33 F.4th 872
6th Cir.2022Background
- In 2001 Presbyterian Village North (a nonprofit) formed a limited partnership to operate an LIHTC-funded affordable housing property; SunAmerica joined as the passive limited partner holding 99.99% of economic interest.
- The Limited Partnership Agreement (LPA) incorporated 26 U.S.C. § 42(i)(7) and granted Presbyterian a one-year post-compliance right of first refusal (ROFR) to buy at a statutorily-informed below‑market "debt plus taxes" price, plus a separate option to purchase at fair market value.
- In 2019 the general partners solicited third‑party offers (including a Lockwood proposal containing a 60‑day investigation/termination period) and notified SunAmerica; Presbyterian attempted to exercise the ROFR after those offers appeared.
- SunAmerica sued, and the district court granted summary judgment for SunAmerica, concluding the Lockwood proposal was not a "bona fide offer" (because solicited and not legally enforceable) and that the general partners lacked an intent to sell; the court held the ROFR was therefore not triggered and found related fiduciary breaches.
- The Sixth Circuit reversed and remanded: it held the meaning of "bona fide offer" in this LPA (which expressly incorporates § 42) is ambiguous as a matter of law, and that genuine factual disputes exist about whether the general partners manifested the requisite intent to sell—both issues for trial; the fiduciary‑duty claim was remanded as intertwined with the contract claim.
Issues
| Issue | Plaintiff's Argument (SunAmerica) | Defendant's Argument (General Partners/Presbyterian) | Held |
|---|---|---|---|
| Meaning of "bona fide offer" in the LPA | LPA should import the common‑law bona fide offer rule (offer must be serious, enforceable, not solicited to defeat ROFR) | Because LPA incorporates § 42, the statutory ROFR alters common law; bona fide must be read in LIHTC context | The term is ambiguous as used in the LPA/§ 42 context; meaning is a factual question for trial |
| Whether the Lockwood proposal was a bona fide offer | Lockwood was solicited to trigger the ROFR and had an unenforceable investigation/termination clause, so not bona fide | Solicitation alone does not defeat a § 42 ROFR; under LIHTC soliciting offers may be necessary to trigger the ROFR | District court erred to decide as a matter of law; disputed material facts remain, so remand for trial |
| Whether general partners manifested an intent to sell (required to trigger ROFR) | No genuine intent to sell to a third party—partners only sought to enable Presbyterian’s ROFR | Partners need only a general willingness to sell consistent with § 42; manifesting intent to entertain third‑party offers suffices | Intent is a question of fact; summary judgment improper—remanded |
| Breach of fiduciary duty tied to LPA breach | Breach of LPA also breached fiduciary duties to SunAmerica | LPA breach findings are premature; fiduciary claim depends on factual resolution | Because contract issues are remanded, fiduciary‑duty claim also remanded for further proceedings |
Key Cases Cited
- Frank Lyon Co. v. United States, 435 U.S. 561 (U.S. 1978) (economic substance doctrine and risk of treating nonprofits as true owners)
- Imperial Refineries Corp. v. Morrissey, 119 N.W.2d 872 (Iowa 1963) (common‑law test for bona fide offer: offeror's ability and intent to perform)
- Homeowner's Rehab, Inc. v. Related Corporate V SLP, LP, 99 N.E.3d 744 (Mass. 2018) (§ 42(i)(7) ROFR differs from common‑law ROFR; caution against importing common‑law bona fide requirement)
- AMTAC Holdings 227, LLC v. Tenants' Dev. II Corp., 15 F.4th 551 (1st Cir. 2021) (describing § 42 price formula as debt plus taxes)
- Shay v. Aldrich, 790 N.W.2d 629 (Mich. 2010) (interpret contract in light of related statute)
- Klapp v. United Ins. Grp. Agency, Inc., 663 N.W.2d 447 (Mich. 2003) (ambiguity in contract terms is a factual question for the jury)