A Funny Thing Happened to Limited Partnerships When the Revised Uniform Partnership Act Came Along

MILLERMACROFINAL.DOC 5/27/2004 12:56 PM Linkage and Delinkage: A Funny Thing Happened to Limited Partnerships When the Revised Uniform Partnership Act Came Along Elizabeth S. Miller† Copyright © 2004 Elizabeth S. Miller I. Introduction “Linkage” of the law governing general partnerships to the law governing limited partnerships has received a good deal of attention in the last few years.1 The concept of filling the gaps in limited partnership law with the general partnership law, or “linkage,” is embodied in provisions of the Uniform Partnership Act of 1914 (UPA),2 the Uniform Limited Partnership Act of 1916 (ULPA),3 and the Revised Uniform Limited Partnership Act of 1976 (RULPA).4 The promulgation of the revised Uniform Partnership Act in 1994 (RUPA)5 unsettled this long-standing tradition, as the drafters of RUPA made significant changes in the general partnership context and declined to address linkage in the Act. How well linkage of limited partnership law to the UPA has worked historically would be the subject of some debate.6 There is less † Professor of Law, Baylor University School of Law. Professor Miller is the incoming Chair of the Partnerships and Unincorporated Business Organizations Committee of the American Bar Association Section of Business Law. 1. See, e.g., Larry E. Ribstein, Linking Statutory Forms, 58 LAW & CONTEMP. PROBS. 186 (1995) [hereinafter Ribstein 95]; Allan W. Vestal, Comprehensive Uniform Limited Partnership Act? The Time Has Come, 28 U.C. DAVIS L. REV. 1195 (1995); see also Larry E. Ribstein, Limited Partnerships Revisited, 67 U. CIN. L. REV. 953 (1999) [hereinafter Ribstein 99]. Additionally, at the 1995 Spring Meeting of the Business Law Section of the American Bar Association, the Committee on Partnerships and Unincorporated Business Organizations presented a program entitled “A Workshop—Linkage Between RULPA and RUPA: Is There a Problem or Is It a ‘Tempest in a Teapot?’” 1995 A.B.A. SEC. BUS. LAW 1. 2. UNIF. P’SHIP ACT (1914) [hereinafter UPA], 6 Pt. I U.L.A. 275 (2001). 3. UNIF. LTD. P’SHIP ACT (1916) [hereinafter ULPA], 6A U.L.A. 312 (1995). 4. REVISED UNIF. LTD. P’SHIP ACT (1976, amended 1985) [hereinafter RULPA], 6A U.L.A. 125 (2003). 5. [REVISED] UNIF. P’SHIP ACT (1994, amended 1997) [hereinafter RUPA], 6 Pt. I U.L.A. 1 (2001). Though the official name of the general partnership statute approved by NCCUSL in 1994 and amended in 1997 is the “Uniform Partnership Act,” it is commonly referred to as the “Revised Uniform Partnership Act” or the acronym “RUPA” to distinguish it from the original Uniform Partnership Act of 1914. 6. See Ribstein 95, supra note 1 (recognizing certain benefits of linkage but concluding costs of linkage outweigh benefits of linkage as general proposition); Vestal, supra note 1, at 1196 (stating link between general partnership law and limited partnership law historically worked well); see also UNIF. LTD. P’SHIP ACT Prefatory Note (2001) [hereinafter Re-RULPA], 6A U.L.A. 2 (2003) (noting that linkage has not been completely satisfactory because its consequences are not always clear and the UPA does not always furnish an appropriate rule for limited partnerships). MILLERMACROFINAL.DOC 5/27/2004 12:56 PM 892 SUFFOLK UNIVERSITY LAW REVIEW [Vol. XXXVII:891 disagreement between the two most vocal commentators in this area with regard to the results of linking limited partnership law to RUPA. Professor Ribstein states that linking RUPA to the limited partnership statutes will create “possible interpretation problems,”7 and Dean Vestal predicts “chaos.”8 Indeed, RUPA has been the catalyst for the recent thoughtful commentary in this area, and it certainly appears to have exacerbated the problems and uncertainties associated with the linkage of general and limited partnership law. Ultimately, the concerns associated with linkage led to the decision to draft the Uniform Limited Partnership Act of 2001 (Re-RULPA) as a “stand alone” statute, i.e., to “delink” the limited partnership statute from the statutory law governing general partnerships, as called for by commentators.9 In this regard, the story appears to have a happy ending; however, Re-RULPA is not yet effective in any jurisdiction.10 RULPA (with or without the 1985 amendments) is in effect in all states except Louisiana.11 A few states enacted RULPA without repealing ULPA,12 and there are thus some limited partnerships that are still governed by ULPA. Both ULPA and RULPA link to general partnership law. Prior to the promulgation of RUPA, all states except Louisiana had adopted the UPA.13 Thirty-one states and the District of Columbia have now adopted RUPA14 though the UPA is still in effect in some of those jurisdictions for transition purposes.15 Thus, the issue of linkage is still very much with us. In Part II, this article reviews the manner in which limited partnership law has historically been linked to the UPA and discusses how the change in approach under RUPA has been addressed in state statutes and cases. In Part III, this article discusses case law addressing linkage issues in the context of the 7. Ribstein 99, supra note 1, at 960. 8. Vestal, supra note 1, at 1195-96. 9. See, e.g., Ribstein 99, supra note 1; Ribstein 95, supra note 1; Vestal, supra note 1. 10. See Uniform Limited Partnership Act (2001) Fact Sheet, at http://www.nccusl.org/nccusl/uniformact_ factsheets/uniformacts-fs-ulpa.asp (last visited Mar. 12, 2004). Hawaii is the only state in which Re-RULPA has been adopted, and the statute does not become effective until July 1, 2004. See 2003 Haw. Sess. Laws 210 (S.B. 1319). Kentucky, Illinois, Iowa, and Minnesota are the only other jurisdictions in which Re-RULPA has been introduced. Uniform Limited Partnership Act (2001) Fact Sheet, supra. 11. See RULPA Table of Jurisdictions Wherein Act Has Been Adopted, 6A U.L.A. 125-26 (2003). The last two jurisdictions to replace ULPA with RULPA were the Virgin Islands in 1998 and Vermont in 1999. See id. 12. See id. (listing Colorado, Georgia, Minnesota, New York, and Oklahoma). 13. RUPA Prefatory Note, 6 Pt. I U.L.A. 5 (2001). 14. See Uniform Partnership Act (1994 & 1997) Fact Sheet, at http://www.nccusl.org/nccusl/uniformact_ factsheets/uniformacts-fs-upa9497.asp (last visited Mar. 12, 2004). 15. See RUPA Table of Jurisdictions Wherein Act Has Been Adopted, 6 Pt. I U.L.A. 1 (Supp. 2003); RUPA § 1206, 6 Pt. I U.L.A. 266 (2001). RUPA provides that, on or after a future date established by the adopting state, RUPA governs all partnerships. RUPA § 1206, 6 Pt. I U.L.A. 266 (2001). Before that future date, however, RUPA governs only a partnership formed either: (1) after the effective date of the act, except a partnership that is continuing the business of a dissolved partnership under the UPA; or (2) before the effective date of RUPA, that elects to be governed by RUPA. Id. This section provides for a transition period similar to that in the Texas Revised Partnership Act, which was actually enacted prior to the completion of RUPA. Id. at Comment (citing TEX. REV. CIV. STAT. ANN. art. 6132b-10.03 (Vernon Supp. 1994)). MILLERMACROFINAL.DOC 5/27/2004 12:56 PM 2004] LINKAGE AND DELINKAGE 893 traditional linkage to the UPA. In Part IV, this article identifies selected linkage problems created or exacerbated by the advent of RUPA. In Part V, this article summarizes the decision making process that led the Re-RULPA drafting committee to draft a delinked Re-RULPA and explains how the appendix to this article summarizes the gap-filling and expansion accomplished by Re-RULPA. II. STATUTORY PROVISIONS LINKING LIMITED PARTNERSHIP AND GENERAL PARTNERSHIP LAW A. Linkage of the UPA to ULPA and RULPA The UPA generally excludes limited partnerships from the scope of its definition of a partnership by carving out any association formed under any other statute; however, it goes on to provide that the UPA applies to limited partnerships “except in so far as the statutes relating to such partnerships are inconsistent with” the UPA.16 Thus, the UPA exports its provisions into ULPA or RULPA, as the case may be, unless stopped by an “inconsistency” in the limited partnership statute.17 The UPA remains in effect in approximately twenty-one states.18 ULPA and RULPA each contain provisions that incorporate by reference general partnership law.19 Though ULPA is not the primary limited partnership statute in any United States jurisdiction,20 its linkage provisions are noted here for purposes of completeness and historical background. ULPA and RULPA suggest or explicitly direct the application of general partnership law to limited partnerships in several ways. First, both ULPA and RULPA suggest the application of basic partnership principles by defining a limited partnership as a type of “partnership.”21 By way of contrast, the stand- alone Re-RULPA defines a limited partnership as a type of “entity.”22 The second way in which ULPA and RULPA import general partnership law is by explicitly providing for the application of such law to the rights, powers, 16. UPA § 6(2), 6 Pt. I U.L.A. 393 (2001). 17. Id. This provision has been referred to as the “downstream link.” See ROBERT W. HILLMAN ET AL., THE REVISED UNIFORM PARTNERSHIP ACT 18-19 (2003); Vestal, supra note 1, at 1199. 18. See UPA Table of Jurisdictions Wherein Act Has Been Adopted, 6 Pt. I U.L.A. 30 (Supp. 2003). The table lists twenty-two states in which the UPA is in effect. The notes to the table reflect that three of the twenty-two states have adopted RUPA and have repealed the UPA effective after a transition period.

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