Delaware Limited Partnership Judicially Dissolved Where General Partner Was Unwilling to Pursue its Business

Delaware Limited Partnership Judicially Dissolved Where General Partner Was Unwilling to Pursue its Business

      In a decision rendered in August, the Delaware Chancery Court ordered the judicial dissolution of a limited partnership. GMF ELCM Fund L.P. v. ELCM HCRE GP LLC, No. CV 2018-0840-SG, 2019 WL 3713844 (Del. Ch. Aug. 7, 2019).

      White, the initial general partner, organized a variety of entities to operate nursing homes. He was, however, apparently not very good at doing so. The court found that he engaged in “unsatisfactory practices” including failure to send bills and failure to cash checks received. Eventually, the nursing homes in which the investments were made were unable to pay their staffs or buy food for the patients. In prior rulings in this dispute, a receiver was appointed to operate the companies. The plaintiffs then brought this action for judicial dissolution of the limited partnerships on the basis that it could not fulfill its purpose. 

      The Delaware Limited Partnership Act, at section 17-802, provides for dissolution of a limited partnership “whenever it is not reasonably practicable to carry on the purpose of the business in conformity with the partnership agreement.”

      The court found that the standard was here met. Initially, the limited partnership had not been successful under White’s control. Once the receiver (over time, there were actually two), was appointed, White refused to cooperate with them in operating the business. 

      While the court noted that dissolution is an extraordinary remedy that is not to be lately invoked, on these facts it was held that judicial dissolution of the limited leadership was appropriate. 

      After this ruling, there were additional efforts to compel White to appear for related depositions. The latter decision with respect to compelling White’s appearance at depositions is set forth at 2019 WL 4096855.