Sunshine Cellular v. Vanguard Cellular Sys., Inc. - 92 Civ. 3194 (RLC), 1993 U.S. Dist. LEXIS 8035 (S.D.N.Y. June 14, 1993)

Rule:

The unanimous consent rule in Md. Code Ann., Corps. & Ass'ns § 9-401(7) guarantees a fundamental right of partnership law, the right to choose one's partners. This right is crucial in light of other aspects of partnership law such as the power of each partner to create partnership liabilities, the personal liability of partners for partnership debts, and the partners' equal participation in the management and conduct of partnership business. If management rights may be transferred to a non-partner without the unanimous consent of the other partners, the assignee in effect becomes a new partner in violation of the consent rule in § 9-401(7). Thus, the standard form rule in Md. Code Ann., Corps. & Ass'ns § 9-504(a) prevents the end-run around Md. Code Ann., Corps. & Ass'ns § 9-401(7) by allowing a partner to transfer only his interest in the partnership and not his management rights. 

Facts:

A general partner accepted the subsidiary's offer to purchase his interest in the partnership subject to the other partners' right of first refusal. The majority partners asserted that the interest would be limited to a profit-sharing interest and not a management interest. The subsidiary filed an underlying suit against the partners and the partnership, asserting claims for breach of contract, a declaratory judgment, and intentional interference with contract. The subsidiary voluntarily dismissed the suit. The partnership subsequently filed an antitrust suit against the corporation, which raised as counterclaims the same three claims raised by the subsidiary in the prior suit.

Issue:

Does the unanimous consent rule apply when some ambiguity existed in the partnership agreement as to whether the partners could transfer their interests to third parties without the consent of the other partners?

Answer:

Yes

Conclusion:

The court found that Maryland law was controlling and held that the partnership was not entitled to summary judgment because some ambiguity existed in the partnership agreement as to whether the partners could transfer their interests to third parties without the consent of the other partners. If no such right was provided for in the partnership agreement, then the standard form rules of Md. Code Ann., Corps. & Ass'ns §§ 9-401(7), 9-504(a) would apply. The partnership was not entitled to costs.