Mizel v. Unified Capital Partners 3 LLC

Background

Steven Mizel Roth IRA, beneficially owned by Steven Mizel, was one of 33 limited partners in Consolidated Asset Funding 3 LP, a partnership formed to pool investments in litigation-related financing ventures. The partnership agreement began the partnership’s term on October 1, 2013 and scheduled dissolution within three years, while allowing the general partner to extend the term for up to two additional one-year periods. Any further extension required an amendment to the agreement.

The plaintiff alleged that Unified Capital Partners 3 LLC, the partnership’s general partner, and Unified Asset Management, LLC, its asset manager, failed to dissolve the partnership by the applicable deadline. The plaintiff originally asserted claims for breach of contract, breach of fiduciary duties, waste of corporate assets, and an accounting. In an earlier order, the court dismissed all claims except breach of contract and the related accounting claim. The parties then filed cross-motions for summary judgment, a procedure allowing judgment without a trial when no material fact is genuinely disputed.

The August 23, 2019 Email

The defendants relied on an August 23, 2019 email sent to the limited partners. The email explained that the partnership’s investments had not been liquidated and stated that the fund would be extended “until 2021.” The plaintiff argued that the email was not a valid written amendment, was not signed, and did not state the extension’s duration clearly enough.

The court held that the email qualified as a written instrument under the partnership agreement. The agreement treated electronic communications as writings, and federal and Delaware law allowed an electronic signature. The email ended with “Thank you, Ron & Walter,” and Walter Klores testified that he composed it and directed that it be sent on his and Ronald Carner’s behalf. The court concluded that no reasonable jury could find the email unsigned. It also concluded that “until 2021” identified an outside date of December 31, 2021 and was sufficiently definite.

Notice and Approval

The court credited Klores’s sworn testimony that he instructed Lena Williams to send the email to the limited partners. The defendants submitted a time-stamped copy addressed to an email group containing the limited partners’ email addresses. The plaintiff stated that it had not received the email but offered no contrary evidence from another limited partner and did not challenge the email’s authenticity. The court found no genuine dispute that the email was sent to the limited partners.

The court further held that the email provided adequate notice because it clearly concerned the partnership’s extension and explained the proposed change. The agreement did not require a ballot, consent form, or express reminder that limited partners could object. Under the agreement, a limited partner who failed to respond within 25 business days was deemed to consent. Because the plaintiff owned less than 4% and the court credited the evidence that no other limited partner objected, the court concluded that a majority in interest consented to and ratified the amendment.

Disposition

The court held that the plaintiff failed to establish a breach of the partnership agreement and that no material fact was genuinely disputed. It granted defendants’ motion for summary judgment in its entirety and denied the plaintiff’s motion. Because the contract claim failed, the derivative accounting claim also failed. The court directed the clerk to terminate the pending motions and close the case. Judge Naomi Reice Buchwald also denied defendants’ request for oral argument.