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LID Associates v. Dolan8/30/2001
UNPUBLISHED
Appeal from the Circuit Court of Cook County. Honorable Lee Preston, Judge Presiding
Plaintiffs, limited partner investors in Cablevision of Chicago (Partnership), brought an action individually and derivatively on behalf of the Partnership against defendants, general partners Charles F. Dolan and Cablevision Systems Services Corporation (CSSC), for breach of fiduciary duty involving three financing transactions. Plaintiffs claim the transactions unfairly benefitted the general partners, to the detriment of the limited partners. A jury found the issues for plaintiffs.
The issues presented on appeal include whether the circuit court erred (1) in allowing certain evidence as to plaintiffs' theory of breach of fiduciary duty; (2) in refusing to submit a defendants' statute of limitations instruction; (3) in refusing a separate verdict form to determine the liability of each defendant; and (4) whether individual verdicts for plaintiffs' claims should not have been submitted to the jury.
The issues presented on cross-appeal include whether the circuit court erred (1) by allowing Partnership indemnification of defendants' attorneys' fees and costs; (2) by denying forfeiture damages; (3) by not submitting the issue of punitive damages to the jury; and (4) by submitting a certain statute of limitations jury instruction.
Dolan, a cable industry pioneer, established the Partnership in 1979 for the purpose of bringing cable television to the Chicago area after a successful cable television venture in Long Island, New York. Bank loans to then-novel cable television companies were considered risky because the companies had few assets to pledge as collateral, needed long-term loans and had cash flow problems. Banks granting such loans in 1979 demanded restrictive loan covenants that required the borrowing cable company to maintain certain financial performance levels or face default.
Dolan formed three Illinois limited partnerships to raise capital for the Partnership. Prior to investing in the three limited partnerships, each plaintiff received a private offering memorandum, which included a copy of the Partnership Agreement and explained that there were substantial risks in investing in start-up cable companies in the early 1980s. Dolan testified that the Partnership Agreements for the Partnership and three limited partnerships were identical, except for monetary terms. Each plaintiff was required to certify that he or she had a substantial net worth, was sophisticated in business and financial affairs and had received the offering memorandum containing a copy of the Partnership Agreement.
Section 8.1(a) of the Partnership Agreement gave Dolan, as a general partner, authority to manage the partnership and enter into transactions in furtherance of the Partnership's business. Section 8.2(d) specifically authorized Dolan, as managing general partner, "to borrow or lend money upon any terms and conditions, including the subordination of such loans; * guarantee indebtedness or obligations of others; provided, however, that [Dolan] determine in good faith that any such transaction is in furtherance of a Partnership purpose." Further, the Partnership Agreement in section 8.2(h) allowed Dolan, as managing general partner, "to engage in any kind of activity and to perform and carry out contracts of any kind necessary to, or in connection with, or incidental to the accomplishment of the purposes of the Partnership, as may be lawfully carried on or performed by a limited partnership under the laws of the State of Illinois *."
The Partnership Agreement also specifically contemplated potential conflicts of interest in
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