Observations of the legal scene from the Cornhusker State, home of Roscoe Pound and Justice Clarence Thomas' in-laws, and beyond.
Thursday, February 28, 2008
The Nebraska Legislature's version of the Revised Uniform Partnership agreement (RUPA) states its policy that partnership statutes should mostly serve as gap-filling provisions when the parties partnership agreement does not address an issue regarding the partnership. Moreover the State states with the RUPA that it prefers partnerships keep operating while dealing fairly with departing partners rather than having partner departures routinely cause partnership dissolution. The Nebraska Supreme Court rejects withdrawing partner's demand that the Lancaster County District Court should have ordered the parties partnership dissolved when the partner who chose to continue the business failed to timely buy-out the withdrawing partner according to their agreement. Shoemaker v. Shoemaker, S-06-319, 275 Neb. 112
"The UPA ’s default rules are gap-filling rules that control only when a question is not resolved by the parties’express provisions in an agreement.
Section 67-404 carries out the legislative intent to make the partnership provisions the controlling rules and the 1998 UPA provisions the default rules. Section 67-431 provides that a partner’s voluntary withdrawal no longer results in mandatory dissolution; it results in a
partner’s “dissociation.” S ection 67-433(1) manifests a legislative intent to create separate paths—dissolution and winding up or mandatory buyout—through which a dissociated partner can recover partnership interests: “If a partner’s dissociation results in a dissolution and winding up of the partnership business, sections 67-439 to 67-445 [dealing with dissolution and winding
up] apply; otherwise, sections 67-434 to 67-438 [dealing with mandatory buyout] apply.”26 The comment to § 603 of RUPA , the section upon which § 67-433 is patterned, specifically provides
that it operates as a “‘switching’” provision.
"To maintain a sensible and consistent scheme and to give effect to every provision.28 When read together with § 67-404 (partnership agreement controls except for limited exceptions)
and § 67-433 (providing separate paths of dissolution or mandatory buyout), we conclude dissolution for a partner’s voluntary withdrawal under § 67-439(1) is a default rule. Section
67-439(1) applies only when the partnership agreement does not provide for the partnership business to continue. Moreover, the 1998 UPA specifically requires that we apply and construe the act “to effectuate its general purpose to make uniform the law with respect to the subject of the act among states enacting it. "
"UPA ’s rule of mandatory dissolution upon a partner’s withdrawal is a default rule. It “applies only [absent] an agreement affording the other partners a right to continue the business.”Under the partnership agreement, Harley did not have the right to force the partnership’s dissolution
when Don elected to continue the business. the partnership agreement to mandate a buyout of a withdrawing partner’s interest, but it failed to specify a remedy for the partnership’s failure to pay, or to timely pay, the buyout price. Therefore, because the agreement is silent on this point, the default rules of the 1998 UPA apply.Although Don failed to timely pay the buyout price, absent a remedy provision in the agreement, Harley’s remedy was statutory. H is statutory
remedy against the partnership did not include dissolution, and he waived the remedy of judicial valuation. Therefore, section 12 of the agreement provided the method for determining his
interest’s value."
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