Material Breach, Cure, and Contractual Forfeiture in LIHTC Partnerships: Commentary on Creative Choice Homes XXX/XXXI v. AMTAX & MG Affordable

Material Breach, Cure, and Contractual Forfeiture in LIHTC Partnerships:
Commentary on Creative Choice Homes XXX/XXXI, LLC v. AMTAX Holdings 690, LLC & MG Affordable Master, LLC

I. Introduction

This Eleventh Circuit decision sits squarely in the increasingly litigious space of Low-Income Housing Tax Credit (“LIHTC”) partnerships. It addresses the circumstances in which investor limited partners may remove a developer-controlled general partner for cause, and what counts as (i) a “material” breach, (ii) an effective cure, and (iii) an enforceable contractual forfeiture of the general partner’s substantial economic expectations (including future acquisition rights).

The case arises from two affordable housing limited partnerships in Florida—Fountainview and Park Terrace—formed in the early 2000s. The developer-side affiliates, Creative Choice Homes XXX, LLC and Creative Choice Homes XXXI, LLC (collectively, the “general partners”), controlled the projects and engaged a related company, Impro Synergies, LLC, to manage them. The investor and special limited partners—AMTAX Holdings 690, Protech 2005-C, MG GTC Middle Tier I, and MG Affordable Master (collectively, the “limited partners”)—contributed capital and expected tax credits and cash yields governed by detailed partnership agreements and “waterfall” distribution structures.

After years of “advances” and withdrawals of partnership cash to undisclosed affiliates of the general partners, documented in audited financial statements as “due from affiliate” (and later the subject of contested promissory notes), the limited partners invoked removal-for-cause provisions. The general partners responded that any breaches were not “material,” were cured, and that removal was an unlawful forfeiture and windfall to the limited partners, barred by waiver and estoppel.

The district court, after a bench trial, rejected the general partners’ arguments and upheld their removal. The Eleventh Circuit affirmed, applying Florida law to interpret the partnership agreements and the common-law doctrines of material breach, cure, forfeiture, waiver, and estoppel.

This commentary analyzes the opinion’s structure, its reliance on Florida precedent, its interpretive methodology for contract terms like “material,” the strict approach to cure provisions, and its enforcement of contractual forfeiture in the LIHTC context. It also highlights a notable concurrence on contract interpretation canons that may influence future drafting and litigation.

II. Summary of the Opinion

A. Holdings in Brief

  • The general partners materially breached the Fountainview and Park Terrace partnership agreements by repeatedly diverting partnership funds to their affiliates in violation of the waterfall and anti-commingling/borrowing provisions, and by breaching fiduciary duties.
  • The breaches caused “material detriment” or a “material adverse effect” on the partnerships and limited partners: reduced partnership cash, diminished distributions, impaired financial security, and irreparably undermined trust.
  • The general partners did not timely and effectively cure their defaults as required by the contractual cure provisions. Payments:
    • were untimely as to several transactions;
    • were funded in part by prohibited loans to the partnerships; and
    • were accompanied by attempts to conceal timing (e.g., backdating) and lacked clarity as to what debts were being repaid.
  • Enforcing the contractual removal and economic consequences against the general partners did not amount to an impermissible forfeiture or unlawful windfall. Florida law permits such contractual forfeiture where bargained for and where the breach is willful and persistent.
  • The limited partners did not waive their right to remove the general partners and were not estopped from doing so. The record showed years of objections and relatively prompt action once the latest violations were clarified through audits and a new asset manager.

B. Key Doctrinal Clarifications

  • “Material” detriment/adverse effect in removal clauses is read contextually and in light of Florida contract principles: it means harm that is real and significant, not trivial, and includes both financial and relational harm (such as loss of trust and fiduciary breakdown).
  • A contractual cure must:
    • occur within the agreed time;
    • truly restore the partnership to the promised position (not replace one violation with another, such as by using prohibited loans); and
    • cannot be salvaged by belated or backdated payments.
  • General partners bear the responsibility to know and correct their own misappropriations; they cannot shift that burden to limited partners by invoking option-contract “hindrance” principles.
  • Contractual forfeiture/removal provisions are enforceable under Florida law when clearly agreed and invoked in response to willful, continuing breaches, even if they strip the breaching party of very substantial future economic rights.
  • A separate concurrence interprets the Fountainview removal clause using the rule of the last antecedent, opining that “material detriment” is required only when removal is based on a negligent “failure to exercise reasonable care,” not when based on intentional misconduct or malfeasance. The majority does not resolve this nuance because material detriment was proved in any event.

III. Factual and Procedural Background

A. Partnership Structure and Economic Arrangements

  • Creative Choice Homes, Inc., controlled by Dilip Barot, developed LIHTC projects using limited partnerships:
    • Fountainview partnership: General Partner – Creative Choice Homes XXX, LLC; Investor LP – AMTAX Holdings 690, LLC; Special LP – Protech 2005-C, LLC.
    • Park Terrace partnership: General Partner – Creative Choice Homes XXXI, LLC; Investor LP – MG GTC Middle Tier I, LLC; Special LP – MG Affordable Master, LLC.
  • Management: Both properties were operated by Impro Synergies, LLC, another affiliate.
  • Agreements:
    • Gave the general partners broad authority over operations and selection of the management company.
    • Established a distribution waterfall: partnership cash must first satisfy specified obligations and limited partners’ returns before any incentive management fees to the general partners.
    • Prohibited the general partners from:
      • borrowing from partnership funds;
      • commingling partnership funds with other entities or individuals.
    • Included removal-for-cause provisions allowing investor/special limited partners to remove the general partner upon:
      • Fountainview: intentional misconduct, malfeasance, fraud, acts outside authority, breach of fiduciary duty, or failure to exercise reasonable care with respect to a material matter, or violation of a “material provision” or law “provided that such violation results in, or is likely to result in, a material detriment or impairment” to the partnership, its assets, the project, or the limited partners. Notice and cure period: 30 days, extended to 60 if cure pursued diligently.
      • Park Terrace: “Material Default,” defined as:
        • (i) breach of obligations reasonably expected to have a material adverse effect on the partnership, complex, or investor LP (subject to a 30-day cure period for monetary defaults); or
        • (iv) gross negligence, fraud, willful misconduct, misappropriation of partnership funds, or breach of fiduciary duty (not subject to cure under the Agreement’s own structure).
    • Provided that if the general partner remained through the LIHTC compliance period, it would have valuable purchase rights (to acquire the properties or the limited partners’ interests).

B. Pattern of Misappropriations and Auditor Red Flags

  • From at least 2008, the auditor (Baker Tilly) reported significant “due from affiliate” balances—amounts that the partnerships had advanced to undisclosed affiliates of the general partners.
  • 2012: Limited partners twice notified the general partners that such advances violated the partnership agreements and demanded return of the funds.
  • 2016 audits:
    • Fountainview: $140,577 loaned to a Creative Choice XXX affiliate, outstanding as of year-end; explicitly noted as violating the waterfall.
    • Park Terrace: $81,198 loan to a Creative Choice XXXI affiliate, likewise violating the waterfall.
  • 2017 audit drafting (March 2018): Baker Tilly proposed reclassifying the cumulative “due from affiliate” balances as “contra-equity” because:
    • Balances were large and long outstanding;
    • No documentation of repayment terms;
    • No evidence of repayment.
    This would have reduced the general partner’s equity and alarmed the limited partners.
  • To avoid that red flag, the general partners produced Naimisha Construction, Inc. promissory notes in August 2018:
    • Naimisha (owned by Barot and his wife) “agreed” to pay $100,000 for each property to “develop a detailed scope and repair cost plan.”
    • Baker Tilly accepted the notes and completed the audits, classifying remaining amounts as “due from affiliate” instead of contra-equity.
    • As of December 31, 2017:
      • Naimisha still owed $87,883 to Fountainview and the full $100,000 to Park Terrace.
      • Park Terrace had additionally advanced $3,261 to undisclosed affiliates during 2017.

C. 2019 Default Notices and Attempted “Cure”

  • January 2019: Limited partners engaged Hunt Capital Partners as asset manager to protect their interests.
  • March 25 & April 9, 2019: Hunt wrote to the general partners regarding improper advances and unauthorized use of partnership funds; no response.
  • Mid-April 2019: Limited partners’ counsel sent a more formal communication:
    • Demanded reimbursement of all unauthorized distributions (including those flagged by Baker Tilly) and accurate financial records;
    • Warned that failure to cure by April 26, 2019 would trigger removal.
  • May 3, 2019: Limited partners sent formal default letters to each general partner:
    • Declared an event of default for ongoing affiliate advances and misappropriation of funds;
    • Gave 30 days to cure (remedy all misappropriations) under the agreements.
    • Expressly noted that the review of financials was incomplete and reserved the right to pursue additional violations discovered later.
  • June 3, 2019: General partners finally responded, acknowledging the issues and asking for more time to repay.
  • June 18, 2019: With the 30-day cure period expired and no full cure tendered, limited partners sent removal notices removing the general partners.
  • June 19–21, 2019: General partners offered to wire funds if removal notices were rescinded and then issued checks:
    • $141,235 to Park Terrace;
    • $105,994 to Fountainview.
    • Funds were sourced partly from new loans to the partnerships (including a $77,000 “short-term loan” from Impro).
  • June 28, 2019: Limited partners acknowledged receipt but:
    • Did not treat the payments as a full cure;
    • Found amounts insufficient and improperly sourced (violating no-loan provisions);
    • Noted lack of clarity re which transactions were being repaid and absence of penalties/interest required under the agreements.
  • Meanwhile, Park Terrace affiliate advances continued into July 2019, and repayment for those 2019 advances was not attempted until November 2019—well beyond any contractual cure period, with efforts to backdate the repayment to September.

D. District Court Proceedings

  • The general partners sued the limited partners in state court for:
    • Breach of the partnership agreements; and
    • Declaratory judgment that their removal was unauthorized.
    • The limited partners removed to federal court based on diversity jurisdiction and counterclaimed for breach of contract and declaratory relief. Impro was later joined as a counter-defendant.
    • After a three-day bench trial, the district court found:
      • The general partners repeatedly and willfully diverted substantial partnership funds to affiliates in violation of the waterfall and non-commingling clauses.
      • These diversions:
        • Were material in amount (sometimes approximating a month of operating expenses);
        • Deprived the limited partners of distributions and undermined the financial stability of the partnerships; and
        • Destroyed the trust necessary for the partnership relationship.
      • The general partners’ attempted cure:
        • Was untimely for several violations;
        • Was funded in material part by prohibited loans to the partnership from affiliates; and
        • Was accompanied by attempts to conceal the timing of repayments (e.g., backdating).
      • The limited partners had not waived their rights and were not estopped from removal; they had objected for years and acted promptly once the full scope and latest violations were clear.
    • The court ordered that the general partners were properly removed in accordance with the agreements.

    E. Appeal

    On appeal, the general partners raised four primary issues:

    1. The district court clearly erred in finding their breaches material and detrimental.
    2. The court clearly erred in finding their cure efforts insufficient.
    3. Their removal constituted an unlawful contractual forfeiture and unjust windfall to the limited partners.
    4. The limited partners had waived or were estopped from enforcing the removal provisions.

    The Eleventh Circuit affirmed in full.

    IV. Doctrinal Framework and Precedents Cited

    A. Standard of Review

    The Court reiterated standard appellate principles for bench trials:

    • Findings of fact – reviewed for clear error, i.e., whether the appellate court is “left with the definite and firm conviction that a mistake has been committed,” citing OHI Asset (VA) Martinsville SNF, LLC v. Wagner (In re Wagner), 115 F.4th 1296, 1303 (11th Cir. 2024) and Anderson v. City of Bessemer City, 470 U.S. 564, 573–74 (1985).
    • Where there are two permissible views of the evidence, the trial court’s choice cannot be clearly erroneous.
    • Conclusions of law – reviewed de novo, see A.I.G. Uruguay Compania de Seguros, S.A. v. AAA Cooper Transportation, 334 F.3d 997, 1003 (11th Cir. 2003).
    • Equitable relief decisions – reviewed for abuse of discretion, with underlying facts again for clear error (Preferred Sites, LLC v. Troup County, 296 F.3d 1210, 1220 (11th Cir. 2002)).

    B. Florida Contract Interpretation and “Materiality”

    Because the partnership agreements contained Florida choice-of-law clauses and the case was in diversity, Florida substantive law governed. The Court drew on the following Florida contract cases:

    • Intent from the four corners: The starting point is the parties’ intention as expressed within the contract, reading provisions in context (Massey Services, Inc. v. Sanders, 312 So. 3d 209, 214 (Fla. 5th DCA 2021); Hand v. Grow Construction, Inc., 983 So. 2d 684, 687 (Fla. 1st DCA 2008); 16205 Captiva Drive, LLC v. Levinson, 418 So. 3d 751 (Fla. 6th DCA 2025)).
    • Consistent usage canon: A word is presumed to have the same meaning throughout the contract (R.J. Reynolds Tobacco Co. v. State, 301 So. 3d 269, 275 (Fla. 4th DCA 2020); Scalia & Garner, Reading Law).
    • Surplusage canon: Avoid interpretations that render contract language redundant; each word should be given effect (Royal American Realty, Inc. v. Bank of Palm Beach & Trust Co., 215 So. 2d 336, 338 (Fla. 4th DCA 1968); Scalia & Garner, Reading Law).
    • Plain meaning and context: When terms are unambiguous, courts apply their plain meaning, informed by context; dictionaries are helpful but not exclusive (Parrish v. State Farm Florida Ins. Co., 356 So. 3d 771, 774–76 (Fla. 2023)).

    For “material” in breach and removal contexts, the Court also canvassed Florida’s general law of material breach of contract:

    • A material breach is one that goes “to the essence of the contract” (JF & LN, LLC v. Royal Oldsmobile-GMC Trucks Co., 292 So. 3d 500, 509 (Fla. 2d DCA 2020)); a term is “of the essence” where the contract would not have been made without it (Seawatch at Marathon Condo. Ass’n, Inc. v. Guarantee Co. of North America, 286 So. 3d 823, 829 (Fla. 3d DCA 2019)).
    • Federal application of Florida law similarly evaluates whether the non-breaching party received “substantially what it bargained for” (Ron Matusalem & Matusa of Florida, Inc. v. Ron Matusalem, Inc., 872 F.2d 1547, 1551 (11th Cir. 1989)).

    C. Cure, Waiver, Forfeiture, and Estoppel under Florida Law

    • Cure obligations: Florida courts read cure provisions in light of the entire contract and the facts of breach (Jones v. Warmack, 967 So. 2d 400, 402 (Fla. 1st DCA 2007); Sun Bank of Miami v. Lester, 404 So. 2d 141, 143 (Fla. 3d DCA 1981)). A late or incomplete cure is insufficient (Tim Hortons USA, Inc. v. Singh, 2017 WL 4837552 (S.D. Fla. 2017), applying Florida law; Hufcor/Gulfstream, Inc. v. Homestead Concrete & Drainage, Inc., 831 So. 2d 767, 769 (Fla. 4th DCA 2002)).
    • Forfeiture:
      • Forfeitures are disfavored but enforceable where clearly intended by contract (Howard Cole & Co. v. Williams, 27 So. 2d 352, 356 (Fla. 1946); Nelson v. Hansard, 197 So. 513 (Fla. 1940); Stoltz v. Truitt, 940 So. 2d 521, 523 (Fla. 1st DCA 2006)).
      • Courts will not relieve against a forfeiture caused by a party’s own negligence or willful and persistent violations (Stoltz, 940 So. 2d at 523; Jenkins v. Eckerd Corp., 913 So. 2d 43, 54 (Fla. 1st DCA 2005)).
      • Conversely, if the breaching party has substantially complied and the non-breaching party has suffered no real damages, enforcing forfeiture may create an improper windfall (Fowler v. Resash Corp., 469 So. 2d 153, 154 (Fla. 3d DCA 1985)).
      • Every contractual provision must be given effect; courts do not rewrite contracts to avoid consequences one party later regrets (Stinson, Lyons, Gerlin & Bustamante, P.A. v. Brickell Building 1 Holding Co., 923 F.2d 810, 813 (11th Cir. 1991) (applying Florida law); KRG Oldsmar Project Co., LLC v. CWI, Inc., 358 So. 3d 464, 468 (Fla. 2d DCA 2023)).
    • Waiver:
      • Waiver is the voluntary and intentional relinquishment of a known right, which may be express or implied by conduct (Raymond James Financial Services, Inc. v. Saldukas, 896 So. 2d 707, 711 (Fla. 2005); Palacios v. Lawson, 381 So. 3d 623, 627 (Fla. 4th DCA 2024); Rader v. Prather, 130 So. 15, 17 (Fla. 1930)).
      • Existence or non-existence of waiver is generally a question of fact (Echo v. MGA Ins. Co., 157 So. 3d 507, 512 (Fla. 1st DCA 2015)).
      • A mere delay in enforcement within a reasonable time, especially without clear notice of the full breach, does not automatically constitute waiver (Fla. Dep’t of Environmental Regulation v. Puckett Oil Co., 577 So. 2d 988, 993 (Fla. 1st DCA 1991); MDS (Canada) Inc. v. Rad Source Technologies, Inc., 720 F.3d 833, 852 (11th Cir. 2013), certified question answered, 143 So. 3d 881 (Fla. 2014)).
    • Estoppel:
      • Equitable estoppel arises when one party’s conduct (often misleading or inconsistent) induces another to reasonably rely and change position to its detriment (Major League Baseball v. Morsani, 790 So. 2d 1071, 1076 (Fla. 2001); Progressive Express Ins. Co. v. Camillo, 80 So. 3d 394, 401–02 (Fla. 4th DCA 2012)).
      • Requires:
        1. A representation of a material fact contrary to the later-asserted position;
        2. Reasonable reliance by the party seeking estoppel;
        3. A detrimental change in position caused by that reliance.

    D. Option-Contract “Hindrance” Cases Distinguished

    The general partners tried to analogize their situation to option cases such as Blackhawk Heating & Plumbing Co. v. Data Lease Financial Corp., 302 So. 2d 404 (Fla. 1974), and PL Lake Worth Corp. v. 99Cent Stuff-Palm Springs, LLC, 949 So. 2d 1199 (Fla. 4th DCA 2007), arguing that the limited partners hindered their cure by not quantifying the amounts owed.

    • In Blackhawk and PL Lake Worth, the optionor withheld the necessary financial data for the optionee to compute the exercise price, effectively making performance impossible.
    • Here, the Court found those precedents inapposite:
      • Cure obligations here were part of a primary performance duty under the partnership agreements, not the exercise of an optional right.
      • The general partners themselves possessed all information about the improper advances—amounts, dates, and affiliate recipients.
      • The limited partners discharged their duty by giving notice of default; they had no contractual obligation to calculate the cure amount.

    V. The Court’s Legal Reasoning

    A. Interpreting “Material” in the Removal Provisions

    Since “material” was not defined in the agreements, the Court applied Florida contract-interpretive principles and dictionary definitions.

    1. Contextual reading:
      • In Fountainview:
        • “Material” appears in “material detriment” and “material provisions” in the removal context, but limited partners’ duties are phrased simply as compliance with “provisions” (without “material”).
        • Elsewhere, the agreement distinguishes “materially adversely affect” tax benefits (permitting some minor negative effects) from “adversely affect timing or amount” of tax credits/income (permitting limited partners to object even to minor adverse changes).
      • In Park Terrace:
        • “Material adverse effect” triggers removal, while “adversely affect” (without “material”) appears in the covenant to preserve the partnership’s federal tax status; any adverse effect there is prohibited.
        • General partners are restrained from materially amending mortgage loan documents, but no amendments (material or not) to the core partnership agreement are permitted without consent.
      This pattern demonstrates that “material” is used as a significance filter—reserving the harsh consequence of removal to more serious violations.
    2. Plain-meaning confirmation:
      • Merriam-Webster: “having real importance or great consequences.”
      • Black’s Law Dictionary: “[o]f such a nature that knowledge of the item would affect a person’s decision-making; significant; essential.”
      The Court concluded that in these agreements “material” means real, significant, non-trivial harm or breach.
    3. Resulting standard:

      To justify removal under the contractual provisions, the limited partners had to show a violation that produced or was likely to produce a real and significant detriment or adverse effect on the partnership, project, assets, or limited partners.

    B. Applying Materiality to the Facts

    The Court upheld the district court’s findings that the harm was material, both under the specific removal clauses and under the more general Florida “material breach” doctrine.

    • Magnitude in context:
      • Misappropriated amounts were repeatedly described as “material” by:
        • Barot (owner of the general partners);
        • Hunt’s chief financial officer; and
        • Baker Tilly, the auditor.
      • These advances represented a significant share of available cash, sometimes approximating a month’s operating expenses.
      • This cash was intended as a reserve for emergencies, capital improvements, and to fund end-of-year waterfall distributions.
    • Economic impact:
      • Less cash in the partnerships meant smaller year-end distributions to the limited partners than they otherwise would have received.
      • The general partners’ conduct eroded the partnership’s financial safety net, exposing the limited partners to greater risk.
    • Relational and fiduciary impact:
      • The repeated, intentional diversion of funds over years, despite prior objections, destroyed the mutual trust needed for a continuing partnership.
      • Such conduct directly violated the general partners’ fiduciary duties of loyalty and care.
    • Rebutting the “tax credits” argument:
      • The general partners argued materiality should be judged by whether the limited partners received their primary “benefit of the bargain” (tax credits).
      • The Court rejected that narrow framing:
        • Tax credits were not the only bargained-for benefit; cash flows, reserve health, and fiduciary compliance were also core.
        • Even under the general Florida material-breach test, the persistent misappropriations and bad-faith conduct clearly went to the “essence” of the agreements.

    Thus, the Court held the breaches plainly met the contractual and common-law thresholds for “materiality.”

    C. What Counts as a Valid Cure?

    The cure analysis turned on two main questions:

    1. Was there timely cure within contractually mandated periods?
    2. Did the actions taken actually remedy the breaches as the contract contemplated?

    1. Timeliness and Scope of Notice

    • The May 3, 2019 default letters were deemed the formal notice starting the cure period:
      • They identified misappropriations and affiliate advances up to that point.
      • They stated that further violations might emerge as records were completed, expressly reserving rights as to additional defaults.
    • For Fountainview and Park Terrace, the agreements gave:
      • Fountainview: 30-day cure for defaults, extendable to 60 if diligently commenced within 30 days.
      • Park Terrace: 30-day cure for monetary defaults under subsection (i), with no cure right for subsection (iv) (gross negligence, misappropriation, etc.).
    • The Court:
      • Accepted the district court’s finding that the May 3 letters put the general partners on notice for all affiliate-advance defaults that had occurred up to that date (even though the letters used specific 2017–2018 figures).
      • Clarified that the general partners could not have been on notice as of May 3 for post-May 3 misappropriations, but that point was immaterial because:
        • Park Terrace affiliate advances continued into July 2019; and
        • Repayment for 2019 advances (including pre–May 3) was not attempted until November 2019—long after any cure period expired.

    2. Substance of the Cure: Loans Cannot Cure Loan Prohibitions

    • The general partners’ June 21 checks:
      • Were offered only after removal notices had been delivered (June 18).
      • Were funded in material part by prohibited loans to the partnerships:
        • A $77,000 deposit from Impro labeled as a “short-term loan” to the partnership, explicitly tied to covering distribution shortfalls.
        • Internal communications and interrogatory responses confirmed that funds came from Impro loans, in direct contravention of no-loan and no-commingling clauses.
    • The Court held:
      • A cure must actually make the partnership whole as contemplated by the relevant provisions; replacing a misappropriation with an unauthorized loan leaves the partnership saddled with new indebtedness, not restored.
      • The contracts expressly prohibited the very type of loan used to fund the cure, so the “cure” doubled as a new breach.
      • For Park Terrace, continuing misappropriations after notice and extremely belated repayments (attempted in November, backdated to September) plainly failed the cure timing required by the agreement and Florida law on contractual time-of-performance.

    3. No Duty on Limited Partners to Compute Cure Amount

    The general partners argued the limited partners hindered cure by:

    • Not telling them precisely how much was owed; and
    • Not agreeing that the checks resolved all defaults.

    The Court rejected this, distinguishing Blackhawk and PL Lake Worth:

    • Unlike a purchase option where the optionor exclusively controls the calculation data, here the general partners:
      • Were the actors who had orchestrated the misappropriations;
      • Possessed the books and records necessary to reconstruct the withdrawals; and
      • Had been repeatedly confronted with the auditor’s and limited partners’ objections for years.
    • The cure provisions imposed a unilateral obligation on the general partners to “remedy” their defaults within a fixed time; the limited partners had no contractual duty to assist them numerically beyond giving notice of the nature of the default.

    D. Forfeiture, Windfall, and Enforcement of Removal Rights

    The general partners argued that removal was an extreme forfeiture of their vested economic rights (e.g., end-of-compliance-period purchase options) and conferred an unjust windfall on the limited partners. The Court disagreed.

    • Contractual forfeiture permissible:
      • The removal provisions formed part of the original bargain; the general partners had agreed to them.
      • Florida law allows contractual forfeiture clauses to be enforced where:
        • The intent is clear; and
        • The forfeiture results from the breaching party’s own persistent or willful misconduct (Howard Cole, Nelson, Stoltz, Jenkins).
    • No substantial compliance:
      • The general partners did not substantially perform the agreements:
        • They repeatedly misappropriated funds over many years;
        • Ignored the waterfall, no-loan, and non-commingling provisions;
        • Breached fiduciary duties and persisted even after successive objections and default notices.
      • This was not a case of technical or accidental minor default.
    • No improper windfall:
      • Unlike Fowler, where forfeiture produced a windfall despite no real damages, the limited partners here suffered concrete harm:
        • Loss of cash reserves and reduced distributions;
        • Exposure to higher financial and operational risk;
        • Destruction of the fiduciary relationship’s integrity.
      • Enforcing the bargained-for removal right in these circumstances simply effectuated the contract; it did not confer a gratuitous bonus.

    E. Waiver and Estoppel Rejected

    1. Waiver

    • The general partners claimed an implied waiver because:
      • Improper affiliate advances began years before litigation;
      • Limited partners did not remove the general partners earlier.
    • The Court agreed with the district court that:
      • Limited partners and their representatives consistently objected to improper withdrawals from at least 2011 onward.
      • The 2017 audits (finalized in September 2018) and the engagement of Hunt in January 2019 clarified and escalated concerns.
      • Hunt raised the issues in March 2019—only a few months after the 2017 audits—and formal default letters followed shortly thereafter.
      • There was no evidence of an intentional relinquishment of the right to remove; at most, there was temporary forbearance while the facts were being clarified.
    • Under Puckett Oil and MDS, a reasonable period of forbearance, absent unequivocal intent to waive, does not create a waiver.

    2. Estoppel

    The general partners also argued equitable estoppel, asserting that the limited partners’ prior inaction induced them to believe removal would never occur.

    • The Court found no support for any of the required elements:
      • No contradictory representation: The limited partners never represented that they would tolerate misappropriations; to the contrary, they repeatedly objected.
      • No reasonable reliance: Relying on a counterparty’s temporary decision not to exercise contractual remedies, in the face of persistent objections, is not reasonable.
      • No detrimental change in position: The general partners did not show they changed their position (e.g., made irreversible investments) in reliance on any supposed assurance of non-enforcement.
    • Thus, equitable estoppel did not apply under Morsani and Progressive Express.

    VI. The Concurring Opinion: Contract Interpretation Canons and the Scope of “Material Detriment”

    Judge Newsom concurred fully in the judgment and the Court’s opinion but separately addressed a subtle textual point: whether the Fountainview agreement’s requirement of “material detriment” applies to all grounds for removal listed in § 8.15(a)(i) or only to one of them.

    A. The Text at Issue

    Section 8.15(a)(i) allows removal of the general partner:

    for any intentional misconduct, malfeasance, fraud, act outside the scope of its authority, breach of its fiduciary duty, or any failure to exercise reasonable care with respect to any material matter in the discharge of its duties and obligations as General Partner (provided that such violation results in, or is likely to result in, a material detriment to or an impairment of the Partnership, the Limited Partners, the Project, or the assets of the Partnership)[.]

    The majority effectively assumes the parenthetical “provided that” clause applies to the whole series (intentional misconduct, malfeasance, etc.). Judge Newsom suggests otherwise.

    B. Rule of the Last Antecedent vs. Series-Qualifier Canon

    • Rule of the last antecedent (Lockhart v. United States, 577 U.S. 347, 351 (2016); Barnhart v. Thomas, 540 U.S. 20, 26 (2003); Scalia & Garner, Reading Law):
      • A limiting clause or phrase ordinarily modifies only the noun or phrase that immediately precedes it.
      • Applied here, the parenthetical “provided that such violation …” would modify only the last listed ground: “any failure to exercise reasonable care with respect to any material matter.”
    • Series-qualifier canon:
      • When there is a straightforward, parallel series of terms or phrases, a modifier at the end typically applies to the entire series.
      • The majority implicitly uses this canon, treating all listed grounds (misconduct, malfeasance, fraud, etc.) as one parallel series governed by the “material detriment” condition.

    C. Why Judge Newsom Reads the Clause Narrowly

    Judge Newsom identifies two features of § 8.15(a)(i) that, in his view, break the series and trigger the last-antecedent rule:

    1. Two separate “any” clauses:
      • The text presents:
        • “any intentional misconduct, malfeasance, fraud, act outside the scope of its authority, breach of its fiduciary duty,” and then
        • “or any failure to exercise reasonable care with respect to any material matter … (provided that such violation results in … a material detriment…).”
      • This second “any” strongly suggests a bifurcated structure: a first category of deliberate, serious wrongs; and a second category of negligent failures.
      • Under the last-antecedent rule, the parenthetical more naturally attaches only to that second category.
    2. Difference in severity:
      • The first group—intentional misconduct, malfeasance, fraud, acts outside authority, fiduciary breaches—reflects purposeful or egregious misconduct.
      • The second—“failure to exercise reasonable care”—captures simple negligence.
      • It is sensible drafting to require a heightened showing (material detriment) when removal is based on simple negligence, but not when based on serious intentional wrongdoing.

    On Judge Newsom’s reading, then, limited partners could remove a general partner for intentional misconduct or fraud without proving “material detriment.” They would only need to show “material detriment” when removal is based on negligent conduct. Nevertheless, because the record here showed material detriment in abundance, this interpretive difference did not affect the outcome.

    From a drafting perspective, the concurrence highlights how crucial structural cues (“any,” “or,” parentheticals) and the placement of modifiers are in removal-for-cause clauses—and how courts may use textual canons to parse them.

    VII. Impact and Practical Implications

    A. For LIHTC and Real Estate Limited Partnerships

    • Clarified removal standard: This opinion provides a roadmap for how courts will read removal-for-cause clauses in LIHTC partnership agreements, especially where “material detriment” or “material adverse effect” language is present.
    • Fiduciary and cash-management discipline:
      • Developer-side general partners frequently use intercompany “advances” across portfolios for cash flow management; this case underscores that:
        • Doing so in violation of waterfall and no-loan/commingling provisions is high-risk; and
        • They are likely to be treated as material breaches, not mere technicalities, particularly when sustained or repeated.
    • Audits and documentation matter:
      • The Court relied heavily on:
        • Baker Tilly’s audits and classifications (due from affiliate vs. contra-equity);
        • Internal emails acknowledging loans to partnerships; and
        • Post hoc promissory notes and backdating efforts as evidence of concealment rather than legitimate business planning.
        • LP-side asset managers should ensure:
          • Regular review of audited financial statements;
          • Timely follow-up when “due from affiliate” or similar accounts appear;
          • Written objections documented over time.
      • Remedies and economic consequences:
        • General partners in LIHTC deals often expect significant “back-end” value—developer fees, refinancing upside, and residual purchase options.
        • This case confirms that those expectations are subject to forfeiture if:
          • The agreements tie them to “for cause” continued service; and
          • The GP engages in willful misappropriation and fails to cure.

      B. For Contract Drafting and Risk Allocation

      • Use “material” with care:
        • Drafters should be explicit:
          • When is “material” intended as a quantitative threshold?
          • Which types of wrongdoing (intentional vs. negligent) require proof of material detriment?
        • Consider separate subsections, each with its own explicit consequences, to avoid interpretive disputes like those highlighted in the concurrence.
      • Specify cure mechanics:
        • Clarify:
          • What constitutes a cure (e.g., repayment plus interest/penalties, documentation corrections);
          • Whether certain defaults (e.g., fraud, willful misappropriation) are incurable by contract; and
          • Whether curing financial shortfalls via loans is ever permitted, and if so, under what conditions.
        • If the intention is to bar curing misappropriations with further prohibited conduct (e.g., loans from affiliates), that should be spelled out.
      • Explicit forfeiture language:
        • Given Florida’s willingness to enforce contractual forfeiture where intent is clear, agreements should:
          • State plainly which economic rights (fees, residuals, buyout options) are lost upon removal for cause;
          • Define “for cause” in detail; and
          • Address whether any vesting or partial-credit regime applies.

      C. For Litigation Strategy

      • For limited partners/asset managers:
        • Document all objections to improper distributions.
        • Use audits strategically as both information tools and evidentiary anchors.
        • When moving to remove a GP, send:
          • Clear default notices referencing specific provisions;
          • Contractually compliant cure periods; and
          • Follow-up monitoring to detect attempted backdating or partial cures.
      • For general partners/developers:
        • Assume that “advances” to affiliates from partnership funds will be scrutinized as potential misappropriations, particularly when:
          • Not documented in real time;
          • Lack clear repayment terms; and
          • Persist over multiple fiscal years.
        • Upon receiving a default notice:
          • Immediately cease the offending conduct (e.g., further advances);
          • Reconstruct and repay all improper withdrawals with permitted sources; and
          • Avoid any appearance of concealment or backdating, which will be treated as aggravating circumstances.

      VIII. Simplifying Key Legal Concepts

      • Limited partnership: A business structure where:
        • General partners manage the business and owe fiduciary duties.
        • Limited partners contribute capital and receive economic benefits but typically have no management role and limited liability.
      • Waterfall: A contractually specified order in which partnership cash is distributed—e.g., first to pay operating expenses, then debt service, then a preferred return to limited partners, and only lastly to the general partner as incentive fees.
      • Due from affiliate: An accounting entry showing money that the partnership has advanced to an affiliated entity and expects to be repaid. It becomes problematic if undocumented, long outstanding, or prohibited by contract.
      • Contra-equity: An accounting treatment reducing an owner’s equity balance to reflect amounts that, in substance, are not recoverable; often signals that “advances” to an affiliate are effectively permanent depletions rather than real receivables.
      • Material breach: A breach serious enough that it strikes at the heart (“essence”) of the contract such that the injured party did not receive substantially what it bargained for.
      • Material detriment / material adverse effect: Harm that is real and significant, not trivial. It can be financial (lost money, reduced reserves) or relational (destroyed trust, compromised control or governance).
      • Cure: A contractual right/opportunity for a breaching party to fix a default—typically by paying amounts owed or otherwise performing as promised—within a set time. To be effective, cure must be timely and restore the other party as the contract requires.
      • Forfeiture: Loss of a legal right or property interest as a consequence of breach or wrongdoing. Contractual forfeiture occurs when the contract specifies that certain rights (e.g., continued partnership status, option rights) are lost if defined events occur.
      • Waiver: When a party voluntarily gives up a right (like a right to terminate or remove), either expressly or by conduct that clearly shows an intent not to enforce it.
      • Estoppel: A fairness doctrine that prevents a party from asserting a position when:
        • They previously made a contrary representation;
        • The other side reasonably relied on that representation; and
        • That reliance caused a detrimental change in position.
      • Rule of the last antecedent: A grammatical presumption that a trailing modifier (“provided that …”) usually applies only to the nearest antecedent phrase, not to earlier items in a list, unless the structure suggests otherwise.
      • Series-qualifier canon: A countervailing presumption that a modifier at the end of a clearly parallel list applies to the entire series.

      IX. Conclusion

      Creative Choice Homes XXX/XXXI v. AMTAX & MG Affordable is an important Eleventh Circuit decision for anyone involved in LIHTC and other real estate limited partnerships. It reaffirms and refines several core principles under Florida law:

      • Terms like “material detriment” and “material adverse effect” in removal clauses are not hollow; they require real, significant harm, but that harm can be both financial and relational.
      • Persistent, willful misappropriation of partnership funds and disregard for waterfall and fiduciary obligations constitute such harm, even where headline tax benefits are still flowing.
      • Cure provisions must be honored in both timing and substance; a cure funded by new contract violations is no cure at all, and late or backdated payments cannot save the day.
      • Florida courts will enforce negotiated contractual forfeiture, including the loss of valuable economic rights, when invoked against parties who have willfully and repeatedly violated core obligations.
      • Waiver and estoppel require clear evidence of intentional abandonment of rights or misleading conduct—neither of which was present here despite the temporal gap between early objections and ultimate removal.

      The decision also underscores the value of careful drafting (particularly of removal and cure provisions), the evidentiary weight of audited financial statements and internal communications, and the sharp consequences that can follow when general partners treat partnership cash as fungible with their broader corporate group. For both developers and institutional investors, this opinion offers a detailed map of how courts are likely to analyze similar disputes going forward.

Case Details

Year: 2025
Court: Court of Appeals for the Eleventh Circuit

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