Red River Wings, Inc. v. Hoot, Inc.

10:45am Tuesday, December 18, 2007
20070087 Red River Wings, Inc., Plaintiff and Appellee
v.
Hoot, Inc., Defendant and Appellant
Appeal from: East Central Judicial District, Cass County, Judge John Charles Irby
Nature of Action: Contracts
Counsel:

Appellant: Lawyer not licensed in N.D.
Appellant: Morley Law Firm, Ltd.
Appellee: McNair, Larson & Carlson, Ltd.
Appellant: Lawyer not licensed in N.D.
Appellant: Lawyer not licensed in N.D.

Issues: Appellant's Statement of the Issues:
This appeal stems from a majority of limited partners (Appellants) in two limited partnerships who voted, pursuant to their rights under the partnership agreements, to remove and replace the general partner who was usurping partnership opportunities and poorly managing the finances and businesses. Ignoring the partnership agreements, the trial court concluded that the replacement of the general partner was improper. The trial court's determination imposed a unanimous partner consent requirement on general partner replacement, which is found nowhere in the partnership agreements. The trial court also held that Appellants breached fiduciary duties in replacing the general partner and terminating the management contract. The statute, however, provides no protection to the Appellee limited partners; instead the legislation protects third parties transacting business with the partnership. Further, Appellants' decisions were not grossly negligent, reckless, intentionally wrongful or a knowing violation of the law - prerequisites to a fiduciary duty breach determination. The trial court ultimately disregarded the partnerships' liability protection, without any factual or legal entity piercing analysis, and imposed personal liability upon the individual limited partners. Appellants, therefore, raise these issues:
I. Did the trial court err in pronouncing the limited partnerships to have been dissolved in October 1998?
II. Did the trial court err and clearly err in holding the limited partners individually liable without analyzing whether the limited partnership veils could be pierced?
III. If the limited partnerships were legitimately pierced, did the trial court clearly err in holding the limited partners personally liable absent a breach of the statutorily defined fiduciary duties?
IV. If the limited partnerships were legitimately pierced and the limited partners breached their duties, did the trial court err in determining that the limited partners can be personally liable beyond their capital contributions?
V. Did the trial court clearly err in calculating damages?
VI.Did the trial court clearly err in dismissing Appellants' breach of fiduciary duty, breach of contract and fraud claims?
VII.Did the trial court err in ordering Hoot, Inc. to pay distributions to Red River Wings, Inc.?
Appellee's Statement of the Issues:
I. The Partnership Agreements Do Not Permit the Replacement of a Removed General Partner by a Majority in Interest of the Limited Partners.
II. North Dakota Law Did Not Permit the Appointment of a Successor General Partner Unless All Limited Partners Agree.
III. The Trial Court Properly Found the Majority Group Breached Fiduciary Duties and Oppressed the Minority Limited Partners.
A. The Limited Partnership Act Imposes Fiduciary Duties on Limited Partners Who Take Control of the Partnership.
B. The Trial Court Properly Imposed Liability Based on Findings That the Majority Group Controlled the Limited Partnership, Violated Fiduciary Duties, and Injured the Minority Partners and the Partnerships by Their Actions.
C. The Trial Court's Finding that the Majority Group Breached Fiduciary Duties Are Not Clearly Erroneous.
D. The Kesselring Defendants Are Not Shielded by the Business Judgment Rule.
IV. Credible Evidence Supported the Court's Dismissal of the Appellant's Claims
A. Breach of Fiduciary Duty
B. Breach of Contract.
C. Fraud.
V. Red River Wings was Entitled to General Partner Distributions.
VI. The Majority Group is Liable for Causing the Termination of LTM's Management Contract Without Cause.
A. LTM Claim v. Majority Group.
VII. LTM was Entitled to Prejudgment Interest from the Time of the Takeover.
Issues on Cross Appeal
1. Did the trial court err in limiting the claims of LTM by ruling that the dissolution of the partnerships in October of 1998 removed the object of the management contracts?
2. Did the Court err in failing to grant LTM prejudgment interest on its unpaid accounts from October of 1998 through the date judgment was entered?
Appellee's Statement of the Issues:
I. Did the trial court correctly determine that Canadian Wings and Manitoba Wings limited partnerships were dissolved effective October 25, 1998 when a replacement general partner was not appointed by the unanimous vote of the limited partners.
II. Did the trial court properly find that the limited partners who took control of and dominated the affairs of the limited partnerships breached their fiduciary duties to the partnerships and the other limited partners.
III. Did the trial court properly determine the damages incurred by the limited partnerships as a result of the controlling limited partners' breach and, through an accounting, correctly award damages to certain minority limited partners.
IV. Did the trial court err in limiting the award of attorneys' fees and costs to the Appellees' by arbitrarily disallowing fees prior to September 2002 when all of the claims litigated were based on the same underlying facts and theories.
Briefs:
Case Summary
Appellant Brief
Appellee 1 Brief
Appellee 2 Brief
Reply 1 Brief
Reply 2 Brief
Reply 3 Brief
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Generated from Supreme Court Docket on 12/31/2007