Sonet v. Plum Creek Timber Co., L.P.

Jerrold M. Sonet (plaintiff) owned units, which were essentially partnership interests, in a limited partnership called Plum Creek Timber Company, L.P. (Plum Creek) (defendant), making Sonet a limited partner. Plum Creek owned and operated over two million acres of timberland across the United States. Plum Creek had a partnership agreement (the agreement) that explained the obligations of its general partners to its limited partners and the partnership more generally. Under the agreement, general partners had to conduct day-to-day business fairly and reasonably. Other actions, such as the merger or combination of the partnership with or into another entity, required the approval of a supermajority of unitholders, meaning the owners of 66.7 percent of the units had to vote in favor of the action. In 1998 Plum Creek announced its intention to convert from a limited partnership into a real estate investment trust, which would have significant tax advantages. To convert into a real estate investment trust, Plum Creek would have to merge with another entity. If Plum Creek were a real estate investment trust, its management would receive greater control over the company. Sonet opposed the proposed conversion and reallocation of rights to Plum Creek’s management. Sonet argued that Plum Creek breached its fiduciary duty to its limited partners by proposing the merger.