Million-dollar verdict against Delaware limited partnership is void

Daily Record, The (Baltimore), Apr 19, 2006 by Ann W. Parks

A million-dollar verdict against a Delaware limited partnership and its corporate general partner was properly overturned last year since Maryland courts had no jurisdiction to hear the case, the Court of Appeals has held. The top court affirmed last year's Court of Special Appeals' decision with respect to Mission West Limited Partnership (Mission West) and Mission West Properties Inc. (Properties), both defendants in a breach of contract suit stemming from a project in California. Mission West, formed in Delaware with its principal place of business in California, had never conducted any kind of activity in Maryland; and Properties, a real estate investment trust incorporated in Maryland with its principal place of business in California, faced liability only because of its status as the corporate general partner of Mission West.The top court recognized Maryland's adherence to the entity theory of partnerships, which treats each partner as a distinct legal entity. Therefore, the fact that its general partner was incorporated in Maryland did not cause Mission West, a foreign entity, to be domiciled in this state for jurisdictional purposes.Nor did the fact that Properties' agent was served in Maryland bring Mission West within reach of the courts.We have stated that 'to exercise either general or specific jurisdiction, the defendant must maintain sufficient minimum contacts with the forum such that the exercise of jurisdiction meets the general test of essential fairness,' Judge Glenn T. Harrell wrote for the court, citing the 1995 Court of Appeals case Presbyterian Univ. Hosp. v. Wilson.Because, on this record, [Mission West] had no contacts with Maryland other than the fact that its corporate managing general partner reincorporated in the State, the [appellants] failed to satisfy the requisite constitutional requirements of demonstrating [Mission West's] minimum contacts with the forum, Harrell added.Finally, the court agreed that there was no alleged wrongdoing against Properties that would have subjected it to suit alone, even though it was incorporated here. In 2000, a group of individuals and businesses, including Mission West, formed another entity known as the Hellyer Avenue Limited Partnership (HALP). HALP, established in California with a principal place of business there, was created to construct, manage, and lease a California headquarters facility for a communications company named Stellex Microwave Systems Inc.Under the agreement creating the HALP partnership, the membership of all the partners except Mission West was conditioned on whether or not Stellex met its obligations under the lease. When Stellex defaulted, Mission West expelled the other HALP partners and stopped paying distributions from HALP's income.The other HALP partners - including Republic Properties Corp., a District of Columbia investment, management and development company - filed suit in Baltimore City Circuit Court, contending that Stellex's payment obligation was not an obligation under the lease that would have justified Mission West's actions. Following a bench trial, the circuit court determined that Mission West breached the partnership agreement, and entered judgment against it and Properties in the amount of $1,010,976.

'Not a lot of law'Robert R. Moore, a San Francisco attorney representing both Mission West and Mission West Properties, said the case should have been dismissed long ago.Still, there's not a lot of law around that deals with the jurisdiction of a state court over a foreign limited partnership, he said, calling the opinion very significant. It'll be cited around the country.Under the court's analysis, the question of jurisdiction over a foreign limited partnership was the same as jurisdiction over a foreign corporation, he noted. A California case addressing the same issue of whether Mission West LP could terminate the interest of HALP's other limited partners has been stayed pending the outcome of this case, he said. Baltimore lawyers Charles S. Hirsch and Robert A. Scott, who also represented the Mission West defendants, said they never understood why the case was filed here. We felt all along there was no jurisdiction over Mission West LP; there were no contacts with the state of Maryland, Scott said. We think the court got it exactly right.The petitioners' attorney was unavailable for comment. WHAT THE COURT HELD

Case:Republic Properties Corp. et al. v. Mission West Properties LP et al., CA No. 41. Opinion by Harrell, J. Filed April 10, 2006.Issue:Did the Maryland courts have personal jurisdiction over a foreign limited partnership and its corporate general partner, where the corporate general partner was incorporated in Maryland and its agent had been served here?Holding:No; CSA affirmed. Since partners and partnerships are considered separate entities, the general partner's state of incorporation is not the foreign limited partner's domicile for jurisdiction purposes. Counsel:Edward J. Tolchin, Fairfax, Va., for petitioners; Robert R. Moore, San Francisco, Ca., for respondents.