Perretta

This action for breach of fiduciary duty requires us to decide what vote of the limited partners of a California limited partnership is necessary to ratify a self-interested transaction proposed by the partnership’s general partner. We hold that only the partnership agreement may vary the unanimous ratification requirement of California law, and that it would be “manifestly unreasonable” for a partnership agreement to include votes cast by an interested general partner or its affiliates in a ratification vote. We reverse the decision of the district court.

FACTUAL AND PROCEDURAL BACKGROUND

Prometheus Income Partners, LP (Partnership) was a California limited partnership, organized to manage two large apartment complexes in Santa Clara, California. Its general partner was Defendant-Appellee Prometheus Development Co., Inc. (PDC), a California corporation. PDC is 100%-owned by the DNS Trust, a trust effectively controlled by Defendant Appellee Sanford N. Diller (Diller), who is also PDC’s sole director, President, and CFO. Plaintiffs-Appellants Louis and Frank Perretta (Plaintiffs) were limited partners in the Partnership, and are suing as representatives of the class of…