Majority can sell JV assets to related party: Wash. SC

Legal News Line Oct. 26, 2007, 8:41am

Justice Charles W. Johnson

OLYMPIA -- Controlling partners do not violate the "duty of loyalty" to a business partnership if they sell the partnership's assets to a related party, the Washington Supreme Court ruled yesterday. The case, J&J Celcom v. AT&T Wireless, Inc. (docket# 79884-2) was a certified question from the 9th Circuit Court of Appeals on whether majority owner AT&T could sell when the agreement does not mention asset sales to related parties. The SC's answer effectively ruled for AT&T. "In this case, the partnership agreement does not preclude the sale of the assets; the price paid was fair at the time as a matter of law and no bad faith exists as a matter of law," wrote Associate Chief Justice Charles W. Johnson in an 8-justice majority verdict. Justice Barbara Madsen agreed with the majority on its answer to the question on a partner's fiduciary duty of loyalty as posed by the appeals court. But in a lone concurrence she notes that changes in the law have further complicated this issue. Madsen wrote that she believes the question of "whether the language in the partnership sufficiently specific to contract around AT&T's refrain from self-dealing" should be answered in light of the law changes.

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