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Tagged Posts: Partnership’

When a Business Partnership Turns Out To Be a Bait-and-Switch (Part II)

September 27, 2016

Soon after Hogan was brought in as a 1/3 owner of Turbine Asset Holdings, LLC (“TAH”), he began assisting TAH with business opportunities using his contacts and expertise.[1]  One such opportunity involved Pratt & Whitney (“Pratt”), which was expected to be a very substantial inventory management opportunity worth at least $80MM of a net profit.  Hogan led the day-to-day discussions and planning with Pratt and kept Glassman informed of the progress, while Glassman started contacting banks to finance the deal. … Read the rest

When a Business Partnership Turns Out To Be a Bait-and-Switch (Part I)

September 15, 2016

Here at The R. Shawn McBride Law Firm, PLLC, we write frequently about partnership, LLC, and multi-owner entities.  In most, if not all, cases or situations we discuss, business partners start out on friendly terms, in a spirit of collaboration and genuine partnership, only to see their relationship deteriorate over time due to disagreements over management, ownership, or other matters.  But what if there is no intent to be business partners in the first place?  AerReach Aero Space Solutions, LLC v.Read the rest

Make Sure To Read the Limited Partnership Agreement Before You Sign: Limited Partnership and Fiduciary Duties Under Delaware Law (Part III)

September 1, 2016

In Dieckman v. Regency GP LP,[1] the court noted that limited partnerships are governed by their partnership agreements and by Delaware’s limited partnership law.  As the court emphasized, the explicit policy of the law is “to give maximum effect to the principle of freedom of contract and to the enforceability of partnership agreements.”  In other words, in Delaware, as in many other states, courts would generally respect what the partners agree to in a limited partnership agreement, including expansion or restriction of fiduciary duties under the partnership agreement.  … Read the rest

Make Sure To Read the Limited Partnership Agreement Before You Sign: Limited Partnership and Fiduciary Duties Under Delaware Law (Part II)

August 25, 2016

Dieckman v. Regency GP LP[1] involved the acquisition of Regency Energy Partners LP (“Regency”) by an affiliated entity in a merger.  Dieckman was a former unitholder of Regency.  Dieckman claimed that Regency’s general partner (“GP”) favored the interests of its affiliates in agreeing to an unfair merger price and, by doing so, breached the limited partnership agreement (“LP agreement”).  Specifically, the LP agreement, which governs GP’s relationship with Regency’s limited partners, provided that whenever GP takes action in its capacity as GP, it must do so in good faith, meaning it “must believe that the determination or other action is in the best interests of the Partnership.”  Interestingly, the LP agreement also contained several “safe harbors” designed to shield GP from claims based on a breach of the LP agreement “or of any duty stated or implied by law or equity” due to conflicts of interest in the following situations:

(i) approval by a majority of the members of the conflicts committee; or

(ii) approval by the vote of a majority of the common units (excluding common units owned by GP and its affiliates).… Read the rest

Make Sure To Read the Limited Partnership Agreement Before You Sign: Limited Partnership and Fiduciary Duties Under Delaware Law (Part I)

August 18, 2016

In our previous blog series on Comparison of LLC Statutes, we talked about fiduciary duties in the context of a limited liability company (LLC).  Fiduciary duty is a legal duty to act solely in another person’s interests.  It generally encompasses the duty of care (duty to act in good faith and exercise reasonable care in carrying out obligations to the company) and the duty of loyalty (duty to put the best interests of your company above any personal advantages).  We mentioned that some states, including Delaware, Texas, and New York, allow an LLC agreement to expand, restrict, or even eliminate a manager’s or a member’s fiduciary duty within limits.  … Read the rest

When a Business Partner Withdraws: Interpretation of Payout Provisions Under a Partnership Agreement

August 9, 2016

As you know, we write and speak frequently about various issues involving business partnership, including the four Ds (death, disability, divorce, and disagreement).  Although many business owners starting a new venture would like to think that they are somehow immune from the four Ds, the odds are that most, if not all, businesses are bound to experience at least one of them if they are around long enough (really, who can avoid death?).  Disagreement, in particular, can precipitate the withdrawal of one or more business partners at an unexpected time, and when that happens, figuring out the financial aspect of the breakup can be messier than you would want.… Read the rest

Covenant Not To Compete When Buying or Selling a Business (Part V)

July 21, 2016

Texas.

In Texas, as in many other states, a covenant not to compete is enforceable if: (i) it is ancillary to or part of an otherwise enforceable agreement at the time the agreement is made; (ii) it is reasonable as to time, geographic area, and scope of activity to be restrained; and (iii) the restraint imposed is no greater than is necessary to protect the goodwill or other business interests at issue.[1]  If the first two conditions are met but the restraint imposed is greater than necessary, Texas courts have the authority to reform the covenant to the extent necessary to make it reasonable as to time, geographic area, and scope of activity.… Read the rest

Covenant Not To Compete When Buying or Selling a Business (Part IV)

July 14, 2016

New York: Sale of Business and Good Will Beyond the Label.

In New York, non-competes used to be strongly disfavored by courts.[1]  Over time, however, courts came to recognize that there are situations in which it was not only desirable but essential to enforce non-competes.[2]  For example, in the context of a sale of a business along with its good will as a going concern, New York courts enforce a covenant not to compete because a seller of a business should not be allowed to recapture the good will of the very business he or she transferred for value by competing against the buyer.… Read the rest

All postings are intended to be planning tools to familiarize readers with some of the high-level issues discussed therein. No posting is intended to be a comprehensive discussion and additional details should be discussed with your transaction planners including attorneys, accountants, consultants, bankers and other business planners who can provide advice for your circumstances. This article should not be treated as legal advice to any person or entity.