Opinion ID: 1117163
Heading Depth: 1
Heading Rank: 3

Heading: Kansas Revised Uniform Limited Partnership Act (K.S.A. 56-1a01 et seq. )

Text: The Kansas Revised Uniform Limited Partnership Act (KRULPA) is based upon the Revised Uniform Limited Partnership Act of 1976 (RULPA), 6 U.L.A. 220 (2003), and the Delaware Revised Uniform Limited Partnership Act (Del. Code Ann. 6, § 15-101 et seq. [2005]) and applies to all domestic limited partnerships formed after January 1, 1984. See K.S.A. 56-1a603(a); K.S.A. 56-1a01 et seq., Revisor's Note to KRULPA, Article 1a; Temple v. White Lakes Plaza Assoc., Ltd., 15 Kan. App. 2d 771, 777, 816 P.2d 399 (1991). The Uniform Partnership Act and case law developed thereunder have been applied to limited partnerships. 59A Am. Jur. 2d, Partnerships § 1235. Additionally, RULPA itself provides that for cases not covered by its provisions, the Kansas Uniform Partnership Act (KUPA) . . . should be applied. K.S.A. 56-1a604. Temple, 15 Kan. App. 2d at 778. See K.S.A. 56-1a604 (In any case not provided for in the Kansas revised limited partnership act, the provisions of the Kansas uniform partnership act [K.S.A. 56a-101 et seq., and amendments thereto] shall govern.). The plaintiffs argue that the defendants have sought to shift this case from a question of rights that limited partners have upon their involuntary dissociation from a partnership to a question of appraisal rights in the event of the merger. They argue the defendants frame the case as being limited to rights granted by certain Kansas Corporation Code provisions, while giving no recognition to the rights expressly reserved to dissociated partners under applicable partnership law. As such, they claim it is necessary to examine the provisions of KRULPA and KUPA. The plaintiffs continue that although KRULPA contains provisions for the withdrawal of a limited partner, the dissolution and winding up of a limited partnership, and the merger of a domestic limited partnership with or into one or more limited partnerships, it does not provide for the dissociation of a limited partner, the right of a dissociated partner to a determination of the buyout price of the partner's interest, or the merger of a limited partnership with any type of entity other than another limited partnership. As such, they contend the provisions of KUPA apply pursuant to K.S.A. 56-1a604. The defendants contend that one does not reach or use K.S.A. 56a-601 (KUPA) for dissociation resulting from withdrawal because withdrawal of a limited partner is specifically provided for in K.S.A. 56-1a353(b) (KRULPA): A limited partner may withdraw from a limited partnership at the time or upon the happening of events specified in writing in the partnership agreement and in accordance with the partnership agreement. If the agreement does not specify in writing the time or the events upon the happening of which a limited partner may withdraw, the limited partner shall have no right to withdraw. Additionally, K.S.A. 56-1a354 provides: Except as provided in K.S.A. 56-1a351 through 56-1a358, upon withdrawal any withdrawing partner is entitled to receive any distribution to which the partner is entitled under the partnership agreement. If not otherwise provided in the agreement, the withdrawing partner is entitled to receive, within a reasonable time after withdrawal, the fair value of the partner's interest in the limited partnership as of the date of withdrawal, based upon the partner's right to share in distributions from the limited partnership. (Emphasis added.) Our review of these statutes reveals that the defendants' argument is without merit. As the plaintiffs point out in their reply brief, the plaintiffs never sought to withdraw from the limited partnership, such withdrawal was not permitted by the limited partnership agreement or K.S.A. 56-1a353(b), and their claims were not based upon the right to withdraw or the rights available to a limited partner who withdraws from the limited partnership. Rather, the question to be resolved under this issue is whether KRULPA provides any appraisal or buyout rights to involuntarily dissociated limited partners of a limited partnership following a merger with a limited liability company. KRULPA does not provide for the rights of a dissociated limited partner, nor does it provide for the merger of a limited partnership with anything other than another limited partnership: Pursuant to an agreement, a domestic limited partnership may merge or consolidate with or into one or more limited partnerships formed under the laws of this state or any other state, with such limited partnership as the agreement shall provide being the surviving or resulting limited partnership. K.S.A. 56-1a609(a). As the defendants point out, this lone merger statute does not provide for appraisal rights, payments for fair value, payment of interest, appraiser fees, expert fees, or attorney fees. Nevertheless, it is inapplicable to this case involving the merger of a limited partnership with a limited liability company. Further support for the conclusion that KRULPA does not provide for the rights of dissociated limited partners upon a merger is found by examining the 2001 revisions to RULPA. In 2001, the Drafting Committee for the New Uniform Limited Partnership Act dramatically revised RULPA to create a new stand alone act which was de-linked from both UPA and RUPA. The Committee explained that the stand alone act was preferable in part because the consequences of linkage were not always clear and it would eliminate confusion as to which issues were solely subject to RULPA and which required reference to RUPA. See Uniform Limited Partnership Act (2001) (ULPA), 6A U.L.A. 2, Prefatory Note, pp. 3-4 (2003). In comparing RULPA with the new 2001 limited partnership act, the Committee specifically recognized that RULPA did not address limited partner involuntary dissociation, but the new Act provides a lengthy list of causes, taken with some modification from RUPA § 601 (see K.S.A. 56a-601). Contrary to the current version of KRULPA, the 2001 ULPA specifically provides that a limited partner is dissociated due to the limited partnership's participation in a conversion or merger under [Article] 11, if the limited partnership: . . . (B) is the converted or surviving entity but, as a result of the conversion or merger, the person ceases to be a limited partner. ULPA § 601(b)(10)(B), 6A U.L.A. at 72. Further, the 2001 ULPA specifically permits the merger of a limited partnership with one or more other constituent entities, and the plan of merger must be consented to by all the partners of a constituent limited partnership. See ULPA §§ 1106(a) and 1107(a), 6A U.L.A. at 110-11. Interestingly, the Comment to § 1107(a) provides in relevant part: [T]he partnership agreement may state a different quantum of consent or provide a completely different approval mechanism. Varying this subsection's rule means that a partner might be subject to a merger (including a `squeeze out' merger) without consent and with no appraisal remedy. 6 U.L.A. at 111. While limited partners may not always be entitled to appraisal rights under the 2001 ULPA, the current version of KRULPA applicable to this case still remains linked to RUPA and does not express an opinion regarding whether appraisal rights exist upon the involuntary dissociation of limited partners following the merger of a limited partnership with an entity other than another limited partnership. Although KRULPA does provide that a withdrawing partner is entitled to the fair value of the partner's interest in the limited partnership as of the date of withdrawal, the absence of any authority concerning the appraisal rights of an involuntarily dissociated partner after a merger requires us to examine the provisions of KUPA pursuant to K.S.A. 56-1a604.