## Facts

- Thomas L. Clancy, Jr. and Wanda T. King formed Jack Ryan Limited Partnership (JRLP) under Maryland law to engage in activities related to writing, publishing, and sale of books and other lawful activities.
- Each held a 1% general partnership interest and a 49% limited partnership interest; both were general partners.
- The partnership agreement contained provisions allowing the general partners and their affiliates to engage in competing ventures and disclaiming any duty to disclose or offer such opportunities to the partnership.
- The agreement also retained certain obligations, stating general partners must conduct partnership affairs in the partnership’s best interests, safeguard partnership assets, act in good faith, and exercise due diligence in partnership business.
- JRLP entered a joint venture with S & R Literary, Inc. to develop and exploit “Tom Clancy’s Op-Center,” with decision-making shared by Clancy and the other principal, but with Clancy’s decision controlling in case of disagreement.
- Op-Center shifted from an intended television project to a successful book series written by another author, using Clancy’s name and reputation and generating substantial revenues.
- After Clancy and King divorced, Clancy became the managing general partner; the ownership structure remained.
- Clancy later withdrew permission to use his name for Op-Center, effectively stopping further exploitation under the existing arrangement; King alleged the withdrawal was driven by personal animus and harmed JRLP.

## Issues

1. To what extent may partners in a Maryland limited partnership agreement contractually limit or modify fiduciary duties owed to the partnership and to each other?
2. Under the JRLP agreement’s competition and fiduciary provisions, did Clancy’s decision to withdraw use of his name from Op-Center constitute a breach of any remaining fiduciary duty, including a duty of good faith?

## Decision

- The Court of Appeals of Maryland held that parties to a limited partnership agreement may contract to limit fiduciary duties, including permitting competition and eliminating obligations to disclose or offer competitive opportunities.
- The court held that even where fiduciary duties are limited by agreement, a partner may not exercise contractual rights and discretion in bad faith.
- Applying the agreement’s express competition and independent-venture clauses, the court concluded the lower courts improperly imposed default loyalty and anti-competition duties that the parties had contracted away.
- The court held that Clancy’s withdrawal of permission to use his name was an exercise of a bargained-for right and, on the record, did not amount to a fiduciary breach as a matter of law.
- The court reversed the determinations that Clancy breached fiduciary duties and remanded for further proceedings consistent with its opinion.

## Legal Principles

- Limited partnership governance is primarily contractual; partners may, by agreement, limit fiduciary duties otherwise imposed by default partnership law.
- A general partner may enforce validly obtained and bargained-for contractual rights even if doing so has adverse financial effects on the partnership.
- Contractual limitation of fiduciary duties does not eliminate the obligation to exercise rights and discretion under the agreement in good faith.
- Courts may not reimpose default fiduciary loyalty/anti-competition rules when the partnership agreement expressly authorizes competition and independent ventures.

## Conclusion

The court enforced the partnership agreement’s allocation of rights and risk, holding that fiduciary duties in a limited partnership may be narrowed by contract, subject to a residual requirement that contractual discretion not be exercised in bad faith; under that framework, Clancy’s conduct regarding Op-Center did not constitute a fiduciary breach.


Clancy v. King, 405 Md. 541, 954 A.2d 1092 (Md. 2008)