Cincinnati SMSA L.P. v. Cincinnati Bell Cellular Systems Co.

Cincinnati SMSA L.P. (the limited partnership) (plaintiff) was a limited partnership that provided cellular service to Cincinnati, Columbus, and Dayton, Ohio. The limited partnership consisted of regional telephone companies, including Cincinnati Bell Cellular Systems Co. (Cincinnati Bell) (defendant). The limited partnership agreement (the agreement) contained a noncompete clause that forbade any limited partner from providing cellular service within the Cincinnati area separately from the limited partnership while a member of the partnership and five years after leaving the partnership. The agreement defined cellular service as those services regulated by the Federal Communications Commission (FCC) under Part 22 of its rules. The agreement also allowed the partners to pursue independent business outside the terms of the noncompete clause. In the 1990s, the FCC started licensing radio stations for a new type of mobile telephone service called personal communication services, regulated under Part 24 of the FCC’s rules. In 1997 Cincinnati Bell obtained a license to provide personal communication services in the Cincinnati area. The limited partnership challenged Cincinnati Bell’s freedom to provide personal communication services. The limited partnership argued that under the covenant of good faith and fair dealing, an additional noncompete provision should be implied into the agreement that would forbid limited partners such as Cincinnati Bell from providing personal communication services independently of the limited partnership. The limited partnership argued that cellular services and personal communication services were indistinguishable by customers and, further, that personal communication services were not covered by the agreement only because they did not exist at the time the agreement was made. The Delaware Court of Chancery held that such a provision should not be implied into the agreement. The limited partnership appealed.