Wallop Canyon Ranch, LLC v. Goodwyn
351 P.3d 943
| Wyo. | 2015Background
- Malcolm and French Wallop formed Wallop Family Limited Partnership (WFLP) and Wallop Canyon Ranch, LLC (WCR) in 1992 to own/operate Canyon Ranch and implement an estate plan transferring interests to their children.
- WCR served as WFLP's general partner; Malcolm and French initially held majority limited partner interests and periodically gifted interests to their children; French's WFLP and WCR interests were awarded to Malcolm in their 2002 divorce decree.
- Scott Goodwyn, a limited partner, sued (federal then state) alleging accounting problems, mismanagement, breaches of fiduciary duty, improper gifting, and incorrect loan interest treatment; federal suit dismissed for failure to join WFLP; state bench trial followed.
- The district court found for Goodwyn on gifting-related claims and adjusted partner loan interest, but rejected his breach-of-fiduciary-duty claims against Malcolm, Paul, and WCR; it treated the gifting claims as derivative and awarded Goodwyn attorney fees under Wyo. Stat. § 17-14-1104.
- Goodwyn appealed the adverse fiduciary-duty findings; WCR appealed the fee award. The Wyoming Supreme Court affirmed both the district court’s merits rulings and the award of attorney fees.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Entitlement to derivative-action attorney fees under Wyo. Stat. § 17-14-1104 | Goodwyn: he prevailed on claims that were derivative (gifting issues) so statute authorizes fees | WCR: Goodwyn only prevailed on direct claims and so is not statutorily entitled to fees | Court: gifting claims affected the partnership and were derivative; fees affirmed under § 17-14-1104 |
| Effect of divorce decree transferring French's WFLP interest | Goodwyn: transfer was a court-ordered transfer, not an authorized "estate planning transfer," so WFLP Agreement procedures were violated | Wallops: decree transfer fell within the Agreement’s "estate planning transfers" exception and was authorized | Court: WFLP Agreement unambiguous; decree transfer fit the estate-planning exception and did not breach the Agreement |
| Liability of Malcolm and Paul as limited partners for fiduciary breaches | Goodwyn: limited partners owe fiduciary duties (via WUPA/WULPA linkage) and diverted corporate opportunities through related entities | Wallops/WCR: WULPA imposes duties on general partners but not limited partners; no statutory or contractual duty existed | Court: WULPA does not impose fiduciary duties on limited partners; no liability in their capacities as limited partners for alleged breaches |
| Whether WCR breached duties as general partner by self-dealing/related-entity transactions | Goodwyn: WCR entered related-entity deals (CRR, Elk Rock, rental arrangements) that diverted opportunities and benefited insiders | WCR: transactions were reasonable, disclosed/consistent with past practice, and benefited or did not harm WFLP; no competition or gross misconduct shown | Court: district court’s factual findings that WCR did not breach duties were not clearly erroneous; WCR did not breach duty of care or loyalty as found by trial court |
Key Cases Cited
- Centrella v. Morris, 597 P.2d 958 (Wyo. 1979) (describing nature and purpose of shareholder/derivative suits)
- Piroschak v. Whelan, 106 P.3d 887 (Wyo. 2005) (bench-trial factual-findings review standard)
- Evans v. Moyer, 282 P.3d 1203 (Wyo. 2012) (review standard for legal authority to award attorney fees and abuse-of-discretion for fee amount)
- Wallop v. Wallop, 88 P.3d 1022 (Wyo. 2004) (prior divorce-based property awards between Malcolm and French)
- GOB, LLC v. Rainbow Canyon, Inc., 197 P.3d 1269 (Wyo. 2008) (definition of derivative claims and reliance on corporate-law principles)
- Lynch v. Patterson, 701 P.2d 1126 (Wyo. 1985) (rule that recovery in derivative actions inures to corporation/partnership rather than to individual plaintiff)