Disclosure Problems in High-Tech Joint Ventures

1/17/2011 LexisNexis® Academic & Library Soluti…
Copyright © Tulane University 1991.
Tulane Law Review
March, 1991
65 Tul. L. Rev. 705
LENGTH: 26990 words
ARTICLE: "ASK ME NO QUESTIONS AND I'LL TELL YOU NO LIES":

STATUTORY AND COMMON-LAW DISCLOSURE REQUIREMENTS
WITHIN HIGH-TECH JOINT VENTURES.
NAME: ALLAN W. VESTAL *
BIO:
* Assistant Professor, Washington and Lee University School of Law. B.A. 1976, Yale
University; J.D. 1979, Yale University. The assistance of the Frances Lewis Law Center,
Washington and Lee University, is gratefully acknowledged.
LEXISNEXIS SUMMARY:
... American business has discovered the joint venture. ... "Things
affecting the partnership," the disclosure of which would be harmful
to the participant, would parallel the information that the joint
venture would require for its internal use (for example, Delta's plans
to expand or curtail service to various locations, American's
occupancy statistics on the various routes, or a plan to merge Delta
and another airline). ... The partners in a sophisticated joint venture
may by written agreement limit the access of any or all of them to
designated partner or venture information. ...
TEXT:
[*706] American business has discovered the joint venture.
Especially in certain high-tech industries n1 and sectors of the
economy with a strong international potential, n2 the joint venture is
being touted as the answer to problems ranging from the need to
minimize risk in high technology projects, n3 to difficulties in capital
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formation, n4
to excessive government regulation, n5 to a need to
[*707] bring new techniques into aging American industries, n6 to a
lack of competitiveness in international markets. n7 As one writer put
it, some American companies have "gone consortia-crazy." n8
Well-publicized examples of recent high-tech joint ventures include

the government-backed joint venture to protect the American
semiconductor industry (Sematech), n9 the partnership between HEM
and Du Pont to develop the AIDS drug Ampligen, n10 and the
"independent partnership" of Delta Air Lines and American Airlines to
consolidate their proprietary reservation systems. n11 But it is not just
the largest businesses that enter into joint ventures; small- and
medium-sized high-tech businesses also participate. In the computer
industry, for example, small- and medium-sized companies "are
beginning to use strategic partnering agreements as a foundation of
their strategic activities" because of the extraordinarily high cost of
research and development and the difficulty in creating distribution
channels into profitable international markets. n12
In the rapidly developing marketplace, the legal dimension of the

joint venture phenomenon in some instances has been [*708]
subordinated to the business dimension. For instance, the
subordination of legal analysis has resulted in the imprecise use of
terms among the business people and some of the lawyers involved.
The terms "joint venture" and "partnership," for example, are used to
characterize both corporate and noncorporate entities. n13 The
consultants and public relations people have added new terms, such
as "strategic partnership" n14 and "independent partnership," n15
which have no intrinsic legal significance. The more creative
investment banker community, meanwhile, has adopted, and misused,
the Japanese term "zaibatsu." n16
The imprecision in terminology, perhaps not critical standing alone,

reflects the relatively underdeveloped state of some aspects of the
legal analysis relevant to the new wave of high-tech joint ventures.
Both the government and business people involved in joint ventures
have addressed some of the legal problems, most notably the external
antitrust aspects. n17 But beyond the antitrust statutes, the
participants in some cases appear to act as if they are free to
establish the terms and conditions of the joint venture by contract,
unconstrained by either statute or common law. n18
[*709] The first section of this Article illustrates some of the

disclosure [*710] problems commonly encountered in high-tech
joint ventures. The second and third sections of this Article examine
the disclosure provisions of existing statutory law and common law
relevant to the joint venture participants' disclosure obligations
among themselves. Emphasis is placed on disclosure issues of special
concern to high-tech joint ventures. The Article also notes those
statutory and common-law provisions that are not subject to
alteration by agreement of the parties and those which should be of
particular concern to high-tech joint venturers.
The fourth section briefly addresses and rejects a proposed synthesis

of the existing statutory and common-law disclosure requirements.
This synthesis would significantly expand the disclosure obligations of
the participants and would pose a substantial burden on high-tech
joint venturers.
The fifth section of this Article traces the development of the

proposed revision of the Uniform Partnership Act and outlines the
revisions that would affect the high-tech joint venturers' disclosure
obligations among themselves. Drawing on this discussion, the final
section of the Article offers an alternative proposal for modification of
the draft revisions of the Uniform Partnership Act, which, if adopted,
would make the revised Act more responsive to the needs of high-
tech joint ventures.
I. DISCLOSURE PROBLEMS IN HIGH-TECH JOINT VENTURES
The risk of subordinating the legal analysis in a partnership-based

high-tech joint venture is demonstrated by the statutory and
common-law disclosure requirements on the participants among
themselves. Often, the exchange and development of proprietary
information are the raisons d'etre for the high-tech joint venture. A
joint venture may involve a mutual pooling of proprietary information,
as is the case with the semi-conductor research being undertaken by
Sematech. n19 It may [*711] involve the exchange of proprietary
information in return for capital and marketing expertise, as was the
case with the partnership between HEM and Du Pont to develop
Ampligen. n20 High-tech joint ventures are also notable for the
importance of information generated by the venture: Sematech exists
to develop information to be used by American semiconductor chip
manufacturers.
The question of information confidentiality is important because the

centrality of information is one characteristic that differentiates high-
tech joint ventures from traditional partnerships. Indeed, it has been
suggested that change in the flow and control of information is a
central aspect of an evolving business environment that compels the
use of joint ventures. n21 Driven by rising competition and new
information technologies, corporations have to become more flexible
in terms of organization and management of human resources. This in
turn requires a new managerial paradigm in which successful
corporations are those that are both "flatter" (having fewer
organizational levels) and "rounder" (characterized by "the dispersion
and decentralization of organizational power"). n22 Under the new
managerial paradigm, it is argued, organizational rigidity gives way to
intra- and intercorporation flexibility. Within the corporation, ad hoc
interdisciplinary teams are fashioned on a project-specific basis. n23
The external corporate parallel is the partnership or joint venture.
Since information is often the coin of the realm in high-tech joint

ventures, provisions for the control and dissemination of information
within the joint venture are of critical importance. The internal
disclosure challenges facing joint ventures relate to both the type of
information at issue and the timing of the disclosures. Two broad
categories of information are involved: information that is in some
sense proprietary to the joint venture and information that is
proprietary to the individual participants, but not primarily to the
venture. n24
[*712] The venture often has an interest in maintaining the

confidentiality of the venture information as against the participants,
or in limiting the use to which the participants put the information.
n25 The classic example of the genre is Meinhard v. Salmon, which
involved the diversion of a joint venture opportunity in a real estate

26
joint venture. n26
A more modern example is the litigation arising out
of the joint venture between NBC/RCA and Sony/Columbia, in which it
is claimed that Sony/Columbia diverted a joint venture business
opportunity to its own advantage. n27
In high-tech joint ventures the confidentiality of venture information

as against the participants is often at issue, raising questions of when
and under what conditions venture information should be made
available to participants. The question commonly arises when one
participant contributes basic development efforts to the joint venture
and the other contributes capital or marketing resources. Since the
parties are not equally positioned to use the venture information at all
points of the development process, the venturer with later
opportunities for use must be protected.
The confidentiality of venture information as against the participants

also arises in development consortia such as Sematech. The ability of
parties to privatize venture information at an early stage in the
development may undermine support for later development efforts. To
assure all participants that the development cycle will be pursued
even after some participants could gain benefits from privatization of
venture information, it may be necessary to withhold the information
from all participants. n28
[*713] The protection of venture information as against the

participants is also raised when it is feared that the participant will in
turn divulge the information to its joint venturers in other joint
ventures. This secondary disclosure of venture information has been
raised in connection with Sematech. The concern is that high-tech
information developed by the joint venture will be transferred
offshore via joint ventures that include American Sematech
participants and foreign computer companies. n29 The response of a
Sematech representative that "there is no way to stop the spread of
technological advances" and that the best one can hope for is delay,
demonstrates the difficult problem posed by secondary disclosure. n30
Secondary disclosure problems have become more important as major
corporations have become involved in more joint ventures. For
example, General Motors is involved in a joint production venture
with Toyota. n31 General Motors Chairman Roger Smith gave
h
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assurances that a direct technology transfer problem will not arise
from the production venture with Toyota:
There should be no problem in assuring that GM and Toyota do not

exchange too much confidential information in the joint venture.
Neither side wants to let the other know more than is necessary,
Smith said, and the project "is limited to one plant, one product . . .
less than 1 percent of all the vehicles that will be produced in the
world." n32
The stakes can be quite high. Even if one discounts GM's internal
high-tech base, a secondary disclosure problem could arise with
respect to GM's other joint ventures. The American car [*714] maker
"has moved aggressively to weave new technologies into every aspect
of its business . . . [a]nd for the first time in its history, GM has made
investments in several small venture companies in fields ranging from
artificial intelligence to machine vision as a means to keep abreast of
relevant technologies." n33 Participants in those joint ventures could
justifiably have a concern over the dissemination to Toyota of
information from those ventures. These two examples illustrate the
complexity of the technology-transfer issues when joint venture
participants are involved in multiple high-tech joint ventures.
Beyond the disclosure of venture information, substantial problems

arise over the disclosure of participant information. Problems arise
when the participants agree to allow the joint venture to use their
individual proprietary information but restrict the other participants'
access to such information. This is not simply a theoretical concern. A
conflict over joint venturer financial information appears to be part of
the problem in the breakup of the NBC/RCA-Sony/Columbia joint
venture. Press reports indicate that NBC/RCA claims that
Sony/Columbia "officials tried to misappropriate confidential financial
information from joint venture employees." n34 Such a problem of
information disclosure by participants might also have arisen in the
Delta-American joint venture, in which the two airlines wanted to
merge their proprietary reservation systems. The venture would
presumably need information concerning flight capacities,
occupancies, and route modifications: information that is necessary
for the operation of the joint venture, but which the participants
ld th i
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would otherwise wish to keep confidential from each other. The same
requirement to keep certain participant information confidential would
arise if a consortium of computer software companies was developing
a programming protocol to ease data transmission between different
software programs. Each individual participant might want the
consortium to have access to its source code, n35 while still
maintaining confidentiality vis-a-vis the other participants.
Furthermore, the internal disclosure concerns of high-tech [*715]

joint venture participants are not constant through the life of the joint
venture. The formation of the joint venture is a situation with special
disclosure concerns. A party considering a joint venture needs to
convince the other party of the value of entering into the
arrangement, without giving away so much information as to enable
the other party to accomplish its goal without the joint venture. The
disclosure obligation on creation of the joint venture has been the
subject of litigation. In the aftermath of the Ampligen joint venture,
Du Pont sued HEM for rescission and damages. One of the grounds
was HEM's submission of allegedly fraudulent medical testing records
to Du Pont in the prepartnership stage. n36 Similarly, there are
disclosure concerns when one party to a joint venture wants to
withdraw and sell its interest to the other participant without the
benefit of a fixed price put. The desire to withdraw may be based on
nonpublic information in the possession of the withdrawing venturer,
and the other participant may not have access to it. This scenario
would result in an overvaluation of the joint venture interest being
transferred. Or, the nonwithdrawing venturer may have nonpublic
information to which the withdrawing partner does not have access,
which would increase the value of the joint venture interest being
transferred. In such a case, the withdrawing partner's interest will be
undervalued.
There are also potential disclosure problems during the operational

period of the joint venture. As with any partnership, a mechanism is
needed for the dissemination of information required for the venturers
to make any decisions in which they will participate. This can be a
problem in a high-tech joint venture because decisions may require
the consideration of confidential venture or participant information.
Finally, disclosure questions arise in situations in which the joint

t i t
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venture is not proceeding as anticipated. In these cases, the question
is whether the joint venturers should have the ability to require
extraordinary disclosures either from the joint venture or from the
other participants. Here again, the normal partnership rules may need
to be modified because of the centrality of information to the high-
tech joint venture.
Some commentators n37 and lawyers n38 have been sensitive to

[*716] the information control problems inherent in joint ventures.
But the literature is commonly cast in terms of contractual
considerations for the security of information brought to the joint
venture and the ownership of information generated by the joint
venture. n39 The literature does not address the significant statutory
and common-law disclosure obligations that may be present simply
by virtue of being a participant in the joint venture. n40 [*717]
Participants ignore the status-based, internal disclosure requirements
at their peril. In this area, the participants are not completely free to
contract as they will; by their terms, certain statutory and common-
law disclosure requirements cannot be superseded by the agreement
of the parties. n41
II. EXISTING DISCLOSURE PROVISIONS UNDER THE UNIFORM

PARTNERSHIP ACT
The disclosure obligations of partners under the Uniform Partnership

Act (UPA) are divided into two categories: obligations designed to be
routine and obligations that are both extraordinary and remedial in
nature. The latter are extraordinary because they are not intended to
be invoked in the normal operation of the partnership. They are
remedial because they are designed to assure access to information
when the normal patterns of information dissemination and
partnership management have broken down.
The requirements in the first category,the routine disclosures, are not

explicitly set forth in the UPA. It is correctly argued, however, that the
obligation to make routine disclosures is implied in section 18 of the
UPA. n42 Professor Melvin Eisenberg concludes that "[t]he effect of
Section 18(e) 'is to require that, absent contrary agreement, every
partner be provided on an ongoing basis with information concerning
th t hi b
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the partnership business, and be consulted in partnership decisions.'"
n43
[*718] The requirements in the second category, the extraordinary

and remedial disclosures, are explicitly set forth in the UPA. The
primary extraordinary and remedial disclosure requirement in section
20, which provides that "[p]artners shall render on demand true and
full information of all things affecting the partnership to any partner
or the legal representative of any deceased partner or partner under
legal disability." n44 In addition [*719] to the primary extraordinary
and remedial disclosure obligation under UPA section 20, the partners
have explicit obligations to disclose under UPA section 19 ("every
partner shall at all times have access to and may inspect and copy
any of [the partnership books ]"), UPA section 21 ("[e]very partner
must account to the partnership for any benefit, and hold as trustee
for it any profits derived by him without the consent of the other
partners from any transaction connected with the formation, conduct,
or liquidation of the partnership or from any use by him of its
property"), and UPA section 22 ("[a]ny partner shall have the right to
a formal account as to partnership affairs").
The distinction between the routine disclosures and the extraordinary

and remedial disclosures is reinforced by several aspects of their
treatment in the UPA. First, by agreement, the partners are able to
override the management allocation provisions and presumably the
implied routine information dissemination provisions, of section
18(e). The extraordinary and remedial provisions of section 19
through 22 contain no parallel language allowing the parties to agree
to waive their rights to information. n45 Second, the routine
information disclosure under section 18(e) is self-executing. It does
not depend on a demand from the party to whom disclosure is to be
given. In contrast, the extraordinary and remedial disclosure
provisions in sections [*720] 19, 20, and 22 either affirmatively
require a demand n46 or contemplate a request of the party to whom
disclosure is required. n47 The scope of required disclosures also
differs. The routine disclosures under section 18(e) are deemed by
Professor Eisenberg to include "'information concerning the
partnership business'" as to matters upon which the particular partner
is given a voice. n48 The statutory coverage of the extraordinary and
remedial sections is
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remedial sections is broader. Section 19 is framed in terms of any
information in the partnership books. Section 20 is cast in terms of
"true and full information of all things affecting the partnership."
Sections 21 and 22 involve all information required for the
accountings. Additionally, the extraordinary and remedial provisions
of sections 19 through 22 operate for the benefit of all partners,
regardless of the allocation of decisionmaking authority under section
18(e). n49
There are four potential internal disclosure problems under the

existing UPA as applied to high-tech joint ventures. The first arises
under Professor Eisenberg's widely accepted formulation of the
section 18(e) disclosure obligation. Under that analysis, venturers
would have a right to information concerning those aspects of the
partnership business on which they have authority to act. Since a
venturer's right to participate under section 18(e), and therefore its
right to information,is always "subject to any agreement between [the
partners]," the parties can always limit the flow of information by
restricting the participation of the venturers in the various venture
decisions. n50 This is, however, a rather gross means of controlling
the information flow because it requires the parties to know and agree
ahead of time what types of decisions are likely to be taken on behalf
of [*721] the joint venture, what information would be appropriate
to such decisions, and whether the information should be made
available. An improvement in the regime would be first to codify the
right to information identified by Professor Eisenberg under section
18(e) and then specifically allow the parties to agree to restrictions
on such information without limiting the right to participate in
partnership decisionmaking.
The second internal disclosure problem for high-tech joint ventures

under the UPA arises under section 19, which provides that "[t]he
partnership books shall be kept, subject to any agreement between
the partners, at the principal place of business of the partnership, and
every partner shall at all times have access to and may inspect and
copy any of them." n51 Since the obligation to keep books, as
contrasted with the location where the books are to be kept, cannot
be amended by the agreement of the parties, the joint venture cannot
be structured to withhold any proprietary venture information
t i d i it b k f th i di id l ti i t n52
contained in its books from the individual participants. n52
Whether this is a significant problem depends on what information is

includable within the partnership books. It can be argued that this is
not a significant problem, since historically the class of partnership
books has been rather narrowly construed as relating simply to the
financial records of the partnership. n53 But the high-tech joint
venturer should be cautious on this point. The cases dealing with the
section 19 right to inspect have typically been suits for a partnership
accounting in which the partnerships were not sophisticated or
complicated businesses [*722] and the information necessary to do
an accounting is a simple record of receipts and disbursements. n54
The relatively low level of sophistication and complexity of the
documents required in those cases is simply a reflection of the
unsophisticated and simple business operations involved. But, even if
the scope of partnership books is limited to basic financial
documents, a section 19 claim on a high-tech joint venture may not
be so simple. In a complex high-tech joint venture, detailed
information on venture operations could be required to accurately
assess and document losses, business expenditures, and other costs.
If, as one treatise suggests, the test for inclusion in the category
"partnership books" is whether the information is necessary for the
preparation of a tax return, n55 the contents of a high-tech joint
venture's "books" may be both voluminous and sensitive. The
situation would be further complicated if the scope of partnership
books were expanded to include all information required for a
financial audit, a reasonable extension for a high-tech joint venture.
n56
Consider the Ampligen partnership. HEM claimed that Du Pont gained

unauthorized access to joint venture computer records on the
Ampligen research. n57 If the information accessed constituted
"books" of the partnership under UPA section 19, it would appear that
Du Pont had an absolute right to such information. n58 Were the
allegedly purloined joint venture documents [*723] in the Ampligen
case part of the joint venture books? The published reports would
indicate that the information included data on the clinical research on
Ampligen. n59 In what was apparently a single product venture, faked
or misrepresented test results would clearly be relevant to the
establishment of loss reserves and the financial viability of the
establishment of loss reserves and the financial viability of the
enterprise. n60 If the test for inclusion in the books of a partnership is
whether the information is used in the preparation of a financial audit
or tax return, there is clearly an argument that the records at issue in
the Ampligen case were properly classified as partnership books.
Even under a restrictive reading of UPA section 19 -- requiring a

nexus to financial audit or tax preparation -- a wide range of records
of a sophisticated business venture could be included as partnership
books. Is there an argument for adoption of an even more expansive
definition of the term? Perhaps. Since the reported section 19 cases
typically deal with feuding partners trying to get an accounting, it is
understandable that the courts focus on the basic ledger of accounts
of the business -- documents that are required to be kept by a
partnership and are necessary for the accounting. But the focus in
section 19 could as easily be shifted from what is required to be kept
to what is in fact kept. Using such a focus, one could fashion a
default rule that would give partners access to all existing partnership
books and records. Under such a rule, a managing partner could not
be disadvantaged for not keeping books and records beyond those
independently required for tax and financial audit purposes. If such
expanded books and records were kept by the partnership,however,
then every partner would have section 19 access to them.
Such an "access to all existing partnership books and records" rule

could expand the range of disclosure even further into the area of
sensitive and proprietary information within some high-tech joint
ventures. One common situation in which this expanded rule would
be a problem is in the area of participant [*724] information. Such
information could constitute a component of the joint venture's
"books" under the expanded rule, creating a substantial problem for
some high-tech joint ventures. n61
The high-tech joint venturer might gain some comfort in the fact that,
at least at common law, the right of inspection was seen as limited to
inspection for a proper purpose. n62 Reliance on this point, however,
should be tempered by caution. On its face, section 19 does not
impose a proper-purpose test for partnership access to the
partnership's books; the right to inspect is not qualified. n63 This
differentiates the partnership situation from that of a stockholder

differentiates the partnership situation from that of a stockholder
attempting to inspect the corporation's books. n64 Further, it is
possible that when a joint venturer examines enterprise records for an
improper purpose, the remedy should be an injunction to bar the
improper use, not denial of the right to inspect. n65
Whether a broad or narrow definition of partnership books is adopted

will significantly expand or constrict the range of information at risk,
and some protection may be offered by the purpose test. But
participants in high-tech joint ventures should be aware that potential
problems do exist in this area. An improvement in the present regime
would be to insert a definition of "partnership books" in the UPA and
either specifically allow the parties to agree to restrictions on access
to partnership [*725] books or impose a proper-purpose test for
access to such information. The revision should specifically empower
the court to limit or prevent access to partnership books upon
requisite showing, as an alternative to merely limiting the use of such
information.
The third internal disclosure problem for high-tech joint ventures

under the UPA arises from section 21, which requires participants to
account for profits from any nonconsensual use of partnership
property. n66 In the high-tech field, ideas and information are the
currency of the joint venture, and tracing the use of proprietary
information can be extraordinarily difficult. Of course, this problem
can be eliminated in the joint venture agreement. If the agreement
simply allows any participant unrestricted use of any joint venture
proprietary information, then no UPA section 21 accounting problems
can arise. However, this blanket permissive-use solution will not be
acceptable in many situations. An example is Sematech, which has as
its purpose the development of a new generation of technology.
Development costs could be financed under an agreement of the
constituent members to contribute to the venture based upon some
objective factor, such as gross sales or current market share in the
segment under development, without further payment. Under such an
agreement the members would be free to use the technical
developments at any stage of completion, even to the point of taking
the fruits of the enterprise in an unfinished state and completing the
development internally.
There are potential problems with this approach It would be difficult

There are potential problems with this approach. It would be difficult
to match the formula for support with the projected value received,
making agreement ex ante on the cost allocation difficult. The
participants with greater research and development capabilities could
appropriate the developing technology at an earlier stage, internalize
its use, and not support further consortium-based development. The
precompletion use of the developing technology by the participants
would lead to confidentiality difficulties. Finally, such use would lead
to the licensing of individually completed technology to outsiders,
decreasing the value of the consortium product and complicating the
prospects for development-cost recovery by the consortium. [*726]
For these reasons, it is likely that the participants would want to
prohibit participants from internalizing their use of the developing
technology, and instead would elect to license the completed new
technology to the members. In such a case, the problems of tracing
participant use of the developing technology, and the associated UPA
section 21 accounting problems, would remain. The section 21
problem would be addressed by the inclusion of a "partnership books"
definition and the confirmation of the ability of the participants to
agree to the exclusion of classes of venture information from the
books.
The fourth internal disclosure problem for high-tech joint ventures

under the UPA is the most significant. This statutory disclosure
problem arises under the UPA section 20 requirement that "[p]artners
shall render on demand true and full information of all things
affecting the partnership to any partner or the legal representative of
any deceased partner or partner under legal disability."
The language of section 20, "all things affecting the partnership," is

necessarily plenary, given the extraordinary and remedial nature of
the section and the generally unsophisticated parties assumed to be
involved. But the same broad language mandated by the underlying
goal of the section can be a problem in a typical high-tech joint
venture. Consider the "independent partnership" of Delta Air Lines
and American Airlines to consolidate their proprietary reservation
systems. n67 "Things affecting the partnership," the disclosure of
which would be harmful to the participant, would parallel the
information that the joint venture would require for its internal use
(for example, Delta's plans to expand or curtail service to various
locations American's occupancy statistics on the various routes or a
locations, American s occupancy statistics on the various routes, or a
plan to merge Delta and another airline). Each of these items would
be required for the reservation system to plan its operations and
project system-wide resource allocations efficiently. Yet, the
disclosures would present confidentiality problems for the
participants, who are, after all, competitors.
The only saving grace, and it is not complete, is that the disclosure
requirement of UPA section 20 is not self-executing. For the
disclosure obligation to arise, there must be a predicate demand by
another partner. Thus, in the Delta-American situation, Delta's
obligation to disclose its plans to expand or curtail [*727] service to
some locations would arise only upon a reasonably specific request
for information from American. Especially in situations like the Delta-
American joint venture, in which both parties have parallel
information they wish to keep confidential, a self-limiting dynamic
may prevent the request from ever being made. But this self-limiting
dynamic is not always present. Consider the Ampligen joint venture.
HEM, essentially a one-product pharmaceutical development
laboratory, would have everything to gain and nothing to lose from
asking Du Pont to disclose information known to the large corporation
that might affect the partnership. The scope of such information
would at the very least include data on other AIDS drugs that Du Pont
has under in-house development, that Du Pont is developing jointly
with other partners, or that Du Pont knows other parties are
developing. The reciprocal request could have little, if any, value to
Du Pont. In a situation with this type of asymmetry, the mutuality of
obligation presents little comfort to the party with more information.
The disclosure requirements of UPA section 20 cannot be modified by

the agreement of the parties. This is appropriate in most
circumstances, given the extraordinary and remedial nature of the
section and the generally unsophisticated nature of the parties.
However, the inability of the parties to contract around the disclosure
provisions should cause concern to high-tech joint venture
participants. An improvement in the present regime would be to allow
sophisticated parties in high-tech joint ventures to agree to
restrictions on the scope of information that would be subject to a
section 20 demand or to impose a proper-purpose test for access to
such information.
III. COMMON-LAW DISCLOSURE OBLIGATIONS
The common law governing the disclosure obligations of partners

among themselves is not always clearly set forth in the decisions on
point. Courts have repeatedly indulged in rhetorical hyperbole before
fashioning a factually limited rule of law. For example, one court
stated that a partner's "standard of conduct must equal that of
Caesar's wife." n68 Another stated that a partner must demonstrate
"that he had been completely frank with his partner and had made full
disclosure." n69 The taproot of [*728] hyperbole on this question is
Judge Cardozo's endlessly cited opinion in Meinhard v. Salmon:
Joint adventurers, like copartners, owe to one another, while the

enterprise continues, the duty of the finest loyalty. Many forms of
conduct permissible in a workaday world for those acting at arm's
length, are forbidden to those bound by fiduciary ties. A trustee is
held to something stricter than the morals of the market place. Not
honesty alone, but the punctilio of an honor the most sensitive, is
then the standard of behavior. n70
The general maxims provide no realistic guidance on the practical

outlines of the common-law disclosure requirement. The common-law
disclosure obligation -- even if stated in the sweeping commands of
fiduciary duty -- has been severely limited by distinctions drawn from
the factual settings in the cases. The general pronouncements of the
courts merely set the stage for the more tightly focused holdings,
which set the actual limits of the common-law disclosure obligation.
So viewed, the holdings group into a small number of fairly narrow
patterns that are distinguishable from the UPA disclosure obligations.
Professors Harold Reuschlein and William Gregory do a credible job of
bypassing the rhetoric for the substance of the decisional law in this
area. n71 They parse the obligation into two classes of specific fact
patterns: "prepartnership transactions" and the purchase by one
partner of another's interest. These classifications are consistent with
the holdings in the reported cases, if not the rhetorical flourishes of
the deciding courts. n72
[*729] The first category cited by Reuschlein and Gregory involves
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partners with the partnership in which
questions of self-dealing arise:
One class of cases emphasizing this duty to disclose are those

involving prepartnership transactions, such as those involving a
transfer to the partnership of property previously owned or recently
acquired by one of the parties to the agreement of partnership. In
these cases the interests of a partner in such property or the cost at
which it was obtained by a partner are [*730] material facts which it
is the partner's duty to disclose. n73
This first class of common-law disclosure cases may be too

restrictively defined. The partners' disclosure obligation arising from
sales to the partnership during the formation stage is scarcely
different from that arising from transactions with the partnership
during its term or its dissolution and winding up. n74 The Reuschlein-
Gregory categorization thus should be expanded to include all
transactions between the partnership and a partner that take place
during the formation, term, or dissolution and winding up of the
partnership.
So expanded, this classification of cases would include the situations

in which one partner usurps a partnership opportunity; n75 in which
one partner purchases, without disclosure, an asset required for
partnership business activities; n76 and in which one partner
mischaracterizes partnership income as nonpartnership income. n77
The second category cited by Reuschlein and Gregory involves actions

and transactions of the partners with each other, in which questions
of self-dealing arise: "Both selling and purchasing partner are duty
bound to reveal such facts as touch the value of the property which
are not available to the other partner." n78 This classification of cases
includes those situations in which one partner is purchasing another
partner's interest in the partnership and the purchasing partner has
information relevant to the price, information that the selling partner
does not have. Such information can range from the expected (one
partner conceals a third-party bid for all of the partnership assets) n79
to the positively grotesque (the purchasing partner knows of the
selling partner's fatal and undisclosed disease). n80 In the context
[*731] of a sale of a partnership interest between partners, there is
[ 731] of a sale of a partnership interest between partners, there is
an obligation to disclose relevant facts unknown to the other partner.
This obligation may be especially acute if the party with the
information is the managing partner of the enterprise. The disclosure
requirement is not effective, however, after the terms of the sale are
agreed to, n81 or if the sale is pursuant to an antecedent fixed-price
option. n82 Nor is disclosure required, according to Reuschlein and
Gregory, when there is an independent availability of the information.
n83
An additional restriction on the common-law disclosure obligation

might be found when the partner to whom the disclosure is to be
made is seeking it for purposes that would breach his fiduciary duty
toward his copartners. n84 A final restriction on the disclosure
obligation would presumably arise when the partner is forbidden to
make disclosure by statute, rule, regulation, or an effective court or
administrative order, although not by virtue of a contract with the
other participant.
Thus, a partner is a fiduciary to the other partners under common

law, with an obligation in certain well-defined situations to disclose
specific items of information even absent an affirmative demand by a
partner. n85 The absence of a demand distinguishes the common-law
disclosure requirements from the [*732] extraordinary and remedial
disclosure requirements under sections 19, 20, and 22 of the UPA.
The common-law disclosure requirements are distinguishable from
the routine disclosure requirement implied under UPA section 18(e)
by both the timing and the scope of the disclosures required.
By its terms, the UPA did not displace the common law. n86 It is clear
that some circumstances give rise to a partner's affirmative obligation
to disclose, even absent a demand from a copartner:
The duty of the partner to give information is something more

extensive than the mere duty to supply information upon demand of a
co-partner or legal representative of a deceased partner or partner
under a legal disability. There are circumstances which put him under
a duty to disclose voluntarily. n87
Consistent with this formulation, courts have properly held that, in

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the well-defined situations in which the common law required

disclosure, disclosure would continue to be required following the
adoption of the UPA. n88
The potential problems for high-tech joint venturers from the

common-law disclosure requirements are substantial. They include
both the transfer of proprietary participant information to the joint
venture at its initiation and the transfer of joint venture interests.
Under the common law, there is an obligation to make a full

disclosure in connection with "prepartnership transactions, such as
those involving a transfer to the partnership of property previously
owned or recently acquired by one of the parties to the agreement of
partnership." n89 The partner transferring the property has an
obligation to disclose material facts bearing on [*733] the value of
the property being transferred. In a high-tech joint venture, the most
valuable commodity brought to the bargaining table is often the
proprietary information of the potential participant. Thus, this
common -law obligation is unrealistic and overly burdensome. The
potential participant must strike a delicate balance. It must give the
other potential participants enough information to prove the value of
the proprietary information, without giving so much information that
the receiving party does not need the joint venture to proceed. At the
same time, the disclosing party must fulfill its common-law obligation
to disclose all material facts that would weigh on the valuation of the
proprietary information being transferred. n90 This mating ritual can
go astray, with disastrous results. An example is the litigation in the
Ampligen joint venture, in which Du Pont now asserts that the value
of the pre-joint-venture research was severely misrepresented by
HEM.
The common law could be appropriately modified to require that

high-tech joint venturers make only those disclosures that are
commercially reasonable under the circumstances, as long as the
disclosure made is not substantially misleading overall. Thus, in a
joint venture such as Sematech, a prospective participant would not
be required to disclose such detailed proprietary research information
as to vitiate the value of that party's participation since such
disclosure would not be commercially reasonable, but only if the

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resulting disclosure was not substantially misleading. n91
The common-law internal disclosure obligations in the transfer of

joint venture interests also impact high-tech joint ventures. Under the
common law, in the event of a sale of one joint venturer's interest to
another, "[b]oth selling and purchasing partner are duty bound to
reveal such facts as touch the value of the property which are not
available to the other partner." n92 This disclosure requirement could
have a profound effect on the [*734] termination of a joint venture,
since both the selling and the purchasing joint venturers are required
to make disclosure. Consider the situation if Sematech had been
structured as a partnership -based joint venture, and one of the
participants had independently developed a new process to
manufacture the chips. While under the common law the developing
party would not have an obligation to disclose the development to the
other joint venturers so long as it remained in the joint venture, n93 it
would have a disclosure obligation if it tried to sell its interest. n94
Joint venture participants can take some steps under the present
regime to avoid this problem. One strategy is to remain in the joint
venture even after it ceases to have any future. Thus, the party with
confidential information does not have to disclose the information
that would bear on the value of the interest. This obviously may not
be a realistic option if the joint venture has a continuing right to call
upon the participants for resources, if there is potential liability from
remaining in the joint venture and the liability is not balanced by the
prospect of some gains, or if the flow of information is such that the
knowledgeable participant needs to extricate itself from the venture in
order to pursue the newly presented opportunity. n95 Another possible
strategy would be to grant each participant a put, with the price to be
either fixed or established on the basis of an agreed-upon formula,
since the disclosure obligation is inoperative when the sale price is
automatic. n96 This, however, is of limited utility. It is certainly not
the normal case to have such a fixed-price put for what are typically
quite speculative ventures.
An appropriate modification of the common law in this respect would

be to relieve sophisticated participants in high-tech joint ventures
from any obligation to disclose in connection with the purchase or
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sale of interests in the venture. This would not change the disclosure
obligation during formation. Nor would it change any disclosure
obligations as to third parties, [*735] since the common-law
obligations apply only to sales between partners.
IV. SYNTHESIS AND EXPANSION OF THE DISCLOSURE PROVISIONS

UNDER THE UNIFORM PARTNERSHIP ACT AND THE COMMON LAW
Separately, the statutory and common-law disclosure requirements

contain substantial potential problems for high-tech joint venturers.
One commentator, however, suggests that the present state of the law
is a synthesis of the UPA section 20 disclosure requirement and the
common-law fiduciary requirements. Thus, the disclosure obligations
of a general partner are presented as a unitary obligation:
In certain circumstances the common law recognized that a partner

had a duty of voluntary disclosure to his co-partners. Under the
Uniform Partnership Act, a partner has the duty to render information
on demand. However, this duty has been expanded and tied in with
the fiduciary relationship. The duty to render information is now also
the duty to disclose information even without demand. In effect, there
is a duty to disclose to the co-partner all matters necessarily affecting
the partnership business. n97
By reading the "on demand" language out of UPA section 20, the
synthesized obligation is made self-executing. By glossing over the
common-law limitation of the disclosure requirement to certain well-
defined factual situations, the synthesized obligation is made plenary.
n98
Adoption of such a sweeping self-executing intrapartnership

disclosure obligation could compound the substantial problems
already identified for high-tech joint venturers. The synthesis does
not withstand even cursory analysis, however. The first problem with
the synthesis argument is a failure even to suggest the mechanism by
which the synthesis has been accomplished. [*736] It simply is not
possible to exorcise the demand requirement from UPA section 20,
using accepted norms of statutory interpretation. The language of UPA
section 20, that "[p]artners shall render on demand true and full
information of all things affecting the partnership to any partner," n99
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is not ambiguous in any sense of the word. Lacking ambiguity, no

statutory interpretation can eliminate the demand component. n100
The second problem with the synthesis argument is a complete failure

to produce any evidence that the synthesis has in fact taken place.
The two cases cited as supporting the expanded disclosure obligation
are, on their facts, explained by reference to pre-existing common-
law disclosure requirements. n101 If there is a synthesized duty to
disclose to the [*737] copartner all matters affecting the
partnership, then one would expect to find a body of cases where
either UPA section 20 was cited to require disclosure absent a
demand, or where the common law was cited to require disclosure
beyond the traditional limitations of the common law. But the courts
have invoked section 20 to require disclosure only when the record
reflects that the predicate demand has been made. This pattern
indicates that -- contrary to the assertion of the synthesis analysis --
the demand is not surplusage. n102 The courts also have refused to
require disclosure when there is no evidence of the required demand,
again acting contrary to the synthesis analysis. n103 In fact, there
appear to be no reported cases citing UPA section 20 as the authority
for disclosure, when there was neither a predicate demand nor an
independent common-law basis for requiring disclosure. n104
Similarly, there appear to be no post-UPA cases citing the common
law as the authority for disclosure, [*738] when there is neither a
common-law basis for disclosure nor a UPA section 20 predicate
demand.
[*739] Thus, while the courts may be accused of sloppiness, they

cannot be rightly accused of either exorcising the demand component
of UPA section 20 n105 or expanding the range of information required
to be disclosed at common law. n106
[*740] V. DRAFT REVISIONS OF THE DISCLOSURE PROVISIONS

UNDER THE UNIFORM PARTNERSHIP ACT
Participants in partnership-based high-tech joint ventures may soon

be free to contract around the statutory and common-law disclosure
requirements, at least in part. Contemporaneously with, but
independent of, the business community's infatuation with joint
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ventures, the legal community is moving to fundamentally revise one
of the basic sources of statutory law applicable to partnership-based
joint ventures, the UPA.
The revision of the UPA is not the product of a desire to accommodate

the law to high-tech joint ventures. The revision effort is driven by a
model of a partnership that is fundamentally different from that of the
high-tech joint venture. The focus of the revision effort is the
"typical" partnership, which reflects the traditional use of the
partnership form, with concentrations "in agriculture and related
fields of fishing and forestry, wholesale and retail trade, finance,
insurance and real estate, and professional and general service
businesses." n107 It is perhaps not surprising, given the focus of the
revision effort, that the proposed revision would not solve the
disclosure problems of high-tech joint ventures, and may in fact
exacerbate them.
Setting aside the synthesis argument, the present statutory and

common-law internal disclosure regime presents five substantial
problems for high-tech joint venturers. First, the scope of the routine
operations disclosure obligation implied under [*741] section 18(e)
is not well defined. Second, the definition of partnership books under
section 19 is imprecise. Third, the demand mechanism under section
20 is open ended and unconditional. Fourth, the common law requires
broad disclosures upon formation of the venture. Fifth, the common
law requires broad disclosures upon the sale of a joint venture
interest to a coventurer. The first three problems create a potential
inability to protect both participant and venture information. The last
two jeopardize participant information. The revision of the UPA being
undertaken by the National Conference of Commissioners on Uniform
State Laws presents an opportunity to remedy these problems.
Unfortunately, the preliminary results of the revision effort do not
correct the problems, and in several significant respects, would
compound them.
The process of developing a revision of the UPA has involved both the
American Bar Association (ABA) and the National Conference of
Commissioners on Uniform State Laws (Conference). In January of
1986, the ABA's Uniform Partnership Act Revision Subcommittee of
the Committee on Partnerships and Unincorporated Business
Organizations, Section of Corporation, Banking and Business Law,
issued its report. n108 The Conference's Drafting Committee to Revise
the Uniform Partnership Act followed and, in the fall of 1989, issued
an initial discussion draft of the Revised UPA to the Conference. n109
Although the proposals for revision are not yet final, n110 some broad
themes are clear: for example, a rejection of the aggregate theory of
the UPA in favor of a modified entity theory as the basis for the
revised act. n111 With regard to the concerns of high- [*742] tech
joint venturers, the results are mixed.
A. Routine Operations Disclosures Under Section 18(e)
The proposed revision fails to meet the needs of high-tech joint

ventures in two ways. The revision fails to codify the section 18(e)
disclosure obligation and it fails to allow the participants to limit the
information required to be disclosed.
Neither the ABA Report n112 nor RUPA n113 proposes any modification
of the language of UPA section 18(e) n114 that would undermine the
validity of the Eisenberg implied disclosure analysis. n115 Indeed, the
drafters of RUPA-89 refer to the Eisenberg analysis with apparent
approval in the comment to section 18. n116 But the drafters decline
to codify the routine operational disclosure requirement.
The UPA does not specifically allow the parties to agree to restrictions
on the information required to be disclosed. Under the Eisenberg
analysis, the only way for participants to limit the information
required to be disclosed to participants is to exclude such participants
from the decisionmaking process. The RUPA drafters take a radically
different approach. Under section 4X the parties are free to make
agreements limiting the availability of information. While this may be
an appropriate provision for high-tech joint ventures among
sophisticated parties represented by counsel, such an ability to
restrict information by agreement invites abuse in partnerships
involving less sophisticated participants and is inappropriate as a
general revision of partnership [*743] law. n117
B. "Partnership Books" Definition Under Section 19

Although the section 19 revision is an improvement over the current
provision, the proposed revision falls short of meeting the needs of
high-tech joint ventures. n118 The ABA committee proposed two
changes in section 19. n119 The Conference drafters proposed three
such changes in the RUPA-89 draft but made substantial changes in
the RUPA-90 draft. n120
For a high-tech joint venturer, the fundamental flaw in UPA section 19

is the inadequate definition of the category "partnership books and
records." Both the ABA committee and the Conference drafters
propose an expansion of the coverage of UPA section 19. Starting
from the assumption that the term "partnership books" includes only
"financial records," itself one step beyond the Crane and Bromberg
focus on tax records, n121 the ABA committee declared that "this
section should be expanded to cover other records as well." n122 The
ABA committee rejected the inclusion of a "laundry list" of records
required to be maintained. n123
The Conference drafters adopted the major thrust of the ABA draft and
expanded upon the theme. n124 The Conference draft proposes that
references within the section be expanded from "partnership books"
to "partnership books and [*744] records." n125 While generally
adopting the ABA committee's analysis, the Conference drafters felt
that the comment to the section
might nonetheless include some discussion of the books and records

that are required. For example, the partnership must maintain the
books and records that are required to be kept by the Internal
Revenue Code. More generally, the comment might include a
statement that the partnership must ["should" in RUPA-90] keep such
books and records as are ["as are" is omitted in RUPA-90] necessary
to enable a partner to determine his ["her" in RUPA-90] share of the
profits and losses of the partnership and his ["her" in RUPA-90] rights
on withdrawal. n126
Thus the scope of expanded coverage proposed is left somewhat

unclear under both the ABA and Conference drafts. Apparently, both
the ABA and Conference drafters are proposing a modest increase to
include at least all records required to be kept by the UPA. However,
it is not clear whether records required to be kept by other statutes,
by agreement of the parties, or under generally accepted accounting
principles would be included. n127 Neither the ABA draft nor the
Conference proposal is clear as to whether the drafters intended to
adopt a rule giving access to all existing partnership books and
records, including, perhaps, even nonfinancial records. Additional
clarity is required.
The second modification suggested by the Conference, although not

by the ABA committee, was an additional provision that "[e]ach
partnership shall keep complete and correct books and records of
account." n128 Whether this change is appropriate depends, of course,
on the definition of partnership books and records. If the definition
allows access to all existing partnership books and records, then the
change would be inappropriate. The requirement that books and
records be kept has been deleted in RUPA-90 apparently because "
[t]he Committee did not want to create new liability to third parties
by stating a duty to keep partnership books," although some "
[m]embers of a subcommittee were uncomfortable with the
suggestion that RUPA [*745] says you don't have to keep books and
records." n129 It seems odd that a fundamental question concerning
the relations of the partners among themselves should be decided on
the basis of third- party-beneficiary status, which should be readily
disclaimable if really a concern.
The third modification, included in both the ABA and Conference

drafts, is a relocation of the access and inspection provision from
section 19 to section 20 and a revision of the text. n130 The result is
troublesome to high-tech joint venturers.
The ABA drafters' pronouncements regarding restrictions on access

were somewhat cryptic:
Subsection (a) dealing with the right to inspect and to copy

partnership books and records should be subject to statutory
restrictions (e.g., a good faith and proper purpose standard or a
provision restricting access to certain technical and confidential
research data) by agreement among the partners. . . . n131
Read literally ("[the inspection right] should be subject to statutory

restrictions . . . by agreement among the partners"), the language
would seem to suggest that there would be a set of statutorily defined
restrictions into which the partners could opt by agreement. But the
clause, "or a provision restricting access to certain technical and
confidential research data," is not an easy fit. It seems difficult to
believe that such a restriction could be structured as a statutory "opt-
in" clause. The wide range of situations would surely frustrate efforts
at statutory drafting by making such an opt-in clause so broad and
generic as to be ineffective. And there is also the question of how
"technical and confidential research data" could be within the
classification "partnership books and records" at all, given the narrow
view suggested by both the ABA and Conference drafters.
In the initial Conference draft, the access and inspection language of

current section 19, "every partner shall at all times have access to and
may inspect and copy any of [the partnership books]," n132 was
replaced by new subsection (a) of section 20:
Partners, their agents, and attorneys shall have access to partnership

books and records. Former partners shall have access to books and
records pertaining to the time when they were partners. [*746]
Subject to reasonable restrictions by agreement, partnership books
and records may be inspected and copied during ordinary business
hours. The partnership may impose a reasonable charge, covering the
costs of labor and material, for copies of any documents provided to a
partner. n133
There was a question as to whether the "reasonable restrictions by

agreement" modified the initial, seemingly unrestricted grant of
access, or only the mechanics of inspection during ordinary business
hours. The placement of the enabling language suggested the
narrower view; the comment suggested the Conference drafters
intended the broader. n134 The problem was in one sense resolved in
RUPA-90, with the revision of section 20(b):
(b) Partners and their agents and attorneys may have access to
partnership books and records. Former partners may have access to
books and records pertaining to the time when they were partners. A
partnership must provide the opportunity to inspect and copy books

and records during ordinary business hours. A partnership may
impose a reasonable charge, covering the costs of labor and material,
for copies of documents furnished to a partner. n135
The changes seem appropriate except perhaps the substitution of the

weaker "may" in place of "shall," as used in the earlier draft.
C. Demands Under Section 20
The most significant proposed revisions deal with the disclosure

obligation under UPA section 20. The ABA Report summarized its
recommendations concerning section 20 as "[t]he obligation of a
partner to render information about the partnership business to his
fellow partners under UPA section 20 is made unqualified, and the
requirement that information be made available only 'upon demand' is
eliminated." n136 In its detailed analysis of UPA section 20, which was
embodied in RUPA-89 section 20(b) and is now embodied in RUPA-90
section 20(c), the ABA committee's recommendation was:
Subsection (b) should include the language in existing section 20

requiring partners to provide information about the partnership
business; however, the 'on demand' requirement should be replaced
by the phrase 'to the extent the circumstances [*747] render it just
and reasonable,' which is used in the Georgia Partnership Act and
more accurately encompasses a partner's fiduciary duty of complete
and continuous disclosure established by case law. . . .
. . . [A] majority of the Committee believed that the duty to render

information about the partnership business should also be subject to
reasonable restrictions by agreement. The Committee did not feel that
it would be appropriate to allow the partners to agree to a complete
elimination of any right of inspection and rendering of information.
One member of the Committee felt that the duty to render information
was so fundamental that it should not be subject to any restriction.
n137
Although the ABA committee did not suggest specific language, the
following provisions would be a fair rendition of section 20(b) as
proposed by the ABA committee:
(b) Partners shall render, to the extent the circumstances render it
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just and reasonable and subject to the reasonable agreement of the
partners, true and full information on all things affecting the
partnership to any partner or the legal representative of any deceased
partner or partner under legal disability.
The Conference committee's initial draft adopted some of the changes

in the UPA section 20 proposed in the ABA Report. In its entirety, the
revision contained in RUPA-89 read as follows (additions are
underlined; deletions have brackets []):
SECTION 20. [DUTY] RIGHTS OF PARTNERS TO [RENDER] OBTAIN

INFORMATION.
(a) Partners, their agents, and attorneys shall have access to

partnership books and records. Former partners shall have access to
books and records pertaining to the time when they were partners.
Subject to reasonable restrictions by agreement, partnership books
and records may be inspected and copied during ordinary business
hours. The partnership may impose a reasonable charge, covering the
costs of labor and material, for copies of any documents provided to a
partner.
(b) Partners shall [render on demand] have the right, to the extent
just and reasonable, to true and full information of all things affecting
the partnership [to any partner or]. This is also the right of the legal
representative of any deceased partner or partner under legal
disability. By agreement, partners can reasonably restrict the right to
information about the partnership [*748] business. n138
The Conference drafting committee's 1990 draft made some

significant changes from the RUPA-89 version. In its entirety, the
revision of UPA section 20 contained in RUPA-90 reads as follows
(with the indicated changes from the RUPA-89 draft):
SECTION 20. RIGHTS OF PARTNERS TO OBTAIN INFORMATION.
(a) The partnership books and records, if any, shall be kept at the
principal place of business of the partnership.
(b) Partners[,] and their agents and attorneys [shall] may have access
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to partnership books and records. Former partners [shall] may have
access to books and records pertaining to the time when they were
partners. [Subject to reasonable restrictions by agreement,
partnership books and records may be inspected and copied] A
partnership must provide the opportunity to inspect and copy books
and records during ordinary business hours. [The] A partnership may
impose a reasonable charge, covering the costs of labor and material,
for copies of any documents [provided] furnished to a partner.
[(b)](c) Partners, and the legal representative of any deceased

partner or partner under legal disability, shall have the right, to the
extent just and reasonable, to true and full information [on all things
affecting] concerning the partnership. [This is also the right of the
legal representative of any deceased partner or partner under legal
disability. By agreement, partners can reasonably restrict the right to
information about the partnership business.] n139
Together, the two Conference drafts propose three important textual

modifications of section 20, in the title, and in what was subsection
(b) in RUPA-89 and is now subsection (c) in RUPA-90. These are a re-
orientation from an extraordinary and remedial focus to a standard
operating focus, with the associated elimination of the UPA demand
requirement, limitation of the scope of information that can be
obtained, and confirmation of partners' agreements to restrict access
to information. The modifications are troublesome for high-tech joint
venturers, both in conception and execution.
The reformulation of UPA section 20 in both drafts of RUPA is cause

for concern because it marks a change in the underlying premise for
the section--a shift from the extraordinary [*749] remedial
orientation of UPA section 20 to a standard procedural orientation
under RUPA. The re-orientation of section 20, including the
elimination of the demand component that accompanies the
theoretical shift, is also a source for procedural concern, due to the
lack of adequate procedural provisions in RUPA.
The first step in reviewing the fate of UPA section 20 is to reach

agreement on what end the section is designed to accomplish. It
seems clear from the language and treatment of section 20 in the UPA
that it was not designed to codify the general obligations of partners
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to tell each other the truth or to share in the management of the
enterprise. Rather, it was designed as a remedial tool available to the
partners in extraordinary situations in which the normal flow of
information is disrupted. That, however, is decidedly not the
orientation adopted by the Conference drafters. It appears that the
drafters see the language of RUPA-89 section 20(b) and RUPA-90
section 20(c) as a mechanism by which a pre-existing, normal,
operational obligation to supply information to the partners can be
fulfilled. In its comment to RUPA-89 section 20, the drafting
committee first refers to the provision that, subject to any agreement
between the partners, n140 "all partners have equal rights in the
management and conduct of the partnership business." n141 From this
provision, the drafters adopt Professor Eisenberg's conclusion that "
[t]he effect of ["UPA" added in RUPA-90] Section 18(e) is 'to require
that, absent contrary agreement, every partner be provided on an
ongoing basis with information concerning the partnership business,
and be consulted in partnership decisions.' " n142 The drafters also
note that UPA section 20 "arguably limits the thrust of the ["UPA"
added in RUPA-90] Section 18(e) information right by suggesting that
it be honored on [*750] 'demand' rather than volunteered as
appropriate," and suggest removing the demand component. n143
The RUPA revision of section 20 is fundamentally flawed as a result of

a mistaken belief that the UPA section 20 disclosure mechanism is
designed to meet the need for ongoing information, pursuant to UPA
section 18(e). The linkage of Eisenberg's UPA section 18(e) implied
information requirement with UPA section 20 is a creation of the
Conference drafters. It is not found in the ABA Report, n144 and it is
not found in Professor Eisenberg's work to which the drafters make
reference. n145 Indeed, one of the works upon which Professor
Eisenberg relies clearly distinguishes the UPA section 20 disclosure
obligation from any implied right to information under UPA section
18(e). n146
The better reading of UPA section 20 is that, whatever obligation the

partners (or the partnership, to adopt the drafters' entity orientation)
have under section 18(e) to supply information for management
purposes under normal operating circumstances, the right to demand
information under UPA section 20 is a tool for individual partners to
i f ti
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secure information from other partners in extraordinary
circumstances. Thus, properly viewed, UPA section 20 does not,
contrary to the drafters' concerns, limit the thrust of any section 18(e)
information right. It merely gives the partners an additional
mechanism to secure information. If one accepts that section 20 is an
extraordinary and remedial tool, then the demand component is
required, and the RUPA revision of section 20 should be modified to
reinstate the demand requirement.
Procedurally, the Conference drafters' re-orientation of section 20 and

the associated removal of the demand component are also sources for
concern. The intention of the drafters is unclear in terms of the
process by which information will be disseminated [*751] to the
partners. This leads to a lack of adequate procedural provisions in the
RUPA revision of section 20.
The procedural uncertainty of the Conference drafters builds upon that

of the ABA committee. The ABA group seemed to be thinking in terms
of a self-executing duty of each partner to render information. They
changed the obligation under UPA section 20 only by the removal of
the demand requirement n147 and the insertion of the provision found
in the recently revised Georgia act that requires disclosure "to the
extent the circumstances render it just and reasonable." n148 Thus,
the ABA committee proposed adoption of the Georgia language,
essentially without amendment. n149
Use of the broad Georgia formulation of section 20 as the mechanism

for achieving routine disclosures within the partnership will be a
logistical and procedural nightmare. As argued above, the broad
interpretation of UPA section 20 is less apt to be burdensome in the
original remedial context since disclosure follows specific demand,
and since the information required to be disclosed in any situation is
defined and limited by the terms of the demand. But when made self-
executing, the broad definition of information to be disclosed is
functionally unlimited.
The procedural problems of the ABA proposal stem, it seems, from a

basic misreading by the ABA committee of the common-law disclosure
obligation. The ABA committee proceeded on the assumption that the
Georgia statute "more accurately encompasses a partner's fiduciary
duty of complete and continuous disclosure established by case law 32/92
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duty of complete and continuous disclosure established by case law,"
citing as its authority the Crane and Bromberg treatise. n150 Of
course, the observation that the Georgia statute "more accurately
encompasses [*752] a partner's fiduciary duty" is misleading
because UPA section 20 was never intended to encompass a partner's
common-law fiduciary duty to disclose. In fact, putting aside the
question of whether the Georgia statute is "more accurate" than the
UPA, it must be noted that the Georgia statute is not, in itself, an
accurate formulation of a partner's common-law disclosure obligation.
The ABA committee cites Crane and Bromberg on Partnership for its
contention that the Georgia formulation is a more accurate rendition
of the common-law disclosure obligation. n151 But that treatise
reflects the analysis that the information required to be disclosed by
demand under section 20 of the UPA differs from the information
required to be disclosed even without demand under the common
law:
At common law, a partner is not only bound to give information on

demand but, in certain circumstances, he is under a duty of voluntary
disclosure. UPA § 20 expresses the duty to render information "on
demand." Strict statutory construction would find a negative
implication where no demand is made. But this should be outweighed
by the high fiduciary duties of partners. In consequence, voluntary
disclosure should be considered as necessary under the Act as at
common law. n152
Properly read, Crane and Bromberg simply state that UPA section 20
did not change the common-law disclosure requirement; "in certain
circumstances," voluntary disclosure remains necessary as provided
under the common law.
Thus, the ABA committee's efforts can be criticized for misstating the
common-law duty to disclose, for trying to transform section 20 from
a remedial measure into a standard operating procedure, and for
creating a disclosure mechanism that will be unworkable in practice.
The Conference drafters further complicated the revision effort. The

Conference drafters clearly contemplate a duty to disclose information
that is self-executing, at least as to some information. n153 But
ith th l
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neither the language of the draft statutory [*753] provision nor the
draft comment provides any clear direction on the process.
The procedural inadequacy of RUPA section 20 is traceable, at least in

part, to the replacement of the "duty to render information" found in
the UPA n154 with the "right to obtain information" found in RUPA.
n155 This is in line with the Conference drafters' understanding that
the ABA report suggested that UPA section 20 "be stated as a 'rights'
section rather than a duty section." n156 The ABA report, however,
does not make such a recommendation with specific reference to UPA
section 20, either in the summary n157 or in the body. n158
Furthermore, the summary specifically speaks in terms of "the
obligation of a partner to render information about the partnership
business to his fellow partners." n159
It probably makes little difference in the long term whether section 20

is structured as a statement of rights or as a statement of duties. As
the Conference drafting committee noted in the context of RUPA-89
section 18, "In a sense, every right is the flip side of a duty." n160 But
in this case, the change from a declaration of obligations to a
statement of rights introduced complications that have not been
resolved. It seems reasonable to assume that any comprehensive
definition of a disclosure procedure should include at least four
elements: how the disclosure obligation is initiated, from whom the
disclosure is required, to whom the disclosure is made, and what the
disclosure must include. Using this measure, the UPA and RUPA both
fail to provide a full definition.
The UPA, which is "duty oriented, "is somewhat imprecise as to how

the obligation is initiated. Clearly there is to be a demand. From
whom the demand comes is less clear, but presumably the actors who
can initiate the demand are the same actors who will receive the
information -- the partners. UPA section 20 is commendably clear as
to both from whom the disclosure [*754] is required ("[p]artners
shall render on demand") and to whom the disclosure is to be made
("any partner or the legal representative of any deceased partner or
partner under legal disability"). n161 As to what information is
required to be disclosed, the UPA and RUPA-89 share the "true and
full information of all things affecting the partnership" language and
the problems it brings to the procedure RUPA 90 modifies the
the problems it brings to the procedure. RUPA-90 modifies the
standard to "true and full information concerning the partnership,"
n162 which narrows the range of disclosure.
The disclosure obligation definition under section 20 of RUPA, which

is "rights oriented," is less complete. As noted in the next section, the
draft language is unclear as to how the disclosure obligation is
initiated. Unlike UPA section 20, which provides that "partners shall
render . . . true and full information," n163 the draft language of RUPA
section 20 does not clearly articulate from whom the disclosure is
required. That is an especially unfortunate omission given the shift in
the theoretical base of the act from an aggregate theory to an entity
theory. n164 Like UPA section 20, RUPA section 20 clearly states to
whom the disclosure is made.
The second substantive change incorporated in the RUPA drafts is a

statutory limitation on the scope of information to which a partner has
access. Under the UPA, a partner has a right to demand "true and full
information of all things affecting the partnership." n165 Under RUPA,
each partner would have the right to information only "to the extent
just and reasonable." n166 The "just and reasonable" modifier may
limit the scope of information required to be disclosed (although it is
a fair assumption that a court would be reluctant to order disclosure
under the existing language of UPA section 20 if unjust or
unreasonable), but it certainly is a slender reed upon which to depend
for protection in a multi-million dollar high-tech joint venture in
[*755] which the protection of proprietary information is of critical
importance.
The RUPA language is notable, however, as much for what it does not
do as it is for what it does. In RUPA-89 the drafters defined
"partnership business" as "the scope of business activity set forth in
the partnership agreement or actually being conducted by the
partnership." n167 This was narrowed in RUPA-90 to define
partnership business as "the scope of business activity authorized by
a partnership agreement." n168 Rather than limit the required
disclosure to "true and full information of all matters of partnership
business," the drafters retained the substantially broader "true and
full information of all things affecting the partnership" in RUPA-89
and adopted the arguably narrower construction "true and full
and adopted the arguably narrower construction true and full
information concerning the partnership" in RUPA-90. n169
In the context of a high-tech joint venture, the difference -- even with

the marginally narrower construction adopted in RUPA-90 -- could be
substantial. Within the Sematech joint venture, for example, the
parallel development of new chip technology by one of the
participants would be within the classification "true and full
information of all things affecting the partnership," and might be
within the classification of "true and full information concerning the
partnership," but would not be within the classification "true and full
information of all matters of partnership business." The same
difference in outcome would occur in the Ampligen partnership. Du
Pont proprietary information concerning its in-house AIDS medication
development would fall within the broader "affecting the partnership"
formulation, and might arguably be within the "information
concerning the partnership" formulation, but would not be within the
narrower "matters of partnership business" formulation.
The final substantive change from UPA section 20 to RUPA-89 section

20 was confirmation of the partners' ability to further limit the scope
of available information by agreements between themselves. This was
accomplished by addition of the language that "[b]y agreement,
partners can reasonably restrict the right to information about the
partnership business." n170 This language was not carried over into
the RUPA-90 draft. The [*756] drafters presumably relied on the
general section 4X ability to modify statutory provisions by
agreement. n171
There were several problems with the proposed language, not all of
which are resolved in the RUPA-90 draft. First, the focus of the
allowance in RUPA-89 was wrong. By using the more restrictive
formulation of "partnership business" rather than the broader
formulation of "all things affecting the partnership," the language
allowing intrapartnership agreements did not allow one type of
restriction -- relating to internal participant knowledge not directly
related to partnership business -- that is of critical concern to high-
tech joint venturers. This problem is resolved in the RUPA-90 draft,
since the power to modify section 20 under section 4X is unlimited.

To the extent affirmative language is re-introduced into future drafts36/92
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To the extent affirmative language is re-introduced into future drafts,
however, it may be appropriate to differentiate between information
concerning partnership business and information concerning the
broader category of all things affecting the partnership.
Second, the qualification in RUPA-89 that the partners might only

"reasonably restrict" such information introduced some uncertainty
into the process. Is it reasonable to restrict the partners' right to
information concerning one party's in-house research? In the
Ampligen example, would it be reasonable for Du Pont and HEM to
deny HEM the right to information on Du Pont's projections relating to
the marketing of a competing AIDS drug? The proposed language
provided no guidance. Relying on the section 4X power, however, the
RUPA-90 drafters have excluded any reasonableness requirement for
contractual modifications of section 20. n172 Given the central
importance of information in the operation of a partnership and the
opportunities for abuse when one partner is relatively sophisticated or
has an overwhelming bargaining advantage, the decision of the
drafters to permit unrestricted contractual modifications of the section
20 right to information is unfortunate.
Third, the procedures in the revised section are flawed. As a

procedural matter, it might be prudent to require that such
agreements be in writing and be signed at least by the partner against
whom they are being enforced. This would greatly simplify the proof
problems and would eliminate arguments as to an agreement arising
from the partners' pattern of activity over [*757] time. Under
section 4X, contractual modifications of RUPA provisions can be
provided in the "partnership agreement," and under section 2(c), the
partnership agreement can be oral. Thus, the RUPA-90 drafters have
left open the possibility of oral modifications of the section 20 right to
information. n173 This is a serious flaw in the RUPA-90 draft.
D. Common-Law Disclosures in Dealings with the Ventures
Neither the ABA draft nor RUPA addresses the common-law

requirements for disclosure in dealings with the venture.
E. Common-Law Disclosures in Dealings with Coventurers

Neither the ABA draft nor RUPA addresses the common-law
requirements for disclosure in dealings with coventurers
requirements for disclosure in dealings with coventurers.
VI. HIGH-TECH AGENDA FOR REVISION
A. The Needs of High-Tech Joint Venturers
The ABA and Conference drafts inadequately address the needs of

high-tech joint venturers. An adequate statute would contain the
following elements in order to meet the identified shortfalls of both
the common law and the existing UPA.
1. Section 18(e). Routine Disclosures.
The routine disclosure obligation under section 18(e) should be

codified. The scope of the disclosure should be indicated, and the
parties should be empowered to restrict disclosure by agreement.
2. Section 19. Access to Partnership Books.
A two-part definition of "partnership books and records" should be

codified. It should include both (1) any information required to be
kept by statute, regulation, or generally accepted accounting
principles, including information required to substantiate entries in a
tax or financial audit, and (2) any additional information beyond that
in (1) which is in fact kept. Parties should be given access to all
existing partnership books and records under section 19, with
statutory provisions for an injunction against disclosure if an
improper purpose can be proved. Further, the parties should be
authorized to restrict [*758] access by prior agreement to
information under (2), but not under (1).
3. Section 20. Extraordinary and Remedial Demands.
The demand mechanism under the existing UPA should be retained.

Statutory provisions should be included tracking the classification of
information under section 19. An injunction against disclosure should
be allowed if an improper purpose can be proved. The parties should
be authorized to restrict access by prior agreement to information
under (2) but not under (1).
4 Common-Law Disclosures in Dealings with Ventures

4. Common Law Disclosures in Dealings with Ventures
Parties to high-tech joint ventures should be required to make only

those disclosures that are commercially reasonable under the
circumstances as long as the disclosure actually made is not
substantially misleading overall.
5. Common-Law Disclosures in Dealings with Coventurers
Parties to high-tech joint ventures should be relieved from any

obligation to disclose in connection with the purchase or sale of
interests in the venture.
B. The Proposal
Even given the shortcomings of the draft revisions, it is logical to

address the peculiar disclosure needs of high-tech joint venturers
within the framework of the pending revision of the UPA. Since some
of the changes proposed in the general revision are flawed in ways
that make them inappropriate both for traditional partners and high-
tech joint venturers, some of the reform proposals are of general
application. These are set forth in the following subsections. But not
all of the disclosure needs of high-tech joint venturers are parallel to
those of parties in traditional partnerships. Therefore, it is necessary
at certain junctures to propose special rules for the high-tech class.
n174 These are set forth in my proposed section 20X, which defines a
class of "sophisticated joint ventures" and allows additional latitude

to the participants.
[*759] This proposal for reform is necessarily more complicated

than the existing regime. This is in part because of the decision to
expand the UPA to include both the existing extraordinary and
remedial function of sections 19 through 22 and the ongoing routine
disclosure obligations implied under present section 18(e). If the
ongoing routine disclosure obligations are included, then the
treatment will be made substantially longer and more complicated
because it will be necessary to state not only the affirmative
requirement, but also to define the numerous limitations and
exceptions to the rule.
There is a reasonable argument that the scope of the UPA disclosure
provisions should not be expanded But the confusion that has arisen
provisions should not be expanded. But the confusion that has arisen
in recent years regarding the disclosure obligations of partners
indicates a need to expand the coverage of the uniform act. The ABA
committee and Conference drafters have determined to pursue a
broader treatment. My draft, therefore, is structured to cover both the
routine ongoing disclosure obligation as well as that for extraordinary
and remedial disclosure.
These proposed sections conform as much as possible to the policy

decisions made by the Conference drafters. They use the Conference
draft as a starting point. Further, they are re-oriented to discuss the
rights of partners and are not structured solely in terms of partners'
obligations. However, since the comprehensive definition of a
disclosure system requires that both rights and obligations be
addressed, my draft speaks to both.
1. Section 18(e). n175
What is now section 18(e) would be revised to read:
(f) All partners shall have equal rights in the management and
conduct of the partnership business, which rights shall entitle
[*760] each partner to such information from the partnership
concerning the partnership business as is reasonably required for the
exercise of such rights, without any demand by such partner.
RUPA section 4X would be modified by the insertion of a new

numbered clause within subsection (a) stating that a partner's right to
information concerning business matters as to which the partner has a
management and conduct right under section 18(f) may not be varied
by agreement. Except for the ability to limit access to information
concerning decisions as to which a partner has a vote under section
18(f), my draft is compatible with the RUPA drafts. My draft simply
provides that the right to participation in the management and
conduct of the business carries with it -- and is limited to the same
extent the right to participate could be limited under proposed section
4X -- the right to such "information . . . concerning the partnership
business as is reasonably required for the exercise of such rights." My
draft provides that such information comes from the partnership. This
preserves the entity orientation of the RUPA drafters and fixes
responsibility for compliance.
responsibility for compliance.
2. Section 19. n176
A definition of "partnership books and records" would be added to

section 2:
(9) "partnership books and records" means (a) the media containing
any information required by applicable statutes, rules, regulations,
GAAP or the partnership agreement, or required for the preparation of
the partnership's tax returns or financial statements, including all
information on any supporting or explanatory schedules and notes,
and all information required to support, clarify or call into question
such tax returns and financial statements (the "required partnership
books and records"), together with (b) the media containing any
information maintained in fact within the partnership's control in
addition to that set forth under (a) (the "optional partnership books
and records"); subject in either case to destruction pursuant to
[*761] a commercially reasonable document/information destruction
policy of general application.
What is now section 19 would be revised to read:
Each partnership shall keep complete and correct partnership books

and records. The partnership books and records shall be kept, subject
to any agreement between the partners, at the principal place of
business of the partnership.
The inspection language, which is transferred from section 19 to

section 20 under the RUPA drafts, is discussed in the following
subsection.
3. Section 20
My draft revision of section 20 follows the existing organization. It is

divided into six subsections that deal in turn with information
available without demand from partners, information available
without demand from the partnership, information available from both
the partners and the partnership upon demand, exceptions to the right
to information, costs of reproduction, and definitions of common
terms. The section would read:
terms. The section would
1/17/2011
read:
§ 20. Partners' Rights and Duties with Respect to Information.
(a) Information from Partners Without Demand: A partner (the

"recipient") shall be given the following information, without any
demand, by any other partner possessing such information (the
"discloser"):
(1) Partnership Transactions: Information regarding commercial

transactions between the discloser and the partnership, other than
transactions that are both incidental to the business of the partnership
and are on terms and conditions generally available in a recognized
market.
(2) Transfers of Partnership Interests inter se: In connection with the

transfer of any interest in the partnership between the recipient and
the discloser, information regarding the value of such interest.
(b) Information from Partnership Without Demand: A partner (the

"recipient") shall be given the following information, without any
demand, by the partnership:
(1) Partnership Tax Returns: Promptly after their being filed, a true
and complete copy of the partnership's federal, state and local income
tax returns for each year, together with all supporting schedules.
(2) Legal Process: Copies of legal process giving the partnership

original notice of any claim or cause of action [*762] against the
partnership which, if adversely decided, would have a material
adverse impact on the partnership.
(c) Information on Demand: A partner (the "recipient") shall have the

right to the following information, upon written demand, from any
partner or the partnership:
(1) Required Partnership Books and Records: The required partnership

books and records.
(2) Optional Partnership Books and Records: The optional partnership

books and records.
(3) Partnership Business: Information regarding the state of the

partnership business and the financial condition of the partnership.
(4) All Things Affecting the Partnership: Information regarding all

things affecting the partnership, other than as provided in (c)(3), as
is just and reasonable.
(d) Exceptions to Disclosure Obligations: The obligation to disclose

information shall be avoided to the extent the party otherwise
required to disclose is able to establish the applicability of an
exception hereunder:
(1) Independent Source: As to disclosures under section (c), that

such information is either reasonably available to the recipient or has
been communicated to the recipient by another source.
(2) Agreement of Partners: As to disclosures under sections (b) and

(c)(2), (3), or (4), that such information is protected from disclosure
to the recipient by a reasonable written agreement of the partners,
signed by the recipient. No agreement shall be effective to limit the
access of the recipient to required partnership books and records
under (c)(1).
(3) Legal Prohibition: As to disclosures under sections (b) and (c),

that the discloser is prohibited from disclosing such information by
applicable statute, rule or regulation, or by an order of a court or
administrative body of competent jurisdiction.
(4) Illegitimate Purpose and Substantial Risk of Harm: As to

disclosures under section (c), that such information is not reasonably
required by the recipient for any legitimate purpose and that the
release of the information requested poses a substantial risk of harm
to the partnership or any partner.
(5) Conclusion of Fiduciary Relationship: As to disclosures under

section (a), that the discloser no longer stands in a fiduciary role as
to the recipient, for reasons that make it equitable to avoid the
disclosure obligation otherwise existent.
[*763] (e) Costs: Partnership books and records to which the

recipient is afforded access hereunder may be inspected and copied
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during ordinary business hours. The partnership may impose a
reasonable charge, covering the costs of labor and material, for
copies of any documents provided to the recipient.
(f) Definitions: For purposes of this section, the following definitions

shall apply:
(1) "Partners": The term "partners" shall be deemed to include the

legal representative of any deceased partner or partner under legal
disability, former partners to the extent the information at issue
pertains to the time when they were partners, and the agents and
attorneys of such parties.
(2) "Information": The term "information" shall be deemed to mean

true and full information of the type specified, presented in a timely
manner.
My draft is a merger of the UPA section 20 obligations with those in

the common law. It does not seek to increase the obligations of the
partners to make disclosure beyond the circumstances set forth in
either the present formulation of UPA section 20 or the common law.
Subsection (a) introduces some basic concepts and sets forth the
information that a partner should receive from any copartner
possessing the information without any triggering demand. First, the
subsection looks both to the right of the receiving party (designated
the "recipient") to the information and to the duty of the disclosing
partner (designated the "discloser") to make the disclosure. As
structured, the class of disclosers is limited to partners "possessing
such information." Thus, the disclosure mechanism does not
contemplate an affirmative obligation that partners seek out such
information if they do not already possess it. Within subsection (a),
there are two categories of information: "partnership transactions"
and "transfers of partnership interests." These conform to the
categories of information that must be disclosed without demand
under the common law. The definition of partnership transactions in
(a)(1) is plenary, "commercial transactions between the discloser and
the partnership," with an exclusion for transactions that are both
incidental to the business of the partnership and on terms and
conditions generally available in a recognized market. Paragraph (a)
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(2) tracks the common-law disclosure situation in which one partner
is either selling or purchasing a partnership interest in a transaction
with another partner. The [*764] paragraph applies only as to sales
between partners. It does not create a disclosure obligation when a
partnership interest is sold to a third party.
Subsection (b) defines two types of information that must be supplied

by the partnership without any predicate demand: partnership tax
returns and legal process giving original notice of claims and causes
of action. The requirement to provide tax returns is broad. The
partner must be given a copy of all partnership federal, state, and
local income tax returns together with all supporting schedules. The
tax provision in (b)(1) does not, however, extend to other than
income tax returns. The tax return requirement parallels the
provisions of the Revised Uniform Limited Partnership Act (RULPA),
although the demand requirement in RULPA is deleted in recognition
of the more central management role and increased liability of
partners in a general partnership. n177 Paragraph (b)(2) requires that
the partners be given copies of original legal process of actions
against the partnership which, if adversely decided, would have a
material adverse impact on the partnership. The requirement is
limited in two respects. First, it requires only that the partners be
given copies of original legal process, not copies of all suit papers.
Presumably, a partner interested in the progress of the litigation could
demand copies of subsequent filings under subsection (c), as
appropriate. The second qualification on the right to legal process is
the materiality test. Copies need be supplied only when an adverse
decision would have a material adverse impact on the partnership. Of
course, it would be possible to further define this threshold, either
through the use of a dollar limit or a more detailed definition of
materiality. But given the wide variations in the types of enterprises
covered by the statute, such an attempt at further specification would
not be productive.
Subsection (c) restates, and restricts somewhat, the demand-driven

mechanism in UPA section 20. First, my draft makes it clear that the
demand originates with a partner n178 and can be directed either to a
copartner or to the partnership. Second, [*765] my draft restricts

the process by requiring that the demand be in writing. In this
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respect, my draft differs from UPA section 20, which simply speaks of
an unqualified "demand." n179 The provision also differs from the ABA
committee's proposal n180 and that of the Conference drafters, n181
both of which proposed deletion of the demand requirement
altogether. The addition of a writing requirement will restrict the
ability of the courts to find constructive demands, as was done in the
Berg v. King-Cola case. n182 On balance, however, a reasonable
argument can be made that the writing requirement is consistent with
the general formalization of the disclosure process embodied in the
ABA and Conference approaches. While the introduction of a writing
requirement is not essential to my draft, it does seem appropriate.
Perhaps the most significant change my draft makes from UPA section
20 is in the definition of the classes of information that are subject to
disclosure upon demand. UPA section 20 gives the demanding partner
access to "true and full information of all things affecting the
partnership." n183 My draft sets forth four categories of information
subject to disclosure on demand: required partnership books and
records, optional partnership books and records, partnership
business, and all things affecting the partnership. The provisions of
(c)(1) and (c)(2) generally follow the recommendations of the ABA
n184 and Conference n185 drafters with respect to the integration of
the inspection provisions of UPA section 19 into the general

disclosure section. Paragraph (c)(3) gives the partner an unqualified
right to "information regarding the state of the partnership business
and the financial condition of the partnership." Paragraph (c)(4) adds
a qualified right to "information regarding all things affecting the
partnership, other than as provided in (c)(3)" to the extent disclosure
is "just and reasonable." This dual track [*766] framework gives the
partner access under (c)(3) to the core financial and business
information that would be provided under Professor Eisenberg's
reading of UPA section 18(e), satisfying the requirement that "every
partner is to be provided on an ongoing basis with information
concerning the partnership business." n186 My formulation tracks the
definition, if not the procedures, of a disclosure provision of RULPA.
n187 Moreover, it gives the partner access to a broader range of
information beyond the core business and financial information to the

extent "just and reasonable," consistent with the Georgia statute
noted with approval by the ABA n188 and Conference n189 drafters.
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This is also consistent in approach with a disclosure provision in
RULPA. n190
Subsection (d) contains exceptions to the disclosure obligations. Not

all of the exceptions under subsection (d) apply to disclosures
required under subsections (a), (b), and (c). The independent source
exception under (d)(1), for example, applies only to disclosures
required under subsection (c), the provision concerning partnership
disclosures by the partners and the partnership upon demand. Under
this exception, the party to whom the demand is made can decline to
disclose if the information is "reasonably available" or if the
requesting party has already received the information from another
source. This exception will avoid use of the disclosure request as a
means of forcing another partner or the partnership to assemble
information that is otherwise available. It will also avoid wasteful
duplication of effort due to parallel disclosure requests.
Paragraph (d)(2) contains the exception to disclosures when the

partners have limited disclosure by their agreement. This exception
applies to disclosures under both subsection (b) and subsection (c),
with the exception of disclosures of required partnership books and
records under (c)(1). To provide an exception to disclosure under (d)
(2), the agreement must meet three [*767] tests. First, it must be
written. Second, it must be signed by the party to whom disclosure
would be made. These procedural requirements are necessary to
avoid the time-consuming proof problems inherent in situations when
the disclosing party claims an oral agreement, or a written agreement
that has not been executed by the recipient. Third, the substance of
the agreement must also be reasonable.
Paragraph (d)(3) creates an exception to disclosure when the

disclosing partner "is prohibited from disclosing such information by
applicable statute, rule or regulation, or by an order of a court or
administrative body of competent jurisdiction." The exception does
not extend, of course, to contractual prohibitions on disclosure. By its
terms, (d)(3) applies to disclosures under both subsections (b) and
(c), although one is hard pressed to envision a situation in which
information required to be disclosed under subsection (b) -- tax
returns and legal process -- would be subject to a legal prohibition on
disclosure. It is certainly possible to describe a situation in which a
disclosure under subsection (a), dealing with partnership transactions
and sales of partnership interests, would be the subject of a legal
prohibition. But disclosures under subsection (a) do not come within
the exception in (d)(3). Since the exception is not available, the
disclosing party must either violate the law or abandon the
transaction. It is assumed that in the normal case the transaction will
be abandoned. In either event, the interests of both the seller and the
purchaser are protected. If the transaction is abandoned, the
disclosing party is protected from violating the legal prohibition and
the receiving party is protected from going forward with the
transaction without the information in the possession of the disclosing
party. If the disclosing party decides to violate the legal prohibition,
presumably the cost of the legal violation is less than the reward of
consummating the transaction. Thus, the value to the disclosing party
is protected and the recipient is protected because it will have the full
range of information required.
Under paragraph (d)(4), demand-generated disclosures under

subsection (c) can be avoided if the disclosing party establishes that
the information demanded "is not reasonably required by the recipient
for any legitimate purpose and that the release of the information
requested poses a substantial risk of harm to the partnership or any
partner." The test is structured so that the party desiring to avoid
disclosure must prove both [*768] elements. Disclosure would still
be required when the information is not reasonably required for any
legitimate purpose of the demanding partner but such disclosure does
not pose a substantial risk of harm to the partnership or any partner.
Partners have traditionally had wide access to partnership records,
and in the absence of harm to the partnership, this right ought not be
curtailed. Similarly, disclosure would be required when the
information is reasonably required for a legitimate purpose of the
demanding partner but such disclosure poses a substantial risk of
harm to the partnership or a partner. Presumably, in such a case a
court can order suitable protections to minimize the harm to the
partnership or partner at risk. The illegitimate purpose and substantial
risk of harm exception is not available for disclosures required under
either subsection (a) or subsection (b). Such an exception would be
inappropriate when dealing with partnership transactions or the sales
of partnership interests inter se, and the partners should have an
absolute right to partnership tax returns and process. Disclosures of
required partnership books and records, however, would come within
the exception of (d)(4). Thus, the partnership has the possibility of
disclosing only the filed returns and supporting schedules, and not
the background records, when there is proof of illegitimate purpose
and impending harm.
Paragraph (d)(5) establishes an exception, available for disclosures

required under subsection (a), when the disclosing partner can
establish "that the discloser no longer stands in a fiduciary role as to
the recipient, for reasons that make it equitable to avoid the
disclosure obligation otherwise existent." The paragraph restates the
exception to the common-law-based disclosure requirements of
subsection (a), when the disclosing partner is no longer a fiduciary as
to the recipient, for reasons that make it equitable to avoid the
disclosure obligation otherwise existent. For example, the disclosure
obligations would be suspended if the parties negotiated a firm price
for the partnership interest before the disclosing party received the
knowledge to be disclosed. n191 This narrow exclusion for disclosures
required under subsection (a) follows the common law without
essential modification.
My draft does not extend the (d)(5) exception to disclosures required

under subsections (b) and (c). By definition, the party [*769]
receiving information under subsection (b) is a partner. Thus, the
partnership should always be deemed to be a fiduciary of the
requesting partner and the exception could not ever come into play.
For the same reason, disclosures from the partnership under
subsection (c) should always be required. Disclosures from the
partners under paragraphs (c)(1) and (c)(2) should be allowed
whether or not the individual partners stand as fiduciaries to one
another, since partnership books and records cannot be the property
of an individual partner. Disclosures under (c)(3) should probably be
required for the same reason. Disclosures under (c)(4) could be
blocked by a court upon a finding that the disclosure would not be
"just and reasonable."
Subsection (e) provides a cost recovery mechanism for the production

of copies of partnership books and records.
Finally, subsection (f) contains two definitions. The first, the
definition of the term "partners," contains both the UPA section 20
inclusion of "the legal representative of any deceased partner or
partner under legal disability" n192 and the ABA and Conference
drafters' inclusion of former partners, n193 and the agents and
attorneys of partners. n194 The second, the definition of the term
"information," contains the UPA qualification of "true and full
information" n195 and the concept that information must be presented
in a timely manner.
4. Section 20X
To accommodate the special needs of high-tech and other

sophisticated joint venturers, a new section, which I have called 20X,
should be added. It would read:
§ 20X. Sophisticated Joint Ventures.
In each case absent the contrary agreement of the partners in the

particular sophisticated joint venture, the following provisions shall
apply to sophisticated joint ventures hereunder:
(a) Definitions.
(1) The term "partner information" shall mean the confidential or

proprietary information of a partner in a sophisticated joint venture
which is not otherwise included in the classification of venture
information.
[*770] (2) The term "sophisticated joint venture" shall mean:
a. a partnership which is both:
1. created pursuant to a written partnership agreement, and,
2. created with a business purpose which is limited in scope at

inception;
b. where the parties to the partnership:
1. are business entities or individuals with substantial business

experience, and,
2. are represented in the formation of the partnership by separate

legal counsel;
c. where the partnership agreement contains an election to adopt

status as a sophisticated joint venture under this section.
(3) The term "venture information" shall mean the confidential or

proprietary information of a sophisticated joint venture, including but
not limited to both original information developed by the
sophisticated joint venture and the confidential or proprietary
information of a partner in the sophisticated joint venture which
either:
a. becomes known to the sophisticated joint venture with permission

from the disclosing partner for unrestricted dissemination, or,
b. becomes known to the sophisticated joint venture with permission

from disclosing partner for restricted dissemination, where the
sophisticated joint venture is acting in compliance with such
restrictions.
(b) Access to Sophisticated Joint Venture Books and Records. The

partners in a sophisticated joint venture may by written agreement
limit the access of any or all of them to designated partner or venture
information. Such agreements shall prevail over the statutory right to
such information from the sophisticated joint venture concerning the
sophisticated joint venture's business as is reasonably required for
the exercise of such partners' rights under section 18(f), and shall
prevail over the statutory right to information under section 20.
(c) Injunctive and Other Relief. Either the sophisticated joint venture
or any partner therein may obtain an injunction against the exercise
of a partner's right to information under section 20(c), when the
moving partner establishes that the request for information is not
made in good faith and for a proper purpose. The issuing court may
in its discretion fashion a more limited remedy, including but not
limited to an order allowing receipt of the information by the partner
requesting it, under bond and with limitations on the dissemination or

use of such information.
[*771] (d) Transactions Between the Joint Venturer and the

Sophisticated Joint Venture. Notwithstanding any contrary common
law or statutory requirement, in transactions between partners in
sophisticated joint ventures and the sophisticated joint venture,
partners need make only those disclosures of partner information that
are commercially reasonable under the circumstances, as long as the
disclosures made by such partner are not affirmatively and materially
misleading when taken as a whole.
(e) Trading in Sophisticated Joint Venture Interests Among the Joint

Venturers. Notwithstanding any contrary common law or statutory
requirement, partners in sophisticated joint ventures need make no
disclosures of partner or venture information when trading in interests
in the sophisticated joint venture among themselves.
The special section on sophisticated joint ventures contains certain

default changes in the partnership structures. A venture meeting the
definitional requirements for a sophisticated joint venture could opt
into the regime by the inclusion of an election in the partnership
agreement. In each case, the default provisions can be overridden.
Thus, the venture could opt into the general changes and then fine
tune the regime to its particular needs.
The election of sophisticated joint venture status is limited to certain

partnerships. Unlike a traditional partnership, n196 a sophisticated
joint venture must be created pursuant to a written partnership
agreement that contains an election to adopt the status of a
sophisticated joint venture. This reflects both a policy judgment that
such entities should be formed with the benefit of a written
agreement and a desire to eliminate any confusion as to the status of
the entity. To qualify, the entity must represent that it was created
with a business purpose. Thus, nonbusiness ventures are excluded,
but not-for-profit consortia such as Sematech are allowed. The entity
must further represent that the business purpose was limited in scope
at inception. The limited purpose requirement follows the traditional,
if somewhat murky, distinction between partnerships and joint
ventures. n197 The scope of the test is deliberately limited to the
inception of the enterprise. Once the status of the venture is
established, the participants should not have to worry about
b td l
…dom.edu/hottopics/lnacademic/ t [*772] h i t t 52/92
subsequent developments [*772] or changes in strategy
compromising their arrangements. The participants must also meet
two definitional requirements. They must be "business entities or
individuals with substantial business experience" and they must be
represented in the formation of the partnership by separate legal
counsel. These requirements are designed to avoid the victimization
of unsophisticated participants through the election of sophisticated
joint venture status when that status is inappropriate.
Enterprises meeting the definitional requirements and electing

sophisticated joint venture status would benefit from several
improvements over the traditional partnership regime. First, the
partners could override the general right to information under section
18(f) and by written agreement limit the access of any or all of them
to designated partner or venture information. n198 Thus, the
Eisenberg right to information, which is codified in my proposal at
section 18(f), is subject to limitation without having to exclude the
partner from participation in business decisions. The parties could
also elect to override the statutory disclosure obligations under
section 20, although this is not self-executing, and the parties would
have to affirmatively specify the modifications to revised section 20.
Second, the inspection rights of partners under section 20(c) are

subject to a good-faith and proper-purpose limitation. The burden on
moving to block such access is placed on the enterprise or another
partner, which can move for an injunction. The injunction
contemplated is against receipt of the information, thus eliminating
one potential problem under current case law, although the issuing
court is specifically empowered to fashion a more limited remedy.
Third, the common-law requirement for disclosures in transactions

between a partner and the partnership is modified. Under my draft,
the party required to disclose under the common law is relieved of
such obligation only to the extent that the full range of common-law
disclosure is not "commercially reasonable [*773] under the
circumstances," and if the disclosures made in lieu of the full
common-law disclosures "are not affirmatively materially misleading
when taken as a whole." The language is not wholly satisfying, but it
does contain the two elements that any acceptable formulation must
address. The disclosing party should have the benefit of being
i dt k
…dom.edu/hottopics/lnacademic/ l h di l bl d th 53/92
required to make only such disclosures as are reasonable under the
circumstances, and the recipient party should have the assurance that,
understanding the disclosure is less than complete, the overall picture
painted by the disclosure is not substantially misleading. While
different formulations are possible, that balance must be struck.
Finally, the common-law requirement relating to disclosures on the

purchase and sale of partnership interests between partners is
eliminated. These sophisticated parties should rely on their own
information and analysis when making such determinations.
VII. CONCLUSION
With great solemnity, generations of lawyers and judges have recited

the essence of duty in the joint venture relationship, as distilled by
Cardozo in Meinhard v. Salmon: "the duty of the finest loyalty . . .
something stricter than the morals of the market place . . . the
punctilio of an honor the most sensitive, is . . . the standard of
behavior." n199
Thereupon, with a wink and a nod, those same lawyers and judges
proceeded to argue and decide cases based on a much narrower set
of rules governing the relations of partners among themselves.
Especially when dealing with the partners' obligations to disclose
information to one another, the lawyers and judges circumvented the
impractical results of the Cardozo pronouncement and fashioned a
narrowly defined set of circumstances in which disclosure would be
required.
But you cannot play penny poker in the church basement forever.
Either a young new priest arrives who takes it all too seriously, or the
stakes get too high for it to be a friendly game. In the same way, the
days of the Cardozo wink and nod on joint venture disclosures should
be coming to an end. Like the new priest full of good intentions, the
ABA and the RUPA drafters take seriously the policy statements of the
higher authorities. And like the penny ante card game grown up, the
stakes in high-tech [*774] joint ventures have simply become too
large to depend on the benign neglect of the powers-that-be to
protect the pot.
It is initially not a comfortable position to argue that the duty of

It is initially not a comfortable position to argue that the duty of
disclosure in a joint venture should be something less than complete,
that the minimum standard of conduct among joint venturers ought to
be something short of "the punctilio of an honor the most sensitive."
But the record is clear that courts -- even the Cardozo court in
Meinhard -- have always recognized the practical limits of the lofty
obligation. The business community's infatuation with high-tech joint
ventures has suddenly increased the stakes on the table. It would be
a mistake to change the statutes to match Cardozo's lofty rhetoric and
unreasonably increase the burden on participants, as the Conference
drafters come perilously close to doing with their self-executing
plenary formulation of section 20. Rather, we should candidly admit
that the rhetoric has always outpaced the reality. We should accept
the realistic limits on the general obligation to disclose, indicated by
the case law and practical considerations, and we should acknowledge
the special requirements of sophisticated and high-tech joint
venturers by fashioning a specific statutory regime for their use.
Legal Topics:
For related research and practice materials, see the following legal
topics:
Business & Corporate LawJoint VenturesFormationBusiness &
Corporate LawJoint VenturesManagement Duties & LiabilitiesMergers
& Acquisitions LawAntitrustJoint Ventures
FOOTNOTES:
n1 Although there is some truth to the observation that "[t]hrough a

mixture of destiny, default and design, virtually every important
industry in the United States is becoming high-tech," Schrage, The
Lure of New Technologies: Companies Radically Reshaping Old
Business Values, Traditions, Wash. Post, Jan. 13, 1985, at E1, col. 3,
this discussion will focus primarily on examples in the "traditionally
high-tech" areas of information processing and dissemination,
pharmaceuticals, biotechnology and basic research.
n2 See, e.g., Henderson, Biotech Firms Reach Overseas for Partners,

Wash. Post, May 19, 1985, at H1, col. 1.
n3 See, e.g., Forry & Joelson, Preface to JOINT VENTURES IN THE

UNITED STATES at v (J. Forry & M. Joelson eds. 1988) [hereinafter
Forry & Joelson, Preface]; McCoy, Competitors Team Up: Joint Efforts
Reduce Project Risks, HIGH TECH. BUS., Jan. 1988, at 17.
n4 See, e.g., Henderson, supra note 2, at H4 (" 'It is necessary for

start-up companies to fund operations from sources other than sales
revenue . . . . It often means trading future rights to moneyed
organizations with a lesser grasp on the technology. We are
technology-rich, but less well-heeled.' Business relationships with
foreign firms provide U.S. companies with critical financial support . .
. .") (quoting Thomas D. Kiley, vice president of Genentech, Inc., a
biotech firm engaged in joint ventures).
n5 For example, a proposed joint venture between Delta Air Lines and
American Airlines to combine their computer reservation systems was
developed in part to overcome "the nagging regulatory issues"
surrounding the two airlines' individually owned systems. Delta Airline
and American Airlines Agreement, PR Newswire, Feb. 6, 1989 (NEXIS,
Current library). The gambit did not succeed; the airlines announced
abandonment of the joint venture when the Justice Department
announced that it would initiate a civil antitrust suit to block the
combination. Washington Roundup, AVIATION WEEK AND SPACE
TECH., June 26, 1989, at 27.
n6 See, e.g., Foreign Investment Makes U.S. Auto Industry More

Productive, Study Says, 1990 Daily Rep. for Executives (BNA) No. 75,
at A-4 (Apr. 18, 1990) (The Brookings Institution study, "Foreign-
Affiliated Automakers in the United States: An Appraisal," by
international economist Robert Z. Lawrence, concludes that such
ventures "have brought technological, management/employee
relations, and training innovations to the U.S. auto industry.").
n7 See, e.g., Henderson, supra note 2, at H4 ("Business relationships

with foreign firms provide U.S. companies with . . . a means to enter
worldwide markets . . . "); Wise, States News Service, Sept. 7, 1989
(NEXIS, Current library) (interview with Congressman Tom Campbell
concerning his legislative initiative to make American businesses
more competitive with Japanese businesses by relaxing statutory
impediments to joint ventures) Of course this is a two way street;
impediments to joint ventures). Of course this is a two-way street;
foreign companies looking for an entree into American markets also
look to the joint venture mechanism. See, e.g., Forry & Joelson,
Preface, supra note 3, at v.
n8 Schrage, U.S. Company Encourages Firm Relationships, Japanese-

Style, Wash. Post, Mar. 9, 1990, at G3, col. 1.
n9 Lewis, Are U.S. Companies Learning to Share?, N.Y. Times, Feb. 7,

1988, at 9, col. 1 (describing Sematech, a consortium of thirteen
private semiconductor companies).
n10 Armstrong, Charlap-Led HEM Revs Bid to Restore Its AIDS Drug,
Phila. Bus. J., July 24, 1989, at 1, col. 3.
n11 Delta Airline and American Airlines Agreement, supra note 5.
n12 Stuart, Strategic Issues in Strategic Partnerships, COMPUTER &

SOFTWARE NEWS, Sept. 19, 1988, at 37.
n13 Sometimes there is no effort to differentiate between partnership-

and corporate-based joint ventures. See, e.g., Incantalupo, She Can
See GM Back in the Driver's Seat, NEW YORK NEWSDAY, Apr. 25,
1990, at 61, 64 (describing the General Motors-Toyota jointly owned
automobile production corporation, New United Motor Manufacturing,
Inc., as a "joint car-building venture"). Less frequently, commentators
use the term joint venture consciously to mean both partnership- and
corporate-based vehicles. See, e.g., Forry & Joelson, Preface, supra
note 3, at v; Dobkin, Burt, Harker & Somay, Joint Venturing by
Turkish and American Firms for U.S. Defense Procurements, MIDDLE
EAST EXECUTIVE REP., July 1988, at 8 [hereinafter Joint Venturing].
n14 See, e.g., Stuart, supra note 12, at 37.
n15 See, e.g., Delta Airline and American Airlines Agreement, supra
note 5.
n16 Schrage, supra note 8, at G3.
n17 See 15 U.S.C. § 638 (1988) (noting, in the Declaration of Policy

at (a), that "[t]he expense of carrying on research and development
programs is beyond the means of many small business concerns;" 57/92
programs is beyond the means of many small-business concerns;
directing at (d)(1) that the federal government assist and encourage
small businesses "to undertake joint programs for research and
development carried out through such corporate or other mechanism
as may be most appropriate for the purpose;" and granting at (d)(3)
that "[n]o act or omission to act pursuant to and within the scope of
any joint program for research and development, under an agreement
approved . . . under this subsection, shall be construed to be within
the prohibitions of the antitrust laws or the Federal Trade Commission
Act [15 U.S.C. 41 et seq.]"); see also 15 U.S.C. §§ 4301-4305 (1988)
(The National Cooperative Research Act, which applies to basic
research activities, includes provisions insulating such activities from
being declared per se illegal under the antitrust laws, id. § 4302,
limiting damages, id. § 4303, and attorney fee awards, id. § 4304, in
antitrust cases involving such activities.).
n18 At common law the differences between joint ventures and

partnerships were slight, with joint ventures being characterized at
various times by the lack of a partnership-entity representation,
somewhat more limited purposes, and a somewhat shorter duration.
See, e.g., Smith v. Metropolitan Sanitary Dist., 77 Ill. 2d 313, 318,
396 N.E.2d 524, 527 (1979) ("a joint venture is an association of two
or more persons to carry out a single enterprise for profit"); Wiley N.
Jackson Co. v. City of Norfolk, 197 Va. 62, 67, 87 S.E.2d 781, 784
(1955) ("a joint adventure, which is a special combination of two or
more persons, where in some specific undertaking of a business
nature a profit or other gain or benefit is jointly sought without any
actual partnership or corporate designation").
One substantive difference in some jurisdictions has been the

existence of a prohibition on corporations being partners in general
partnerships without a parallel prohibition on corporations being joint
venturers.
[I]t appears to be well-established as the majority rule that a

corporation, in the absence of express statutory or charter authority
to do so, has no power to become a partner . . .
...
Surprisingly enough in view of the close similarities between

Surprisingly enough, in view of the close similarities between
partnerships and joint adventures, the courts have usually found that
although the partnership relationship is beyond the scope of corporate
powers, there is nothing objectionable about a corporation becoming
a joint adventurer . . . ."
Annotation, Corporation's Power to Enter into Partnership or Joint
Venture, 60 A.L.R.2d 917, 919 (1958) (footnote omitted).
By its terms, the Uniform Partnership Act allows for corporate

partners. UNIFORM PARTNERSHIP ACT § 6(1), 6 U.L.A. 22 (1969)
[hereinafter UPA], defines "partnership" as "an association of two or
more persons." UPA § 2, 6 U.L.A. 12 defines "person" to include
"individuals, partnerships, corporations, and other associations."
Once past the bar on corporate partners, the common law made few
substantive differentiations between partnerships and joint ventures.
See, e.g., Smith, 77 Ill. 2d at 318, 396 N.E.2d at 527 ("the rights and
liabilities of its members are tested by the same legal principles which
govern partnerships"); Wiley N. Jackson Co., 197 Va. at 67, 87 S.E.2d
at 785 ("The relations of the parties to a joint adventure and the
nature of their association are so similar and closely akin to those of
partners that it is commonly held that their rights, duties and
liabilities are to be tested by rules which are substantially the same as
those which govern partnerships."); 1 A. BROMBERG & L. RIBSTEIN,
BROMBERG AND RIBSTEIN ON PARTNERSHIP § 2.06(a), at 2:42-:43
(1988) ("[M]ost courts have chosen to distinguish between isolated
transactions and continuing enterprises by classifying the former as
joint ventures and applying partnership law with little or no
modification."). The primary differences have been in the scope of
liability for usurpation of partnership/joint venture opportunities and
in the degree to which the partner must refrain from outside business
activities. Id. § 6.07 Lest joint venturers intent on sharp practices
gain too much comfort from the differentiation, however, it should be
noted that the parties in Meinhard v. Salmon were classic joint
venturers and not partners. Meinhard v. Salmon, 249 N.Y. 458, 463,
164 N.E. 545, 546 (1928).
The Uniform Partnership Act does not speak in terms of joint

ventures, treating all such entities as either partnerships within the
coverage of the Act or nonpartnerships outside its coverage. It seems
clear that under the test in § 7 of the Act see UPA § 7 6 U L A 38- 59/92
clear that under the test in § 7 of the Act, see UPA § 7, 6 U.L.A. 38-
39, most of the business arrangements here under review would be
classifiable as partnerships. Indeed, even under the common-law test,
many would be classified as partnerships and not joint ventures given
their broadly defined purposes and relatively long durations.
Finally, the drafters of the first proposed revision of the Uniform

Partnership Act faced the question squarely and provided that "[a]
joint venture is a partnership and is subject to the provisions of this
[Act]." UPA § 6(1), at 11 (Tent. Draft 1989) [hereinafter RUPA-89].
The subsequent draft addressed the "Joint Venture Issue" and
reversed the earlier blanket inclusion on the basis of the conclusion
that "not every relationship called a joint venture rises to the level of
partnership." U.P.A. § 7 comment, at 20 (Tent. Draft 1990)
[hereinafter RUPA-90]. After noting the theoretical "possibility that at
least some kinds of joint ventures will be found to be outside the
UPA," id. at 21, the drafters conclude by quoting Professor Eisenberg
to the effect that some result-oriented courts have created a
differentiation between general partnerships and joint ventures when
the same result could be achieved by simply finding an agreement
between the parties overriding the applicable UPA provision. Id. at 22
(citing M. EISENBERG, AN INTRODUCTION TO AGENCY AND
PARTNERSHIP 88-90 (1987)). Presumably, the final draft of the
Revised Uniform Partnership Act will clarify the point.
n19 Lewis, supra note 9, at 9, col. 1.
n20 Armstrong, supra note 10, at 31.
n21 Webber, Ricochet Change Across the Pacific, HARV. BUS. REV.,
Sept.-Oct. 1988, at 144.
n22 Id. at 148.
n23 Id.
n24 See, e.g., Baillie, Intellectual Property in the U.S. and Research
and Development Joint Ventures, in JOINT VENTURES IN THE UNITED
STATES, supra note 3, at 76. For purposes of this discussion I shall

refer to the classifications as "venture information" and "participant
information " respectively I say that participant information is not
information, respectively. I say that participant information is not
primarily proprietary to the venture since, although the venture may
have an interest in preserving the confidentiality of the information
either because of the interest of the participant or because the venture
has an interest in preventing the value of the information from being
appropriated by nonparticipants, this venture interest is secondary to
that of the participant.
n25 Of course, to say that the venture has an interest in maintaining

such confidentiality is simply a shorthand for saying that the
participants have a shared interest ex ante in the maintenance of
confidentiality.
n26 Meinhard v. Salmon, 249 N.Y. 458, 164 N.E. 545 (1928).
n27 NBC Sues Sony/Columbia in Video "Plot," L.A. Times, Mar. 16,
1990, at D5, col. 4.
n28 This is of course not the only option. The parties could agree, for
example, that they would have full access to venture information, but
would not make use of the information until the conclusion of the
project. One problem with such a solution is that in order to monitor
compliance, the venturers would have to make their internal
operations open to inspection, thus jeopardizing their purely internal
information. Another problem is that, given the way in which high-
tech information is utilized, it is often extraordinarily difficult and
expensive to prove the use, or misuse, of such information.
n29 Sematech's Noyce Urges U.S. Adoption of Strategy to Address

Japan Challenge, 6 Int'l Trade Rep. (BNA) No. 11, at 320-21 (Mar. 15,
1989).
n30 Commenting on concerns that technology developed at

SEMATECH will flow to Japanese chip firms as a result of joint
ventures, [Sematech President Robert] Noyce said that there is no
way to stop the spread of technological advances. The only advantage
the U.S. firms have is one of time, he said, where U.S. firms can get a
jump of 12-15 months on their Japanese competitors. Addressing
concerns centered on a joint venture between Texas Instruments -- a

SEMATECH member -- and Hitachi to make 16 megabit dynamic
random access memory chips (DRAMs) Noyce said he had "complete
random access memory chips (DRAMs), Noyce said he had complete
faith" in TI's ability to keep technology advances coming out of
SEMATECH to itself, noting that it is not the intention of joint ventures
"to give away the store."
Id. at 321.
n31 The General Motors-Toyota joint venture, New United Motor

Manufacturing, Inc., is actually structured as a corporation, not a
partnership, but the factual illustration remains helpful in illustrating
the potential problems for partnership-based joint ventures.
n32 Abbott, United Press Int'l, Feb. 7, 1984 (NEXIS, Current library)
(quoting General Motors Corp. Chairman Roger Smith).
n33 Schrage, supra note 1, at E1.
n34 NBC Sues Sony/Columbia in Video "Plot," supra note 27, at D16.
n35 The source code is the proprietary operating instructions for the
computer, written in machine-readable language. The smooth
transmission of data between programs might require the programmer
to have access to both the source code of the sending and receiving
computer. This would be particularly true where the source code used
nonstandard or unique coding, which might well be of increased
proprietary value.
n37 See, e.g., Stuart, supra note 12, at 38.
n38 See, e.g., Joint Venturing, supra note 13, at 8. This primer on
international joint ventures suggests measures for handling the flow
of information. After noting that one of the joint venturers in the
hypothetical has as a secondary purpose "to obtain for its own
purposes the technology and know-how that will be developed as a
result of the joint undertaking." id. at 17, the authors suggest a
stepped exchange of information. The first step, in the pre-joint-
venture stage, is an information-exchange agreement, under which
the two putative joint venturers can "exchange certain limited

technological and business information." Id. The primer does suggest
caution:
caution:
the technological and business information exchanged at this point is

necessarily limited. The U.S. firm must reveal enough of its
proprietary technology to demonstrate the feasibility and
innovativeness of the new systems, but not so much as to
compromise its proprietary rights. The disclosures must be
sufficiently substantive to demonstrate that each party can make a
meaningful contribution to the venture.
The agreement should make the disclosures subject to appropriate

confidentiality measures and the return of all information if
discussions are terminated. Promises of confidentiality in such
circumstances are, of course, no panacea in the event of deliberate or
inadvertent unauthorized disclosure. Where, however, the disclosures
are made in countries that recognize proprietary rights and afford
judicial enforcement of such rights, the risk is less. . . .
In any event, a careful assessment of the intentions of both parties is

required, and even information of a nonconfidential nature should not
be freely given if there is any reason to suspect improper motivation
on the part of the prospective partner.
Id. (footnotes omitted).
This initial exchange is followed, assuming the successful

investigation of the joint venture prospects, by the agreement
establishing the joint venture entity. It is noted that this document
should include provisions as to the treatment upon termination of
information supplied by the two parties. "The partners should also
discuss at the outset, and incorporate in their agreement, provisions
effective upon termination for the return of all confidential material,
coupled with continuing confidentiality requirements. . . ." Id. at 19.
The primer does not expand, however, upon the statutory and
common-law information disclosure obligations of the parties during
the pendency of the joint venture if it is structured as a partnership-
based joint venture, one of the options under consideration but not
ultimately adopted.
n39 Stuart, supra note 12, at 38, states:
In many hardware and software organizations information is the most

y
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important tool the organization has. Intellectual property and

proprietary technologies can be the core of the organization's
competitive advantage.
One of the risks involved with strategic partnerships is the potential

leak of information that is of critical importance to the firm.
...
In some cases an organization may have to terminate a strategic

partnership if they find that they cannot control the information that is
being contributed.
n40 See, e.g., Hennessy, Basic Forms and Terms of US Joint

Ventures, in JOINT VENTURES IN THE UNITED STATES, supra note 3,
at 12-14 (listing advantages and disadvantages of partnership-based
joint venture without mention of statutory and common-law internal
disclosure requirements).
n41 There is a lively debate on the essentially parallel question in

corporate law as to whether corporate participants should be free to
contract as they wish, unconstrained by external requirements. See
generally Butler & Ribstein, Opting Out of Fiduciary Duties: A
Response to the Anti-Contractarians, 65 WASH. L. REV. 1 (1990). On
one hand are the "contractarians," who argue for complete freedom of
contract. On the other are the traditionalists, the "anti-contractarians"
in Butler and Ribstein's nomenclature, who argue for the right of the
society, operating through the state, to impose certain conditions on
corporations. On balance, it seems that the traditionalists have the
better argument, since in any meaningful sense the society, acting
through the state, is a party to the contract through the grant of
limited liability, the establishment of governmental institutions to
assist the corporations in their activities, and the toleration of
corporate aggregations of power that would not exist but for the
permission of the state. The argument, although not at present
focused on general partnerships, becomes more interesting in this
area, since these three arguments do not apply.
n42 UPA § 18(e), 6 U.L.A. 213 (1969), provides that, absent the
contrary agreement of the partners, "[a]ll partners have equal rights
in the management and conduct of the partnership business."
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& Library Soluti…
n43 RUPA-89, supra note 18, § 20 comment, at 61; RUPA-90, supra

note 18, § 20 comment, at 65 (quoting in both instances M.
EISENBERG, supra note 18, at 42) (emphasis added).
n44 UPA § 20, 6 U.L.A. 256. The Uniform Partnership Act has been
adopted in every state but Louisiana, with the language of § 20 in the
Uniform Partnership Act incorporated into the statute of each adopting
state. ALA. CODE § 10-8-46 (1987); ALASKA STAT. § 32.05.150
(1986); ARIZ. REV. STAT. ANN. § 29-220 (1989); ARK. STAT. ANN. §
4-42-403 (1987); CAL. CORP. CODE § 15020 (Deering 1979); COLO.
REV. STAT. § 7-60-120 (1986); CONN. GEN. STAT. ANN. § 34-58
(West 1987); DEL. CODE ANN. tit. 6, § 1520 (1974); FLA STAT. ANN.
§ 620.655 (West 1977)0; GA. CODE ANN. § 14-8-20 (1989); HAW.
REV. STAT. § 425-120 (1985); IDAHO CODE § 53-320 (1988); ILL.
ANN. STAT. ch. 106 1/2, para. 20 (Smith-Hurd 1987); IND. CODE
ANN. § 23-4-1-20 (Burns 1989); IOWA CODE ANN. § 544.20 (West
1987); KAN. STAT. ANN. § 56-320 (1983); KY. REV. STAT. ANN. §
362.245 (Baldwin 1983); ME. REV. STAT. ANN. tit. 31, § 300 (1978);
MD. CORPS. & ASS'NS CODE ANN. § 9-403 (1985); MASS. ANN.
LAWS ch. 108A, § 20 (Law. Co-op. 1985); MICH. STAT. ANN. §
449.20 (Callaghan 1990); MINN. STAT. ANN. § 323.19 (West 1981);
MISS. CODE ANN. § 79-12-39 (1989); MO. ANN. STAT. § 358.200
(Vernon 1968); MONT. CODE ANN. § 35-10-403 (1989); NEB. REV.
STAT. § 67-320 (1986); NEV. REV. STAT. § 87-200 (1987); N.H.
REV. STAT. ANN. § 304-A:20 (1984); N.J. STAT. ANN. § 42:1-20
(West 1940); N.M. STAT. ANN. § 54-1-20 (1988); N.Y. PARTNERSHIP
LAW § 42 (McKinney 1988); N.C. GEN. STAT. § 59-50 (1989); N.D.
CENT. CODE § 45-07-03 (1978); OHIO REV. CODE ANN. § 1775.19
(Baldwin 1986); OKLA. STAT. ANN. tit. 54, § 220 (West 1969); OR.
REV. STAT. § 68.330 (1989); 15 PA. CONS. STAT. ANN. § 8333
(Purdon 1990); R.I. GEN. LAWS § 7-12-31 (185); S.C. CODE ANN. §
33-41-530 (Law. Co-op. 1990); S.D. CODIFIED LAWS ANN. § 48-3-
11 (1983); TENN. CODE ANN. § 61-1-119 (1989); TEX. REV. CIV.
STAT. ANN. art. 6132b, § 20 (Vernon 1970); UTAH CODE ANN. § 48-
1-17 (1989); VT. STAT. ANN. tit. 11, § 1243 (1984); VA. CODE ANN.
§ 50-20 (1989); WASH. REV. CODE ANN. § 25.04.200 (1969); W.VA.
CODE § 47-8a-20 (1986); WIS. STAT. ANN. § 178.17 (West 1989);
WYO. STAT. § 17-13-403 (1989). Even Louisiana, the only state that
has not adopted the Uniform Partnership Act, has statutory provisions
has not
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LexisNexis® Act,
Academic & Library has statutory provisions
Soluti…
which to some degree parallel §§ 20 and 21 of the UPA:
A partner may inform himself of the business activities of the

partnership and may consult its books and records, even if he has
been excluded from management. A contrary agreement is null.
He may not exercise his right in a manner that unduly interferes with
the operations of the partnership or prevents other partners from
exercising their rights in this regard.
LA. CIV. CODE ANN. art. 2813 (West Supp. 1990). The Civil Code
further states:
A partner owes a fiduciary duty to the partnership and to his partners.

He may not conduct any activity, for himself or on behalf of a third
person, that is contrary to his fiduciary duty and is prejudicial to the
partnership. If he does so, he must account to the partnership and to
his partners for the resulting profits.
Id. art. 2809.
In only three states has the language of § 20 been changed from that
of the Uniform Partnership Act: Florida modifies the Uniform Act text
by moving the phrase "on demand" to the beginning of the section:
"On demand partners shall render true and full information of all
things affecting the partnership to any partner or the legal
representative of any deceased partner or partner under legal
disability." FLA. STAT. ANN. § 620.655 (emphasis added). Georgia
varies the official text to: "Partners shall render, to the extent the
circumstances render it just and reasonable, true and full information
of all things affecting the partners to any partner and to the legal
representative of any deceased partner or of any partner under legal
disability." GA. CODE ANN. § 14-8-20 (emphasis added). Minnesota
makes the words "on demand" into a separate clause, and changes
the word "partnership" to "partnerships": "Partners shall render, on
demand, true and full information of all things affecting the
partnerships to any partner or the legal representative of any
deceased partner or partner under legal disability." MINN. STAT. ANN.
§ 323.19 (emphasis added). Only one state, Georgia, has modified
the uniform language to eliminate the demand component from the
enacted statute. GA. CODE ANN. § 14-8-20.
n45 Within § 19 the language "subject to any agreement between the
partners" clearly modifies the preceding clause, "[t]he partnership
books shall be kept," and the last clause, "and every partner shall at
all times have access to and may inspect and copy any of them." UPA
§ 19, 6 U.L.A. 254; see also A. BROMBERG, CRANE AND BROMBERG
ON PARTNERSHIP § 66, at 383 n.13 (1968) (characterizing the
language of § 19 as "rather oblique, since the statement is primarily
where they shall be kept, and only secondarily that they shall be
kept")(emphasis in original).
The informational right under § 22 apparently can be expanded, but

not restricted, by the agreement of the partners. "Any partner shall
have the right to a formal account as to partnership affairs . . . [i]f
the right exists under the terms of any agreement. . . ." UPA § 22, 6
U.L.A. 284.
n46 Uniform Partnership Act § 20 provides that "[p]artners shall

render on demand true and full information." UPA § 20, 6 U.L.A. 256
(emphasis added).
n47 The inspection right under § 19 and the right to an accounting

under § 22 necessarily presuppose an affirmative act of the partner
desiring the information.
The duty to account for profits made from the unauthorized use of
partnership property under § 21 is self-executing. But this is best
viewed as a modification of the right to an accounting under § 22,
where the benefited partner has all of the information that would lead
the disadvantaged partners to act, and is divulging the information as
trustee for the benefit of the disadvantaged partners.

note 18, § 20 comment, at 11 (quoting in both instances M.
EISENBERG, supra note 18, at 42).
n49 UPA § 20, 6 U.L.A. 256.
n50 See id. § 18(e), 6 U.L.A. at 213 ("The rights and duties of the
partners in relation to the partnership shall be determined, subject to
any agreement between them, by the following rules: . . . (e) All
y g
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partners have equal rights in the management and conduct of the

partnership business.").
n51 Id. § 19, 6 U.L.A. at 254.
n52 Exceptions to the general rule are found in some special purpose
joint ventures created under federal law. Under the Steel and
Aluminum Energy Conservation and Technology Competitiveness Act
of 1988, 15 U.S.C. §§ 5101-5110, "[t]he knowledge resulting from
research and development activities conducted under this chapter
shall be developed for the benefit of the domestic companies who
provide financial resources to the program," id. § 5103(b)(3), and the
"results from research and development activities" in the federally
sponsored joint venture can be kept confidential for up to five years,
id. § 5103(b)(4)(A). A parallel provision exists for confidential
information from participants in the National Institute of Standards
and Technology's Advanced Technology Program. Id. § 278n(d)(5).
n53 See, e.g., Saballus v. Timke, 122 Ill. App. 3d 109, 118, 460
N.E.2d 755, 760 (1983) ("As a general rule, one of the ordinary
duties of partners is to keep true and correct books showing the firm
accounts . . ."); 2 A. BROMBERG & L. RIBSTEIN, supra note 18, §
6.05(c), at 6:55 n.17 ("U.P.A. § 19 refers only to 'partnership books,'
which apparently includes only financial records . . ."); A.
BROMBERG, supra note 45, § 66, at 383 (concluding that the
applicable statutes do not specify what types of records are included,
but noting that applicable tax regulations would require financial
records for tax purposes).
n54 See, e.g., Lowell Perkins Agency,Inc. v. Decker, 256 Ark. 211,
212-13, 506 S.W.2d 559, 559-60 (1974) (operation of a garage under
an oral agreement); Royal v. Moore, 580 S.W.2d 159, 160-61 (Tex.
Ct. App. 1979) (operation of apartment building).
n55 A. BROMBERG,supra note 45, § 66, at 383.
n56 For example, one of the obligations of the auditor is "to
determine whether litigation, claims, and assessments have been

properly reflected in the financial statements in accordance with
generally accepted accounting principles." M. MILLER & L. BAILEY,
g
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GAAS GUIDE 8.36 (1986). The Financial Accounting Standards Board
standard requires that a loss contingency "be accrued by a charge to
income if . . .: (a) [i]nformation available prior to issuance of the
financial statements indicates that it is probable that an asset had
been impaired or a liability had been incurred at the date of the
financial statements . . . [and] (b) [t]he amount of loss can be
reasonably determined." CODIFICATION OF ACCOUNTING
STANDARDS AND PROCEDURES, Statement of Financial Accounting
Standards No. 5, P8 (Am. Inst. of Certified Pub. Accountants 1989).
In order to fulfill this obligation, "the auditor must collect evidential
matter (1) to identify circumstances that may result in a loss
contingency, (2) to identify the period in which the event occurred
that may lead to the loss contingency, (3) to support the probability
of the loss,and (4) to support the estimated loss or the estimated
range of the loss." M. MILLER & L. BAILEY, supra, at 8.36.
n58 In its litigation HEM charged that the access of Du Pont to the
records "violated Food and Drug Administration guidelines." Id. It
should be noted that UPA § 19 gives each partner access to
partnership books "at all times," even the dead of night, and allows
the inspecting partner to "inspect and copy any of them." UPA § 19, 6
U.L.A. 254 (1969).
n60 In the Ampligen case the auditor would be required to probe the
research documentation -- the key to the later controversy between
the parties -- in order to determine whether a loss contingency
needed to be accrued. See supra note 56 and accompanying text. If
the standard for inclusion in the classification "partnership books" is
whether information is required for audit purposes, then the sweep of
the classification would be very broad.
n61 The confidentiality of participant proprietary information is

addressed in some special-purpose joint ventures created under
federal law. Under the Steel and Aluminum Energy Conservation and
Technology Competitiveness Act of 1988, "[n]o trade secrets or
commercial or financial information that is privileged or confidential .
. . which is obtained from a domestic company shall be disclosed in
the conduct of the management plan or research plan, or as a result
of activities under this chapter." 15 U.S.C. § 5104(a). A parallel
provision exists for confidential information developed by joint
ventures funded under the National Institute of Standards and
Technology's Advanced Technology Program. Id. § 278n(d)(5).
n62 See A. BROMBERG, supra note 45, § 66, at 385 n.31.
n63 " The partnership books shall be kept, subject to any agreement
between the partners, at the principal place of business of the
partnership, and every partner shall at all times have access to and
may inspect and copy any of them." UPA § 19, 6 U.L.A. 254 (1969)
(emphasis added).
n64 See REVISED MODEL BUSINESS CORP. ACT § 16.02(b9)-(c)

(1989) (providing for inspection of certain board minutes, records of
committee actions, and records of shareholder actions only if the
demand for inspection is "made in good faith and for a proper
purpose").
n65 See A. BROMBERG, supra note 45, § 66, at 385 n.31 ("'[The
inspecting] partner's rights are not absolute. He may be restrained
from using the information gathered from inspection for other than
partnership purposes.'") (quoting Sanderson v. Cooke, 256 N.Y. 73,
175 N.E. 518 (1931)).
n66 UPA § 21(1), 6 U.L.A. 258 ("Every partner must account to the
partnership for any benefit, and hold as trustee for it any profits
derived by him without the consent of the other partners from any
transaction connected with the formation, conduct, or liquidation of
the partnership or from any use by him of its property.").
n67 Delta Airline and American Airlines Agreement, supra note 5.
n68 Slingerland v. Hurley, 388 So. 2d 587, 589 (Fla. Dist. Ct. App.
1980).
n69 Peskin v. Deutsch, 134 Ill. App. 3d 48, 54, 479 N.E.2d 1034,
1038 (1985).
n70 Meinhard v. Salmon, 249 N.Y. 458, 463-64, 164 N.E. 545, 546
(1928). For example, Professor Beane reproduces language from
Meinhard as the introduction to her article discussed in the following
section. Beane, The Fiduciary Relationship of a Partner, 5 J. CORP.
LAW 483, 483 (1980).
n71 H. REUSCHLEIN & W. GREGORY, HANDBOOK ON THE LAW OF

AGENCY AND PARTNERSHIP § 189 (1979) (citing Starr v.
International Realty, Ltd., 271 Or. 396, 533 P.2d 165 (1975); Johnson
v. Buck, 540 S.W.2d 393 (Tex. Ct. App. 1976)).
n72 The narrowing of the disclosure obligation pronounced in the

rhetoric of the decisions goes beyond the limitation of the obligation
to the classes of situations noted. It also takes place by
circumscribing both the information deemed material and the parties
subject to the requirement even within the defined classes. For
example, one court appeared to be ready to find a duty to disclose
when it observed that the "utmost good faith is required of partners in
their relations with each other; [and] that one is the confidential
agent of the other and is required to make full disclosure of all
material facts within his knowledge in relation to their partnership
affairs." Florida v. Wilkerson, 247 S.W.2d 678, 682 (Mo. 1952).
Wilkerson involved a situation in which one of the partners had been
dispatched to negotiate a potential acquisition. During the course of
negotiations, it developed that the seller was putting a condition on
the sale that the negotiating partner stay to manage the acquisition.
This condition was rejected by the other partners and negotiations
were broken off. The negotiating partner then arranged for his
partners to buy out his interest in the partnership without disclosing
that he had agreed to purchase the former acquisition target for his
own account. Id. at 679-82.
But having stated the disclosure obligation in sweeping terms, the

Wilkerson court adopted a factually narrow interpretation and held
that his acquisition of the former target was not a material fact in
relation to the partnership affairs. Id. at 682. The position that his
acquisition could be deemed not material to the partnership in its
discussions on terminating his participation is remarkable; that the
fiduciary bonds could be so restricted following the Meinhard-esque
rhetorical windup is not unusual, however.
Wilkerson dealt with the type of information required to be disclosed.

Another range of cases restricts the generalized common-law
disclosure requirements by narrowing the class of parties subject to
the disclosure requirement. These include an exception to the
fiduciary-based obligation to disclose when there is an agreement to
terminate the partnership and the partners are found to be dealing as
between themselves at arm's length and not as fiduciaries.
In Algernon Blair Group, Inc. v. Corneal, joint venturers had a falling

out and through a settlement agreement structured an option to
purchase for the minority interest holder. No. 86-4465 (E.D. Pa. Feb.
18, 1988) (LEXIS, Genfed library, Dist file). Thereupon, the minority
venturer sought financing and, unable to find financing, sought a
purchaser for the joint venture assets. The court found no fiduciary
duty to disclose because "the settlement agreement . . . significantly
altered the relationship of the parties and . . . they buy-sell clause
placed them in an arms-length posture each free to pursue its own
interest." Id. at * 17-18. The court indicated that the outcome would
have been different "if there were a committed purchaser waiting in
the wings at the time the settlement agreement was executed." Id. at
* 18. But after the buy-sell was negotiated, there was no duty to
disclose: "There is no duty to disclose matters affecting the value of
the assets once the buy out price has been determined since it would
serve no purpose." Id. at * 18-19 (citing Kaufmann v. Kaufmann, 222
Pa. 58, 70 A. 956 (1908)).
That the court in Algernon Blair considered the underlying disclosure

obligation terminated, and not merely suspended on the question of
the buy-sell price, is made clear by the post buy-sell agreement
conduct of the parties. The minority interest holder negotiated an
extension of the buy-sell agreement without disclosing the
prospective purchaser. At trial, the majority interest holder stated
that, had it been informed of the third party offer, it would have
denied the extension requested by the minority interest holder and
exercised its secondary buy-sell option, thereby appropriating the
entire benefit of the pending sale of joint venture property. "That,"
the court observed, "is precisely what motivated [the minority interest
holder] in withholding the information. This demonstrates beyond
peradventure that with respect to the rights and obligations of the
parties under the settlement agreement, they were adversaries and
neither had any fiduciary duty with respect to the other." Id. at * 21.
n73 H. REUSCHLEIN & W. GREGORY, supra note 69, § 189, at 280

(citing Starr v. International Realty, Ltd., 271 Or. 396, 533 P.2d 165
(1975)).
n74 While the dissolution situation could be covered under the second
classification, as a transaction between the partners themselves, see,
e.g., Allen v. Sanders, 176 Ga. App. 647, 337 S.E.2d 428 (1985),
transactions between a partner and the partnership during the term of
the partnership should certainly be included and indicate the
appropriateness of a general expansion of the classification.
n75 Meinhard v. Salmon, 249 N.Y. 458, 164 N.E. 545 (1928).
n76 Bakalis v. Bressler, 1 Ill. 2d 72, 115 N.E.2d 323 (1953).
n77 Peskin v. Deutsch, 134 Ill. App. 3d 48, 479 N.E.2d 1034 (1985).

(citing Johnson v. Buck, 540 S.W.2d 393 (Tex. Ct. App. 1976)).
n79 Johnson v. Peckham, 132 Tex. 148, 120 S.W.2d 786 (1938).
n80 Alexander v. Sims, 220 Ark. 643, 649-50, 249 S.W.2d 832, 836
(1952) ("[W]e think that [the defendant] failed to observe and obey
the rule which requires partners to exercise the utmost good faith in
their dealings with each other," when the defendant, with knowledge
of her partner's impending death, got the unsuspecting but soon to be
deceased partner in the two-person partnership to sign a mutual
agreement giving a deceased partner's interest to the survivor.).
n81 Patrick v. Bowman, 149 U.S. 411, 420 (1893). The Patrick court
faced a situation in which the acquiring partner, who was also the
managing partner, knew of a rich mineral strike prior to the
consummation of his purchase of the partnership interest. The court
noted, but did not rely upon, conflicting evidence of a demand for
information by the seller, and qualified the duty to disclose:
If, [when the minerals were discovered], there was a completed

d t di b t
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understanding between them that [the acquiring partner] was to buy
out [the selling partner's] interest and release him from his liability
upon the note, there was no obligation to make such disclosure. If,
upon the other hand, no such understanding had been reached, it was
then incumbent upon [the acquiring partner] to inform [the selling
partner] of the progress of the work before taking from him the deed.
...
Id.
n82 Graham v. Stratton, 339 F.2d 1004, 1008 (7th Cir. 1964).
n83 " Facts, such as those appearing on the firm books, to which all
the partners have equal access need not be divulged." H.
REUSCHLEIN & W. GREGORY, supra note 71, § 189, at 280 (citing
Bradley v. Marshall, 129 Vt. 635, 285 A.2d 745 (1971)).
n84 Of some assistance on this point is Sanderson v. Cooke, 256 N.Y.

73, 80-81, 175 N.E. 518, 520-21 (1931), which, although framed in
the context of a request to examine partnership documents and not a
request for information per se, suggests that the motive and objective
need of the partner for the disclosure would be considered.
n85 The Uniform Partnership Act does not, by its terms, affirmatively
provide that the partners are fiduciaries to each other. The only use of
the term "fiduciary" in the Uniform Partnership Act is in the title to
Uniform Partnership Act § 21, "Partner Accountable as a Fiduciary."
UPA § 21, 6 U.L.A. 258 (1969).
n86 Id. § 5, 6 U.L.A. at 19 ("In any case not provided for in this act
the rules of law and equity . . . shall govern."). The nature and extent
of the fit between the Act and the common law has been the source of
varying judicial interpretations, some finding the common law to be
superseded when a topic is covered in the Act, see, e.g., Chien v.
Chen, 759 S.W. 2d 484, 491 (Tex. Ct. App. 1988).
n87 H. REUSCHLEIN & W. GREGORY, supra note 71, § 189, at 280.
n88 See, e.g., Alexander v. Sims, 220 Ark. 643, 649-50, 249 S.W.2d
832, 836 (1952); Bakalis v. Bressler, 1 Ill. 2d 72, 81-82, 115 N.E.2d
323, 328 (1953); Kreutz v. Jacobs, 39 Ill. App. 3d 515, 519-20, 349
2d 93 9 ( 9 6)
…dom.edu/hottopics/lnacademic/ Off 266 d 93 96 98 29 74/92
N.E.2d 93, 95 (1976); Herring v. Offutt, 266 Md. 593, 596-98, 295
A.2d 876, 879 (1972); Johnson v. Buck, 540 S.W.2d 393, 399 (Tex.
Ct. App. 1976).

(citing Starr v. International Realty, Ltd., 271 Or. 396, 533 P.2d 165
(1975)).
n90 See, e.g., Joint Venturing, supra note 13, at 17 (citing need for a
pre-memorandum-of-understanding "information exchange
agreement" to provide for confidentiality in the preliminary disclosure
phase).
n91 An alternative would be simply to eliminate the common-law

disclosure obligation on participants in high-tech joint ventures when
dealing with transactions between the participant and the venture.
This alternative has the attraction of being simple in operation. On
balance, however, it goes too far and leaves the situation too open to
abuse.

(citing Johnson v. Buck, 540 S.W.2d 393 (Tex. Ct. App. 1976)).
n93 It is assumed that the development is truly independent and not

within a Meinhard v. Salmon-type obligation to surrender the
development to the joint venture.
n94 Note that it would not have a self-executing obligation to disclose

under the Uniform Partnership Act, either. It would, however, have an
obligation to disclose upon a § 21 request being made by a
coventurer.
n95 Nor is it a protection against another participant seeking to exit,

when the agreement requires the remaining participants to purchase
the exiting participant's interest at some nonfixed price, since the
disclosure obligation includes both the seller and the buyer.
n96 Graham v. Stratton, 339 F.2d 1004, 1008 (7th Cir. 1964).
n97 Beane, supra note 70, at 491-92 (footnotes omitted). In support

of her formulation of the "expanded" disclosure obligation Professor
of her formulation of the "expanded" disclosure obligation, Professor
Beane cites two cases, Libby v. L.J. Corp., 247 F.2d 78 (D.C. Cir.
1957), and Auld v. Estridge, 86 Misc. 2d 895, 382 N.Y.S.2d 897 (Sup.
Ct. 1976); see also infra note 101 and accompanying text.
n98 Simplicity of formulation ought not in this case be confused with

practicality: the disclosure regime that the merger analysis suggests
would be unworkable. The conditions under which disclosure is
mandated are far too broad. As formulated by Professor Beane, the
merged obligation does not even explicitly contain the common-law
exception for information that is either known to the party receiving
the disclosure or equally available to such party. See A. BROMBERG,
supra note 45, § 67; 1 N. LINDLEY, W. GULL & W. LINDLEY, A
TREATISE ON THE LAW OF PARTNERSHIP *303.
n99 UPA § 20, 6 U.L.A. 256 (1969).
n100 Some thirteen states have statutory provisions governing the

interpretation of statutes, the baseline assumption of which is that
unambiguous statutory language is to be applied as written. See, e.g.,
COLO. REV. STAT. § 2-4-203 (1980) (adopting UNIFORM STATUTORY
CONSTR. ACT § 15 (1980)); MINN. STAT. ANN. § 645.16 (West 1947)
("When the words of a law in their application to an existing situation
are clear and free from all ambiguity, the letter of the law shall not be
disregarded under the pretext of pursuing the spirit."). As to those
states where there is no statutory construction provision on point in
the statutes, the case law either requires ambiguity in the statute, or a
parallel situation such as absurdity of result, as a predicate for
recourse to the rules of construction. Also, some courts hold that the
standard for interpreting a facially unambiguous statute is so
extraordinarily burdensome that it prevents construction as a practical
matter when dealing with language as unambiguous as that of UPA §
20. See, e.g., Cilley v. Lamphere, 206 Conn. 6, 9-10, 535 A.2d 1305,
1308 (1988); County of DuPage v. Graham, Anderson, Probst &
White, Inc., 109 Ill. 2d 143, 151, 485 N.E.2d 1076, 1079 (1985);
Storey v. Meijer, Inc., 431 Mich. 368, 376, 429 N.W.2d 169, 173
(1988).
n101 Beane, supra note 70, at 492 n.65. In Libby, the court faced the
classic diversion of a partnership opportunity, related to that
addressed by Judge Cardozo in Meinhard v. Salmon. The plaintiff and
th d f d t h d
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the defendants had entered into a joint venture to purchase and
develop some real estate. The other joint venturers had usurped the
opportunity by forming an entity to develop the property without the
plaintiff's participation. In reversing the trial court grant of summary
judgment in favor of the defendants, the court stated: "The
relationship of joint adventurers gives rise to certain reasonably well-
defined fiduciary duties and obligations. The duty imposed is
essentially one of good faith, fair and open dealing and the utmost of
candor and disclosure to all concerned." Libby, 247 F.2d at 81.
Professor Beane is incorrect in citing Libby as an example of the

expanded disclosure obligation arising from the merger of § 20 of the
Uniform Partnership Act and the common-law provisions. The Libby
court did not even cite § 20 of the Uniform Partnership Act,
presumably because Congress did not adopt the Uniform Partnership
Act for the District of Columbia until five years after the Libby
decision. (D.C. CODE ANN. § 41-119 (1990) was enacted in Act of
Sept. 27, 1962, Pub. L. No. 87-709, 76 Stat. 636.)
The other case cited by Professor Beane, Auld v. Estridge, is squarely

within the coverage of the common law, and is equally unavailing to
Professor Beane in establishing the merged, expanded disclosure
obligation. Auld involves "another of those cases which may be fairly
called business matrimonial disputes," 86 Misc. at 896, 382 N.Y.S.2d
at 898-99, where the issue is the valuation of the partnership upon
dissolution. Simply stated, the plaintiff established that the defendant
-- who was the managing partner of their enterprise -- liquidated the
business in return for stock; that the defendant failed to disclose fully
the nature of the stock received; and that the defendant did not fairly
allocate the liquidatin proceeds. The Auld court found a breach of the
defendant's fiduciary duty toward the plaintiff, and, citing "[t]he
classic statement of Chief Judge Cardozo in Meinhard . . . [which]
rings sonorously through the archives of this case," id. at 902, 382
N.Y.S.2d at 902, found that the managing partner
was under a duty to disclose to his partners information uniquely his,

which was fundamental to their enterprise. In the end, nothing was
more fundamental or basic to [the plaintiff's] interest in the business
than the price for which it was sold. Yet, [the managing partner] was
misleadingly silent here.
Id ( it ti itt d) Th A ld
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Id. (citation omitted). The Auld court did not refer to the Uniform
Partnership Act. It apparently based its disclosure holding on
Meinhard v. Salmon and Schneider v. Brenner, neither of which refer
to the Uniform Act disclosure provisions. See Meinhard v. Salmon,
249 N.Y. 458, 164 N.E. 545 (1928); Schneider v. Brenner, 134 Misc.
449, 235 N.Y.S. 55 (Sup. Ct. 1929). Uniform Partnership Act § 20 was
enacted in New York in 1919, prior to both Meinhard and Schneider.
1919 N.Y. Laws 408.
n102 See, e.g., Wortham & Van Liew v. Superior Court, 188 Cal. App.
3d 927, 932-33, 233 Cal. Rptr. 725, 728 (1987); Block v. Lea, 5 Haw.
App. 266, 278, 688 P.2d 724, 733, cert. denied, 67 Haw. 685, 744
P.2d 781 (1984); Fouchek v. Janicek, 190 Or. 251, 272-73, 225 P.2d
783, 793 (1950).
n103 E.g., Coleman v. Lofgren, 593 P.2d 632, 636 (Alaska 1979).
Coleman is interesting because the court quoted UPA § 20 with
emphasis on the demand component, and, seeing no evidence of
demand, found for defendant on the nondisclosure claim. The court
did not address any common-law theory requiring disclosure, which
might have been present given the facts of the case.
n104 It is true that courts, citing § 20 as their authority, have

required disclosure by partners of information affecting the
partnership without any record of a demand by a partner being made.
See, e.g., Berg v. King-Cola, Inc., 227 Cal. App. 2d 338, 341-43, 38
Cal. Rptr. 655, 657-58 (1964); Peskin v. Deutsch, 134 Ill. App. 3d 48,
52, 479 N.E.2d 1034, 1038 (1985); Jaffa v. Shacket, 114 Mich. App.
626, 640-41, 319 N.W.2d 604, 609 (1982); R.C. Gluck & Co. v.
Tankel, 24 Misc. 2d 841, 847, 199 N.Y.S.2d 12, 19-20 (Sup. Ct.
1960), aff'd, 12 A.D.2d 339, 211 N.Y.S.2d 602 (App. Div. 1961). But
in each case, one of two factors was present. Either the court found a
constructive demand, or the invocation of Uniform Partnership Act §
20 is surplusage since the situation would have required disclosure
even absent a demand under the common law.
One way to finesse the demand component while deciding the matter
under UPA § 20 is to find conduct which, although falling short of an
express demand for the specific information later at issue, constitutes
in effect a constructive demand. This is one reading which can be
given to the opinion in Berg v King Cola Inc The case involved an 78/92
given to the opinion in Berg v. King-Cola, Inc. The case involved an
investor who had been promised stock in a to-be-formed corporation
in return for her investment. The managing partner told the investor
that he had not formed the corporation, when in fact he had formed a
corporation and issued all of the stock to himself. The plaintiff did not
ask whether the corporation had been formed. She asked for her
stock. King-Cola, 227 Cal. App. 2d at 340-41, 38 Cal. Rptr. at 656-57.
The King-Cola court recited that the managing partner "was under a
legal duty to disclose to plaintiff matters affecting their business
relationship," citing UPA § 20 and making no reference to the demand
component. Id. at 341, 38 Cal. Rptr. at 657-58. But, at an earlier
point in the opinion, reference is made to conduct of the plaintiff that
could be taken to constitute a § 20 demand. Id. at 341-42, 38 Cal.
Rptr. at 657-58. Even absent a precisely worded demand, the court
characterized the plaintiff's requests in such a way as to supply the
demand component in § 20:
Plaintiff made frequent demands on [the managing partner] to give

her some evidence of her interest in the enterprise or to arrange for
stock to be issued by the corporation for her contributions, but [the
managing partner] each time put her off, stating that he did not have
time to take care of the matter. By his statements and conduct [the
managing partner] dissuaded plaintiff from pursuing any investigation
into the matter of issuance of stock.
Id. at 340, 38 Cal. Rptr. at 657.
The use of constructive demand does not evidence the type of merger
and expansion suggested by Professor Beane. The courts are, after
all, finding the predicate demand, or at least its functional equivalent.
Of course, the easiest way to finesse the demand component of § 20

is to cite to § 20 without quoting the language. For instance, in Covalt
v. High, 100 N.M. 700, 675 P.2d 999 (Ct. App. 1983) (citing N.M.
STAT. ANN. § 54-1-20 (1978)), cert. denied, 100 N.M. 631, 674 P.2d
521 (1984), the court concluded that "[a]s a fiduciary, each partner
has a duty to fully disclose to the other, all material facts which may
affect the business of the partnership." Id. at 702, 675 P.2d at 1001.
Contrast the court's conclusion with the language of the cited
statutory section: "Partners shall render on demand true and full
information of all things affecting the partnership to any partner or
the legal representative of any deceased partner or partner under
the legal representative of any deceased partner or partner under
legal disability." N.M. STAT. ANN. § 54-1-20 (1978). Another easy
way to finesse the demand component is simply to misquote § 20:
"The [Uniform Partnership] Act requires that partners render 'true and
full' information of all things affecting the partnership to their co-
partners. . . ." Peskin, 134 Ill. App. 3d at 52, 479 N.E.2d at 1037.
Certainly, the Uniform Partnership Act § 20 demand requirement has

been ignored in cases in which the common law would require
disclosure without a demand, with the courts combining the common-
law requirement with Uniform Partnership Act § 20 to find a
disclosure requirement that does away with the demand component,
seemingly on the basis of § 20. If one discounts the "constructive
demand" reading of King-Cola, for example, that case illustrates this
type. There is, under the King-Cola fact pattern, a clear obligation of
one partner to disclose to his partners his breach of an independent
fiduciary duty. This arises from the defendant's failure to issue stock
in the replacement corporate entity, in which his partner was to have
been given an interest, but in which the nondisclosing partner had
acquired all of the issued stock. A common-law-based obligation to
disclose is present, but the King-Cola court insisted on bringing
Uniform Partnership Act § 20 into the formulation in a way that -- if
one discounts the earlier constructive demand -- reads the demand
component out of the statutory section:
[The defendant] was a fiduciary, both because of the personal

relationship of trust and confidence found by the court, and because
of the confidential relationship which exists between partners, as a
matter of law. [The defendant] was under a legal duty to disclose to
plaintiff matters affecting their business relationship, and his failure
to disclose that he held the outstanding stock of King-Cola was a
breach of that duty, amounting to fraud.
King-Cola, 227 Cal. App. 2d at 341-42, 38 Cal. Rptr. at 657-58
(citations omitted) (citing California's version of § 20 of the Uniform
Partnership Act). The King-Cola court had perhaps telegraphed its
intention to stretch to find several grounds for recovery, and in the
process to muddle the § 20 analysis; given a compelling fact pattern
it had noted that "plaintiff is clearly entitled to a return of her money
on one theory or another." Id. at 341, 38 Cal. Rptr. at 657.
But the body of cases invoking Uniform Partnership Act § 20 to justify

But the body of cases invoking Uniform Partnership Act § 20 to justify
disclosure where there was no predicate demand -- either actual or
constructive -- all involve disclosures in which the common-law
standards would independently require the disclosure at issue. Some
involve situations where disclosure would have been required under
the common-law rule governing prepartnership transactions. See,
e.g., Jaffa, 114 Mich. App. at 640-41, 319 N.W.2d at 609; Gluck, 24
Misc. 2d at 847, 199 N.Y.S.2d at 19-20. Others present situations in
which disclosure would have been required under the common-law
rule governing transactions between copartners. See, e.g., King-Cola,
227 Cal. App. 2d at 341-42, 38 Cal. Rptr. at 657-58; Penner v. De
Nike, 288 Mich. 488, 490, 285 N.W. 33, 34 (1939).
n105 See supra note 104.
n106 The courts have been imprecise in their invocation of the

common-law rule. For example, Peskin involved a failure to account
for partnership income by a former law partner. Under the common
law a partner clearly has an affirmative duty to disclose partnership
income that is diverted by the partner for his own purposes. But the
Peskin court stated that "[t]he fiduciary duty owed by one partner to
another includes a duty to make a full and fair disclosure," without
any qualification to fit the narrower common-law rule. Peskin, 134 Ill.
App. 3d at 53, 479 N.E.2d at 1038. Similarly, in Johnson v. Peckham,
132 Tex. 148, 120 S.W.2d 786 (1938), a partner purchased his
copartner's interest following a third party offer, without disclosing
the offer. The court properly and narrowly framed the question as
"whether it is a partner's duty to disclose material matters in
purchasing his copartner's interest in firm assets," which falls
squarely within the common-law rule. Id. at 151, 120 S.W.2d at 787.
But the Johnson court framed the answer to overwhelm the common-
law distinctions: "Since each is the confidential agent of the other,
each has a right to know all that the others know, and each is
required to make full disclosure of all material facts within his
knowledge in any way relating to the partnership affairs." Id. The
court in Johnson may have redeemed itself by its final pronouncement
on the subject, which ties in the common-law rule:
This necessity for good faith and the making of a full disclosure of all
important information applies in the case of sale by one partner to
another of his interest in the partnership. Such a sale will be
sustained only when it is made in good faith for fair consideration 81/92
sustained only when it is made in good faith, for fair consideration
and on a full and complete disclosure of all important information as
to value.
Id.
n107 See UPA Rev. Subcomm. of the Comm. on Partnerships and

Unincorporated Bus. Organizations, Section of Corp., Banking and
Bus. L., Am. Bar Ass'n, Should the Uniform Partnership Act Be
Revised?, 43 BUS. LAW. 121, 121 (1987) [hereinafter Revision
Report]. (This report was not submitted to the American Bar
Association for approval and does not express the views of either the
Association or its Section of Corporation, Banking and Business Law.)
It is clear that the American Bar Association subcommittee, which
initiated the revision of the Uniform Partnership Act, focused on a
different type of partnership. In its report, the subcommittee noted
Census Bureau figures showing that there were in excess of 1.4
million partnerships in the United States in 1981, that these
represented 9% of the business enterprises in the country, and that
they are concentrated "in agriculture and related fields of fishing and
forestry, wholesale and retail trade, finance, insurance and real
estate, and professional and general service businesses." Id. The
subcommittee noted, "As a general rule, partnerships tend to be
slightly larger in terms of revenues than proprietorships but are
usually considerably smaller than corporations." Id. In developing a
framework governing the rights of the partners among themselves,
the subcommittee acted in the belief that "the UPA should contain
rules that provide a reasonable and equitable framework for resolving
the basic problems that are encountered in a hypothetical 'typical'
partnership, with the right of the partners to vary the statutory rules
in the partnership agreement." Id. at 123.
n108 Revision Report, supra note 107. A brief chronology of the

development process is given at RUPA-89, supra note 18, at i-ii;
RUPA-90, supra note 18, at 1.
n109 RUPA-89, supra note 18.
n110 At the 1990 summer meeting of the Conference, the UPA

revisions were discussed. See RUPA-90, supra note 18. A further
revision will be generated, with final adoption projected for the
Conference meeting in the summer of 1991
Conference meeting in the summer of 1991.
n111 See RUPA-89, supra note 18, at i-ii; RUPA-90, supra note 18, at
2 ("The Drafting Committee has recommended a Revised Uniform
Partnership Act ('RUPA') that moves the law of partnership closer to
an entity model. RUPA does not adopt, however, a 'strict' entity
approach."); Revision Report, supra note 107, at 124 ("Because the
'entity theory' avoids a number of technical problems, such as the
authority of a general partnership to sue or be sued in its partnership
name, the subcommittee determined that it should be incorporated
into any revision of the UPA whenever possible and that the
'aggregate theory' should be retained only where it appears to be
essential, e.g., because of tax considerations."). This is, of course, a
reversal of the decision made at the time the Uniform Partnership Act
was drafted. The UPA was adopted by the Conference in 1914 after
twelve years of celebrated debate during which the theoretical
foundation of the Act was changed from the entity theory advanced by
Harvard Dean James Barr Ames to the aggregate theory supported by
Pennsylvania Dean William Draper Lewis.
n112 The ABA Subcommittee proposes no changes in the text of §

18(e). Revision Report, supra note 107, at 147-49.
n113 The Conference drafters in RUPA-89 and RUPA-90 propose only

to renumber the present § 18(e) to be § 18(f), without any changes in
wording. See RUPA-89, supra note 18, § 18(f), at 50; RUPA-90, supra
note 18, § 18(f), at 55.
n114 In its present incarnation, Uniform Partnership Act § 18(e)

states: "The rights and duties of the partners in relation to the
partnership shall be determined, subject to any agreement between
them, by the following rules: . . . (e) All partners have equal rights in
the management and conduct of the partnership business." UPA §
18(e), 6 U.L.A. 213.
n115 See supra text accompanying note 43.
n116 The comment to RUPA-89 § 18 does refer to the Eisenberg

analysis, with a somewhat cryptic note that "[p]erhaps the Official
Comment should contain at least a cross-reference to Section 20(b),
which states more directly the duty of partners to provide each other
which states more directly the duty of partners to provide each other
with information." RUPA-89, supra note 18, § 18 comment, at 55.
This is modified in RUPA-90 to a notation that the official comment to
§ 18(f) "could refer to RUPA Section 20(b), which states the rights of
partners to obtain information." RUPA-90, supra note 18, § 18
comment, at 60.
n117 Even among sophisticated joint venturers, the contractual

modifications of the right to information should be both reasonable
and in writing. The proposed language allowing reasonable written
restrictions of the information available to participants in high-tech
joint ventures is found at § 20X(b), discussed infra subsection VI.B.4.
n118 In its present incarnation Uniform Partnership Act § 19 states:

"The partnership books shall be kept, subject to any agreement
between the partners, at the principal place of business of the
partnership, and every partner shall at all times have access to and
may inspect and copy any of them." UPA § 19, 6 U.L.A. 254.
n119 Revision Report, supra note 107, at 149.
n120 Compare RUPA-89, supra note 18, § 19& comment, at 58-59

with RUPA-90, supra note 18, §§ 19-20 & comments, at 62-66.
n121 A. BROMBERG, supra note 45, § 66, at 383.
n122 Revison Report, supra note 107, at 149.
n123 Id; see REVISED UNIFORM LIMITED PARTNERSHIP ACT § 105, 6

U.L.A. 271-72 (Supp. 1990) (listing records required to be kept by a
limited partnership). The ABA committee rejected a laundry list in this
context because of the informal nature of many partnerships, an
inability to agree on an appropriate penalty for a failure to comply,
and a belief that "the procedural requirements and allocation of the
burden of proof in accounting actions between partners provide
adequate remedies in the event inadequate records are kept." Revison
Report, supra note 105, at 149.
n124 See RUPA-89, supra note 18, § 19, at 58; RUPA-90, supra note
18, § 20, at 63.
n125 RUPA-89, supra note 18, § 19, at 58; RUPA-90, supra note 18, §
n125 RUPA 89, supra note
1/17/2011
18, § 19, at 58; RUPA 90, supra note 18, §
20, at 63.
n126 RUPA-89, supra note 18,§ 19 comment, at 59; RUPA-90, supra

note 18,§ 20 comment, at 64-65.
n127 Revision Report, supra note 107, at 149; RUPA-89, supra note
18, § 19 comment, at 59; RUPA-90, supra note 18, § 20 comment, at
64-65.
n128 RUPA-89, supra note 18, § 19, at 58.
n129 RUPA-90, supra note 18, § 20 comment, at 64.
n130 RUPA-89, supra note 18, §§ 19-20, at 58-60; RUPA-90, supra

note 18, §§ 19-20, at 62-63; Revision Report, supra note 107, at 149.
n132 UPA § 19, 6 U.L.A. 254 (1969).
n133 RUPA-89, supra note 18, § 20(a), at 59 (emphasis added).
n134 Id. § 20 comment, at 60.
n135 RUPA-90, supra note 18, § 20(b), at 63.
n137 Id. at 150-51 (footnotes omitted).
n138 RUPA-89, supra note 18, § 20, at 59-60.
n140 UPA § 18, 6 U.L.A. 213, contains prefatory language that "[t]he
rights and duties of the partners in relation to the partnership shall be
determined, subject to any agreement between them, by the following
rules." (emphasis added). RUPA-89 and RUPA-90 § 18 delete the cited
language but achieve the same result as to § 18 through a new
section, designated § 4X, which "lists the provisions of RUPA that
cannot be varied by agreement" and does not include § 18 in the list.
RUPA-89 supra note 18 § 18 comment at 51; see id § 4X at 7-8 &
1/17/2011
RUPA 89, supra note 18,LexisNexis® Academic & Library Soluti…
§ 18 comment, at 51; see id. § 4X, at 7 8, &
§ 18 comment, at 51; RUPA-90, supra note 18, § 4X, at 11-12, & § 18
comment, at 57.
n141 RUPA-89, supra note 18 § 20 comment, at 61; RUPA-90, supra

note 18, § 20 comment, at 65.

note 18, § 20 comment, at 65 (emphasis added) (in both instances
quoting M. EISENBERG, supra note 18, at 42).

note 18, § 20 comment, at 65-66.
n144 See Revision Report, supra note 107, at 150-51.
n145 M. EISENBERG, supra note 18, at 42. Professor Eisenberg does

not mention UPA § 20 in the section of his work where he develops
the information requirement based on UPA § 18(e).
n146 Hillman, Power Shared and Power Denied: A Look at

Participatory Rights in the Management of General Partnerships, 1984
U. ILL. L. REV. 865, 874 & n.53 (1984) ("The participatory rights
assured by section 18(e) . . . may provide a basis for obtaining
information equal, if not greater in importance, to the more specific
disclosure provisions outlined in the U.P.A.") (referring in a footnote
to UPA §§ 19, 20, 21 & 22, 6 U.L.A. 254, 256, 258, 284).
n147 Revision Report, supra note 107, at 126 ("The obligation of a

partner to render information about the partnership business to his
fellow partners under UPA section 20 is made unqualified, and the
requirement that information be made available only 'upon demand' is
eliminated.").
n148 Id. at 150 ("Subsection (b) should include the language in

existing section 20 requiring partners to provide information about
the partnership business; however, the 'on demand' requirement
should be replaced by the phrase 'to the extent the circumstances

render it just and reasonable,' which is used in the Georgia
Partnership Act . . . .").
n149 " Partners shall render, to the extent the circumstances render it
just and reasonable, true and full information of all things affecting
the partners to any partner and to the legal representative of any
deceased partner or of any partner under legal disability." GA. CODE
ANN. § 14-8-20 (1989) (emphasis added).
The ABA committee did in addition indicate that the partners would be
able to agree to "reasonable" modifications of the disclosure
obligations. Revision Report, supra note 107, at 150-51.
n151 Id. (citing A. BROMBERG, supra note 45, § 67, at 388).
n152 A. BROMBERG, supra note 45, § 67, at 388 (citations omitted)

(emphasis added).
n153 The drafters seemed in the earlier draft to concede that the
obligation cannot be completely self-executing, with their observation
that the comments "should give some guidance on the extent to which
information must be provided whether requested or not." RUPA-89,
supra note 18, § 20 comment, at 61. That position, however, may be
changing; the RUPA-90 comment changes the statement that guidance
should be given into a question: "Should Comment give some
guidance on the extent to which information must be provided even if
not requested?" RUPA-90, supra note 18, § 20 comment, at 66.
n154 UPA § 20, 6 U.L.A. 256 (1969).
20, at 63.

n157 See Revision Report, supra note 107, at 126.
n158 See id. at 150-51.
n159 Id. at 126.
n160 RUPA-89, supra note 18, § 18 comment, at 51. The language is
not included in the comments to RUPA-90. See RUPA-90, supra note
18, § 18 comment, at 57-61.
n161 UPA § 20, 6 U.L.A. 256.
n163 UPA § 20, 6 U.L.A. 256.
n164 This certainly is not to suggest that the problems of the RUPA
drafts are problems inherent in a structure based on a right to obtain
information. A full definition could obviously be created using either
basis. It is merely to observe that the change in basis created
problems in the new structure, and these problems have not been
addressed.
n165 UPA § 20, 6 U.L.A. 256.
n166 RUPA-89, supra note 18, § 20, at 59. RUPA-90 includes the "just
and reasonable" modifier while changing the definition of what
information is to be disclosed to "true and full information concerning
the partnership." RUPA-90, supra note 18, § 20, at 63.
n167 RUPA-89, supra note 18, § 2(9), at 2.
n168 RUPA-90, supra note 18, § 2(d), at 5.
n169 RUPA-89, supra note 18, § 20, at 59-60; RUPA-90, supra note
18, § 20, at 63.
n171 RUPA-90, supra note 18, § 4X, at 11-12, & § 20, at 63.
n172 Section 4X does not contain a reasonableness requirement for

modifications by agreement of the parties. See id. § 4X(a), at 11.
n173 Id. § 2(c), at 5, § 4X, at 11-12.
n174 The scope of this Article is limited to high-tech joint ventures.

Certain of the proposals could also be seen as appropriate for a class
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of partnerships involving sophisticated participants. Other than the
centrality of information to the high-tech joint venture, it is easy to
imagine that these partnerships of sophisticated parties would present
many of the same concerns.
n175 In its present form § 18(e) provides that, absent the contrary
agreement of the partners, "All partners have equal rights in the
management and conduct of the partnership business." UPA § 18(e),
6 U.L.A. 213 (1969). Under the RUPA drafts the provision is
renumbered as § 18(f), and the ability to modify is moved from the
introductory clause of § 18 to a new section designated § 4X, which
provides that "[u]nless the partnership agreement provides otherwise,
the provisions of this [Act] govern ["the" in RUPA-89] relations
among the partners." RUPA-89, supra note 18, § 4X, at 7; RUPA-90,
supra note 18, § 4X,at 11. Proposed § 4X does list several sections
that cannot be modified by the partnership agreement, and § 18 is not
included. Between RUPA-89 and RUPA-90, the drafters changed the
order of the clauses in § 4X, but not the content, and augmented the
listing of sections not subject to variation in the partnership
agreement. Neither change restricts the ability to modify the
provisions of § 18(e), now § 18(f), by agreement. Compare RUPA-89,
supra note 18, § 4X, at 7-8 with RUPA-90, supra note 18, § 4X, at 11-
12.
n176 In its present form § 19 provides that "[t]he partnership books

shall be kept, subject to any agreement between the partners, at the
principal place of business of the partnership, and every partner shall
at all times have access to and may inspect and copy any of them." As
is noted in the text, RUPA-89 added a requirement that "[e]ach
partnership shall keep complete and correct books and records of
account," and transfered the inspection language to § 20, while RUPA-
90 deleted the requirement that records be kept. See supra text
accompanying notes 128-30.
n177 Under RULPA a limited partner is entitled on "reasonable

demand" to receive from the general partner "a copy of the limited
partnership's federal, state and local income tax returns for each
year." REVISED UNIFORM LIMITED PARTNERSHIP ACT § 305(2), 6
U.L.A. 320 (Supp. 1990) [hereinafter RULPA].
n178 Note that under the draft language at (f)(1), the term "partner"
includes "the legal representative of any deceased partner or partner
under legal disability, [and] former partners to the extent the
information at issue pertains to the time when they were partners."
See supra subsection VI.B.3.
n179 " Partners shall render on demand true and full information . . ."
UPA § 20, 6 U.L.A. 256 (1969).
n180 The ABA drafters proposed deletion of the demand requirement.

Revision Report, supra note 107, at 150.
n181 The Conference drafters also proposed deletion of the demand

requirement. RUPA-89, supra note 18, § 20 comment, at 61; RUPA-
90, supra note 18, § 20 comment, at 65-66.
n182 Berg v. King-Cola, Inc., 227 Cal. App. 2d 338, 341-42, 38 Cal.
Rptr. 655, 657-58 (1964).
n183 UPA § 20, 6 U.L.A. 256.
n184 Revision Report, supra note 107, at 150-51.
20, at 63.
n186 M. EISENBERG, supra note 18, at 42.

demand" to receive from the general partner "true and full
information regarding the state of the business and financial condition
of the limited partnership." RULPA § 305(2), 6 U.L.A. 320 (Supp.
1990).


demand" to receive from the general partner "other information
regarding the affairs of the limited partnership as is just and
reasonable." RULPA § 305(2), 6 U.L.A. 320.
n191 Algernon Blair Group, Inc. v. Corneal, No. 86-4465 (E.D. Pa.
Feb. 18, 1988)(LEXIS, Genfed Library, Dist file); see supra note 72
and accompanying text.
n192 UPA § 20, 6 U.L.A. 256 (1969).
63.
63.
n195 UPA § 20, 6 U.L.A. 256.
n196 Under UPA § 7, a writing is not required to create a general

partnership. UPA § 7, 6 U.L.A. 38-39.
n197 See supra note 18 and accompanying text.
n198 Both the term "partner information" and "venture information"

are defined in terms of "confidential or proprietary information." Such
information of a partner does not become venture information unless
the venture either receives it with permission from the disclosing
partner for unrestricted dissemination, or receives it with restrictions
that it is following. A blanket bar on the dissemination of partner
information would be one possible approach. It seems clear, however,
that in many joint ventures the free flow, at least internally, of such
information is the norm and not the exception. Under the proposed
regime, the parties would be required to identify such information and
affirmatively agree on restrictions.
n199 Meinhard v. Salmon, 249 N.Y. 458, 463-64, 164 N.E. 545, 546
(1928).
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Disclosure Problems in High-Tech Joint Ventures

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Copyright © Tulane University 1991.

Tulane Law Review

65 Tul. L. Rev. 705

LENGTH: 26990 words

ARTICLE: "ASK ME NO QUESTIONS AND I'LL TELL YOU NO LIES":

NAME: ALLAN W. VESTAL *

Well-publicized examples of recent high-tech joint ventures include

In the rapidly developing marketplace, the legal dimension of the

The imprecision in terminology, perhaps not critical standing alone,

[*709] The first section of this Article illustrates some of the

The fourth section briefly addresses and rejects a proposed synthesis

The fifth section of this Article traces the development of the

I. DISCLOSURE PROBLEMS IN HIGH-TECH JOINT VENTURES

The risk of subordinating the legal analysis in a partnership-based

The question of information confidentiality is important because the

Since information is often the coin of the realm in high-tech joint

[*712] The venture often has an interest in maintaining the

involved the diversion of a joint venture opportunity in a real estate

In high-tech joint ventures the confidentiality of venture information

The confidentiality of venture information as against the participants

[*713] The protection of venture information as against the

There should be no problem in assuring that GM and Toyota do not

Beyond the disclosure of venture information, substantial problems

Furthermore, the internal disclosure concerns of high-tech [*715]

There are also potential disclosure problems during the operational

Finally, disclosure questions arise in situations in which the joint

Some commentators n37 and lawyers n38 have been sensitive to

II. EXISTING DISCLOSURE PROVISIONS UNDER THE UNIFORM

The disclosure obligations of partners under the Uniform Partnership

The requirements in the first category,the routine disclosures, are not

[*718] The requirements in the second category, the extraordinary

The distinction between the routine disclosures and the extraordinary

There are four potential internal disclosure problems under the

The second internal disclosure problem for high-tech joint ventures

Whether this is a significant problem depends on what information is

Consider the Ampligen partnership. HEM claimed that Du Pont gained

Even under a restrictive reading of UPA section 19 -- requiring a

Such an "access to all existing partnership books and records" rule

differentiates the partnership situation from that of a stockholder

Whether a broad or narrow definition of partnership books is adopted

The third internal disclosure problem for high-tech joint ventures

There are potential problems with this approach It would be difficult

The fourth internal disclosure problem for high-tech joint ventures

The language of section 20, "all things affecting the partnership," is

The disclosure requirements of UPA section 20 cannot be modified by

III. COMMON-LAW DISCLOSURE OBLIGATIONS

The common law governing the disclosure obligations of partners

Joint adventurers, like copartners, owe to one another, while the

The general maxims provide no realistic guidance on the practical

[*729] The first category cited by Reuschlein and Gregory involves

actions and transactions of the partners with the partnership in which

One class of cases emphasizing this duty to disclose are those

This first class of common-law disclosure cases may be too

So expanded, this classification of cases would include the situations

The second category cited by Reuschlein and Gregory involves actions

An additional restriction on the common-law disclosure obligation

Thus, a partner is a fiduciary to the other partners under common

The duty of the partner to give information is something more

Consistent with this formulation, courts have properly held that, in

the well-defined situations in which the common law required

The potential problems for high-tech joint venturers from the