Sonwalkar v. St. Luke's Sugar Land P'ship
| Decision Date | 26 November 2012 |
| Docket Number | No. 01–11–00473–CV.,01–11–00473–CV. |
| Citation | 394 S.W.3d 186 |
| Parties | Subodh SONWALKAR, M.D. and Wolley Oladut, M.D., Appellants v. ST. LUKE'S SUGAR LAND PARTNERSHIP, L.L.P. and St. Luke's Community Development Corporation —Sugar Land, Appellees. |
| Court | Texas Court of Appeals |
OPINION TEXT STARTS HERE
Matthew J. Kita, Attorney at Law, Dallas, TX, for Appellants.
Kenneth E. Broughton, Haynes & Boone, LLP, Patrick W. Mizell, Vinson & Elkins, LLP, Keith M. Remels, Dow, Golub, Remels & Beverly, LLP, Houston, TX, for Appellees.
Panel consists of Justices BLAND, MASSENGALE, and BROWN.
Appellants Subodh Sonwalkar, M.D. and Wolley Oladut, M.D. held partnership units in appellee St. Luke's Sugar Land Partnership, L.L.P (“the Partnership”). They applied for a temporary injunction to enjoin the Partnership and its managing partner, appellee St. Luke's Community Development Corporation—Sugar Land (the “Managing Partner”) from terminating their partnership interests and taking other actions. The trial court denied the application. Sonwalkar and Oladut filed notice of an accelerated appeal. SeeTex. Civ. Prac. & Rem. Code Ann.. § 51.014(a)(4) (West 2008). We reverse the order denying the application and remand the case to the trial court for further proceedings consistent with our opinion.
The Partnership is a Texas limited liability partnership, which owns and operates St. Luke's Sugar Land Hospital in Sugar Land, Texas. Under the original partnership agreement, the ownership of the Partnership was divided into two classes of partnership units: Class A units, which were reserved for physicians, and Class B units, which were reserved for the Partnership's managing partner. At the Partnership's formation, Class A units were owned by three physicians, and Class B units were owned by SLEHS Holdings, Inc., a Texas corporation. Under the original partnership agreement, Class A units always represented 49% of the “Percentage Interest” of the Partnership and Class B units always represented 51% of the “Percentage Interest,” regardless of the number of outstanding Class A units and Class B units. The original partnership agreement defined a partner's “Percentage Interest” as “the percentage of the total Partnership Interest in the Partnership held by a Partner, which percentage shall be calculated by dividing the number of Units held by the Partner by the total number [of] Units issued and outstanding among all Partners at the time, all irrespective of class.”
The day after its formation, the Partnership offered Class A units to physicians at the hospital in exchange for $40,000 each. As part of that initial offering, Sonwalkar and Oladut purchased two units each. Shatish Patel and Hemalatha Vijayan, who are co-plaintiffs in the trial court but no longer parties to this appeal, purchased four units each. Other physicians purchased Class A units as part of that first offering as well.
The Partnership made a second offering of Class A units in July 2007. In connection with that second offering, the Partnership adopted the Amended Partnership Agreement. Under the Amended Partnership Agreement, SLEHS Holdings assigned all of its Class B units to the Managing Partner. Paragraph 4.01, concerning the classification of partnership units and the manner for calculating Percentage Interest, was substantially altered, including the elimination of the provision that Class A Units always represented 49% of the Percentage Interest and Class B Units always represented 51% of the Percentage Interest. Instead, any partner's Percentage Interest was calculated by “dividing the number of Units held by the Partner by the total number [of] Units issued and outstanding among all Partners at the time, all irrespective of class.” The affirmative vote of partners holding at least 75% of the Partnership Interest was required to approve several types of major actions. For instance, Paragraph 8.03 provided that “neither the individual Partners nor the Governing Board nor the Managing Partner shall have any authority to ... cause the Partnership to ... amend or otherwise change this Agreement” without “the consent of Partners holding at least seventy-five percent (75%) of the Partnership Interest.” Similarly, Article 11 provided that the partnership agreement could be amended “only by a written instrument executed by Partners holding at least seventy-five (75%) of the Partnership Interest.”
An exhibit attached to the Amended Partnership Agreement displayed a table showing the following ownership of partnership units at the time of the agreement's adoption:
The Amended Partnership Agreement gave the Managing Partner the right to purchase Class B units, including fractional units, when new Class A units were issued, in order “to permit the Unit ownership to remain proportionate among the two classes of Partners.” Thus, when the Partnership issued 54 additional Class A units in connection with the second offering, the Managing Partner acquired 56.20408 Class B units, such that the final ratio of Class B units to Class A units was 204 to 196, thus maintaining the percentage ratio of 51% to 49%.
The Amended Partnership Agreement, like the original partnership agreement, also established a Governing Board to manage several aspects of the Partnership. Paragraph 8.01 provided that the number of Governing Board members was fixed at 15, with 8 reserved for members appointed by the Managing Partner. The remaining members of the Governing Board, called “Physician Representatives,” were appointed by partners holding Class A units. The amended agreement also provided that “all decisions of the Governing Board shall be decided by the affirmative vote of Board Members controlling greater than fifty percent (50%) of the voting interest of all Board Members (the ‘Voting Interest’).” Paragraph 8.09 provided that “Physician Representatives, whether one or more, shall collectively control forty-nine percent (49%) of the Voting Interest.” The agreement also specified that several types of major actions of the Partnership, including a capital call, required the affirmative vote of Governing Board members representing 75% of the Voting Interest.
In April 2011, Patel sued the Partnership, alleging that when he purchased his Class A units he was promised healthy returns, but instead the Partnership was operating at a net loss. He further alleged that after an unsuccessful attempt to obtain financial information from the Partnership, he was forced to resign his hospital privileges and also to resign as a member of the Governing Board. He asserted various causes of action including breach of fiduciary duty, fraud, misrepresentation, and theft. Vijayan subsequently joined the suit as Patel's co-plaintiff, and the Managing Partner was joined as the Partnership's co-defendant.
A few weeks after the litigation commenced, the Partnership sent a “Rescission Offer” letter to each owner of Class A units. According to the letter, the Partnership was concerned that other Class A unit holders might assert claims because the disclosures made in connection with offering those units might have been inadequate. Therefore, the letter explained, the Governing Board decided to send the “Rescission Offer” in order to mitigate that risk of litigation. The letter provided each recipient 30 days to elect to rescind his or her purchase of Class A units in exchange for a repayment of the purchase price plus six percent interest from the date of purchase. Upon accepting the “Rescission Offer,” a Class A unit holder also agreed to release the Partnership, Managing Partner, and others associated with the Partnership from any and all claims and causes of action. Although almost all of the Class A owners signed and returned acceptances of the Rescission Offer, Patel, Vijayan, Sonwalkar, and Oladut did not.
On the same date of the “Rescission Offer” letter, Patel and Vijayan applied for a temporary injunction (“First Temporary Injunction Application”). Patel and Vijayan requested that the Partnership and the Managing Partner be enjoined from the following actions:
A. Taking any further action on the “Rescission Offer”;
B. Making any offer to rescind a purchase of Class A units;
C. Making any offer to purchase, redeem, or otherwise acquire Class A units;
D. Taking any action to alter the make-up of the Governing Board; and
E. Taking any action to alter the then current ratio of Class A partners to Class B partners.
The trial court granted Patel and Vijayan's requested relief of a temporary injunction, and it additionally restricted the Partnership and the Managing Partner from:
F. Taking any action that would alter the organization and corporate make-up of the Partnership;
G. Taking any action to initiate a capital call, without further court order; and
H. Taking any action to alter in any manner the Amended Partnership Agreement.
Shortly after the trial court granted this injunctive relief, the Partnership and the Managing Partner filed a motion to modify or vacate the temporary injunction. At a hearing on the motion, the Partnership and the Managing Partner offered, in lieu of the temporary injunction, to place $450,000 into the court's registry out of which any eventual judgment in favor of Patel and Vijayan could be satisfied. Following the hearing, the trial court...
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