J & J Celcom v. AT&T Wireless Services, Inc.

J & J Celcom and other former partners (the minority partners) (plaintiffs) owned less than 5 percent in each of nine regional, cellular-telephone partnerships. AT&T Wireless Services, Inc. (AT&T) (defendant) owned the rest of the partnership interests. AT&T sent a letter to the minority partners offering to buy them out at a price that was slightly higher than a third-party appraisal of four of the nine partnerships. The offer letter also stated that if any minority partner declined the offer, AT&T would use its controlling interest in the partnerships to sell the assets to an affiliated entity at the appraised value. The partnerships would then be dissolved, and the minority partners would receive their pro-rata share of the purchase price. The partnership agreements expressly permitted the sale and/or dissolution of the partnerships by majority vote but did not specify whether assets could be sold to an affiliated entity. Some of the minority partners rejected the offer, and AT&T proceeded with the asset sales. The minority partners did not incur damages as a result of the transactions. The minority partners filed suit in federal court, alleging that AT&T breached its duty of loyalty to them by causing their interests to be sold to an affiliated entity at a price set by a third party. On appeal to the United States Court of Appeals for the Ninth Circuit, the court held that the price of the transactions was fair as a matter of law and certified a question of state law to the Washington Supreme Court to determine whether AT&T violated its duty of loyalty by selling the assets to an affiliated entity.