Rsd Aap Llc v. Alyeska Ocean Llc& Jeff & Jane Doe Hendrick's
358 P.3d 483
Wash. Ct. App.2015Background
- AOI (managed by Jeff Hendricks) and RSD are partners in Auriga/Aurora General Partnership (AAGP); partnership agreement (1988) contains (1) a two‑thirds consent requirement to transfer/encumber interests (Section 7.1.1) and (2) a separate right of first refusal procedure (Section 7.3).
- O’Brien, a 20.618% partner, negotiated an option granting AOI the right to buy his partnership interest upon his death; option paperwork listed an effective date of May 24, 2012; O’Brien signed May 31; Hendricks paid $200,000 consideration June 6.
- By May 31 (after O’Brien signed), two‑thirds of the partnership (excluding O’Brien) had given written consent to the transfer; AOI exercised the option after O’Brien’s death and closed the purchase in late July/early August 2012.
- RSD sued AOI alleging breach of contract (right of first refusal and §7.1.1 consent requirement), breach of fiduciary duty (loyalty/good faith), and sought declaratory relief, constructive trust, and specific performance.
- Trial court granted summary judgment for AOI; the Court of Appeals affirmed, holding the right of first refusal was a separate, optional mechanism and AOI complied with the two‑thirds consent and fiduciary duties.
Issues
| Issue | Plaintiff's Argument (RSD) | Defendant's Argument (AOI) | Held |
|---|---|---|---|
| Does Section 7.3 right of first refusal apply even when two‑thirds consent under §7.1.1 is obtained? | §7.3 trumps §7.1.1; selling partner must comply with ROFR regardless of consent. | §§7.1.1 and 7.3 create two separate transfer mechanisms; "notwithstanding" and "may" show ROFR is optional. | Court: ROFR is separate and optional; not triggered because two‑thirds consent was obtained. |
| Was O’Brien’s option an encumbrance before partners’ written consent (timing/formation of option)? | The option’s effective date (May 24) made it binding before consents given. | Option was not binding until signed and supported by consideration; consideration passed June 6. | Court: Option became binding when signed and supported by consideration; no encumbrance before written consent. |
| Was written two‑thirds consent obtained as required by §7.1.1? | No, RSD asserts lack of written consent or inadequate proof. | AOI produced consent forms and evidence showing written consents were obtained prior to encumbrance. | Court: Sufficient evidence of written consents; no genuine factual dispute. |
| Did Hendricks/AOI breach fiduciary duties (loyalty/good faith) or appropriate disclosure? | Hendricks engaged in self‑dealing and failed to disclose material terms; O’Brien’s interest was a partnership opportunity. | Hendricks informed partners of O’Brien’s condition, provided transaction details, and partners had chance to act; RUPA permits partners to further own interests. | Court: No breach; disclosure and conduct satisfied duties; transaction lawful and not a forbidden usurpation of a partnership opportunity. |
Key Cases Cited
- Rekhter v. Dep't of Soc. & Health Servs., 180 Wn.2d 102 (Wash. 2014) (standard for contract interpretation and when interpretation is question of law)
- Hearst Commc'ns, Inc. v. Seattle Times Co., 154 Wn.2d 493 (Wash. 2005) (objective manifestation theory; limits on extrinsic evidence to vary written contract)
- Durland v. San Juan County, 182 Wn.2d 55 (Wash. 2014) (standard of review for summary judgment)
- Whitworth v. Enitai Lumber Co., 36 Wn.2d 767 (Wash. 1950) (option contract bindingness tied to consideration)
- Wendle v. Farrow, 102 Wn.2d 380 (Wash. 1984) (appellate court may affirm on any theory supported by the record)