U.S. District Court Rules that Right of First Refusal Was Not Triggered
On Feb. 4, the U.S. District Court for the Eastern District of Michigan released a new opinion in the matter of SunAmerica Housing Fund 1050 v. Pathway of Pontiac Inc. et al. The court ruled that, in the absence of language otherwise, the right of first refusal (ROFR) was a classic ROFR under Michigan law and common law, requiring intent on the part of the LIHTC partnership to sell its property interest. Thus, to trigger the nonprofit’s ROFR, the following factors were necessary: a bona fide offer and intent on the part of the LIHTC partnership’s general partners to sell. In this instance, the court found that neither existed: the third-party offer (the offer) was solicited by the general partners without good faith on the part of the general partners to accept the offer, and the offer was non-binding as to the third party, being unilaterally cancelable by the third party for any or no reason. The court ruled that the LIHTC partnership’s general partners, in attempting to enforce the ROFR, breached their fiduciary duty to the limited partner as provided in the LIHTC partnership agreement.