Legal Question in Business Law in California

Re: Fiduciary Duty of GPs to limited partners

First, I should note that California currently has three sets of limited partnership laws on the books, each with different applicability depending upon (1) when the LP was formed; (2) whether it has elected to be governed by the newer law(s), and (3) the nature of the legal question or issue (some of the new provisions govern after 2009 whether adopted by the LP or not, for example).

The fiduciary duties are perhaps expressed most clearly in the 2008 law, but I suspect the new laws haven't really changed the duties that much. Corporations Code section 15904.08, replacing section 15643 of the 1984 law, declares the fiduciary duties of a general partner to be the duties of loyalty and care. Volumes have been written in learned treatises about the duty of care and the duty of loyaly, and there is much case law. The facts you describe may constitute a breach of the duty of loyalty, since the GPs seem to be feathering their own nests at the expense of the limited partnership and the limited partners.

To the extent there is also managerial carelessness here, the duty of care might also be breached.

In addition to the fiduciary dutues, there are ordinary (non-fiduciary) breaches here. The GPs also have duties to carry out the partnership agreement and to conduct partnership business in good faith and fair dealing. While not rising to the level of fiduciary, these are breaches of contract upon which suit could be brought, with a less severe penalty, perhaps.

Re: Fiduciary Duty of GPs to limited partners

I know that it is an unpleasant thought to want to spend money on an attorney. However, there is a reason why we relied on to help solve such problems. Your question about fiduciary duty is just a small part of the help you may need. Knowing the fiduciary duties will not help you, if you do not have an attorney to ensure they are enforced. It sounds clear that, besides the issue of fiduciary duties, it is the intent of the partnership that GPs only take money if there is profit. It is unlikely that "profit" is defined to include the initial contribution of LPs. The problem is, they may find a way to take that money, properly or not, and let you worry about how to deal with your loss. Ideally, you will have an attorney assisting you before things get worse, to prevent it, prepare for it, and act to protect your investment.

Best,

Daniel Bakondi

IMPORTANT:

No attorney-client nor confidential relationship is created through this communication. You may not rely in any way on this communication, and nothing herein constitutes legal advice nor legal opinion. Your issue may be time sensitive and may result in loss of rights if you do not obtain an attorney immediately.

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Re: Fiduciary Duty of GPs to limited partners

For an informed opinion and advice on your problem and remedies, you're going to have to sit down with counsel and go over all the documents and facts that bear on this issue. Free advice is worth less than what you pay for it; it is of no value other than to point you towards getting an attorney to help you. Assuming you are entitled to take action against GPs who may be mishandling your interests, you are going to have to do it effectively through counsel unless you are capable of representing yourself in filings, motions, hearings, depositions, evidence disputes, and ultimately trial. If this is in SoCAL, feel free to contact me if serious about doing this right, or at least getting informed advice.