Kentucky Court of Appeals Considers the Effect of “Gift Letter”

Kentucky Court of Appeals Considers the Effect of “Gift Letter”

      In a recent decision from the Kentucky Court of Appeals, it rejected reliance upon a “gift letter” issued in connection with residential financing. In this instance, it was characterized “a financial maneuver and not a true gift.” Kelien v. Kelien, No. 2019-CA-000045-MR, 2019 WL 5681417 (Ky. App. Nov. 1, 2019). 

      Lance and Angela married in October, 2013; by April 2018 they were separated. Prior to the marriage, Angela owned a house in her own name. She sold that house, receiving net proceeds of $47,067.40. The same day she sold that house, Angela and Lance bought a new house. Essentially the entirety of the down payment was the amount Angela had received from the sale of her prior home. However, Angela, due to being disabled and not having regular income, was not a party to the financing note and mortgage. Rather, Lance was the only borrower (still, both of their names would appear on the deed). In order that Lance would have the funds to make the down payment, Angela executed a “gift letter” evidencing her gift of the proceeds of her house to Lance. When the marriage ultimately dissolved, the Family Court ordered the sale of the marital residence, with Angela to receive first from the proceeds the $47,067.40, traced back to the sale of her own house, as non-marital property. As characterized by the Court of Appeals: 

The [family] court determined that the “gift” from [Angela] to [Lance] was a financial maneuver and not a true gift, and that the gift letter “was done solely because the bank required it to be done for [Lance] to qualify for the bank loan to the parties could purchase the marital residence.”

      From that determination, Lance brought this appeal. 

     Lance's argument would boil down to the position that the gift letter was a contract, and that the parol evidence rule precluded looking outside of its express terms. On that basis, he argued those funds were his non-marital property. The Court of Appeal set aside this argument, finding that because the gift letter does not constitute a contract, the parol evidence rule was not implicated. Freed of the limits of the parol evidence rule and able to look at extrinsic evidence, the court found that the: 

Funds used for the down payment on the [marital] house was [Angela's] nonmarital property, which can be traced to the equity she received from [her nonmarital] house. In fact, those funds could not be more easily traced, as the check received from the sale of the non-marital home was endorsed as the deposit on the marital home. The Greenup Family Court properly characterize these funds as [Angela's] non-marital property, and we find no error.

Delaware Limited Partnership Judicially Dissolved Where General Partner Was Unwilling to Pursue its Business

Delaware Limited Partnership Judicially Dissolved Where General Partner Was Unwilling to Pursue its Business

      In a decision rendered in August, the Delaware Chancery Court ordered the judicial dissolution of a limited partnership. GMF ELCM Fund L.P. v. ELCM HCRE GP LLC, No. CV 2018-0840-SG, 2019 WL 3713844 (Del. Ch. Aug. 7, 2019).

      White, the initial general partner, organized a variety of entities to operate nursing homes. He was, however, apparently not very good at doing so. The court found that he engaged in “unsatisfactory practices” including failure to send bills and failure to cash checks received. Eventually, the nursing homes in which the investments were made were unable to pay their staffs or buy food for the patients. In prior rulings in this dispute, a receiver was appointed to operate the companies. The plaintiffs then brought this action for judicial dissolution of the limited partnerships on the basis that it could not fulfill its purpose. 

      The Delaware Limited Partnership Act, at section 17-802, provides for dissolution of a limited partnership “whenever it is not reasonably practicable to carry on the purpose of the business in conformity with the partnership agreement.”

      The court found that the standard was here met. Initially, the limited partnership had not been successful under White’s control. Once the receiver (over time, there were actually two), was appointed, White refused to cooperate with them in operating the business. 

      While the court noted that dissolution is an extraordinary remedy that is not to be lately invoked, on these facts it was held that judicial dissolution of the limited leadership was appropriate. 

      After this ruling, there were additional efforts to compel White to appear for related depositions. The latter decision with respect to compelling White’s appearance at depositions is set forth at 2019 WL 4096855.

The University of Kentucky College of Law Has Been Renamed the University of Kentucky J. David Rosenberg College of Law

The University of Kentucky College of Law Has Been Renamed the University of Kentucky J. David Rosenberg College of Law

            The University of Kentucky College of Law, in light of a $20 million gift, has been renamed that University of Kentucky J. David Rosenberg College of Law.  HERE IS A LINK to the announcement.

Kentucky’s New Business Courts Featured on the Business Courts Blog

Kentucky’s New Business Courts Featured on the Business Courts Blog

      Lee Applebaum, who maintains the Business Courts Blog, has today posted about Kentucky’s new Business Court Docket here in Jefferson County.  HERE IS A LINK to his posting

The Direct Versus Derivative Distinction in Limited Partnerships

The Direct Versus Derivative Distinction in Limited Partnerships

      In a recent decision from Alabama, the Court considered and applied the direct versus derivative distinction in the context of a limited partnership. In this instance, as the injury suffered by the plaintiff limited partner was separate and distinct from any injury to the limited partnership itself, the court found that the suit was direct, not derivative, and on that basis allowed it to proceed. Mid-South Tax Credit Partners 1 v. Junkin, Case No.: 6:19-CV-496-RDP, 2019 WL 4277365 (N.D. Ala. Sept. 10, 2019). 

      Plaintiff Mid-South and others were limited partners in Fayette Properties, Ltd., a limited partnership organized in Alabama. The defendant Junkin was a general partner, along with Oswalt, in Fayette Properties. Junkin and Oswalt caused Fayette Properties to receive, in settlement of certain disputes, $184,912.20. As alleged by the plaintiffs, Junkin and Oswalt then misappropriated the limited partners’ share of those settlement funds. When the plaintiffs learned of this alleged diversion, demand was made upon Junkin and Oswalt, who in the meantime had withdrawn and disassociated from the partnership, for the return of the funds. The plaintiffs settled their dispute with Oswalt, and initiated this action against Junkin for the balance due and owing. 

      In response, and apparently inartfully, Junkin sought dismissal of the complaint on the basis that it needed to be brought as a derivative action, and that, necessarily, a derivative action would involve the limited partnership as a party, thereby destroying diversity jurisdiction. Hence, whether the court could consider the merits of the case would depend upon whether the plaintiff's claim was characterized as direct or derivative.

      Applying the distinction between direct and derivative distinctions as set forth by the Delaware Supreme Court in Tooley v. Donaldson, Lufkin & Jenrett, Inc., 845 A.2d 1031 (Del. 2004), and applying as well the pre-Tooley decision rendered in Anglo A.M. SCC. Funds, L.P. v. S.R. Globe Int’l Fund, L.P., 829 A.2d 1043, 1049 (Del. Ch. 2003), the court looked to who had been injured and considered as well the question of preventing a windfall to those not injured by the alleged wrongful conduct. In this instance, because in part of the particular wording of the relevant operating agreements, it was found that the alleged diversion of the settlement funds injured only the plaintiffs in their capacity as limited partners, but not the partnership as a whole.

      As the claims were direct, the limited partnership need not be joined as a necessary party to the action, so diversity jurisdiction was retained.

The Demise of The Apostrophe Protection Society

The Demise of The Apostrophe Protection Society

      The Apostrophe Protection Society was founded in 2001 to, as reported by the BBC, “defend the ‘much abused punctuation mark’, waging war against advertisements for ‘ladies’ fashions’ or the much maligned grocer’s’, used to sell apple’s and pear’s.” 

      Sadly, as reported on the BBC article Do apostrophes still matter?, The Apostrophe Production Society is no more. HERE IS A LINK to that article.

More on Service of Process by E-mail

More on Service of Process by E-mail

      In a recent decision from California, service of process by email was authorized against a company selling allegedly infringing baseball cards through eBay. Panini America, Inc. v. KollectorsVault, LLC, Case No. 19-CV-03800-LB, 2019 WL 6311414 (N.D. Ca. Nov. 25, 2019). 

      The plaintiff, Panini, makes a variety of sports memorabilia including trading cards. It alleged that defendants Stephen Teani and KollectorsVault, LLC were selling infringing products through eBay. When they failed to cease those activities after demand, Panini filed this lawsuit under a variety of theories including federal trademark infringement.

      Apparently there were no problems filings the complaint and summons upon Mr. Teani individually. He alleged, however, that he had no association with KollectorsVault and that he was the victim of identity theft. The plaintiffs then engaged in a variety of efforts to ascertain the facts, including a subpoena on the police department with respect to Teani’s alleged identity theft, upon eBay for information with respect to KollectorsVault’s; registration, and upon the USPS seeking information with respect to KollectorsVault’s P.O. Box. After these efforts, Panini sought permission from the court to serve the complaint upon KollectorsVault at its Yahoo address.

      The court, finding that Panini had undertaken significant efforts to locate information with respect to KollectorsVault, ordered that service of the summons and complaint could be affected through KollectorsVault’s Yahoo email address that it maintained on its eBay profile.