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The principles of contract preempt fiduciary principles where the parties to a limited partnership have made their intentions to do so plain.
Plaintiff Brickell Partners, a limited partner in the Partnership, El Paso Energy Partners, L.P., brought the present action challenging the partnership's acquisition of a company owned by the general partner. The general partner moved to dismiss the action due to a specific provision in the partnership agreement that authorized the transaction. According to the general partner, Section 6.9 of the Agreement supplanted the traditional default fiduciary duties that would otherwise apply to the acquisition in the absence of contractual modification.
Should the plaintiff’s complaint be dismissed in light of Section 6.9 of the Partnership Agreement?
The court reviewed the partnership agreement and held that its specific provisions preempted traditional fiduciary duty principles. It set up a procedure whereby a committee would review transactions and its decision would be conclusive of the fairness and reasonableness thereof. The limited partner's allegation that the committee's decision was tainted because its members were all directors of the general partner was meritless. The limited partner failed to show that the directors did not follow the procedures set forth in the partnership agreement or that the members were managers or stockholders of the general partner.