*This order and judgment is not binding precedent, except under doctrines

of law of the case, res judicata, and collateral estoppel. The court generally

disfavors the citation of orders and judgments; nevertheless, and order and

judgment may be cited under the terms and conditions of 10th Cir. R. 36.3.

F I L E D

United States Court of Appeals

Tenth Circuit

SEP 17 1997

PATRICK FISHER

Clerk

UNITED STATES COURT OF APPEALS

TENTH CIRCUIT

UNITED STATES CELLULAR

INVESTMENT COMPANY OF

OKLAHOMA CITY, INC., an

Oklahoma corporation,

Plaintiff-Appellee and CrossAppellant,

vs.

SOUTHWESTERN BELL MOBILE

SYSTEMS, INC., a Delaware and

Virginia corporation,

Defendant-Appellant and CrossAppellee.

No. 96-6140

 96-6146

 96-6294

 (D.C. No. CIV 92-2327)

 (W.D. Okla.)

ORDER AND JUDGMENT*

Before TACHA, BALDOCK, and KELLY, Circuit Judges.

This diversity case involves a dispute over the construction of a limited

partnership agreement between the general partner, Southwestern Bell Mobile
- 2 -

Systems, Inc. (SBMS) and one of four limited partners, United States Cellular

Investment Company of Oklahoma City, Inc. (USC-OKC). Our jurisdiction arises

under 28 U.S.C. § 1291, and we affirm the district court’s judgment.

Background

The Oklahoma City SMSA Limited Partnership (OKC Partnership) was

formed among competing applicants to operate a cellular telephone system within

the five-county area of the Oklahoma City Metropolitan Statistical Area

(Oklahoma City MSA). SBMS was the sole and managing general partner with a

40% interest as a general partner and a 22% interest as a limited partner, for a

total interest of 62%. The remaining 38% interest was held by three other limited

partners, including USC-OKC with a 14.60% interest.

The OKC Limited Partnership Agreement (Agreement) predated the

establishment of outlying Rural Service Areas (RSA) for rural cellular service. 

The Agreement necessarily reflected the uncertainty prevailing before the FCC

established the final boundaries for RSAs. The primary issue in this lawsuit is

whether SBMS could expand into these rural areas on its own behalf, or whether

instead it was obligated to do so on behalf of the limited partnership.

The central sections of the Agreement in dispute are §§ 8.8 and 7.2(f). 

Under Article VIII entitled “Obligations of General Partner,” § 8.8 provides:
- 3 -

8.8 Cellular Service in Other Areas. Nothing herein shall

preclude the General Partner or an Affiliate thereof from providing

Cellular Service independently from the Partnership in areas other

than the SMSA and adjoining areas. Applications by the General

Partner or an Affiliate thereof to provide Cellular Service in areas

adjoining the SMSA shall be deemed to be made on behalf of the

Partnership pursuant to the terms of Section 7.2(f).

Aplt. App. 143, 145.

Section 8.8 references § 7.2(f) under Article VII entitled “Rights and

Powers of Partnership, General Partner and Limited Partners,” and provides that:

7.2 Powers of the General Partner. [T]he General Partner hereby is

vested with the power to:

. . .

 (f) Subject to the provisions of Sections 5.2 and 5.4 herein, apply to

the FCC on behalf of the Partnership for permits and licenses to

provide Cellular Service in counties contiguous to the SMSA where

such contiguous counties and the SMSA have a community of

interest and where such expansion appears to be economically

justifiable and would result in Cellular Service being provided by the

Partnership in a unified area which includes the SMSA and

contiguous counties, negotiate on behalf of the Partnership to reach

mutually acceptable arrangements with other carriers desiring to

provide service in such areas and decide and conduct all matters

pertaining to such applications and to the Cellular Service that may

result from such applications. 

Aplt. App. 139-42.

Also relevant to the dispute is § 8.1 which provides::

8.1 Duty of the General Partner. The General Partner will at all

times act in the best interests of the Partnership.

Aplt. App. 143.
- 4 -

Section 8.8 defines the partnership service area in terms of “the SMSA

[that is, the five-county Oklahoma Standard Metropolitan Statistical Area] and

adjoining areas,” but also provides that an application to provide cellular service

in those “adjoining areas” by SBMS would be deemed “made on behalf of the

Partnership pursuant to the terms of Section 7.2(f).” Section 7.2(f) appears to

restrict the power given to SBMS to expand the area served by the OKC 

Partnership to “counties contiguous to the SMSA.”

In 1987, three years after the Agreement was executed, the FCC established

the boundaries for three Oklahoma RSAs, RSAs 3, 5 and 9. These RSAs

encompass 22 counties, but only 6 counties within these RSAs are “contiguous

counties to the SMSA” within the meaning of § 7.2(f). SBMS or the independent

partnerships it organized applied for and were awarded construction permits for

the three RSAs during 1990.

In 1992, USC-OKC filed this lawsuit. In its amended complaint, it alleged

that SBMS usurped the rights of USC-OKC to provide cellular service in the three

RSAs. Count I sought relief for breach of partnership agreement and count II for

breach of fiduciary duty. Although relief was sought for USC-OKC as well as for

the Partnership, both parties agree that USC-OKC’s action is a direct action on

behalf of USC-OKC, not a derivative action on behalf of the Partnership. See
- 5 -

USC-OKC’s Reply Br. on Cross-Appeal filed Sept. 16, 1996 at 11; SBMS Answer

Br. on Cross-Appeal and Reply Br. filed Aug. 30, 1996 at 34 n.26.

At trial, SBMS contended that the term “adjoining areas” in § 8.8 meant

(and was limited to) “contiguous counties” in § 7.2(f). According to SBMS,

because the three RSAs contained both contiguous and noncontiguous counties, it

could not have filed an application on behalf of the OKC Partnership to provide

rural cellular service limited to contiguous counties. Accordingly, SBMS argued

that it was free to file independent applications for the three RSAs.

USC-OKC disagreed that the reference to § 7.2(f) in § 8.8 limited the

application of SBMS’s obligation to contiguous counties. It argued that § 8.8

allowed SBMS to provide cellular service only in areas other than the SMSA and

adjoining areas, and that applications made by SBMS in adjoining areas are

deemed to be made on behalf of the OKC Partnership regardless of whether the

adjoining areas are contiguous counties or otherwise meet the discretionary

powers criteria of § 7.2(f). In the alternative, USC-OKC contended that even if

§ 7.2(f) limited SBMS’s obligation to file on behalf of the OKC Partnership to

contiguous counties, SBMS could have submitted partitioned applications for the

three RSAs, but did not.

After consideration of extrinsic evidence, the district court found that the

parties did not intend the reference to “contiguous counties” in § 7.2(f) to limit
- 6 -

SBMS’s obligations and duties contained in § 8.8, including the duty not to

compete with the limited partners in adjoining areas. D. Ct. Finding Nos. 64, 70-

74, Aplt. App. 374-77. While SBMS was not required to apply to provide cellular

service in adjoining RSAs 3, 5 and 9, once it did so, any interest acquired was

deemed on behalf of the OKC Partnership. D. Ct. Finding No. 73; Aplt. App.

377. The district court not only rejected SBMS’s interpretation of the Agreement,

but also found that even under that interpretation, and contrary to SBMS’s

conduct, SBMS could have applied to serve the three rural RSAs with partitioning

as to contiguous counties. The district court awarded $9,531,543.13 in damages

to USC-OKC, based upon its 14.6% interest in the total value of the three RSAs

of $65,284,542.

On appeal, SBMS contends that (1) § 7.2(f) of the OKC Partnership

Agreement is a limitation on the powers of SBMS as a general partner and was

intended for the protection of the other partners in the partnership; (2) since the

district court found that SBMS could have filed “partitioned applications,” USCOKC’s injury was limited to the 6 contiguous counties and it was not entitled to

damages for all 22 counties, (3) the damage evidence submitted by USC-OKC was

not relevant to its injury, and (4) since USC-OKC failed to submit proof on an

essential element of its case, the court of appeals should direct the district court to

enter judgment for SBMS. In its cross-appeal, USC-OKC contends that the
- 7 -

district court under facts conceded (1) should have awarded punitive damages,

and (2) should have imposed a constructive trust. The contentions of the parties

are either beside the point or without merit and may be handled with dispatch.

Discussion

We review the district court’s factual findings under the deferential clearly

erroneous standard and its legal conclusions de novo. See Fed. R. Civ. P. 52(a);

Salve Regina College v. Russell, 499 U.S. 225, 239-40 (1991). SBMS does not

challenge the basic findings of fact made by the district court, only the scope of

their application. Aplt. & Cross-Aplee. Br. at 2. The essence of SBMS’s appeal

is that the district court erred in calculating damages based upon 22 adjoining

counties rather than limiting damages to 6 contiguous counties.

SBMS first argues that § 7.2(f) of the OKC Agreement is a limitation on

the general partner’s power and was intended for the protection of the other

limited partners. According to SBMS, the “contiguous county” language was

motivated solely by the limited partners’ concern that the general partner not be

allowed to pursue unlimited expansion of the Partnership’s cellular service area

and make unlimited “capital calls.” The district court found that the language had

its genesis in Chickasaw’s (another limited partner) desire to limit the

discretionary powers of SBMS, to assure that Chickasaw would participate in
- 8 -

cellular service within its exchange area and to assure that SBMS could not

provide cellular service in Chickasaw’s traditional exchange area independently

from the OKC Partnership. D. Ct. Finding Nos. 56 & 57, Aplt. App. 371-72. 

Even if § 7.2(f) limits SBMS’s discretionary powers regarding expansion in

contiguous counties, the district court plainly found that the provision did not

limit SBMS’s duties to the OKC Partnership regarding expansion in “adjoining

areas.” Finding No. 64, 70-74, 151, Aplt. App. 374-77, 404. The district court’s

construction of the ambiguous provisions in the OKC-Agreement is anchored in

its unchallenged findings concerning the intent of the parties; therefore, we must

reject SBMS’s argument that § 7.2(f) so limited its power to act on behalf of the

Partnership.

SBMS next argues that since the district court found that SBMS could have

filed “partitioned applications,” USC-OKC’s injury was limited to the 6

contiguous counties and it was not entitled to damages for all 22 counties. 

SBMS seizes on the district court’s finding that it could have filed partitioned

applications for the three RSAs. Finding No. 178, Aplt. App. 410. The district

court made its finding in response to SBMS’s position that its obligation to the

partnership extended only to contiguous counties and it was not possible to file an

application for an RSA that contained both contiguous and non-contiguous

counties. There is no merit to SBMS’s argument. SBMS never attempted to file
- 9 -

partitioned applications, and when it filed for adjoining areas, such applications

were deemed to be made, in their entirety, on behalf of the OKC Partnership. The

district court found that SBMS breached the OKC Agreement and its fiduciary

duties by usurping partnership opportunities in adjoining counties, not merely

contiguous counties. Finding Nos. 151-154; Aplt. App. 404.

SBMS also contends that the damage evidence submitted by USC-OKC was

not relevant to its injury because it was based on an RSA-wide basis, rather than

restricted to contiguous counties. It further contends that because USC-OKC

failed to submit appropriate proof on an essential element of its case, damages,

we should direct the district court to enter judgment for SBMS.

After determining that SBMS breached the OKC Agreement and its

fiduciary duties and that such breaches were the proximate cause of USC-OKC’s

damages, the district court valued the profit interests in Oklahoma RSAs 3, 5 and

9 to the date of trial. Finding No. 198-201; Aplt. App. 421. SBMS’s contentions

are not tenable in light of the district court’s unchallenged finding regarding the

parties’ intent concerning the relationship between §§ 8.1 and 7.2(f) of the OKC

Agreement. Given that finding, SBMS was required to submit applications for

RSAs adjoining the Oklahoma City MSA on behalf of, rather than independently

of, the OKC Partnership. USC-OKC’s damage evidence provided a satisfactory

basis for the district court to award damages.
- 10 -

In its cross-appeal, USC-OKC contends that the district court erred in

failing to award it punitive damages in accordance with its lengthy proposed

findings and conclusions of law on the subject. See Aplt. App. 336-344. Instead,

the district court found and concluded that “[t]he evidence does not support an

award of punitive damages against SBMS.” D. Ct. Finding No. 282, Aplt. App

438. We review the district court’s denial of an award of punitive damages for an

abuse of discretion. Green v. Johnson, 977 F.2d 1383, 1389 (10th Cir. 1992);

Wright v. Sheppard, 919 F.2d 665, 672 (11th Cir. 1990). We have carefully

reviewed the findings of fact that, according to USC-OKC, “not only supports,

but also mandates, the imposition of punitive damages against SBMS.” Aplee. &

Cross-Aplt. Br. at 38. We are not persuaded. The district court’s resolution of

this issue was well within the bounds of permissible choice, particularly in light

of the ambiguity contained in the OKC Agreement.

USC-OKC also argues that a constructive trust should be imposed upon

SBMS’s interests in the RSAs. According to USC-OKC, a constructive trust in

the amount of $55,752,998.87 (value of the RSAs less USC-OKC’s proportionate

share) is necessary in order to prevent the unjust enrichment of SBMS and to

deter future misconduct. See Aplee. & Cross-Aplt. Br. at 44-47.

A constructive trust would be an appropriate remedy were this a derivative

action, however, neither the parties on appeal nor the district court treated it as
- 11 -

such. The OKC Partnership was not made a party, and neither party has raised the

issue of whether USC-OKC may obtain its proportionate share of the value of the

RSAs in a direct action.

By way of background, the OKC Partnership is a Delaware limited

partnership with a Delaware choice-of-law provision. Aplt. App. 165. Delaware

law allows a limited partner to bring a derivative action after demand upon the

general partner or without demand if it would be futile. See Del. Code Ann. tit.

6., § 17-1001 (1996); Seaford Funding Ltd. Partnership, 672 A.2d 66, 69 (Del.

Ch. 1995). Generally, whether an action is direct or derivative depends upon

whether the injury alleged is independent of the injury suffered by the limited

partnership. See Litman v. Prudential-Bache Properties, 611 A.2d 12, 15 (Del.

Ch. 1992). Where the claim belongs to the partnership, “[l]imited partners

ordinarily cannot enforce their proportional interest in a partnership claim as their

individual claim.” See 4 Alan R. Bromberg & Larry E. Ribstein, Bromberg &

Ribstein on Partnership, § 15.04(g) at 15:34-35 (1996).

At the same time, limited partners can bring a direct action when the injury

can be differentiated from that suffered by the other partners. See Litman, 611

A.2d at 15. Courts have allowed claims for (1) an accounting, (2) fiduciary

breach, and (3) breach of the partnership agreement to proceed as individual

claims in varying circumstances, id. § 15.04(h), at 15:35-37 (discussing claims
- 12 -

that may be either individual or partnership); HB General Corp. v. Manchester

Partners, L.P., 95 F.3d 1185, 1195 (3rd Cir. 1996) (stating that breach of a

partnership agreement “has been held to constitute an individual as well as a

partnership claim”); see also Bromberg & Ribstein on Partnership, § 15.04(f), at

15:31-33 (discussing individual claims), particularly where the general partner

has engaged in self-dealing and a direct action is necessary to protect a limited

partner’s investment, id. §§ 15.04(c), at 15:27 (“If the general partner(s) have a

conflict of interest in enforcing a partnership right, the courts are likely to allow

one or more limited partners to enforce it by, for example, direct suit . . . .”), at

15:29 (“Extreme situations . . . may justify a single limited partner’s action.”);

15.01(c)(2), at 15:10 (discussing reasons for allowing a limited partner to enforce

partnership rights). In Jaffe v. Harris, 338 N.W. 2d 228 (Mich. App. 1983), rev’d

in part, appeal denied, 355 N.W.2d 617 (Mich. 1984), limited partners with an

eight-percent interest obtained a judgment for their allocable share of

unauthorized management fees and withdrawals taken by the general partner,

notwithstanding a later appellate ruling that allowed them a derivative action. Id.

at 230-31.

Regardless, SBMS has waived any argument that USC-OKC could not

proceed with its claims in a direct action by failing to assert such an argument. 

We will not allow USC-OKC to achieve the result of a derivative action (a
- 13 -

constructive trust imposed for the benefit of the limited partnership and its

members) without having instituted a derivative action and naming the limited

partnership.

Without benefit of briefing, the dissent concludes that the OKC Partnership

is an indispensable party and that this action must be dismissed for want of

subject matter jurisdiction. The dissent’s conclusion is based on the incorrect

premise that only derivative claims are involved in this lawsuit. The distinction

between direct and derivative actions is often difficult to apply and the same set

of facts may result in direct and derivative claims. Grimes v. Donald, 673 A.2d

1207, 1212-13 (Del. 1996). We do not read the amended complaint, the final

pretrial order, or the district court’s analysis as precluding direct relief. See Fed.

R. Civ. P. 8(e) (allowing multiple theories). For example, the OKC Agreement

specifically allows each limited partner “a formal account of partnership affairs

whenever circumstances render it just and reasonable,” Aplt. App. 142, and OKCUSC sought an accounting as well as damages. Moreover, given that SBMS owns

62% of the limited partnership and has not been injured by its conduct (indeed, it

has profited), the non-SBMS limited partners including USC-OKC have an injury

that is separate and distinct from SBMS and the limited partnership.

Plainly, SBMS has waived any argument that the OKC Partnership is a

necessary party. See State Farm Mut. Auto Ins. Co. v. Mid-Continent Cas. Co.,
- 14 -

518 F.2d 292, 294 (10th Cir. 1975) (“No objection was made that Garton was a

necessary party under Rule 19(a), so that objection is waived.). Thus, the

statement that “[w]e must protect the interests of an absent necessary party, and

have a duty to ensure that the best possible parties litigate this suit,” Dissent at 5,

is not accurate. Only if the OKC Partnership is an indispensable party would

dismissal for lack of jurisdiction be appropriate. To the extent that the OKC is

not a necessary party, the indispensability inquiry need not be considered. State

Farm, 518 F.2d at 294.

Although a court may raise the indispensable party issue sua sponte, we

have no need to do so. The district court did not commit plain error in awarding

relief to USC-OKC on a direct basis. See Aspen Highlands Skiing Corp. v. Aspen

Skiing Co., 738 F.2d 1509, 1516 (10th Cir. 1984) (discussing strictness of plain

error review), aff’d, 472 U.S. 585 (1985). With relief awarded on direct claims

against the sole general partner of the OKC Partnership, we are not required to

consider the interests of absent parties.

AFFIRMED.

Entered for the Court

Paul J. Kelly, Jr.

U.S. Circuit Judge
Editor’s Note:

While the order and judgment was not designated for publication, the

dissent which follows is published.
F I L E D

United States Court of Appeals

Tenth Circuit

SEP 17 1997

PATRICK FISHER

Clerk

PUBLISH

UNITED STATES COURT OF APPEALS

TENTH CIRCUIT

UNITED STATES CELLULAR

INVESTMENT COMPANY OF

OKLAHOMA CITY, INC., an

Oklahoma corporation,

Plaintiff-Appellee and CrossAppellant,

vs.

SOUTHWESTERN BELL MOBILE

SYSTEMS, INC., a Delaware and

Virginia corporation,

Defendant-Appellant and CrossAppellee.

No. 96-6140

No. 96-6146

No. 96-6294

APPEALS FROM THE UNITED STATES DISTRICT COURT

FOR THE WESTERN DISTRICT OF OKLAHOMA

(D.C. No. CIV-92-2327-M)

G. Blaine Schwabe, III (Sarah A. Hall and J. Matthew Thompson, with him on the

briefs) of Gable, Gotwals, Mock, Schwabe, P.C., Oklahoma City, Oklahoma, for

Plaintiff-Appellee/Cross-Appellant.

Dennis G. Lyons of Arnold & Porter, Washington, D.C. (Carol L. Tacker, Dallas,

Texas; Kenneth N. McKinney and Charles C. Green of McKinney, Stringer &

Webster, P.C., Oklahoma City, Oklahoma; James E. Scarboro of Arnold & Porter,

Denver, Colorado; and Norman M. Sinel, Patrick J. Grant, Ellen T. Noteware, and

Paul S. Feira, Of Counsel, Arnold & Porter, Washington, D.C., with him on the

briefs), for Defendant-Appellant/Cross-Appellee.
- 2 -

Before TACHA, BALDOCK, and KELLY, Circuit Judges.

BALDOCK, Circuit Judge, dissenting from an unpublished order and judgment.

The court’s opinion would be absolutely correct if, as the court concludes,

USC-OK’s action against SWBS is a direct one. Unfortunately, the court’s

conclusion is erroneous. USC-OK’s action is derivative in nature. Because the

action is derivative, an indispensable party, namely the OKC Partnership, was not

before the district court. Because the joinder of the Partnership would have

destroyed diversity jurisdiction in the district court, that court lacked jurisdiction

to adjudicate this matter. See First Nat’l Bank & Trust Company v. McKeel, 387

F.2d 741, 743 (10th Cir. 1967) (if joinder of an indispensable party would oust

the court of diversity jurisdiction, then dismissal would be compelled). 

Accordingly, I dissent.

As this is an action against a general partner for breach of fiduciary duty

owed to the OKC Partnership, we first ask whether this action is a direct action or

a derivative one. In a diversity case, the characterization of an action is a state

law question. See McDaniel v. Painter, 418 F.2d 545, 547 (10th Cir. 1969). The

Partnership Agreement in this instance provides that Delaware law controls. 

Thus, under Oklahoma’s choice-of-law rules, we look to Delaware law to

determine whether this action is direct or derivative. See Okla. Stat. Ann. tit. 15,
- 3 -

§ 162 (West 1993); Bohannan v. Allstate Ins. Co., 820 P.2d 787, 793-96 (Okla.

1991).

Under Delaware law, the distinction between direct and derivative actions,

“rests upon the [plaintiff] being directly injured by the alleged wrongdoing.” 

Litman v. Prudential-Bache Properties, Inc., 611 A.2d 12, 15 (Del. Ct. Chan.

1992) (treating limited partnership same as corporation to determine the

derivative nature of action), amended by, 1992 WL 94369 (Del. Ct. Chan. 1992)

(unpublished) (amendment irrelevant). The plaintiff’s injury must be “separate

and distinct from that suffered by other [partners]” and it must exist

“independently of any right of the [partnership].” Id. Thus, discerning the nature

of an action–derivative or direct–requires an examination of the alleged injury.

See id.

The Amended Complaint reveals that USC-OK brought this action for

damages to the OKC Partnership. The prayer of the Amended Complaint

requested the following relief:

(a) a declaration that defendant’s

interests in the cellular systems in

Oklahoma RSAs 3 and 5 are held on behalf

of the partnership;

(b) an injunction requiring defendant to

take all measures to transfer its interest in

the cellular systems in Oklahoma RSAs 3

and 5 to the partnership;
- 4 -

(c) an accounting of revenues generated

by the cellular systems in Oklahoma RSA’s

3, 5, and 9 and profits earned therefrom by

defendant;

(d) a injunction requiring Southwestern

to share with the partnership any and all

benefits derived from its applications to

provide cellular service in Oklahoma RSAs

3 and 5 . . . .

Amended Complaint at 10 (emphasis added). The prayer of each count of

the complaint requests a remedy for the OKC Partnership’s benefit and alleges

injuries specific to the OKC Partnership. Likewise the questions presented in the

final pre-trial order also allege injury to the OKC Partnership and request relief in

its favor. See generally Final Pretrial Order, Appellant’s Appendix, vol. 1, p. 84-

107. USC-OK has suffered no discernable separate harm. Accordingly, this suit,

although not captioned as a derivative action, is pleaded as a derivative action

brought for the benefit of the OKC Partnership. Cf. United States Cellular Inv.

Co. v. Bell Atlantic Mobile Sys. Inc., 677 A.2d 497 (Del. 1996) (action on nearly

identical contract brought as a derivative suit).

Because this suit is derivative, the OKC Partnership is the real party in

interest. See Fed. R. Civ. P. 17(a). A federal court sitting in diversity must apply

the law of the forum state, including its choice-of-law rules, to all substantive

issues. See Rocky Mountain Helicopters, Inc. v. Bell Helicopter Textron, Inc., 24

F.3d 125, 128 (10th Cir. 1994). Because Oklahoma is the forum state, its law
- 5 -

designates whether the OKC Partnership is the real party in interest in this

diversity suit. See K-B Trucking Co. v. Riss Int’l Corp., 763 F.2d 1148, 1153

(10th Cir. 1985). “If an incorporated or unincorporated association has capacity

to sue or be sued as provided under Rule 17(b), it is considered the real party in

interest for purposes of enforcing any right it has as an entity.” 6A Charles A.

Wright, Arthur R. Miller, & Mary Kay Kane, Federal Practice and Procedure

§1552, at 394 (1990). A limited partnership or unincorporated association has the

capacity to sue or be sued in Oklahoma. See Okla. Stat. Ann. tit. 12, § 2017B

(West 1993). Thus, OKC Partnership is the real party in interest in this suit. See

Singer v. Singer, 634 P.2d 766, 769-70 (Okla. Ct. App. 1981). Notably, the Fifth

Circuit has stated that a limited partnership is the real party in interest to a

derivative suit seeking relief for an alleged breach of fiduciary duty, see Bankston

v. Burch, 27 F.3d 164, 167 (5th Cir. 1994), and we have drawn a like conclusion

in the corporate context, see Nunn v. Chemical Waste Mgt., Inc., 856 F.2d 1464,

1470 (10th Cir. 1988).

Moreover, the OKC Partnership, like any partnership in a derivative suit, is

a necessary party. Three circuits have arrived at this conclusion in the limited

partnership context. See HB General Corp. v. Manchester Partners, L.P., 95 F.3d

1185, 1190 (3d Cir. 1996); Bankston, 27 F.3d at 167-68; Buckley v. Control Data

Corp., 923 F.2d 96, 98 (8th Cir. 1991). Also, the U.S. Supreme Court has so
- 6 -

concluded in the corporate context. See Ross v. Bernhard, 396 U.S. 531, 538

(1970). Save possibly for the accounting, the OKC Partnership is the only entity

directly interested in the relief sought by USC-OK, which itself has only a

derivative interest. As we shall see, resolution of the issues in this suit without

the OKC Partnership will impair or impede its ability to protect its interests. See

Fed. R. Civ. P. 19(a)(2), (2)(I).

The matter of a party’s absence can be raised at any time and should be

raised by a court sua sponte. See State Farm Mut. Auto. Ins. Co. v. MidContinent Cas. Co., 518 F.2d 292, 294 (10th Cir. 1975). We must protect the

interests of an absent necessary party, and have a duty to ensure that the best

possible parties litigate this suit. Joining the OKC Partnership, however, would

destroy diversity and strip the court of subject matter jurisdiction over this suit. 

See Carden v. Arkoma Assoc., 494 U.S. 185, 195-96 (1990) (holding a

partnership is a citizen of each state of which the general or a limited partner is a

citizen). Thus, we must determine if the OKC Partnership is an indispensable

party under Rule 19(b). If it is, we must dismiss this suit for non-joinder.

To determine whether the OKC Partnership is an indispensable party to this

matter, Fed. R. Civ. P. 19(b) requires us to examine (1) the extent to which a

judgment rendered in the party’s absence might be prejudicial to the party; (2) the

extent to which, by protective provisions in the judgment, by shaping of relief, or
- 7 -

other measures, the prejudice can be lessened or avoided; (3) whether a judgment

rendered in the party’s absence will be adequate; and (4) whether the plaintiff will

have an adequate remedy if the action is dismissed for non-joinder.

Applying these factors, two of our sister circuits and one of our district

courts have come to the conclusion that an absent partnership is an indispensable

party in a derivative suit. See Bankston, 27 F.3d at 167-68; Buckley, 923 F.2d at

98; New York Life Insurance Co. v. Ramco Holding Corp. 938 F. Supp. 754

(N.D. Okla. 1996). But cf. HB General Corp., 95 F.3d at 1190 (holding that a

partnership was not an indispensable party to an action brought solely for

declaratory relief against a limited partner and where every partner was a party to

the lawsuit). Moreover, the Supreme Court has held that a corporation (which is

treated identically with respect to derivative suits in Delaware, see Litman, 611

A.2d at 15) is an indispensable party to a derivative suit. See Koster v.

Lumbermens Mut. Cas. Co., 330 U.S. 518, 520-523 (1947). Applying these

factors to our case leads to a like result.

First, the court’s entry of a judgment and remedy in this suit prejudices the

OKC Partnership. SWBS breached the fiduciary duties it owed to the OKC

Partnership, and the OKC Partnership is the only entity directly interested in the

money remedy sought in this litigation. The damage award, however, represents

only 14.6% of the gains SWBS realized from its wrongful conduct because
- 8 -

USC-OK owns only 14.6% of the OKC Partnership. Not only does the court’s

judgment permit SWBS to wrongfully retain the balance of the ill-gotten proceeds

(at least the balance in excess of SWBS’s ownership interest in the OKC

Partnership), but the judgment effectively deprives the remaining limited partners,

namely Chickasaw Telephone and Pottawomie Telephone, whose interests total

23% of the OKC Partnership, of their share of the proceeds.

Second, the court makes no attempt to shape the judgment to ameliorate or

avoid the prejudice to the OKC Partnership. Again, the judgment accounts for

only 14.6% of the damage caused by SWBS’s conduct. Moreover, the court

cannot award the absent OKC Partnership the remaining measure of damages via

a constructive trust because the Partnership is nondiverse. While the OKC

Partnership may not be bound by the judgment in this suit, see Martin v. Wilks,

490 U.S. 755 (1989), it would be difficult if not impossible for it to protect its

own interest because at least five years have elapsed since the accrual of the

claims for breach of fiduciary duty, putting the claims outside many limitations

periods. See, e.g., Okla. Stat. Ann. tit. 12, § 95 (West 1988).

Third, the court’s judgment is not adequate to protect the OKC

Partnership’s interest. Although SWBS owns approximately 62% in the OKC

Partnership, and it would have been entitled to a share of the profits in the

absence of the breach, the judgment nevertheless fails to account for 85.4% of the
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monies wrongfully diverted by SWBS. A derivative action must not proceed

where the named plaintiff does not “fairly and adequately represent the interests”

of the members of the limited partnership. See Fed. R. Civ. P. 23.1.

Fourth, USC-OK or, more accurately, the OKC Partnership, will have an

adequate remedy if this suit is dismissed for nonjoinder. The applicable statute of

limitations is ultimately a question of the choice-of-law rules of the forum state. 

See Yoder v. Honeywell, Inc., 104 F.3d 1215, 1224-25 (10th Cir.), petition for

cert. filed, 65 U.S.L.W. 3799 (May 20, 1997). Almost certainly either Oklahoma

or Delaware law governs, see Restatement (Second) of Conflict of Laws §§ 142-

43, 186-88, 292-95 (1971), and both Delaware and Oklahoma law contain savings

provisions which would allow USC-OK or the OKC Partnership to refile this suit

under the laws of those states. See Del. Code Ann. tit. 10, § 8118 (1996); Okla.

Stat. Ann. tit. 12, § 100 (West 1988). Nothing indicates that an adequate remedy

is not available in a state court applying the Delaware or Oklahoma savings

provisions.

In addition to Rule 19(b)’s standards, the limited partnership’s legal

existence, independent from that of its partners, see, e.g., W.B. Johnston Grain

Co. v. Self, 344 P.2d 653, 654 (Okla. 1959); Litman, 611 A.2d at 15, weighs

against entering a judgment in the absence of the OKC Partnership. A

corporation is a similar artificial entity independent of its shareholders, and even
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a person owning all of a corporation’s shares cannot represent the corporation’s

interest in a lawsuit. See 1 William M. Fletcher, Fletcher Cyclopedia of the Law

of Private Corporations § 25.1 (perm. ed. rev. vol. 1990). Additionally, a limited

partner, like a corporate shareholder, enjoys limited liability because of the legal

form of the limited partnership and its separate legal existence.

USC-OK would doubtlessly be quick to rely on this limited liability, and

this court likely would be equally quick to recognize it, see, e.g., Robertson v.

Roy L. Morgan Prod. Co., 411 F.2d 1041, 1043 (10th Cir. 1969) (discussing

limited circumstances under which a court will disregard the corporate form under

Oklahoma law), if faced with the appropriate prospect of liability. Further,

USC-OK demands without justification that it be paid all the monies SWBS

accrued from its breach–to the exclusion of both the OKC Partnership itself and

USC-OK’s other partners, regardless of the fact that USC-OK owns only a portion

of the OKC Partnership. In exchange for a limited partner’s limited liability

shield, however, the limited partner surrenders its right to bring in its own name

claims for damages to the limited partnership itself. USC-OK should not be so

free to disregard, and the court so eager to approve, the form of business under

which it and its partners chose to organize because the parties prefer to be in

federal court.
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In summary, the OKC Partnership is an indispensable party to this suit. 

The court’s judgment fails to protect its interests; the current parties do not

represent its interests; and the OKC Partnership cannot protect its own interests

because of the time lapse since the accrual of the causes of action. Moreover, the

court’s judgment imprudently allows USC-OK to escape the consequences of its

choice of business organization.

Finally, I sense at least an unspoken reluctance on the part of this court to

dismiss this case in light of the considerable time and effort which the district

court devoted to it as evidenced by that court’s extensive findings of fact and

conclusions of law. Although the initial pleadings in this case establish that all

claims, except for the accounting claim, were derivative, nothing on or off the

record indicates that the procedural rules for this type of derivative action, e.g.,

Fed. R. Civ. P. 23.1; Daily Income Fund, Inc. v. Fox, 464 U.S. 523, 527-34

(1984), were complied with even minimally. The difficulties involved with

fashioning and administering a remedy in this case should have at least raised a

question about the absence of OKC Partnership and prompted a Rule 19 analysis. 

It is difficult to believe that these issues did not occur to the attorneys in this case

who come from large firms in Oklahoma and Washington, D.C.
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For the foregoing reasons, I would remand this matter to the district court

with instructions to dismiss for failure to join an indispensable party and want of

subject matter jurisdiction. Accordingly, I dissent.