## Facts

- East Park Limited Partnership owned and developed commercially zoned property and a shopping center in Glen Burnie, Maryland.
- Joseph M. Della Ratta became the sole general partner under amended partnership agreements; several other investors held limited partnership interests.
- East Park faced an upcoming loan maturity on the shopping center and lacked sufficient reserves to pay the debt at maturity.
- In March 2002, the general partner issued a substantial capital call requiring limited partners to contribute funds toward the debt.
- Several limited partners concluded paying the capital call was financially unwise and, on March 15, 2002, sent written notices of withdrawal, giving six months’ notice and setting an effective withdrawal date in late September 2002.
- The general partner asserted the limited partners had no right to withdraw as claimed, warned they would be in default if they did not meet the capital call, and accelerated the capital call’s due date to a time before the stated withdrawal effective date.
- The withdrawing limited partners also asserted the general partner failed to adequately investigate alternative financing (including refinancing) instead of requiring capital contributions.
- The withdrawing limited partners sued for declaratory and injunctive relief regarding withdrawal rights and enforcement of the capital call; the trial court ruled largely for them and also held an interest assignment violating an anti-assignment clause was enforceable and caused dissolution.
- The Maryland Court of Appeals granted certiorari before intermediate appellate decision.

## Issues

1. Whether Maryland’s Uniform Partnership Act (UPA) or Revised Uniform Partnership Act (RUPA) governed the dispute.
2. Whether the limited partners had a statutory right to withdraw and, if so, whether their March 2002 notices effected withdrawal.
3. Whether the general partner breached fiduciary duties and acted in bad faith by accelerating the capital call and not adequately pursuing alternative financing.
4. Whether an assignment of a partnership interest made contrary to an express anti-assignment clause was valid and could cause dissolution.

## Decision

- The court affirmed application of the UPA rather than RUPA.
- The court affirmed that the limited partners possessed a statutory right to withdraw and that the withdrawing partners properly exercised that right by timely written notice.
- The court affirmed that the general partner breached fiduciary duties and acted in bad faith by accelerating the capital call to precede the withdrawal date and by failing to adequately investigate alternative financing.
- The court reversed the ruling that an assignment violating an anti-assignment clause was valid and enforceable and that it caused dissolution.
- Disposition: affirmed in part and reversed in part.

## Legal Principles

- When statutory transition provisions do not mandate application of a newer partnership statute, an existing partnership may remain governed by the earlier act applicable to its formation and governing relationship.
- Limited partners retain a statutory withdrawal right unless validly eliminated by agreement; compliance with statutory notice requirements makes withdrawal effective on the stated date.
- A general partner in a limited partnership owes fiduciary duties, including good faith and fair dealing, and may breach those duties by using partnership powers to defeat partners’ lawful rights or by acting opportunistically in connection with capital calls and financing choices.
- Anti-assignment clauses in partnership agreements are enforceable; a transfer made in violation of such a clause is not treated as a valid assignment with dissolution-triggering effect.

## Conclusion

The Maryland Court of Appeals held that the limited partners could withdraw by statutory notice and that the sole general partner acted in bad faith by accelerating a capital call and not adequately pursuing alternative financing, but it rejected the view that a transfer violating an anti-assignment clause could be enforced to dissolve the partnership.


Della Ratta v. Larkin, 382 Md. 553, 856 A.2d 643 (Md. 2004)