Partnership judicially dissolved due to frustration of economic purpose from disagreement among partners.
In 1978, Charles Russell created a partnership called Russell Realty Associates to invest in certain assets, including commercial real property. By 1985, Charles had withdrawn from the partnership and the remaining partners were Charles’ children, Eddie and Nina, as well as trusts for the benefit of Nina’s children, Rob and Isham. The partnership agreement provided that the partnership was to be managed by all of the partners, but in the event of any disagreement between them Eddie’s decisions would control.
Eddie conducted the partnership business and relations between Nina and Eddie became increasingly strained. As Eddie attempted to manage the partnership’s business, conflicts between Eddie and Nina escalated. Nina increased her involvement in the partnership’s management and frequently questioned or objected to Eddie’s business management proposals or decisions. In 2008, Eddie filed suit in the Chesapeake Circuit Court seeking judicial dissolution of the partnership under Virginia Code § 50-73.117(5). Pursuant to that section, a court may dissolve a partnership if the “economic purpose of the partnership is likely to be unreasonably frustrated.” The circuit court ruled that the deteriorated relationship between the partners was sufficient to frustrate the economic purpose of the partnership. Nina appealed.
On appeal, the Supreme Court of Virginia affirmed the circuit court on the grounds that: (1) the economic purpose of the partnership was to invest in certain properties and undertake these activities in an efficient and productive manner; (2) because of the distrust and disagreement between Nina and Eddie, the partnership failed to take advantage of several lucrative economic opportunities; (3) the conflicts also added substantial costs to business operations; and (4) therefore, the economic purpose of the partnership was likely to be unreasonably frustrated and the partnership should be dissolved.