Monday, March 07, 2005

Sweat the Big Stuff AND the Small Stuff

In Mission West Properties, L.P. v. Republic Properties Corp., the Court of Special Appeals spent a good deal of effort to establish a relatively simple proposition, namely that personal jurisdiction cannot be obtained over a limited partnership simply because personal jurisdiction can be exercised over a general partner.

In essence, a dispute broke out among a variety of parties. The dispute concerned various business ventures in California. So far as I can determine, the only connection to Maryland was that the general partner of Mission West Properties, L.P. was a REIT that was organized under Maryland law. (Actually, re-organized under Maryland law. The REIT had initially been organized under California law and had its principal place of business in that state. It subsequently reorganized under Maryland law, presumably due to this state's favorable and advanced REIT statute.)

Ultimately, the Court of Special Appeals ruled that (i) a limited partnership is a juridical entity separate and apart from its partners and (ii) due process requirements must be met with respect to the entity in order to allow the exercise of personal jurisdiction over the entity.

The most interesting aspect of the case, however, is the procedural path that it took to get the jurisdictional issue before the appellate court. It illustrates the inefficiencies of the procedural rule against piecemeal appeals, a rule that is designed to promote efficiency.

The challenge to the exercise of personal jurisdiction had been made early in the litigation process and the lower court had rebuffed the attack. Ultimately, there was a week long bench trial and numerous substantive questions at issue in the appeal. This course presumably cost the litigants a good deal of time and money, all for naught.

Indeed, the Court of Special Appeals was somewhat embarrassed by the awkwardness of this process. It noted that the statute of limitations had not been blown because a lawsuit had been filed in California and it had been stayed, essentially suspending the running of the statute. Had that not been the case, one presumes that limitations would have expired and the aggrieved party would be without a remedy.

The Mission West Properties case illustrates once again that a well drafted contract will outline the remedies available in the event that the contract breaks down, including a provision concerning the courts that have jurisdiction over any dispute and the agreement of the parties to submit to the exercise of personal jurisdiction by those courts.

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