307 P.3d 56
Ariz. Ct. App.2013Background
- TP Racing, LLLP is a limited partnership; J & R Racing, LLC (managed by Jerry) is its sole general partner; RASCD (Ron’s corporation) and Ron are minority managers/limited partners.
- Ron, RASCD, and trusts sued Jerry and others seeking, among other relief, judicial dissolution of TP Racing under A.R.S. § 29-345; that pleading named J & R Racing as a third-party defendant.
- Jerry notified limited partners that J & R Racing was automatically withdrawn as general partner under A.R.S. § 29-323(5) because a dissolution proceeding against it had been pending >120 days, and sought election of a new general partner.
- Ron and RASCD obtained a preliminary injunction from the superior court preventing Jerry/TP Racing from removing J & R or holding elections to replace the general partner; Jerry and TP Racing appealed.
- The appellate court considered whether § 29-323(5) mandates automatic withdrawal when a dissolution proceeding remains pending >120 days and whether the superior court abused its discretion in granting and shaping the injunction.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Does A.R.S. § 29-323(5) require automatic withdrawal of a general partner when a proceeding seeking dissolution remains pending >120 days? | Jerry/TP: The statute’s plain language is broad; any proceeding seeking dissolution that survives 120 days triggers automatic withdrawal. | Ron/RASCD: The statute should be read to cover only proceedings that could legally cause the general partner’s dissolution (e.g., bankruptcy/reorganization or actionable dissolution of that entity). | The statute does not compel withdrawal here; even under a broad reading the particular pleading could not legally produce dissolution of J & R Racing, so it did not trigger withdrawal. |
| Did the dissolution claim against TP Racing state a colorable claim sufficient to cause J & R Racing’s removal? | Jerry/TP: The filed dissolution pleading sought dissolution and named J & R Racing, so it implicated § 29-323(5). | Ron/RASCD: The allegations targeted TP Racing, cited the limited-partnership dissolution statute, and lacked allegations or proper parties to dissolve J & R Racing (an LLC); thus it could not support J & R’s removal. | Held for Ron/RASCD: the pleading failed to state a claim to dissolve J & R Racing under the LLC dissolution statute and was insufficient to trigger § 29-323(5). |
| Was the superior court’s grant of a preliminary injunction an abuse of discretion? | Jerry/TP: Injunction was overbroad, barred future legitimate withdrawal mechanisms, and unjustified. | Ron/RASCD: Without the injunction, Jerry could unilaterally effectuate removal via the contested dissolution claim, causing irreparable harm to RASCD’s managerial rights. | No abuse: court reasonably found likelihood of irreparable harm and fashioned an injunction that preserves court oversight and allows future lawful withdrawals upon court order. |
| Did prevailing parties have entitlement to attorney fees on appeal? | Both sides sought fees under the operating agreement and statutory provisions. | Both sides argued entitlement. | Fees denied to Jerry/TP as nonprevailing; Ron/RASCD denied contractual and § 12-341.01 fees in discretion but entitled to costs under § 12-341. |
Key Cases Cited
- Valley Med. Specialists v. Father, 194 Ariz. 363 (App. 1999) (standard of review for preliminary injunction)
- McCarthy W. Constructors, Inc. v. Phx. Resort Corp., 169 Ariz. 520 (App. 1991) (abuse-of-discretion framework)
- Kromko v. City of Tucson, 202 Ariz. 499 (App. 2002) (statutory interpretation reviewed de novo)
- Bilke v. State, 206 Ariz. 462 (App. 2003) (plain-meaning rule and avoiding absurd results)
- Kenworthy v. Kenworthy Corp., 149 S.W.3d 296 (Tex.App. 2004) (construing identical statute to limit withdrawal to suits that could dissolve the general partner)
- Cullen v. Auto-Owners Ins. Co., 218 Ariz. 417 (App. 2008) (pleading standards: accept well-pleaded facts and reasonable inferences)
- Curley v. Brignoli Curley & Roberts Assocs., 746 F. Supp. 1208 (S.D.N.Y. 1990) (example of equitable relief—removal and receivership sought as alternative to dissolution)