Opinion ID: 3014885
Heading Depth: 2
Heading Rank: 3

Heading: Mismanagement Claims Against Acorn

Text: The Barracks next seek permission to sue Acorn and Acorn Partners for mismanagement, alleging that if Acorn had not been mismanaged by Torkelsen, and if Torkelsen had not told them that Acorn was being managed in accordance with federal and state 12 laws, they would not have invested or continued to invest. Appellant Br. at , 23. The District Court concluded that these claims could only be brought in a derivative suit by the SBA as receiver for Acorn, and therefore the receivership stay should not be lifted to allow their assertion by the Barracks individually. District Court Order at . We agree. The Barracks’ claim, despite creative characterization, reduces to an allegation that they would not have invested, or have lost money on capital already invested, if the company had been properly managed or had disclosed the mismanagement. In this, the Barracks suffered the same wrong as all other investors in Acorn–management misled them as to how the company was being run, and its compliance with various laws, and as an indirect result their investments lost value. There was no special wrong done to the Barracks–the wrong was to the partnership, which lost almost all of its capital as a result of the Torkelsens’ alleged looting. This is a classic derivative claim under the Revised Uniform Limited Partnership Act, which New Jersey has adopted. N.J. Stat. Ann. §§ 42:2A-1 to 42:2A-73. The Receivership Order granted all powers possessed by Acorn’s limited partners under state and federal law–including the ability to bring derivative suits on behalf of the partnership–to the SBA as receiver. Receivership Order at . We conclude that since the Barracks suffered no direct wrong as a result of the mismanagement and lack of compliance with securities laws, independent of the wrong to the partnership itself, the Barracks cannot bring this claim individually. Since the claim fails individually as a matter of law, the District Court did not err in refusing to lift the receivership stay to allow its assertion.