## Facts

- Minority owners held fractional (generally under 5%) interests in nine Washington general partnerships operating regional cellular businesses; AT&T Wireless Services, Inc. (AWS) held the majority interests and managed technical and administrative operations.
- The partnerships’ key assets were rights related to cellular radio-frequency licenses.
- Seeking to restructure and reduce administrative costs, AWS used its majority voting power to pursue transactions that would eliminate the minority interests.
- AWS obtained third-party appraisals for four partnerships and used those appraisals to set or extrapolate values for the transactions.
- AWS offered to buy out minority owners at prices slightly above the appraised values and disclosed that, if the offers were rejected, AWS would vote to sell partnership assets to affiliated entities at appraised value, dissolve the partnerships, and distribute proceeds pro rata.
- Some minority owners rejected the offers; AWS then caused asset sales to affiliated entities, followed by dissolution and distribution.
- In the ensuing federal litigation, the valuation of the asset-sale prices was determined to be fair as a matter of law.

## Issues

1. Under Washington’s Revised Uniform Partnership Act (RUPA), does a controlling partner breach the duty of loyalty by causing a partnership to sell all assets to an affiliated entity at a third-party appraised price, where the appraisal and affiliation are disclosed and the partnership agreement authorizes asset sales by majority/supermajority vote but is silent on related-party sales?
2. After Washington’s answer to the certified question, did any triable issue remain on the minority owners’ duty-of-loyalty claim, or was summary judgment for AWS proper?

## Decision

- The Washington Supreme Court answered the certified question “no,” holding that the described affiliate asset sale did not, on those facts, violate the duty of loyalty.
- The Washington court relied on RUPA’s loyalty framework together with Washington fiduciary-law principles permitting partner purchases of partnership assets when conducted in good faith, for fair value, with full disclosure.
- The Ninth Circuit, applying the certified answer and the existing fair-price determination, affirmed the district court’s summary judgment for AWS in full, including on the remaining duty-of-loyalty claim.

## Legal Principles

- Under Washington RUPA, a controlling partner’s involvement in a transaction with the partnership is not automatically disloyal; the inquiry centers on good faith, fair consideration, and full disclosure of material information.
- A partnership agreement that authorizes asset sales and dissolution by majority (or supermajority) vote may permit related-party asset sales when not expressly prohibited, subject to nonwaivable fiduciary constraints.
- An asset sale to an affiliate based on an independent third-party appraisal, with disclosure of the appraisal and the affiliation, may satisfy the duty of loyalty where the transaction is fair and undertaken in good faith.
- Where transaction prices are established as fair as a matter of law and minority owners cannot show damages from the challenged conduct, a duty-of-loyalty claim may fail as a matter of law.

## Conclusion

The federal appellate court affirmed judgment for AWS because Washington law, as clarified on certification, did not treat a disclosed, independently appraised affiliate asset sale authorized by the partnership governance provisions as a per se breach of loyalty, and the record established fair pricing and no compensable harm to the minority owners.


J & J Celcom v. AT&T Wireless Servs., Inc., 508 F.3d 1177 (9th Cir. 2007)