: Court Rejects Assignment of Limited Partner’s Economic Interest