On October 25, 2007, the Washington Supreme Court answered the certified question in the negative, finding that a controlling partner does not violate the duty of loyalty where the controlling partner causes the partnership to sell its assets to an affiliated party. J J Celcom v. AT T Wireless Servs., Inc. 169 P.3d 823 (2007). The partnership agreements at issue are dependent upon Washington law for the question before us.
The evidence showed that the claims regarding "unauthorized fees" were developed by scrutinizing audits in which all of those fees were fully disclosed by the GP. There is no evidence that 334th Place ever acted with intent to conceal anything or enrich itself at the expense of the partnership. See J & J Celcom v. AT & T Wireless Servs. Inc., 162 Wn.2d 102, 113, 169 P.3d 823 (2007) (no breach of fiduciary duty in connection with affiliate transactions when partner acts in good faith on full disclosure of material information). To the contrary, as recorded in every annual Parkway audit, 334th Place has advanced millions to the partnership and deferred payment on fees owed to it in order to keep Parkway a going concern, with AMTAX's full knowledge and to its benefit.
It correctly claims that under Washington law, "a partner does not violate a duty or obligation under this chapter or under the partnership agreement merely because the partner's conduct furthers the partner's own interest." See RCW 25.05.165(5); J&J Telecom v. AT&T Wireless Servs. Inc., 169 P.3d 823 (2007) (other citations omitted). This principle and these authorities do not foreclose the possibility, though, that something more could be a violation of such duties.
The court notes that its conclusion here does not conflict with its conclusion that Kische fails to demonstrate a lack of genuine dispute regarding whether Mr. Uysal gave Mr. Simsek permission to transfer the Marseille mark as the Operating Agreement required for transactions involving more than $10,000.00 or matters outside Kische's ordinary business. Although it is possible that a person may be absolved of fulfilling his duty of loyalty if he receives permission to take an action that would otherwise breach that duty, cf. J&J Celcom v. AT&T Wireless Servs., Inc., 169 P.3d 823, 828 (Wash. 2007) (stating that under Washington law, partners may agree to "authorize transactions that would otherwise violate the duty of loyalty"), neither party raises the issue, and the court has not identified any case law suggesting that the court must analyze this question before finding a breach of the duty of loyalty. Thus, although the Operating Agreement speaks specifically of permission for certain purposes, the law regarding the duty of loyalty does not.
Additionally, this purchase was injurious to the partnership because it cost the partnership funds to buy and to operate, while the partners (but not the partnership) benefited in earnings from the property. Id.; see also J&J Celcom v. AT&T Wireless Servs. Inc., 162 Wn.2d 102, 107, 169 P.3d 823 (2007) (noting that "a partner has a duty to account for any benefit of profit held by the partner relating to any aspect of the partnership"). Here, the trial court concluded that the DeGidios breached their fiduciary duty to Janton.
The Ninth Circuit certified the question of "whether, under the Revised Uniformed Partnership Act . . ., a controlling partner violates the duty of loyalty where the controlling partner causes the partnership to sell its assets to an affiliated party" to the Supreme Court of Washington. J&J Celcom v. AT&T Wireless Servs., Inc., 169 P.3d 823, 823 (Wash. 2007). The Supreme Court of Washington held that the district court's factual findings were dispositive.
Finally, Johanna Grider references J&J Celcom v. AT&T Wireless Services, Inc., 162 Wn.2d 102, 169 P.3d 823 (2007) as employing the term "controlling partner." In fact, the Washington Supreme Court used the word "controlling partner" in its decision, but in a lay sense and not for the purpose of attaching a legal meaning to the term. The complaining partners owned a five percent interest in the partnership, while the defending partner owned the remaining ninety-five percent of the business.
RCW 25.05.165(4).J & J Celcom v. AT & T Wireless Servs., Inc., 162 Wash.2d 102, 107, 169 P.3d 823 (2007) ; RCW 25.05.165(2).
As part of this obligation, each partner must fully disclose all material information relating to the partnership. J J Celcom v. AT T Wireless Servs. Inc., 162 Wn.2d 102, 107, 169 P.3d 823 (2007). A partner must avoid self-dealing, secret profits, and conflicts of interest.