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

20070087 Red River Wings, Inc., Plaintiff and Appellee
v.
Hoot, Inc., Defendant and Appellant

Appeal from: District Court, East Central Judicial District, Cass County
Judge John Charles Irby
Nature of Action: Contracts
Counsel:
Appellant: Lawyer not licensed in N.D.
Appellant: Lawyer not licensed in N.D.
Appellant: Lawyer not licensed in N.D.
Appellant: Morley Law Firm, Ltd.
Appellee: McNair, Larson & Carlson, Ltd.
Term: 12/2007   Argument: 12/18/2007  10:45am
ND cite: 2008 ND 117
NW cite: 751 N.W.2d 206

Listen to recording of oral argument in MP3 format

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.
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Docket entries:
103/27/2007 NOTICE OF APPEAL: 03/23/2007
203/27/2007 ORDER FOR TRANSCRIPT: 03/23/2007
303/27/2007 THIS CASE IS CONSOLIDATED WITH 20070088 AND 20070089 MAKE ALL ENTRIES EXCEPT DIS & MAN IN 20070087
404/03/2007 Affidavits of Timothy R. Thornton, Timothy G. Gelinske & Jonathan P. Schmidt pursuant to Rule 3,
504/03/2007 Admission to Practice Rule (Authorized)
604/09/2007 NOTICE OF CROSS APPEAL by Richard H. Walstad, et al.
704/09/2007 NOTICE OF CROSS APPEAL by LTM, Ltd.
804/12/2007 ANNOUNCED DISQUALIFICATION: Sandstrom, Dale V.
904/12/2007 MOTION for Leave to File Brief Exceeding Word Limit, Notice, Brief and Aff in Support & Aff Service
1004/16/2007 Rec'd Cert of Serv for updated affidavits of Thornton, Gelinske and Schmidt
1104/25/2007 Statement of the Issues for Appellants
1204/25/2007 Certificate of Service by Federal Express of Appellant's Statement of Issues
1304/26/2007 RECORD ON APPEAL (2 Vols.) and transcript dated 1/31/02. Not Received were Steno Notes and Tapes
1404/30/2007 Statement of Issues on the Cross-appeal of LTM, Inc.
1504/30/2007 Statement of Issues on the Cross-appeal of the Walstad Group and Cert. of Service (electronically)
1604/30/2007 E-FILED Statement of Issues on the Cross-appeal of the Walstad Group
1704/30/2007 ANNOUNCED DISQUALIFICATION: Crothers, Daniel John
1805/01/2007 ANNOUNCED DISQUALIFICATION: Maring, Mary Muehlen
1905/02/2007 ACTION BY SUPREME COURT (Mtn. for extra words, granted in part). Granted
2005/07/2007 TRANSCRIPTS DATED 7/7/05, 7/8/05, 7/11/05, 7/12/05, 7/13/05, 7/14/05, 7/15/05, 7/18/05, 7/20/05,
2105/07/2007 7/21/05, 7/22/05, 8/9/05, 8/10/05, 8/11/05, 8/12/05, 8/16/05, 8/17/05, 12/12/05, 12/13/05, 12/15/05
2205/07/2007 12/21/05, & MASTER INDEX (22 Total Volumes)
2305/08/2007 DISK-Tra(22 Volumes-Filed 5/7/07)
2405/08/2007 Clerk's Certificate of Service of Transcripts
2505/08/2007 DISK-tra(7/6/05)
2605/10/2007 TRANSCRIPT DATED 7/6/05
2705/11/2007 Clerk's Certificate of Service of Transcript dated 7/6/05
2805/15/2007 Clerk's Supplemental Certificate of Record dated 5/15/07 (Entry Nos.219-Filed in 02-C-2753 & 220)
2905/30/2007 MOT. EXT/TIME APPELLANT BRIEF, Brief/Support, Affidavit/Jonathan Schmidt
3005/30/2007 ACTION BY CHIEF JUSTICE (MAT). Granted: 08/03/2007
3108/02/2007 APPELLANT BRIEF
3208/02/2007 Addendum (attached to ATB)
3308/02/2007 APPELLANT APPENDIX (2 vols.)
3408/03/2007 DISK - atb
3508/09/2007 Copies of Order dated 12/13/06; Judgment; Notice of Cross-Appeal of LTM; and Notice of Cross-Appeal
3608/22/2007 MOT. EXT/TIME APPELLEE BRIEF (letter dated August 21, 2007)
3708/22/2007 ACTION BY CLERK. Granted: 10/04/2007
3808/23/2007 MOT. EXT/TIME APPELLEE BRIEF (letter dated August 22, 2007)
3908/23/2007 ACTION BY CLERK (MAE). Granted: 10/04/2007
4009/28/2007 MOTION for Leave to File Appellees' Brief of 15000 words on behalf of Thomas H. Lavelle, Dyan K.
4109/28/2007 Dockter, Shelly J. Dockter, LTM, and Red River Wings; Affidavit in Support and Aff. of Service
4209/28/2007 E-FILED MOTION (Leave to File AEB of 15000 words)
4309/28/2007 ACTION BY CLERK (15000 words for AEB of Lavelle, Dockters, LTM, Red River Wings). Granted
4410/05/2007 MOT. EXT/TIME REPLY BRIEF (e-filed)
4510/05/2007 E-FILED MOTION (RYB)
4610/05/2007 ACTION BY CHIEF DEPUTY CLERK (MRY). Granted: 11/01/2007
4710/04/2007 APPELLEE BRIEF of Lavelle, etc.
4810/04/2007 Attached addendum for AEB
4910/04/2007 APPELLEE BRIEF of Walstad, et al. (e-filed)
5010/04/2007 E-FILED BRIEF (AEB-Walstad)
5110/04/2007 APPELLEE APPENDIX (PDF) (e-filed)
5210/04/2007 E-FILED APPENDIX (AEA-Walstad)
5310/05/2007 Received $117.50 of surcharge for AEB - Walstad
5410/08/2007 New Table of Contents, Statement of Issues and Certificate of Compliance for AEB of Lavelle, etc.
5510/08/2007 DISK - AEB (Lavelle, etc.)
5610/11/2007 Received 7 copies of AEB from Central Duplicating
5710/11/2007 Received 6 copies of Joint Appendix of Appellees from Central Duplicating
5810/16/2007 Received $29.00 surcharge for AEB & AEA - Walstad (receipt #17881)
5910/19/2007 MOTION by Kesselring and Emerson to file RYB in excess of word limit, Aff. & Brief in support
6010/19/2007 ACTION BY CHIEF JUSTICE (MOT/RYB of Kesselring group and Emerson group extended to 5000 words). Granted
6110/31/2007 REPLY BRIEF of Appellants
6211/01/2007 DISK - RYB
6311/14/2007 REPLY BRIEF of Appellee/Cross-Appellant LTM, Inc.
6411/14/2007 Addendum to RYB of LTM, Inc.
6511/15/2007 DISK - ryb of Appellee/Cross-Appellant LTM, Inc.
6611/19/2007 REPLY BRIEF of Appellees/Cross-Appellants Walstad Group
6711/19/2007 E-FILED BRIEF (RYB of Appellees/Cross-Appellants Walstad Group)
6811/21/2007 Received copies of RYB of Walstad Group from Central Duplicating Services
6911/26/2007 SITTING WITH THE COURT: Foughty, Donovan John
7011/26/2007 SITTING WITH THE COURT: Holte, Robert W.
7111/27/2007 SITTING WITH THE COURT: Bohlman, Bruce E.
7212/04/2007 MOTION FOR ADDITIONAL TIME FOR ORAL ARGUMENT (FAX DATED 12/04/2007)
7312/05/2007 ACTION BY CHIEF JUSTICE. Denied
7412/18/2007 APPEARANCES: Timothy R. Thornton, Jonathan P. Schmidt, Patrick R. Morley; Bruce H. Carlson;
7512/18/2007 Ronald H. McLean, Timothy G. Richard
7612/18/2007 ARGUED: Thornton; Carlson; McLean
7712/18/2007 ORAL ARGUMENT WEBCAST
7806/20/2008 DISPOSITION (AND REMANDED): AFFIRMED/PT, REVERSED/PT
7906/20/2008 UNANIMOUS OPINION: Kapsner, Carol Ronning
8006/20/2008 At the direction of the Court no costs are taxed on this appeal
8106/20/2008 Judgment e-mailed to Parties
8206/24/2008 Corrected Opinion Page 20
8307/16/2008 MANDATE

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