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In re Dissolution of Midnight Star Enterprises, L.P.

Supreme Court of South Dakota
724 N.W.2d 334 (2006)


Facts

Midnight Star Enterprises, L.P. (Midnight) was a limited partnership that operated a casino in South Dakota. Midnight was owned by Midnight Star Enterprises, Ltd. (MSEL) (plaintiff) as a general partner, Kevin Costner, and Francis and Carla Caneva. The Canevas managed Midnight and were paid for their services. MSEL became concerned about the Canevas’ management of Midnight and tried to reach a friendly disassociation with the Canevas, but the Canevas declined. MSEL decided to dissolve Midnight and hired an accountant, Paul Thorstenson, who valued Midnight at $3,100,000 based on the hypothetical-transaction valuation method. The Canevas solicited a $6,200,000 offer from a casino owner, Ken Kellar. MSEL claimed that this offer was in direct violation of the Limited Partnership Agreement (LPA). In the event of Midnight’s dissolution, the LPA required MSEL to determine Midnight’s fair market value and then distribute that value among the partners. The LPA did not require that Midnight be sold. Rather, the LPA only required Midnight’s sale if MSEL chose to distribute Midnight’s assets in kind rather than as a cash distribution. Further, the LPA noted that the fair market value would be the price paid in a hypothetical transaction. MSEL petitioned for dissolution of Midnight. The trial court valued Midnight at $6,200,000 in accordance with the offer by Kellar. The trial court then ordered MSEL and Costner, the majority partners, to either purchase Midnight for that price or sell Midnight on the open market. MSEL appealed.

Rule of Law

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Issue

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Holding and Reasoning (Sabers, J.)

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