Miller v. American Real Estate Partners, L.P

2001 WL 1045643 (Del Ch.)

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Nature of the Case

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Facts

Miller and others (P) are holders of limited partnership units in American Real Estate Partners, L.P. (D). P alleges that Icahn (i) acquired the General Partner interest; (ii) used the General Partner to make a rights offering that would enable High Coast to acquire a majority of American Real Estate’s units and insulate the General Partner from removal; (iii) cut off all distributions so that Icahn could devote available cash to investments in which other Icahn entities were interested and place pressure on other unitholders to sell out; (iv) amended the Partnership Agreement through a written consent executed by High Coast to broaden the purposes of the Partnership and allow American Real Estate to invest in any securities, thus furthering Icahn’s plan to use American Real Estate as a financing agency for the investment goals of his other entities; and (v) bought out additional unitholders at an allegedly unfair price through a tender offer. P contends that they are now unitholders in a profitable Partnership that pays no distributions so that it can instead serve as a pool of available capital that Icahn can use for his own personal purposes. D contends that Ps have failed to plead a cognizable claim because the Partnership Agreement eliminated any default fiduciary duty of loyalty owed by the General Partner, Icahn, and the other defendant directors to the limited partners of American Real Estate. Section 6.13 subsection (d) states: Whenever in this Agreement the General Partner is permitted or required to make a decision (i) in its “‘sole discretion ” or “discretion “, with “absolute discretion ” or under a grant of similar authority or latitude, the General Partner shall be entitled to consider only such interests and factors as it desires and shall have no duty or obligation to give any consideration to any interest of or factors affecting the Partnership, the Operating Partnership or the Record Holders, or (ii) in its “good faith” or under another express standard, the General Partner shall act under such express standard and shall not be subject to any other or different standards imposed by this Agreement or any other agreement contemplated herein. D claims that 6.13(d) sweeps away all default principles of fiduciary duty when the sole and complete discretion standard. Ds contend that the sole and complete discretion standard is utterly inconsistent with the default duty of loyalty, which would require that the General Partner treat the limited partners fairly in any conflict situation. D also contends that the Agreement contains broad provisions for management and control of the partnership wherein the General Partner shall have full, exclusive and complete discretion to manage and control the business and affairs of the Partnership, to make all decisions affecting the business and affairs of the Partnership, and to take all such actions as it deems necessary or appropriate to accomplish the purposes of the Partnership.