Lead Opinion
On 26 February 1992, Thomas L. Clancy, Jr, perhaps best known as the author of many popular “techno-thriller” novels, and Wanda King,
*547 A The General Partners or their Affiliated Persons may act as general or managing partners for other partnerships engaged in businesses similar to that conducted by the Partnership. Nothing herein shall limit the General Partners or their Affiliated Persons from engaging in any such business activities, or any other activities which may be competitive with the Partnership or the [JRLP-owned] Property, and the General Partners or their Affiliated Persons shall not incur any obligation, fiduciary or otherwise, to disclose or offer any interest in such activities to any party hereto and shall not be deemed to have a conflict of interest because of such activities.....
E. The General Partners shall be under a fiduciary duty to conduct the affairs of the Partnership in the best interests of the Partnership, including the safekeeping and use of all Partnership funds and assets and the use thereof for the benefit of the Partnership. The General Partners shall at all times act in good faith and exercise due diligence in all activities relating to the conduct of the business of the Partnership.
Section 5.7 of the JRLP Partnership Agreement provides that:
Neither the Partnership nor any Partner shall have any rights or obligations, by virtue of this Agreement, in or to any independent ventures of any nature or description, or the income or profits derived therefrom, in which a Partner may engage, including, without limitation, the ownership, operation, management, syndication and development of other businesses, even if in competition with the Partnership’s trade or business.
JRLP, in furtherance of its purpose, contracted with S & R Literary, Inc., in a 23 March 1993 letter agreement, forming a joint venture known as “Tom Clancy’s Op-Center” (Op-Center).
2. All decisions with respect to the development, use and exploitation of the proposal shall be made by mutual agreement between Steve R. Pieczenik and Tom Clancy; provided, however, that if, after discussion, no agreement is reached, the decision of Tom Clancy should prevail.
The signature page of the Joint Venture Agreement appears as follows:
If the foregoing is in accordance with your understanding, please indicate your agreement by signing and returning copies hereof to us.
Very truly yours,
JACK RYAN LIMITED PARTNERSHIP By [Mr.
Clancy]
AGREED TO AND ACCEPTED:
S. & R. LITERARY, INC. By [Dr. Pieczenik]
AGREED TO (insofar as I am concerned):
[Mr. Clancy]
[Dr. Pieczenik]
To develop the paperback book series, Pieczenik assembled a team including Martin Greenberg, a book “packager,”
The Op-Center paperback books proved to be successful. Every book appeared on the New York Times Paperback Bestseller list. As of July 2003, the Op-Center book series generated over $28 million in domestic and foreign profits, after deducting writers’ fees, commissions, and other expenses.
In 1996, in the midst of the Op-Center series of books, Clancy and King, as husband and wife, separated. Their divorce was finalized by the Circuit Court for Calvert County on 6 January 1999. Leading up to the divorce, Clancy and King entered into a Marital Property Agreement.
After a total of 10 books were published in the Op-Center series, and Books 11 and 12 slated for publication, Clancy set the stage for the possible removal of his name from the Op-Center series. JRLP and S & R Literary agreed, in a jointly signed letter dated 28 October 2001, that Clancy’s name would be used in connection with Books 13 and 14 in the series. Clancy signed on behalf of JRLP; Pieczenik on behalf of S & R Literary. The letter agreement provided further that, after the publication of Book 14, JRLP could withdraw permission to use Clancy’s name in connection with future books in the series.
King filed a Complaint in the Circuit Court for Calvert County on 3 July 2003 alleging that Clancy breached his fiduciary duty to her and JRLP by, inter alia, stating
It was not until 19 January 2004 that Clancy “pulled the trigger” on his announced intent to withdraw his name prospectively from the Op-Center series. Through counsel in a 19 January 2004 letter, he expressed his refusal to permit the Op-Center joint venture to use his name in connection with the series beyond Book 14. Specifically, the letter stated:
Although [Clancy], individually, permitted the joint venture to use the name “Tom Clancy” in the series title in connection with op-Center paperback books 1 through 14, he has withdrawn permission to the joint venture for further and future use of his name in the titles to the Op-Center paperback book series beyond book 14. Please accept this letter as confirmation of the fact that [Clancy] will not permit the joint venture to use his name in the title to the Op-Center paperback book series beyond book 14.
On 20 January 2004, Clancy filed in the case initiated by King a Counterclaim for Declaratory Relief. Clancy sought a declaration holding:
(1) That beyond rights granted by [him] to the Joint Venture to use the “Tom Clancy” name in the publication of Books 1 through 14 of the Op-Center paperback book series, the Joint Venture does not possess the right to use the name “Tom Clancy” in the Op-Center series title;
(2) That the Joint Venture does not have the right to use the name “Tom Clancy” in the series title for hardback book publications;
(3) That all decisions with respect to the development, use and exploitation of the Op Center concept are at the unfettered discretion of [Clancy], individually;
(4) That [Clancy] may withhold or withdraw any license to use his name in Joint Venture business endeavors for any reason, including for purely personal competitive reasons;
(5) That JRLP does not possess the right to use the name “Tom Clancy”;
*552 (6) That Wanda King does not possess the right to use the name “Tom Clancy”; [and]
(7) That [Clancy] does not owe a duty, as managing partner or otherwise, to JRLP such as would require him to permit the use of his name in JRLP’s business ventures, including through its participation in the Joint Venture.
Clancy later filed a motion for summary judgment.
In consideration of arguments made on the first day of trial, the trial court vacated its summary judgment ruling in King’s favor to the extent that it held that Clancy breached his fiduciary duty to JRLP and King.
The Circuit Court bifurcated the trial. The object of the first portion of the trial was to determine whether Clancy
Clancy noted a timely appeal to the Court of Special Appeals. The intermediate appellate court affirmed, in an unreported opinion, the Circuit Court’s judgment. The Court of Special Appeals, however, expressed its view that the scope of the trial court’s order as to King’s authority as managing partner of JRLP with regard to the Op-Center project was not sufficiently clear. The court remanded the case to the Circuit Court for clarification.
We granted Clancy’s Petition for Writ of Certiorari,
1. Whether the lower courts erred in failing to recognize that principles of contract preempt fiduciary duties where the contract is unambiguous and the parties have made their intentions clear?
2. Whether the intermediate appellate court erred by failing to order that under [King’s] control the Op-Center Joint venture cannot expand its activities beyond its current scope, which is television productions and mass market paperback books?
3. Whether the lower courts erred in awarding attorneys’ fees and expenses to the respondent?
Where, as in the present case, an action has been tried without a jury, we “review the case on both the law and the evidence.” Maryland Rule 8-131(c). ‘We will not disturb the judgment on the facts, however, unless the trial court’s findings are clearly erroneous.” Goff v. State,
Clancy concedes that, contract law aside,
Section 9A-103(a) of the Maryland Code, Corporations and Associations Article notes that “relations among the partners and between the partners and the partnership are governed by the partnership agreement.” Section 9A-103(b)(3)(i) permits partnerships to “identify specific types or categories of activities that do not violate the duty of loyalty.”
Thus, the first step in the proper analysis of the questions presented by the instant case is to examine the contracts governing the operation of JRLP and the Op-Center Joint Venture. See Sonet v. Timber Co.,
The rules of contract interpretation are well-settled. “The interpretation of a contract, including the determination of whether a contract is ambiguous, is a question of law,
There are essentially two contracts of concern in the present case.
The General Partners or their Affiliated Persons may act as general or managing partners for other partnerships engaged in businesses similar to that conducted by the Partnership. Nothing herein shall limit the General Partners or their Affiliated Persons from engaging in any such business activities, or any other activities which may be competitive with the Partnership or the [JRLP-owned] Property, and the General Partners or their Affiliated Persons shall not*558 incur any obligation, fiduciary or otherwise, to disclose or offer any interest in such activities to any party hereto and shall not be deemed to have a conflict of interest because of such activities.
Similarly, § 5.7 of the JRLP Partnership Agreement provides that:
Neither the Partnership nor any Partner shall have any rights or obligations, by virtue of this Agreement, in or to any independent ventures of any nature or description, or the income or profits derived therefrom, in which a Partner may engage, including, without limitation, the ownership, operation, management, syndication and development of other businesses, even if in competition with the Partnership’s trade or business.
In short, these provisions trumped the usual duty not to compete with the limited partnership and, to a large extent, the duty not to usurp partnership opportunities. See Kahn v. Icahn, No. Civ. A. 15916,
Thus, Clancy was under no obligation to allow JRLP to participate in the Op-Center Joint Venture. Clancy was free to retain all profits and management of the Op-Center Joint Venture for himself as an individual.
As to the second contract of special relevance in the present case, the Op-Center Joint Venture Agreement, states:
2. All decisions with respect to the development, use and exploitation of the proposal shall be made by mutual agreement between Steve R. Pieczenik and Tom Clancy; provided, however, that if, after discussion, no agreement is reached, the decision of Tom Clancy should prevail.
The contract is in the form of a letter from JRLP to S & R Literary. Thus, where the contract refers to “you,” it refers to S & R Literary.
If the foregoing is in accordance with your understanding, please indicate your agreement by signing and returning copies hereof to us.
Very truly yours,
JACK RYAN LIMITED PARTNERSHIP By [Mr.
Clancy]
AGREED TO AND ACCEPTED:
S. & R. LITERARY, INC. By [Dr. Pieczenik]
AGREED TO (insofar as I am concerned):
[Mr. Clancy]
[Dr. Pieczenik]
There would be no reason for Clancy’s and Pieczenik’s signatures to appear twice on the signature page unless they also were signing in their individual capacities. JRLP and S & R Literary already and objectively had indicated their intent to be bound by the contract as evidenced by the signatures earlier on the page. The phrase “AGREED TO (insofar as I am concerned)” also indicates that Clancy signed individually. Throughout the contract, JRLP is referred to in the first person plural as “we” or “us.” The use of the word “I” shows that those signatures were of individuals.
If traditional common law and statutory fiduciary duty principles were paramount to the analysis and outcome of the present case in the posture in which it reaches us, portions of this contract clearly would be improper self-dealing and a usurpation of a partnership opportunity. Clancy reserved control of the project to himself, not the entity to which he owed fiduciary duties. Instead, the JRLP Partnership Agreement clearly contemplates that Clancy may compete with JRLP. In fact, Clancy, under the JRLP Partnership Agreement, may contract to control individually the entire management and profits of the Op-Center Joint Venture. There is no reason, therefore, that he could not contract for less of an interest in the Op-Center activities for himself individually. In essence, Clancy agreed to retain full and final management authority for himself individually, while assigning the profits and ownership of the venture to JRLP. Thus, the terms of the Op-Center Joint Venture contract were permitted by the terms of the JRLP Partnership Agreement.
A fiduciary, under appropriate circumstances, may acquire and enforce legal rights against the firm for which he or she serves as a fiduciary. In Waterfall Farm Systems, Inc. v. Craig,
In Storetrax.com, Inc. v. Gurland,
Similarly, in Manufacturers Trust Co. v. Becker,
Manufacturers Trust stands for the proposition that where there is “no component of unfair dealing or bad faith,” fiduciaries may recover beyond their personal financial exposure on fairly purchased corporate notes. Id. Thus, a fiduciary does not need to show a potential personal financial loss in order to enforce a valid and fairly obtained contractual right that is adverse to the firm. See In re Philadelphia & W. Ry. Co.,
The fact that Clancy validly reserved the right to control the use and exploitation of the Op-Center project does not end the inquiry. According to the terms of the JRLP Partnership Agreement and contract law generally, Clancy must exercise his discretion in good faith. Section 5.5E of the JRLP Partnership Agreement states that “[Clancy and King] shall at all times act in good faith and exercise due diligence in all activities relating to the conduct of the business of the Partnership.”
Even if the contract did not contain this general good faith term, Maryland contract law implies such an obligation. See Maryland Code (1975, 2007 Repl. Vol.), Corporations & Associations Article, § 9A-103(b)(5) (noting that the partnership
In Della Ratta,
The Circuit Court found that “a significant motivation for Della Ratta issuing the capital call was to squeeze out some of the limited partners.” The trial judge did not believe Della Ratta’s testimony regarding his motivation for issuing the capital call and found Della Ratta’s actions to be “completely self-serving.” In addition, the Circuit Court found that Della Ratta advanced the date of the capital call in order to “out-maneuver” the Withdrawing Partners and block them from exercising their statutory right to withdraw.
Della Ratta,
In Desert Equities, Inc. v. Morgan Stanley Leveraged Equity Fund, II, L.P.,
The Supreme Court of Delaware reversed. The court held that the limited partner may recover if it could prove that the general partner acted in retaliation against the limited partner.
The requirements of good faith in contract law are similar to the good faith doctrine in partnership law. In First Nat. Realty Corp. v. Warren-Ehert Co.,
If a significant motive for Clancy exercising his contractual right to withdraw his name from the Op-Center
“Good faith ordinarily is a question of fact....” David A. Bramble, Inc. v. Thomas,
Although it is not strictly necessary for us to comment also on the issue of attorneys’ fees and expenses in light of our holding on the first question presented, we nonetheless note an analytical consideration in that regard as means to offer limited guidance to the trial court in the event it becomes appropriate to consider that subject anew on remand. See Maryland Rule 8-131(a). The Circuit Court previously awarded attorneys fees to King, despite the fact that the court did not determine that or how Clancy violated the parties’ Marital Property Agreement. The only apparent basis for an award of attorneys’ fees and expenses in these circumstances would (or could) have been a breach of the Marital Property Agreement. See Friolo v. Frankel,
JUDGMENT OF THE COURT OF SPECIAL APPEALS REVERSED; CASE REMANDED TO THAT COURT WITH DIRECTIONS TO REVERSE THE JUDGMENT OF THE CIRCUIT COURT FOR CALVERT COUNTY AND REMAND THE CASE TO THE CIRCUIT COURT FOR FURTHER PROCEEDINGS NOT INCONSISTENT WITH THIS OPINION; COSTS IN THE COURT OF SPECIAL APPEALS AND THIS COURT TO BE PAID BY RESPONDENT.
BATTAGLIA, J., dissents and files opinion joined by GREENE, J.
Notes
. At the time of the execution of the agreement, King was known as Wanda Clancy. The couple resided in Calvert County, Maryland, during their marriage and at the time of execution of the agreement.
. Paragraph nine of the letter agreement states that the joint venture agreement shall be “governed by the law of the State of New York." This does not impact our analysis here. King claims that Clancy breached his fiduciary duty to her and JRLP. The principal agreement
. The television miniseries aired on NBC; however, the network declined to continue the series thereafter. The scope of the Op-Center franchise was expanded to paperback books by letter agreements dated 11 September 1994 and 26 September 1994. Each letter "ratified and confirmed” the terms of the Joint Venture Agreement.
. It is our understanding that a book packager is a person, outside of a publishing company, that coordinates the various tasks required to
. The Marital Property Agreement was “incorporated but not merged” into the divorce decree.
. The Marital Property Agreement provided, in pertinent part:
Husband and Wife are the only and equal partners in Jack Ryan Limited Partnership, a Maryland limited partnership ("JRLP”), each owning a 1% general partner interest and a 49% limited partner interest____ Husband shall act as the managing partner of JRLP and as such shall have the usual powers of a managing partner to negotiate and sign on behalf of the Partnership royalty and other contracts for the exploitation of JRLP's literary assets [including the Op-Center Joint Venture], such power not to be exercised in a manner inconsistent with this Agreement. However, approval of Husband and Wife shall be required for: (1) any contract for the*550 licensing or sale of motion picture rights, (2) any contract between JRLP and Husband or Wife, or between JRLP and any entity in which Husband or Wife has a direct or indirect interest, and (3) any contract pursuant to which Husband or Wife would receive benefit other than as a partner of JRLP.
. Specifically, the Marital Property Agreement stated:
Each party shall indemnify and hold the other harmless from all damages, liabilities, losses, costs, fees and expenses (including attorneys and accountants fees and expenses) resulting from such party's breach of this Agreement, including any amounts incurred in the enforcement of this Agreement.
. If JRLP exercised its option to withdraw Clancy's name, the profit sharing arrangement under the Op-Center Joint Venture Agreement would be altered. Instead of a 50-50 split, 75% of the profits from the series would belong to S & R Literary. Thus, JRLP’s share would be reduced to 25% of the profits.
. Clancy admitted making such statements in his answer to King’s complaint.
. Clancy requested that the Circuit Court grant summary judgment in his favor on both King’s original complaint and his counterclaim for declaratory relief.
. King sought summary judgment on all issues except her request for equitable relief and her request to recover attorneys' fees.
. The trial court noted:
The Court is going to stand by its ruling with regard to the judgment in favor of Ms. King on Mr. Clancy’s counterclaim for declaratory relief and the ruling that it does not individually own or control the mark Tom Clancy's Op-Center. However, I feel bound to reverse my ruling with regard to the contractual obligations. This is a motion for summary judgment, and ruling as a matter of law that Mr. Clancy’s obligation to Ms. King precludes him from stopping the future use of the mark Tom Clancy’s Op-Center I think will depend*553 on a factual determination as to whether in fact that is an appropriate business decision on behalf of the Jack Ryan Limited Partnership, as opposed to whether it is a decision that sits in and of itself only for that asset and not for the other assets that that partnership owns. So we can take testimony with regard to that issue, and that issue alone.
. A limited partnership is essentially a creature of contract or a series of contracts. See Maryland Code (1975, 2007 Repl. VoL), Corporations & Associations Article, § 9A-103(a) ("[R]elations among the partners and between the partners and the partnership are governed by the partnership agreement.”); id. § 10-403 ("Except as provided in this title or in the partnership agreement, a general partner of a limited partnership has the rights and powers and is subject to the restrictions and liabilities of a partner in a partnership.” (emphasis added)); Sonet v. Timber Co., L.P.,
. The present case is analogous to cases involving traditional partnerships and corporations. Therefore, it is helpful to turn to cases in those contexts to analyze the legal issues here. See Klein v. Weiss,
The fact that the present case deals with a limited partnership rather than a corporation provides even greater reason to defer to the provisions of the various contracts. Limited partnership agreements are more likely to be the result of extensive arm’s-length negotiations and thus involve business venturers in a better position to bargain for various terms modifying fiduciary duties than the purchasers of mere stock in a corporation, especially a publicly-traded one. Larry E. Ribstein, Unlimited Contracting in the Delaware Limited Partnership and its Implications for Corporate Law, 16 J. Corp. L. 299, 305 (1991).
. Section 9A-103 is applicable to limited partnerships, as well as general partnerships. Maryland Code (1975, 2007 Repl. Vol.), Corporations & Associations Article, § 10-108.
. Although the original Joint Venture Agreement was extended to include the Op-Center book series, the agreement to expand the joint venture “ratified and confirmed” the terms of the original Joint Venture Agreement. Similarly, the Marital Settlement Agreement in the separate divorce case between Clancy and King did not alter the terms of the JRLP Partnership Agreement.
. Although the citation of unreported opinions (Maryland or otherwise) ordinarily is not appropriate, this is an unusual situation. Kahn has been cited by the Maryland Court of Special Appeals. Alloy v. Wills Family Trust,
. Cases from other jurisdictions firmly establish that fiduciaries and those to whom they owe such duties, by contract, may permit actions that otherwise would be flagrant violations of common law and statutory fiduciary duties. Jerman v. O’Leary,
. This is evidenced further by the variety of other ventures with which Clancy is involved and in which JRLP has no interest, such as the Tom Clancy’s Splinter Cell books and video game line and Tom Clancy’s Net Force. King was aware of these other ventures at the time that she signed the JRLP Partnership Agreement. King, as least at the time of her divorce from Clancy, maintained a 40% interest and served as a director of a competing venture, Jack Ryan Enterprises, Ltd.
. As foretold in footnote 2, supra, New York law is in accord with Maryland law on the specific issues governing this case. Under New York law, partners and joint venturers owe each other fiduciary duties. Meinhard v. Salmon,
. For example, paragraph one states that "[y]ou agree to furnish the services of Steve R. Pieczenik....” "You” clearly refers to S & R Literary. If it referred to Pieczenik individually, it would be nonsensical.
. Paragraph five states that "[cjopyright in the proposal shall be held jointly in your name and ours.” The Op-Center trademark application in the record was submitted jointly by JRLP and S & R Literary.
. In fact, the additional signatures of Clancy and Pieczenik were necessary to complete the contract. Paragraphs one and two impose duties on both Clancy and Pieczenik. The two must discuss and
If Clancy and Pieczenik were not signatories individually, the non-breaching entity would not be able to recover directly from the individuals for their failure to perform. This illustrates one of the purposes of limited liability entities such as the closely-held corporation, limited partnership, and limited liability company. Much of the motivation behind forming such a business entity is to shield the individuad from the liabilities of the business entity.
. Because Clancy is an artist who by contract retained creative control over a project which bears his name, we are hard-pressed to conceive of a contractual situation which more implicates the necessity for personal satisfaction in the contract. It is for this reason that the subjective “good faith” standard applies to Clancy’s actions, instead of the objective “reasonable person” standard. See Samuel Williston & Richard A. Lord, A Treatise on the Law of Contracts (4th ed. 2000) §§ 38:23, 38:24 (noting the distinction between the subjective test applied to matters of personal taste, such as art, and the objective test applied to "matters of mechanical fitness, utility or marketability”).
. The limited partner alleged that the general partner's decision to exclude the limited partner was in retaliation for previous litigation that the limited partner initiated against the general partner.
. The court also held that the limited partner may recover if it proved that the general partner used its discretion to find a "materially adverse effect” in an unreasonable manner. Desert Equities, Inc. v. Morgan Stanley Leveraged Equity Fund, II, L.P.,
. Jerry Seinfeld, perhaps an unlikely legal illustrator, once epitomized the duty of good faith in contract. In an episode of his television show, Jerry’s character purchased a jacket at a men’s clothing shop. The terms of the contract permitted Jerry to return the item for refund at his discretion. When Jerry attempted to return the jacket after an unrelated personal quarrel with the salesman, the following discussion took place.
Jerry: Excuse me, I'd like to return this jacket.
Clerk: Certainly. May I ask why?
Jerry: For spite.
Clerk: Spite?
Jerry: That’s right. T don’t care for the salesman that sold it to me.
Clerk: I don't think you can return an item for spite.
Jerry: What do you mean?
Clerk: Well, if there was some problem with the garment. If it were unsatisfactory in some way, then we could do it for you, but I'm afraid spite doesn’t fit into any of our conditions for a refund.
Jerry: That's ridiculous, I want to return it. What’s the difference what the reason is?
Clerk: Let me speak with the manager ... excuse me ... Bob!
(walks over to the manager and whispers)
Bob: What seems to be the problem?
Jerry: Well, I want to return this jacket and she asked me why and I said for spite and now she won’t take it back.
Bob: That's true. You can’t return an item based purely on spite.
Jerry: Well, so fine then ... then I don't want it and then that’s why I’m returning it.
Bob: Well you already said spite so....
Jerry: But I changed my mind.
Bob: No, you said spite. Too late.
Seinfeld: The Wig Master (NBC original television broadcast 4 April 1996).
In attempting to exercise his contractual discretion out of “spite,” Jerry breached his duty to act in good faith towards the other party to the contract. Jerry would have been authorized to return the jacket if, in his good faith opinion, it did not fit or was not an attractive jacket. He may not return the jacket, however, for the sole purpose of denying to the other party the value of the contract. Jerry’s post hoc rationali
. Specifically the trial court found:
While there is evidence that Mr. Clancy wants to end the Op-Center series because sales are going down and it is hurting his literary reputation, there is proof to the contrary that the books in the "Clancy” brand are going down in sales no more than the general decline in book sales. Penguin Group USA cannot be too concerned with the expansion of the “Clancy” brand because they just agreed to add two (2) books to a new branded series: Splinter Cell, a computer game. Therefore, this Court is not persuaded that the Op-Center series is damaging Mr. Clancy in any way because there is evidence to show that the sales of the other series of books not authored by Mr. Clancy are declining as well. Further, the evidence that Mr. Clancy does not want Mrs. King to benefit in any way from the Op-Center series further supports the contention that he was not acting in the best interests of JRLP in requesting his name be withdrawn from the series and that there should not be any further publications with his name. It is this Court’s opinion that Mr. Clancy breaches his fiduciary duty not only to JRLP and his partner, Mrs. King, but also to the joint venture formed for the development of the Op-Center series.
. Given our resolution of the first question presented in Clancy’s Petition for Certiorari, we shall not address his second question regarding the scope of King’s authority, with regard to the Op-Center Joint Venture, were she to replace Clancy as managing partner of JRLP.
Dissenting Opinion
Dissenting opinion by BATTAGLIA, J-, which GREENE, J. joins.
I respectfully dissent.
In the present case, the Circuit Court for Calvert County concluded in an opinion and order that Thomas L. Clancy, Jr., Petitioner, Managing Partner of Jack Ryan Limited Partnership (“JRLP” or “the Partnership”), breached his fiduciary duty to Wanda T. King, Respondent, his ex-wife and partner in JRLP, when he attempted to withdraw his name from the “Tom Clancy’s Op-Center” book series; the Op-Center series was created by Mr. Clancy and Dr. Steve Pieczenik under the auspices of the Op-Center Joint Venture between JRLP and S & R Literary, Inc. (“S & R”), a company owned by Dr. Pieczenik and his wife. As a result of Mr. Clancy’s breach, the judge appointed Ms. King as Managing Partner of JRLP with respect to the Op-Center Joint Venture; subsequently, in a second order, the judge awarded Ms. King attorneys’ fees and expenses. The Court of Special Appeals agreed that Mr. Clancy breached his fiduciary duty to Ms. King and JRLP, but remanded the case for clarification of the scope of Ms. King’s role as Managing Partner of JRLP. The majority herein disagrees with both the trial court and the intermediate
Mr. Clancy and Ms. King’s relationship with respect to the Partnership is governed by the JRLP Partnership Agreement, dated, February 26, 1992, Section 5.5, “Rights, Powers and Duties of Partners,” of which prescribes the duties owed by the partners:
A. ... The General Partners or their Affiliated Persons may act as general or managing partners for other partnerships engaged in businesses similar to that conducted by the Partnership. Nothing herein shall limit the General Partners or their Affiliated Persons from engaging in any such business activities, or any other activities which may be competitive with the Partnership or the Property, and the General Partners or their Affiliated Persons shall not incur any obligation, fiduciary or otherwise, to disclose or offer any interest in such activities to any party hereto and shall not be deemed to have a conflict of interest because of such activities.
E. The General Partners shall be under a fiduciary duty to conduct the affairs of the Partnership in the best interests of the Partnership, including the safekeeping and use of all Partnership funds and assets and the use thereof for the benefit of the Partnership. The General Partners shall at all times act in good faith and exercise due diligence in all activities relating to the conduct of the business of the Partnership.
Section 5.7 of the Partnership Agreement provides:
Neither the Partnership nor any Partner shall have any rights or obligations, by virtue of this Agreement, in or to any independent ventures of any nature or description, or the income or profits derived therefrom, in which a Partner*575 may engage, including, without limitation, the ownership, operation, management, syndication and development of other businesses, even if in competition with the Partnership’s trade or business.
The Op-Center Joint Venture is governed by the Op-Center Joint Venture Agreement, a letter agreement signed by Mr. Clancy, on behalf of JRLP, and Dr. Pieczenik, on behalf of S & R; the letter agreement contains a provision specific to Mr. Clancy and Dr. Pieczenik, which explains the process of decision-making for the Op-Center Joint Venture:
All decisions with respect to the development, use and exploitation of the proposal shall be made by mutual agreement between Steve R. Pieczenik and Tom Clancy; provided, however, that if, after discussion, no agreement is reached, the decision of Tom Clancy shall prevail.
The bottom of the letter contained the notation, “AGREED TO (insofar as I am concerned),” and was signed by Mr. Clancy and Dr. Pieczenik individually.
The gravamen of the instant case is what fiduciary duty is owed by Mr. Clancy to Ms. King in light of the JRLP Agreement and the Op-Center Joint Venture Agreement. The majority concludes that because Mr. Clancy reserved for himself, individually, in the Op-Center Joint Venture Agreement, management and control of the Op-Center series, Mr. Clancy owed no fiduciary duty to Ms. King and JRLP, and that the pertinent inquiry is whether Mr. Clancy’s actions in attempting to withdraw his name from the Op-Center series were in good faith. The issue is not whether good faith existed, however, even though Mr. Clancy did not prove his bona fides, but whether he could, for his own purposes, violate an agreement under which he had fiduciary obligations.
Professor Reed Rowley, in his treatise Rowley on Partnership, states that “[o]ne of the essentials or results of the partnership relation” is that a general partner “is the agent for the other partners and the partnership in partnership business,” with the right to incur obligations and execute instruments on behalf of the partnership. 1 Reed Rowley,
In the present case, Section 5.5E of the JRLP Partnership Agreement establishes the general fiduciary relationship owed by Mr. Clancy to Ms. King, providing that, “The General Partners shall be under a fiduciary duty to conduct the affairs of the Partnership in the best interests of the Partnership.” (emphasis added). The fiduciary duty referred to in the JRLP Partnership Agreement has been explored by commentators, including Professor Rowley:
The law imposes upon each partner the duty of exercising toward his copartner the utmost integrity and good faith in all partnership affairs. In transactions concerning the interests of the firm he must consider their mutual welfare, rather than his own private benefit.
* * *
The relationship between partners being fiduciary, the highest degree of good faith between the partners is required. “There can be no question but that the law holds each member of a partnership to the highest degree of good faith in his dealings with reference to any matter which concerns the business of the common engagement, and that each partner, being the agent of the firm, must be held, during*577 the existence of the relation, to the same accountability as other trustees, in all matters which affect the common interest.” “There is no stronger fiduciary relation known to the law than that of a copartnership, where one man’s property and property rights are subject to a large extent to the control and administration of another.”
1 Rowley, Rowley on Partnerships at 516-17 (footnotes omitted). See also 2 Bromberg & Ribstein, Bromberg and Ribstein on Partnership at Section 6.07 (stating that generally, “partners owe fiduciary duties to each other and to the partnership”); Callison & Sullivan Partnership Law and Practice at Section 12:1 (“The status of partners as fiduciaries with respect to the partnership and each other is an established principle of partnership law.”). In Della Ratta,
The partnership relationship is a fiduciary one, a relation of trust. Allen v. Steinberg,244 Md. 119 , 128,223 A.2d 240 , 246 (1966). Managing or general partners particularly owe a fiduciary duty to inactive partners. Id. Moreover, the partnership relationship carries with it the requirement of utmost good faith and loyalty. Herring v. Offutt,266 Md. 593 , 597,295 A.2d 876 , 879 (1972). As Justice Cardozo, then Chief Judge of the New York Court of Appeals, stated:
“Many forms of conduct permissible in a workaday world for those acting at arm’s length are forbidden to those bound by fiduciary ties. A trustee is held to something stricter than the morals of the market place. Not honesty alone, but the punctilio of an honor the most sensitive, is then the standard of behavior. As to this there has developed a tradition that is unbending and inveterate. Uncompromising rigidity has been the attitude of courts of equity when petitioned to undermine the rule of undivided loyalty by the ‘disintegrating erosion’ of particular exceptions.... Only thus has the level of conduct for fiduciaries been kept at a level higher than that trodden by the crowd.”*578 Meinhard v. Salmon,249 N.Y. 458 ,164 N.E. 545 (1928) (quoted in Herring,266 Md. at 597 ,295 A.2d at 879 ).
Clearly, under the JRLP Partnership Agreement, General Partners of JRLP, Mr. Clancy and Ms. King, owed each other a fiduciary duty to conduct the affairs of the Partnership, including the Op-Center Joint Venture, in the best interests of the Partnership. The fact that under the Partnership Agreement Mr. Clancy and Ms. King could each pursue independent business ventures similar to, or even in competition with, the business conducted by the Partnership, does not change this basic tenet of partnership law, which Mr. Clancy and Ms. King adopted in the JRLP Agreement.
The majority circumvents the fiduciary duty owed by Mr. Clancy to Ms. King by referencing the Op-Center Joint Venture Agreement, which includes a provision specific to Mr. Clancy and Dr. Pieczenik explaining that, essentially, Mr. Clancy reserved for himself, individually, management and control of the Op-Center series. That clause, which pertains only to that agreement, however, does not eviscerate the fiduciary duty owed to Ms. Kang and JRLP under a different agreement. As both the trial court and the Court of Special Appeals recognized, even though Mr. Clancy reserved to himself, individually, in the Joint Venture Agreement, the management and control of the development, use and exploitation of the book series, that agreement was signed by Mr. Clancy as general partner of JRLP. The trial court concluded that “as an agent of the partnership, [and] also as managing partner, Mr. Clancy has the duty to act in the best interests of JRLP by informing Ms. King of any matters that are to the benefit or detriment of JRLP and any related projects”:
It is clear that Mr. Clancy no longer wanted to be associated with the Op-Center series, but there is evidence that indicates that he had no problem continuing with the other products in the Clancy line.
Mr. Clancy was aware that not only was the Op-Center series declining in sales, but also the sales in the other*579 products in the Clancy brand. There is nothing to indicate that he wished to prevent the use of his name on the other Clancy brand products, even those books he does not personally author.
Tom Clancy is a name synonymous with the techno-thriller genre and because Mr. Clancy’s name is significant in the publishing world and carries such a name brand recognition, it would have been damaging to the partnership and the joint venture to have had his name removed from the Op-Center series. The purpose of the partnership and the joint venture would become frustrated for the reasons that the parties would not be able to contract, obtain the dollar values for the books and enjoy the fan base it enjoys now.
In the case at bar, even though Dr. Pieczenik and Mr. Clancy reserved to themselves, each individually, the management and control over the Op-Center series, Mr. Clancy signed the agreement on behalf of JRLP to carry out the business of JRLP which is to pursue activities relating to writing and the sale of books. Not only was the agreement made in the usual course of the partnership business, it was prepared by the attorney for JRLP and signed by the managing partner of JRLP, with the partnership name on the agreement.
While there is evidence that Mr. Clancy wants to end the Op-Center series because sales are going down and it is hurting his literary reputation, there is proof to the contrary that the books in the “Clancy” brand are going down in sales no more than the general decline in book sales. Penguin Group USA cannot be too concerned with the expansion of the “Clancy” brand because they just agreed to add two (2) books to a new branded series: Splinter Cell, a computer game. Therefore, this Court is not persuaded that the Op-Center series is damaging Mr. Clancy in any way because there is evidence to show that the sales of the other series of books not authored by Mr. Clancy are declining as well. Further, the evidence that Mr. Clancy*580 does not want Mrs. King to benefit in any way from the Op-Center series further supports the contention that he was not acting in the best interest of JRLP in requesting his name be withdrawn from the series and that there should not be any further publications with his name. It is this Court’s opinion that Mr. Clancy breached his fiduciary duty not only to JRLP and his partner, Mrs. King, but also to the joint venture formed for the development of the Op-Center series.
The Court of Special Appeals agreed and noted that although it “is possible that [Mr. Clancy] could have withdrawn permission to use his name without breaching a duty to the Op-Center Joint Venture,” Ms. King’s “complaint, however, raised the issue of whether appellant had breached his fiduciary duty to Ms. King and JRLP, not to the Op-Center Joint Venture”:
Tom Clancy’s Op-Center is an asset of JRLP. The evidence before the circuit court leads to the reasonable conclusion that any acts that diminish the sales of Op-Center products, and thus income, will adversely effect the income of its co-owners—JRLP and S & R. Thus, our inquiry is whether appellant upheld his ... contractually imposed (JRLP limited partnership agreement) fiduciary duties to JRLP and appellee to protect and exploit the Op-Center asset.
We find no error in the court’s legal rulings that appellant was subject to a fiduciary duty, and that duty was not superceded by the partnership agreements.
We, therefore, affirm the circuit court’s conclusion that appellant breached his fiduciary duty to appellee and JRLP.
In the case sub judice, there are two extant partnership agreements which the majority, apparently, conflates, although Ms. King was not a signatory to the Op-Center Joint Venture Agreement but only the JRLP Agreement. The JRLP Agreement predated that Joint Venture Agreement, which was executed by Mr. Clancy, Managing Partner of JRLP, on the Partnership’s behalf, to carry out its business,
Moreover, the majority errs in stating that because Clancy could control the management of the Op-Center Joint Venture, “[tjhere is no reason ... that he could not contract for less of an interest in the Op-Center activities for himself individually,” and “[tjhus, the terms of the Op-Center Joint Venture contract were permitted by the terms of the JRLP Partnership Agreement.” Majority op. at 562,
Nevertheless, the majority cites to our decision in Storetrax. com, Inc. v. Gurland,
In Waterfall Farm Systems,
We found Judge Harvey’s reasoning persuasive in Storetrax.com,
In the present case, the Circuit Court, however, found as a matter of fact, uncontested before us, that Mr. Clancy had not proven that the use of his name in the Op-Center book series was adverse to his personal interests:
Tom Clancy is a name synonymous with the techno-thriller genre and because Mr. Clancy’s name is significant in the publishing world and carries such a name brand recognition, it would have been damaging to the partnership and the joint venture to have had his name removed from the Op-Center series. The purpose of the partnership and the joint venture would become frustrated for the reasons that the*583 parties would not be able to contract, obtain the dollar values for the books and enjoy the fan base it enjoys now.
While there is evidence that Mr. Clancy wants to end the Op-Center series because sales are going down and it is hurting his literary reputation, there is proof to the contrary that the books in the “Clancy” brand are going down in sales no more than the general decline in book sales. Penguin Group USA cannot be too concerned with the expansion of the “Clancy” brand because they just agreed to add two (2) books to a new branded series: Splinter Cell, a computer game. Therefore, this Court is not persuaded that the Op-Center series is damaging Mr. Clancy in any way because there is evidence to show that the sales of the other series of books not authored by Mr. Clancy are declining as well. Further, the evidence that Mr. Clancy does not want Mrs. King to benefit in any way from the Op-Center series further supports the contention that he was not acting in the best interest of JRLP in requesting his name be withdrawn from the series and that there should not be any further publications with the name.
JRLP’s interests, the court found, were not adverse to those of Mr. Clancy, and therefore, Mr. Clancy was not relieved of his fiduciary duty to Ms. King and JRLP. The Court of Special Appeals agreed when it noted,
Most significant on the question of whether a glut of Op-Center books was damaging to the sales and income, of Tom Clancy’s books, was testimony of David Shanks, the Chief Executive Officer of Penguin Books, the publisher of Tom Clancy’s books. From Shanks’s wide-ranging testimony the court was able to conclude that the Op-Center brand was not a significant cause of decreasing Tom Clancy sales.
Pieczenik testified as to his disagreements with Clancy about the future of Op-Center and concluded that the proposal to withdraw the Clancy name from the Op-Center brand was not put forward until Clancy and King began their divorce proceedings. He opined that Clancy, together*584 with his literary agent, undertook to subvert the Op-Center products. There existed throughout the trial the undercurrent that Clancy’s motive in withdrawing his name from the Op-Center venture, and effectively crippling it, was to harm the financial interests of King.
Moreover, what Mr. Clancy, and the majority, fail to recognize is that Mr. Clancy’s interests in the Op-Center book series, in fact, are consistent with those of Ms. King and JRLP. As JRLP partners, Mr. Clancy and Ms. King owned rights to several of Mr. Clancy’s literary works, in addition to the Op-Center series, including “Without Remorse,” “Debt of Honor,” “Executive Orders,” and “Rainbow Six.” Had Mr. Clancy proven that the decline in sales in the Op-Center series had had a negative affect on the “Tom Clancy” brand, including the other works under the purview of JRLP, he could have acted within his fiduciary obligation, in his, Ms. King’s and JRLP’s interests, should he have attempted to withdraw his name from the book series. I agree with the Circuit Court and-the Court of Special Appeals, however, that Mr. Clancy did not prove adverse effect. To say absent adverse effect, that a general partner can withdraw an asset vital to the Partnership without breach, not only offends the terms of the JRLP Partnership Agreement,
I dissent.
. Because of the majority’s holding, the issue regarding Ms. King’s role as managing partner of JRLP is not reached, although I do agree with the Court of Special Appeals that a remand for clarification of Ms. King's role as managing partner of JRLP would be necessary.
. The majority also cites Manufacturers Trust Co. v. Becker,
. Section 5.3 of the JRLP Agreement states:
Restrictions on Authority
A. With respect to the Partnership and the Property, the General Partners shall not have any authority to perform any act in violation of any applicable laws or regulations thereunder, nor shall any General Partner as such, without the Consent of the Limited Partners, have any authority:
(i) to do any act in contravention of this Agreement.
(ii) to do any act which would make it impossible to carry on the ordinary business of the Partnership; or
(iii) to possess Partnership property, or assign its rights in specific Partnership property, for other than a Partnership purpose.
. Mr. Clancy’s and Ms. King’s divorce was finalized on January 6, 1999. “Incorporated but not merged” into the divorce decree was a Marital
