Opinion ID: 3029447
Heading Depth: 3
Heading Rank: 1

Heading: New Jersey Revised Uniform Partnership Act

Text: In 2000, New Jersey adopted the Revised Uniform Partnership Act (RUPA), N.J.S.A. 42:1A-1 et seq., and both parties agree that RUPA applies to the 1959 LJM partnership agreement. Generally speaking, RUPA is a gap-filler statute meant to apply where partnership agreements are silent. For example, § 4a states: “Except as otherwise provided in subsection b. of this section, relations among the partners and between the partners and the partnership are governed by the partnership agreement. To the extent the partnership agreement does not otherwise provide, this act governs relations among the partners and between the partners and the partnership.” N.J.S.A. 42:1A-4a. The exceptions in subsection b. do not apply in the instant case. Although it is clear that RUPA sets forth default rules that are not intended to supercede the express terms of a partnership agreement (exception in certain instances not 5 relevant here), Appellants make the purely legal argument that Section 34’s “fair value provision” does just that – requires that a buyout be at a “fair” value – thus rendering invalid the $100,000 buyout provision in the LJM partnership agreement. Section 34 of RUPA states: a. If a partner is dissociated from a partnership . . . , except as otherwise provided in the partnership agreement, the partnership shall cause the dissociated partner's interest in the partnership to be purchased for a buyout price as determined pursuant to subsection b. of this section. b. As used in subsection a. of this section, buyout price means the fair value as of the date of withdrawal based upon the right to share in distributions from the partnership unless the partnership agreement provides for another fair value formula . N.J.S.A. 42:1A-34. Appellants argue that the phrase “another fair value formula” in § 34b demonstrates that RUPA requires all buyout provisions, including express ones in a partnership agreement, to be based on some sort of fair value formula (which Appellants argue a fixed sum is not), whether it be the formula set forth in § 34b (i.e. “fair value as of the date of withdrawal based upon the right to share in distributions from the partnership”) or another fair value formula set forth in the partnership agreement. Appellants argue that interpreting § 34b to apply only when the partnership agreement is silent regarding buyout price renders § 34b’s phrase “another fair value formula” meaningless. We reject this argument for two reasons. First, Appellants ignore the clear disclaimer in § 34a – “except as otherwise provided in the partnership agreement” – which reinforces the gap-filler nature of RUPA as set forth in § 4a. Second, Appellants ignore the fact that buyout provisions may be triggered for many different reasons, including a partner’s death, retirement, or disassociation for some other reason. For example, a partnership agreement 6 may be silent regarding the buyout price for a partner who has died, but the agreement may nevertheless set forth a fair value formula for determining the buyout price for a partner who voluntary disassociated for some other reason, such as retirement. Under such an agreement, if a partner died, § 34b would apply, but that section might permit application of the fair value formula for the buyout of a retiring partner in order to determine the dead partner’s buyout price. Such an example illustrates how § 34a and b of RUPA can be read together, in accordance with the plain language of the statute, without rendering any of the statutory language meaningless. We therefore agree with the District Court that RUPA does not render the $100,000 buyout provision of the LJM partnership agreement invalid.