Generation Partners, L.P. v. Mandell , 148 Conn. App. 294 ( 2014 )

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GENERATION PARTNERS, L.P., ET AL. v.
LLOYD MANDELL
(AC 35042)
DiPentima, C. J., and Sheldon and Flynn, Js.
Argued October 22, 2013—officially released February 18, 2014
(Appeal from Superior Court, judicial district of
Stamford-Norwalk, Hon. Kevin Tierney, judge trial
referee.)
A. Robert Fischer, with whom, on the brief, was Kris-
tin L. Plude, for the appellants (plaintiffs).
Hilary B. Miller, for the appellee (defendant).
Opinion
SHELDON, J. In this case, the plaintiffs, Generation
Partners, L.P. (Generation Partners), and Generation
Capital Partners, L.P. (Generation Capital), claim that
they are entitled to receive from the defendant, Lloyd
Mandell, a ‘‘giveback’’ of certain funds previously paid
to him pursuant to a limited partnership agreement
between the parties. The plaintiffs appeal from the trial
court’s judgment accepting the report of an attorney
trial referee (referee) finding in favor of the defendant.
The plaintiffs claim that the court erred in (1) failing
to apply Delaware law to their claim that the defendant
was bound to give the funds at issue back to them even
in the absence of a signed partnership agreement, and
(2) finding that the plaintiffs had waived their rights
to enforce the ‘‘giveback obligation’’ arising under the
partnership agreement. We affirm the judgment of the
trial court.
After this case was tried before her, the referee found
the following relevant facts. In 1996, the defendant
became an employee of Generation Partners Manage-
ment, LLC (Generation Management), a Delaware lim-
ited liability company that managed a private equity
fund for Generation Capital, which was a Delaware
limited partnership. Generation Partners, which was
also a Delaware limited partnership, was the general
partner of Generation Capital. The defendant was a
‘‘special limited partner’’ of Generation Capital. Genera-
tion Capital operated pursuant to a ‘‘Limited Partner-
ship Agreement,’’ which provided that Generation
Partners would receive ‘‘carried interest’’ payments,
which were based upon the estimated profits resulting
from Generation Capital’s investments. Article 7.7 of the
Limited Partnership Agreement contained a ‘‘giveback
obligation’’ setting forth the obligations of those individ-
uals, such as the defendant, who also received ‘‘carried
interest’’ payments. The Limited Partnership Agreement
provided that, in the event that estimated payments of
carried interest exceeded the actual value of the carried
interest, the recipients must return the overpayments.
Section (d) of article 7.7 stated that the giveback obliga-
tion ‘‘shall be evidenced by a Giveback Agreement’’ and
that Generation Partners ‘‘shall cause [the defendant]
to execute a Giveback Agreement to or on behalf of
the Limited Partners.’’ The defendant disagreed with
the terms of the Giveback Agreement, and so refused
to sign and execute it. He explained his reasons for
refusing to agree to the terms of the Giveback
Agreement to an agent of Generation Partners before
he received any distributions of carried interest from
Generation Capital. Therefore, Generation Partners
knew or should have known of the defendant’s disagree-
ment with the terms of the Giveback Agreement and
his resulting refusal to sign it prior to making any distri-
bution of carried interest to him. The giveback obliga-
tion in the Limited Partnership Agreement was not
triggered unless the special limited partner signed the
Giveback Agreement, which was a separate agreement
that created an obligation that would not otherwise
exist. The defendant never executed the Giveback
Agreement.
In 2000, in addition to the W-2 wages he received as
an employee of Generation Management, the defendant
received a payment of $858,639 from Generation Capital
as a distribution to him in his capacity as a special
limited partner. Thereafter, in 2001, the defendant’s
employment with Generation Management was termi-
nated. On August 20, 2008, the plaintiffs demanded a
giveback from the defendant in the amount of $200,510
from the $858,639 distribution in carried interest he had
received in 2000. The defendant has not given back all
or any portion of that amount.1
On February 26, 2009, the plaintiffs commenced this
action against the defendant, seeking to recover the full
amount of their alleged overpayment to the defendant,
plus interest, by way of a four count complaint, stating
claims of breach of contract, unjust enrichment, quan-
tum meruit and statutory theft pursuant to General Stat-
utes § 52-564. In response, the defendant asserted three
special defenses: laches, estoppel and waiver; statute
of limitations; and a claim that the second and third
counts of the complaint fail to state a cause of action
upon which relief may be granted. On February 14,
2012, the referee issued a decision recommending that
judgment enter in favor of the defendant on all four
counts of the plaintiffs’ complaint.2
The plaintiffs thereafter filed an objection to the refer-
ee’s report, in which they claimed that several of the
referee’s factual findings were not supported by the
record and that the referee had erred in not applying
Delaware law, which, they contend, provides that the
defendant had an obligation to repay the giveback
amount even in the absence of an executed Giveback
Agreement because the giveback obligation of the
defendant is fully contained in the Limited Partnership
Agreement, which binds the defendant by its terms. The
plaintiffs relied upon the Delaware Revised Uniform
Limited Partnership Act (act) for the proposition that
the lack of a signed Giveback Agreement does not ren-
der the provisions of the Limited Partnership
Agreement unenforceable.
Following a hearing, the court issued a memorandum
of decision in which it concluded that the referee’s
report was legally and logically correct. The court
addressed and rejected the plaintiffs’ claim that Dela-
ware law required the defendant to pay the giveback
amount. The court concluded that even if Delaware law
does not require a signature to enforce a partnership
agreement, the Limited Partnership Agreement in this
case did expressly require the execution of a separate
Giveback Agreement. The court further concluded that
the plaintiffs had waived their right to enforce the terms
of the Giveback Agreement by distributing carried inter-
est to the defendant with full knowledge of the defen-
dant’s objection to the giveback obligation, and
resulting refusal to sign the Giveback Agreement. The
court thus rendered judgment in favor of the defendant
as recommended by the referee. This appeal followed.
The standard of review in cases referred to attorney
trial referees is well settled. ‘‘[B]ecause the attorney
trial referee does not have the powers of a court and
is simply a fact finder, [a]ny legal [determinations]
reached by an attorney trial referee have no conclusive
effect. . . . The reviewing court is the effective arbiter
of the law and the legal opinions of [an attorney trial
referee], like those of the parties, though they may be
helpful, carry no weight not justified by their soundness
as viewed by the court that renders judgment. . . .
[When] legal [determinations] are challenged, [the
reviewing court] must determine whether they are
legally and logically correct and whether they find sup-
port in the facts found by the . . . referee.’’ (Internal
quotation marks omitted.) Absolute Plumbing & Heat-
ing, LLC v. Edelman, 146 Conn. App. 383, 390, 77 A.3d
889 (2013).
‘‘The trial court’s findings of fact were based entirely
on the record of the proceedings before the attorney
trial referee. Under these circumstances, application of
the clearly erroneous test must reflect the special rules
that govern judicial review of a report of an attorney
referee. While the reports of [attorney trial referees] in
such cases are essentially of an advisory nature, it has
not been the practice to disturb their findings when
they are properly based upon evidence, in the absence
of errors of law, and the parties have no right to demand
that the court shall redetermine the fact thus found.
. . . A reviewing authority may not substitute its find-
ings for those of the trier of the facts. This principle
applies no matter whether the reviewing authority is
the Supreme Court . . . the Appellate Court . . . or
the Superior Court reviewing the findings of . . . attor-
ney trial referees. . . . This court has articulated that
attorney trial referees and factfinders share the same
function . . . whose determination of the facts is
reviewable in accordance with well established proce-
dures prior to the rendition of judgment by the court.
. . . [T]he trial court may not retry the case and pass
on the credibility of the witnesses . . . .’’ (Internal quo-
tation marks omitted.) Id., 392. With these principles
in mind, we turn to the plaintiffs’ claims on appeal.
I
The plaintiffs first claim that the trial court ‘‘erred by
ignoring Delaware law,’’ which provides that a partner is
bound by a partnership agreement whether or not the
partner executes the partnership agreement, and thus
that the absence of an executed partnership agreement
does not render that agreement unenforceable. See Del-
aware Revised Uniform Limited Partnership Act, Del.
Code Ann. tit. 6, § 17-101 (12) (2012). The trial court
did not, in fact, ignore Delaware law, but, rather,
rejected the plaintiffs’ claims in spite of Delaware law.
As the plaintiffs contend, the act provides that the
failure of an executed partnership agreement does not,
pursuant to the act, render a partnership agreement
unenforceable. As the court pointed out, however, the
Limited Partnership Agreement here at issue expressly
required the execution of a separate Giveback
Agreement to trigger the giveback obligation set forth
in the Limited Partnership Agreement. Thus, even if the
lack of a signed partnership agreement does not render
that agreement unenforceable pursuant to the act, the
Limited Partnership Agreement in this case, upon which
the plaintiffs have based this cause of action, imposed
upon the plaintiffs the duty to obtain from each limited
partner a separate executed Giveback Agreement.
Because the plaintiffs failed to fulfill their obligation
to obtain an executed Giveback Agreement from the
defendant, as required under the Limited Partnership
Agreement, their claim must fail.
II
The plaintiffs also claim that the court erred in con-
cluding that they waived their right to enforce the give-
back obligation. Although the plaintiffs attempt to cast
this claim as a legal challenge to the choice of law
employed by the trial court, they are essentially
attacking the underlying factual findings made by the
referee. The court found, and we agree, that much of
the plaintiffs’ argument ‘‘is devoted to characterizing
and restating the facts and evidence in an attempt to
recast them in a light favorable to [their] position, often
in contradiction to the findings of the . . . referee.’’
The plaintiffs are essentially challenging the referee’s
factual determination, upon which the trial court based
its conclusion, ‘‘that the actions of the plaintiffs when
they distributed the funds to [the defendant] were taken
at the time that they knew that [the defendant] had
not executed the Giveback Agreement and that [the
defendant] had objected to the Giveback Agreement all
before the payments were made.’’ In support of this
claim, the plaintiffs suggest that the defendant’s testi-
mony did not have the import attributed to it by the
referee. The plaintiffs cite to various portions of the
defendant’s testimony and to the testimony of other
witnesses in an attempt to undermine the referee’s fac-
tual findings. It is well settled, however, that it is not
the role of this court, nor is it the role of the trial court,
to second guess the finding of the referee as to the
credibility of the witnesses. The court properly declined
to retry the case or revisit issues of credibility decided
by the referee. The court found, and we agree, that
‘‘there is evidence in the record that supports each and
every one of the findings of fact and legal conclusions
made by the [referee].’’ Accordingly, the plaintiffs’ claim
in this regard also fails.
The judgment is affirmed.
In this opinion the other judges concurred.
1
The parties stipulated that, as of September 30, 2011, the correct giveback
amount owed by the defendant, as alleged by the plaintiffs, was $219,702.
2
The referee further recommended that the defendant’s special defenses,
claiming statute of limitations and that the second and third counts of the
plaintiffs’ complaint were legally insufficient, be rejected. The referee did
not make any recommendations concerning the defendant’s claim of laches
or estoppel. Those findings are not challenged in this appeal.