Labovitz v. Dolan

Charles Dolan (defendant) was general partner of Cablevision Programming Investments (CPI), a limited partnership whose articles called for annual cash distributions roughly matching partners' taxable income, but gave Dolan sole, broad discretion over whether to actually make those distributions. Despite the partnership earning over $34 million in 1985 and about $18 million in 1986, Dolan made only nominal distributions, forcing the limited partners to pay their share of the partnership's tax liability out of their own pockets rather than from partnership income. In November 1986, Cablevision Systems Corporation (CSC), a Dolan-owned affiliate, offered to buy out the limited partners' interests for roughly two-thirds of book value; Joel Labovitz and most other limited partners (plaintiffs) accepted but then sued, claiming Dolan breached his fiduciary duty in structuring and pushing through the buyout. The circuit court held it couldn't examine the fairness of the buyout given Dolan's broad contractual discretion and dismissed the complaint; Labovitz appealed.