United States Court of Appeals
                           FOR THE EIGHTH CIRCUIT
                                    ___________

                                    No. 01-1875
                                    ___________

LG&E Capital Corp.,                  *
                                     *
            Plaintiff-Appellee,      *
                                     * Appeal from the United States
     v.                              * District Court for the
                                     * District of Nebraska.
Tenaska VI, L.P.; Tenaska            *
Grimes Partners, L.P.,               *
                                     *
            Defendants-Appellants.   *
                                ___________

                              Submitted: November 15, 2001

                                   Filed: May 17, 2002
                                    ___________

Before BYE and BEAM, Circuit Judges, and GOLDBERG,1 Judge.
                              ___________

BYE, Circuit Judge.

        This is a dispute over the exercise of an option to acquire a 10% interest in a
limited partnership. Tenaska VI, L.P., and Tenaska Grimes Partners, L.P., two
affiliates of Tenaska, Inc. (collectively, Tenaska) who held a majority interest in the
limited partnership, allege LG&E Capital Corp. violated the option's anti-assignment
provision by exercising the option with an agreement already in place to transfer the


      1
       The Honorable Richard W. Goldberg, Judge, United States Court of
International Trade, sitting by designation.
interest to a third party. Tenaska also alleges LG&E's failure to disclose the reason
for requesting an extension of the option deadline (which Tenaska granted) should
void the exercise of the option. The district court2 rejected Tenaska's claims. We
affirm.

                                          I

       In 1995, four entities — Tenaska, KU Capitol Corp. (KUCC), and affiliates of
Illinova Generating Co. (Illinova) and Continental Energy Services (Continental) —
formed a partnership called Tenaska Power Partners (Power Partners) to develop
power plant projects in the western United States. Tenaska served as managing
partner.

       In 1997, Power Partners considered developing a power plant in Grimes
County, Texas. After Power Partners spent over $1 million on the project, including
$150,000 of KUCC's money, Tenaska determined the Grimes plant did not meet
Power Partner's criteria for project development. When the other partners objected,
Tenaska invited Continental and Illinova to form a separate limited partnership called
Tenaska Frontier Partners, Ltd. (Frontier Partners) to develop and operate the Grimes
plant. Tenaska wanted to exclude KUCC because Howard Hawks, Tenaska's
CEO/chairman/president, disagreed with positions taken by KUCC in the operation
and financing of Power Partners. The other partners, however, believed KUCC
should be allowed to join the new limited partnership. Tenaska ultimately relented
and invited KUCC to join Frontier Partners, but by that time it was too late for KUCC
to obtain corporate approval. So, instead of joining Frontier Partners outright, KUCC
negotiated an option to participate in Frontier Partners.



      2
       The Honorable Thomas M. Shanahan, United States District Judge for the
District of Nebraska.

                                         -2-
       The option allowed KUCC to acquire a 10% interest in Frontier Partners in
exchange for KUCC's promise to advance up to $1.5 million to fund the Grimes plant,
and other funding promises. The option agreement contained an anti-assignment
provision which stated "[t]his Agreement may not be assigned by any Party to any
other Person." App. 927. The agreement placed no restrictions, however, on KUCC's
ability to transfer the interest after the option was exercised. LG&E had to use or lose
the option by June 30, 1998.

       As a result of a corporate merger in the spring of 1998, LG&E became KUCC's
parent company and succeeded to KUCC's rights and obligations under the option
agreement. LG&E evaluated whether to exercise the option and ultimately decided
not to participate in Frontier Partners. At the same time, Illinova wanted a bigger
share of the limited partnership (Illinova had 10%, Continental 25%, and the two
Tenaska affiliates 65%), and approached LG&E about exercising the option for the
sole purpose of immediately transferring the interest to it. LG&E was willing to deal,
but it wanted to be fully protected from the economic consequences of exercising the
option. LG&E therefore insisted that an agreement be in place with Illinova prior to
the option's exercise.

       By June 30, 1998, the date the option was to expire, LG&E had not reached an
agreement with Illinova. LG&E called Tenaska and asked for a two-week extension.
LG&E did not say why it needed the extension and Tenaska did not ask. Tenaska
granted a one-week extension. During that week, LG&E and Illinova finalized a
"Memorandum of Agreement" in which Illinova agreed to purchase LG&E's interest
after LG&E exercised the option. Illinova also agreed to indemnify LG&E for all
financial obligations resulting from the exercise of the option.

       On July 6, 1998, LG&E exercised the option and then immediately transferred
the interest to Illinova. LG&E waited about a month before telling Tenaska about the
transfer. By that time, the financial closing on the Grimes plant was just a week

                                          -3-
away. Tenaska claims it objected to the transfer, but because it was concerned about
the closing, Tenaska represented to the lender that it approved of the transfer.
Tenaska assured LG&E in correspondence regarding LG&E's financial obligations
that it would "straighten out all of the disarray after financial closing." App. 1010.

       After exercising the option, LG&E provided letters of credit for the project
totaling $8.58 million, which Illinova independently guaranteed. In addition, after
the material terms of the "Memorandum of Agreement" were disclosed, Tenaska
accepted certain payments directly from Illinova to satisfy funding obligations for the
project. But after a successful closing, Tenaska refused to convey the 10% interest
to LG&E. Tenaska claimed the exercise of the option was void because it would not
have extended the option deadline if LG&E had disclosed the reason for requesting
the extension. Tenaska also claimed LG&E's exercise of the option — with an
agreement already in place to transfer the interest to Illinova — violated the option's
anti-assignment provision.

       LG&E filed an action in federal district court alleging breach of contract and
requesting the court to order a transfer of the interest. The parties brought cross-
motions for summary judgment. The district court found in LG&E's favor and
ordered Tenaska to transfer the 10% interest to LG&E. Tenaska timely appealed the
district court's decision.

                                          II

       The district court's determination that LG&E had no duty to disclose the reason
for requesting an extension of the option deadline, as well as its determination that
the LG&E/Illinova transaction was not an impermissible assignment of the option,
present issues of Nebraska law we review de novo. See ACTONet, Ltd. v. Allou
Health & Beauty Care, 

, 843 (8th Cir. 2000).



                                         -4-
A.    The Request to Extend the Option Deadline

       Tenaska contends LG&E's failure to disclose the reason for requesting an
extension of the option deadline supports a claim of fraudulent concealment under
Nebraska law. A claim of fraudulent concealment consists of several elements, the
first of which requires proof that a party had a duty to disclose a material fact.
Streeks, Inc. v. Diamond Hill Farms, Inc., 

, 118 (Neb. 2000). The
parties dispute whether Tenaska has shown LG&E had a duty to disclose its reason
for requesting an extension of the option deadline.

       In determining whether a duty to disclose has been triggered, Nebraska follows
the Restatement (Second) of Torts, 

, which provides
in relevant part that

      [o]ne party to a business transaction is under a duty to exercise
      reasonable care to disclose to the other before the transaction is
      consummated,

             (a) matters known to him that the other is entitled to know
             because of a fiduciary or other similar relation of trust and
             confidence between them; and

             ...

             (e) facts basic to the transaction, if he knows that the other
             is about to enter into it under a mistake as to them, and that
             the other, because of the relationship between them, the
             customs of the trade or other objective circumstances,
             would reasonably expect a disclosure of those facts.

Restatement (Second) of Torts § 551(2) (1977). Tenaska relies on these provisions
to contend LG&E had an obligation to disclose the reason for the requested
extension.


                                          -5-
      1.     Fiduciary Relationship

       Tenaska contends LG&E owed it a fiduciary duty because of the contractual
relationship between the parties, that is, the option agreement. We disagree. The
general rule is that a contract between two parties does not give rise to a fiduciary
relationship or trigger a duty to disclose material facts. Lincoln Benefit Life Co. v.
Edwards, 

, 747 (D. Neb. 1999), aff'd, 

(8th Cir. 2001).
Tenaska nevertheless argues a fiduciary relationship arose because LG&E was
planning to assign the option in violation of the contract. We are not persuaded by
that argument because it presupposes LG&E's transaction with Illinova breached the
contract, a premise we reject. Furthermore, it suggests a party's intended breach of
contract triggers a fiduciary duty to disclose that intention. That would transform
many breach of contract actions into tort actions involving a fiduciary duty to
disclose, a proposition we reject out of hand.

       Tenaska next asserts that, if the option agreement alone did not create a duty
to disclose, LG&E's other business relationships with Tenaska did. As a result of its
acquisition of KUCC, LG&E obtained interests in several Tenaska projects. Tenaska
argues those ancillary business relationships triggered a fiduciary duty, as well as
LG&E's prospective partnership in Frontier Partners. We disagree. Whatever
fiduciary duties LG&E may have owed Tenaska in other Tenaska projects were
limited to those ventures. E.g., Silverman v. Miller (In re Silverman), 

,
374 (Bankr. E.D.N.C. 1993) ("[F]iduciary status . . . cannot be extended beyond [this
corporate relationship] to apply to all subsequent business dealings between these
parties."); GCM, Inc. v. Ky. Cent. Life Ins. Co., 

, 150 (N.M. 1997)
("Whether a partner owes a fiduciary duty to another partner or the partnership, the
scope of that duty is limited to partnership dealings."); Lipinski v. Lipinski, 

, 713 (Minn. 1949) (addressing a joint venture and holding that "the
relationship between the parties was fiduciary in character . . . but that such
relationship and its obligations were limited to the enterprise in which they were

                                         -6-
mutually engaged."). In addition, the partnership agreement for Frontier Partners was
governed by Texas law, which imposes no pre-formation duties on a prospective
partner. Tex. Rev. Civ. Stat. Ann. art. 6132b-4.04; see also Neb. Rev. Stat. § 67-424
(eliminating the fiduciary duty Nebraska had previously recognized during the
formation stage of a partnership).

       Finally, Tenaska argues LG&E had a fiduciary duty to disclose the reason for
requesting the extension of the option deadline because Illinova, as an existing
partner, breached a fiduciary duty to Tenaska by negotiating with LG&E behind
Tenaska's back. Tenaska contends Illinova's fiduciary duties should extend to LG&E.
We disagree with this novel position, for which Tenaska cites no authority. Whether
Illinova breached a fiduciary duty to Tenaska by dealing with LG&E is entirely
separate, we believe, from whether LG&E itself had a duty to disclose its reason for
requesting an extension.

      2.     Facts Basic to the Transaction

      Tenaska also claims LG&E had an obligation to disclose the reason for the
extension request because it was a "fact basic to the transaction." The district court
concluded LG&E's intent to sell the prospective partnership agreement to Illinova did
not concern the basis or essence of LG&E's transaction with Tenaska, and thus did
not give rise to a duty to disclose. We agree with the district court.

       The facts basic to the transaction between LG&E and Tenaska concerned the
value of the 10% partnership interest, and the other consideration exchanged for the
right to the option. LG&E's possible intentions after exercising the option were
immaterial to the option agreement itself. Thus, when LG&E requested an extension,
it was not obligated to disclose its intention to sell to Illinova because that transaction
was not a fact basic to the transaction with Tenaska.



                                           -7-
B.    Violation of the Anti-Assignment Provision

      Tenaska argues the LG&E/Illinova transaction should be construed as an
assignment of the option (thereby breaching the anti-assignment provision), because
LG&E had already reached an agreeement with Illinova to transfer the 10% interest
before the option was exercised. We disagree for several reasons.

       First, we conclude Tenaska is estopped from contending LG&E breached the
option's anti-assignment provision. Tenaska received a copy of the LG&E/Illinova
"Memorandum of Agreement" on August 22, 1998, and thus knew all the material
details regarding the LG&E/Illinova transaction on that date. Nevertheless, Tenaska
subsequently accepted letters of credit from LG&E totaling $8.58 million. Tenaska
also accepted money directly from Illinova in response to a cash call to fund a turbine
payment for the Grimes project. The cash call occurred after the "Memorandum of
Agreement" had been disclosed and Tenaska accepted Illinova's payments without
reserving its right to contest the exercise of the option. Thus, contrary to the dissent's
suggestion, it is undisputed that Tenaska accepted benefits resulting from LG&E's
exercise of the option and subsequent sale to Illinova with full knowledge of the
material terms of the "Memorandum of Agreement." Despite this, Tenaska now
wants to avoid its corresponding obligation to transfer the interest. "The acceptance
of any benefit from a transaction or contract, with knowledge or notice of the facts
and rights, will create an estoppel." Baye v. Airlite Plastics Co., 

,
150 (Neb. 2000) (collecting Nebraska cases setting forth the test for applying estoppel
in a contract case); see also Total Petroleum, Inc. v. Davis, 

, 737 (8th
Cir. 1987) (holding equitable estoppel prevents "a party who has full knowledge of
the facts from accepting the benefits of a transaction, contract, or order and
subsequently taking an inconsistent position to avoid corresponding obligations.").3


      3
       The dissent relies on a fraud case, Nathan v. McKernan, 

, 768
(Neb. 1960), which is, of course, inapposite because we are here concerned with

                                           -8-
       Second, even if we turn a blind eye to the estoppel issue, and further assume
the LG&E/Illinova transaction constituted an assignment of the option, we still could
not side with Tenaska. In several cases involving land-sale contracts, the Nebraska
Supreme Court has refused to enforce anti-assignment provisions where the "contract
has been fully performed or if assignee offers and is able to complete performance."
Panwitz v. Miller Farm-Home Oil Serv., 

, 66 (Neb. 1988) (emphasis
in original); see also Obermeier v. Bennett, 

, 528-29 (Neb. 1988);
Martin v. Baxter, 

, 421 (Neb. 1977); Riffey v. Schulke, 

, 6-7 (Neb. 1975); Wagner v. Cheney, 

, 223 (Neb. 1884). The Nebraska
Supreme Court recently applied this principle to a case outside the land-sale context.
Folgers Architects Ltd. v. Kerns, 

, 126-27 (Neb. 2001) (citing
Panwitz). The court noted "the intent of [a] provision against assignment of rights
under a contract [is] generally [] to allow the parties to choose with whom they
contract," and refused to enforce an anti-assignment provision where the assignment
did not affect the parties' actual performance of the contract. 

together, we believe these cases indicate Nebraska would not enforce an anti-
assignment provision under the circumstances involved in this case. Clearly, the
alleged assignee, Illinova, had offered and was able to complete performance of its
obligations under the limited partnership.

       Furthermore, Tenaska can hardly complain that its right to choose with whom
it contracts is hindered, since Illinova is already an existing partner in the limited
partnership. The dissent disagrees, emphasizing Tenaska's "right to control with
whom and at what time it chose to offer a percentage of its own partnership interest."
Post at 16. But the facts of record undercut this argument. Before the LG&E option
was exercised, Tenaska had engaged in negotiations to transfer to Illinova an
additional 7.5% interest in the limited partnership in the event LG&E elected not to
participate in the partnership. App. 311-12, 503. Indeed, the facts suggest Tenaska


Tenaska's breach-of-contract claim, not its fraud claim.

                                         -9-
was more than willing to transfer some of its partnership share to Illinova, so long as
Tenaska received the financial benefit of that transaction. See App. 221 (recounting
Hawks' displeasure with the LG&E/Illinova transaction merely "[b]ecause I didn't
get anything.").

       Finally, and most importantly, the LG&E/Illinova transaction was a permissible
sale of the interest following an exercise of the option, and did not constitute an
assignment of the option itself. Under Nebraska law, "the intention of the assignor
must be to transfer a present interest in the debt or fund or subject matter; if this is
clearly expressed, the transaction is an assignment; otherwise not." Tilden v.
Beckmann, 

, 586 (Neb. 1979) (emphasis added). Tenaska cannot
show that the "Memorandum of Agreement" reflects LG&E's clear intention to
transfer to Illinova a present interest in the option agreement. The "Memorandum of
Agreement" states that LG&E "hereby grants [Illinova] the exclusive right and option
to purchase the KUCC Partnership Interest at any time after the transfer of such
Partnership Interest to [LG&E] pursuant to the Option Agreement." App. 693
(emphasis added). Thus, the "Memorandum of Agreement" expressly sets forth
LG&E's intention to transfer a future interest should it exercise the option.

       In Craig v. Farmers Mut. Ins. Co., 

(Neb. 1991), the Nebraska
Supreme Court applied Tilden to the assignment provisions of a ranch sale agreement,
and drew a clear distinction between agreements transferring present and future
interests. 

The ranch at issue was an asset of a bankrupt corporation,
to which the bankruptcy trustee, Craig, was found to have title in late 1986. In
February 1987, Craig purchased a policy from Farmers Mutual that provided property
damage coverage for certain ranchhouses and buildings, then made attempts to sell
the property. Before Craig negotiated a sale, some of the ranch buildings were
vandalized. In August 1987, Craig sold the ranch in an agreement that provided




                                         -10-
      Seller [Craig] shall assign to Buyer [Big B, Inc.] all right, title and
      interest of Seller to any insurance proceeds for damage in regard to any
      claims prior to the date of this Agreement . . . and for damage in regard
      to any claim subsequent to the date of this Agreement . . . provided,
      however, that Buyer shall use any insurance proceeds to repair or
      improve the property.

suit brought by Craig to recover insurance proceeds for the vandalism,
Farmers Mutual argued that Craig assigned his entire interest in the insurance
contract to Big B, and therefore was not the proper party and lacked standing to bring
the suit against Farmers Mutual. 

Craig contended "the language of the
sale agreement indicates an agreement for future assignment of interest in the
proceeds of an insurance policy" and that while the insurance proceeds were assigned,
the cause of action to obtain the proceeds was not. 

The
Nebraska Supreme Court agreed, stating "the evidence shows that Craig had no intent
to transfer a present interest in the policy, but, rather, that he agreed to transfer the
proceeds, if any, of the policy when those proceeds were obtained." 

"Memorandum of Agreement" is comparable to the
Craig/Big B ranch sale agreement. Neither agreement expresses an intent to transfer
a present interest in the subject matter of the agreement. Both agreements
demonstrate an intent to transfer the subject matter in the future should that interest
be obtained. We believe the present/future interest distinction made in Craig controls
this case, and thus conclude the LG&E/Illinova transaction did not constitute an
impermissible assignment of the option.

       The dissent claims section 3 of the "Memorandum of Agreement" made
Illinova "obligated for all financial burdens associated with the option interest before
LG&E even became a partner of TFP." Post at 20 (emphasis added). We disagree.


                                          -11-
Section 3 sets forth the manner in which the purchase price of the partnership interest
was to be calculated — that is its clear and only purpose. One of the three
components of the purchase price was the amount needed to reimburse LG&E for any
funding obligations it might incur prior to exercising its option. App. 694. The
agreement's reference to that amount as part of the purchase price did not somehow
impose a present financial obligation upon Illinova (triggered before LG&E even
exercised the option or before Illinova had purchased the interest), and thus did not
transform the "Memorandum of Agreement" into the transfer of a present interest in
the option agreement.

                                          III

       We feel obliged to respond to an argument Tenaska did not make in the district
court, and did not make on appeal, but which the dissent raises for the first time. The
dissent contends LG&E breached the Power Partners' limited partnership agreement,
specifically, that the Illinova/LG&E transaction violates section 14.3(iii), which the
dissent construes as a notice provision. Post at 17-19 & n.7.

       First, we disagree that section 14.3(iii) operates as a notice provision. That
section provides, in its entirety, that "no Partnership interest may be transferred by
sale, transfer, or otherwise if: . . . (iii) such transfer would adversely affect the
financial and operating integrity of the Partnership, any individual Partner, Parent, or
Affiliate thereof." App. 882. Thus, the partnership could refuse to approve a transfer
of interest because the transfer "would adversely affect the financial and operating
integrity of the Partnership," but not because a partner failed to give notice prior to
the transfer.

       Second, Tenaska never claimed or argued in the district court (or before this
court) that LG&E breached the limited partnership agreement, either on the ground
the transfer would adversely affect the financial and operating integrity of the

                                         -12-
partnership, or because of an alleged deficiency in notice. Therefore, any such claim
has been waived. Turpin v. County of Rock, 

, 782 (8th Cir. 2001).

       Finally, the dissent suggests LG&E violated the partnership agreement to the
extent the agreement incorporates the notice requirements of the Texas Revised
Partnership Act. See post at 19. But Tex. Rev. Civ. Stat. Ann. 6132b-5.03(d)
addresses a partnership's duty to give effect to a transferee's rights after receiving
notice of a transfer: the statute does not impose a duty on the transferor to give notice
to the partnership prior to the transfer. It is undisputed that LG&E notified Tenaska
it had transferred its interest to Illinova — this dispute concerns Tenaska's refusal to
give effect to Illinova's (the transferee's) rights after receiving notice. Thus, the
dissent's suggestion that Texas law and the limited partnership agreement imposed
a pre-transfer notice obligation upon LG&E is simply unfounded.

                                           IV

      We affirm the judgment of the district court in all respects.

BEAM, Circuit Judge, dissenting.

       Because I believe the anti-assignment provision of the option agreement
controls the outcome here, I dissent. I adopt the facts set forth in the court's opinion
with one clarification. The option agreement "placed no restrictions . . . on KUCC's
ability to transfer the interest after the option was exercised," ante at 3, only because
once the option was exercised, the Tenaska Frontier Partners, Ltd. ("TFP")
partnership agreement controlled the party's rights regarding post-exercise transfers,
not the option agreement. So, there was no need for the option agreement to be
concerned with these future requirements. I additionally note that at all times, I refer
to KUCC as LG&E for practical purposes in this dissent.



                                          -13-
       LG&E violated the anti-assignment provision of the option agreement when
it attempted to exercise the option and carry out its duties under the option agreement
as a strawman for the real party in interest, Illinova. LG&E did not merely transfer
its economic interest in TFP to Illinova, but rather purported to transfer its entire
partnership interest whereby Illinova would be substituted for LG&E as partner, thus
increasing Illinova's stake in TFP. The decisions of the district court as well as this
court permit this transfer without limitation and I disagree. The court partially refutes
Tenaska's claim of fraudulent concealment by determining that LG&E had no duty
to disclose the reason for requesting an extension of the option deadline. However,
we need not reach this issue because LG&E's purported exercise of the option was
a breach of contract and ineffective.

       First, Tenaska is not estopped from contending LG&E breached the option's
anti-assignment provision, contrary to the court's conclusion. In a claim of contract
fraud, "'acts in affirmance of the contract amount to a waiver of the fraud only where
they are done with full knowledge of the fraud and of all material facts and with the
intention clearly manifested of abiding by the contract and waiving all right to
recover for the deception.'" Nathan v. McKernan, 

, 768 (Neb. 1960)
(quoting Dargue v. Chaput, 

, 158 (Neb. 1958) (quoting 24 Am. Jur.
Fraud and Deceit § 214)).4 Thus, in its claim of fraudulent concealment, Tenaska is


      4
        The court cites Baye v. Airlite Plastics Co., 

, 150 (Neb. 2000)
for the proposition that "[t]he acceptance of any benefit from a transaction or contract,
with knowledge or notice of the facts and rights, will create an estoppel." In Baye,
however, the party was challenging the validity of the contract under which the
defendant had accepted money annually. The Nebraska Supreme Court essentially
held that an assertion of invalidity is nullified by the acceptance of the benefits. 

Baye does not, however, deal with a claim of fraudulent concealment in
the performance of a contract as we have here. In this case, Tenaska is not arguing
that the option agreement is invalid, but that LG&E engaged in fraudulent
concealment in relation to the exercise of LG&E's option, which concealment resulted
in a breach of the option contract. Thus, Nathan, not Baye, is on point legally and

                                          -14-
estopped from contending LG&E breached the option agreement only if the facts are
undisputed regarding Tenaska's knowledge of the Memorandum of Agreement
("MOA") between LG&E and Illinova, and that when Tenaska proceeded with the
closing of the Grimes project in spite of that alleged knowledge, it did so with the
intent to waive all right to object to LG&E's deception.5 These facts are clearly in
dispute, and summary judgment cannot be supported as a matter of law on this issue.

      Second, the court asserts that even if the LG&E/Illinova transaction constituted
an assignment of the option, LG&E did not breach the anti-assignment provision
because Illinova could presumably meet LG&E's obligations in the TFP partnership.
I wholly disagree that "Tenaska can hardly complain that its right to choose with
whom it contracts is hindered, since Illinova is already an existing partner in the


factually and, as such, Nathan presents the apposite precedent. Estoppel in this
instance requires proof of knowledge and intent, both of which are issues of fact more
appropriately left for the fact finder in this instance.
      5
         The court states that contrary to my suggestion in dissent "it is undisputed that
Tenaska accepted benefits . . . with full knowledge of the material terms of the
'Memorandum of Agreement.'" Ante at 8. I respectfully suggest that this argument
both ignores other material facts and substantively misses the point. The MOA
between LG&E and Illinova was signed on June 30, 1998. LG&E purported to
exercise the option on July 6, 1998, and Tenaska was informed of the MOA
transaction on August 18, 1998, eight days before the scheduled closing with the
lenders financing the construction of the power plant on August 26, 1998. The record
discloses that TFP and Tenaska were concerned that a full blown dispute with LG&E
at this late date would jeopardize the financial arrangements. From this "between a
rock and a hard place" position, the TFP partners proceeded with the closing.
However, Tenaska by letter to LG&E dated August 24, 1998, concerning the closing,
stated "[w]e can straighten out all of the disarray after financial closing." This, of
course, is hardly the stuff of knowing and intentional waiver of the claim of
fraudulent deception intertwined with breach of contract. Indeed, under precedent
established by Nathan, the court's contention clearly fails to pass muster under
Nebraska law.

                                          -15-
limited partnership." Ante at 9. Undoubtedly, parties have the right to freely
contract.6 Tenaska certainly had the right to control with whom and at what time it
chose to offer a percentage of its own partnership interest. The difference between
Illinova's existing ten percent partnership interest and the increase to a twenty percent
interest by way of the agreement with LG&E is significant, make no mistake. Any
speculation to the contrary only diminishes long-standing contract and partnership
principles. Whether Illinova could presumably fulfill LG&E's obligations is
irrelevant.

       Likening this situation to one that involves the sale of land is misplaced. See
Panwitz v. Miller Farm-Home Oil Serv., Inc., 

, 66 (Neb. 1988)
(holding that in a vendor/vendee relationship, the majority view is that if the assignee
offers and is able to complete performance, a contract provision requiring a seller's
consent has limited application). A land-sale contract is wholly different than an
interest in a partnership, which carries with it ongoing obligations, liabilities and


      6
        The court contends that the fundamental right of a partner to limit, by contract,
its right to associate with whomever it pleases and to whatever degree is undercut by
Tenaska's purported negotiations with Illinova for a 7.5 percent interest if LG&E
failed to exercise its option for 10 percent. The court's argument, I respectfully
suggest, misstates the record. The purported option agreement referred to by the
court appears as Exhibit 35 at App. 503 of the record on appeal and is neither the
option agreement at issue in this case nor a proposed option representing negotiations
between Tenaska and Illinova. Exhibit 35 (App. 501-507) appears to have provided
the basis for a pre-formation discussion with Illinova concerning a potential initial
TFP partnership interest. On the other hand, the option at issue here is not an option
granted for an initial stake in the limited partnership but rather an option by partner
Tenaska granting LG&E a right to acquire a portion of Tenaska's partnership share
obtained as part of the original formation of the TFP partnership. Rather than
undercutting the existence of Tenaska's fundamental contract rights, these
negotiations simply highlight the fact that every partner and partnership, absent
partnership agreement language to the contrary, has the right to pick and choose the
identity, timing and amount of partnership interest that it may wish another to acquire.

                                          -16-
duties. Thus, it is not for a court to determine that since Illinova is an existing partner
of TFP, Tenaska necessarily would have sold Illinova this additional ten percent
interest in TFP; a sort of "no harm, no foul" argument.

       The district court also adopted the "no harm, no foul" approach when it held
that neither the option agreement nor the TFP partnership agreement restrict the
transfer of the interest once the option is exercised, thus presuming that the transfer
of partnership interests is freely permissible. Once LG&E exercises its option and
gains an interest in the TFP partnership, it is subject to the transfer restrictions set
forth in the partnership agreement, and the option agreement is inapplicable. Under
the partnership agreement, LG&E's ability to transfer its interest is subject to
limitations. One such limitation is that no partnership interest may be transferred
under the TFP partnership agreement under any circumstance if such transfer would
adversely affect the financial and operating integrity of the partnership, any individual
partner, parent or affiliate thereof. TFP Limited Partnership Agreement, § 14.3(iii),
App. 0882. Further, even if the partnership approves of a transfer, LG&E is not
released from its obligations under the agreement unless the executive review
committee ("ERC") of the partnership votes affirmatively to do so. 

14.1.1,
App. 0881. Even the MOA contemplates that the transfer of LG&E's partnership
interest to Illinova is limited by the affirmative vote of the ERC. Memorandum of
Agreement, § 2.2.

       Section 14.3(iii) of the partnership agreement, which must be satisfied before
any transfer pursuant to section 14.1 may be considered, and which restricts transfers
that adversely affect the financial and operating integrity of any partner or the
partnership, clearly implies that the transferor partner must give notice to the
partnership and the remaining partners prior to a transfer of the transferor's interest.7


       7
       The court takes me to task for seeing a "notice" requirement in section 14.3(iii)
of the partnership agreement saying, in part, "[t]hus, the dissent's suggestion that

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In fact, it is a basic tenet of partnership law that a transfer of more than a partner's
economic rights in the partnership requires partner and partnership consent, unless
the partnership agreement provides otherwise.8 Tex. Rev. Civ. Stat. Ann. 6132b-
4.01; Aztec Petroleum Corp. v. MHM Co., 

, 293 (Tex. App. 1985).
Anything less than this limitation on alienability creates a risk that the organization


Texas law and the limited partnership agreement imposed a pre-transfer notice
obligation upon LG&E is simply unfounded." Ante at 13. I again, respectfully
suggest that it is the court's contract and statutory analysis that is unfounded. What
the court apparently fails to notice is that the partnership agreement states at the
beginning of section 14.1 (containing thereafter section 14.1.1) the following:
"[e]xcept as provided in Section 14.3, nothing herein after shall prevent: [a transfer
under the limitations set forth in section 14.1.1]." Section 14.3(iii) then states:
"Notwithstanding any other provision of this Agreement, no Partnership Interest may
be transferred by sale, transfer, or otherwise if: such transfer would adversely affect
the financial and operating integrity of the Partnership, any individual Partner, Parent,
or Affiliate thereof." (Emphasis added). Thus, section 14.3 clearly contains
requirements and approvals that must be met before the terms of section 14.1 may,
in the first instance, be implemented. Indeed, section 14.3 merely recites, in contract
terms, the usual partnership law requirements of notice prior to a transfer that results
in substitution of one individual or entity for an already existing partner, here,
purportedly, the substitution of Illinova for LG&E. Thus, before a transfer with
additional limitations described in sections 14.1.1, 14.1.2 and 14.1.3 can proceed, if
at all, the overriding requirements of section 14.3(iii) must be met. The court does
not indicate how this can possibly be done without giving the partnership and all
existing partners notice before this transfer occurs. Under the court's apparent
scheme, a transfer, without notice, would occur only to be unraveled if the
requirements of section 14.3(iii) and section 14.1.1. are not ultimately met. I find no
statutory or case law in support of this approach and it seems totally at odds with a
reasonable reading of the partnership agreement and usual partnership concepts.
      8
       TFP is a Texas limited partnership, and we apply Texas law as the TFP
partnership agreement so provides. TFP Limited Partnership Agreement, § 17.4.3.
In contrast, the option agreement between Tenaska and LG&E provides for the
application of Nebraska law under the terms of the contract. Option and Agreement,
§ 6.5.

                                          -18-
will be treated as a corporation for tax purposes due to the freely transferable
partnership interests. See MCA Inc. v. United States, 

, 1101 (9th Cir.
1982) (citing the free transferability of interests as one characteristic of a corporation
for tax purposes); Outlaw v. United States, 

, 1380 (Ct. Cl. 1974)
(same). Thus, under the partnership agreement, in order for LG&E's transfer of its
partnership interest to Illinova to occur, the partners and the partnership must agree
that such transfer upholds the financial and operating integrity of the partners and the
partnership. The only way the partners and the partnership could make this
determination is if they had notice of the transfer. Then, and only then, can the
additional limitation conditions set forth elsewhere in section 14.1 (and in part
specifically referenced by LG&E and Illinova in section 2.2 of the MOA) be
implemented. This notice requirement is further evidenced by the Texas Revised
Partnership Act, which requires notice in order for the partnership to give effect to a
transfer of a partnership interest. Tex. Rev. Civ. Stat. Ann. 6132b-5.03 ("Until
receipt of notice of a transfer, a partnership does not have a duty to give effect to a
transferee's rights under this section.").

       When LG&E entered into the MOA with Illinova, and subsequently exercised
its option with Tenaska, LG&E did not provide TFP or Tenaska with notice of the
transfer of LG&E's interest to Illinova. As a result, neither TFP nor Tenaska had an
opportunity to determine whether the transfer would adversely affect the financial and
operating integrity of the partners or partnership. LG&E's disclosure just prior to
financial closing is of no consequence, as the transaction between LG&E and Illinova
had already occurred at that time. We may not assume that even if LG&E validly
exercised its option and gained its ten percent interest in TFP, TFP would necessarily
have favored this particular transfer to Illinova.

     To specifically address the basis of this dissent, I note that the MOA between
LG&E and Illinova, executed before LG&E exercised its option with Tenaska,
unquestionably violates the anti-assignment provision of the option agreement

                                          -19-
between Tenaska and LG&E. First, it is certain that LG&E would not have exercised
the option without the guarantee from Illinova that it would, in fact, purchase LG&E's
interest and perform all of LG&E's partnership obligations. Thus, the acceptance of
the MOA by Illinova immediately divested LG&E of its option and partnership duties
and liabilities. Second, section 3 of the MOA obligates Illinova to pay a purchase
price for the option as well as assume all of LG&E's liabilities and obligations under
the TFP partnership agreement upon transfer of the partnership interest to LG&E.
Illinova further agreed to reimburse and/or indemnify LG&E with respect to all of
LG&E's funding obligations required upon the exercise of LG&E's option, and in fact
did fund LG&E's obligations. The option funding obligations under the MOA are
incurred prior to the transfer of the partnership interest, thus Illinova was obligated
for all financial burdens associated with the option interest before LG&E even
became a partner of TFP.

       It is unduly simplistic to contend that because the MOA states that LG&E
grants to Illinova the option to purchase LG&E's partnership interest after the transfer
of such partnership interest, it is not a present assignment of LG&E's option. Ante
at 10. Indeed, to do so exalts form over substance. Illinova paid a purchase price for
the contractually unassignable option and immediately assumed all of LG&E's
financial and legal obligations. The final transfer of the interest from LG&E to
Illinova, then, was merely a formality, a formality that violated both the option
agreement and the partnership agreement. It appears from the plain language of the
MOA that the only uncertainty was whether LG&E would exercise its option at all
with Tenaska. Once LG&E moved to exercise the option, Illinova instantly assumed
total partnership financial and legal burdens and the terms of the MOA constituted
LG&E's improper transfer of the partnership interest to Illinova without either the
contractually or statutorily required notice. LG&E failed in its attempt to satisfy the
letter of the option agreement pro forma. To hold that LG&E surreptitiously and
successfully drafted its way around the option agreement rewards behavior I am not
willing to sanction, especially given the mandates of well-established partnership law.

                                         -20-
       Stated simply, LG&E's attempted exercise of the option agreement is
inextricably and improperly intertwined with the immediate transfer of LG&E's
partnership interest to Illinova. As a result of the MOA, Illinova became the true
holder of the interest in the TFP partnership. This transfer not only violates both the
terms and spirit of the anti-assignment section of the option agreement, but also the
limitation on transfers at section 14.3(iii) of the limited partnership agreement.

    For these reasons, I would reverse the judgment of the district court granting
summary judgment in favor of LG&E.

      A true copy.

             Attest:

                CLERK, U.S. COURT OF APPEALS, EIGHTH CIRCUIT.




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