MHR Estate Plan, LLC v. K&G Partnership
2016 IL App (3d) 150744
| Ill. App. Ct. | 2017Background
- K&G Partnership (mobile-home-park developer) had a partnership agreement that provided termination on December 31, 2010, and a broad arbitration clause for "all disputes arising under this Agreement."
- MHR (assignee of partner Rose’s interest) sued to judicially dissolve the partnership and appoint a receiver, alleging breaches and that the partnership had terminated per the agreement.
- Respondents moved to dismiss, asserting the arbitration clause; the circuit court denied dismissal (Sept. 22, 2011). A receiver (CR Realty Advisors) was later appointed to liquidate/sell the partnership assets.
- After marketing, the receiver recommended accepting Olympia Acquisitions’ $12.6M offer; respondents objected, arguing Olympia bid for partnership interests (not assets) and that respondents’ higher $13M bid should control.
- The circuit court allowed Olympia to restructure its bid into an asset sale and approved the sale (Oct. 21, 2015). The court’s sale approval produced a final receivership judgment, and respondents appealed, also challenging prior denials of arbitration.
Issues
| Issue | Plaintiff's Argument (MHR) | Defendant's Argument (Respondents) | Held |
|---|---|---|---|
| Whether dispute must be submitted to arbitration | MHR: No — partnership had already terminated and only winding up remained (not arbitrable). | Respondents: Broad arbitration clause covers disputes about termination, dissolution, and related breaches. | Reversed: arbitration clause is broad; issues of dissolution/liquidation are arbitrable or reasonably in doubt and must be sent to arbitration. |
| Appealability of prior arbitration-denial orders | MHR: Respondents’ interlocutory appeals of earlier orders were untimely under Rule 307(a). | Respondents: October 21, 2015 receivership sale order is a final liquidation judgment under Rule 304(b)(2), permitting review of earlier arbitration denials. | Held: October 21 order is a final liquidation judgment; appellate court has jurisdiction to review earlier arbitration rulings. |
| Scope of arbitration clause (broad vs. limited) | MHR: Clause should not cover post-termination winding up under UPA §801. | Respondents: Clause covers "all disputes arising under this Agreement," including termination/liquidation disputes. | Held: Clause is broad; disputes over dissolution/liquidation fall within or are reasonably in doubt and belong to arbitrators. |
| Consideration of remaining substantive sale issues | MHR: Court should decide sale approval issues. | Respondents: Sale approval decisions are intertwined with arbitrable disputes. | Held: Court declined to address substantive sale issues because they are subject to arbitration; remanded for arbitration proceedings. |
Key Cases Cited
- Salsitz v. Kreiss, 198 Ill. 2d 1 (Ill. 2001) (party may wait for final judgment to appeal interlocutory arbitration rulings)
- Hollingshead v. A.G. Edwards & Sons, Inc., 396 Ill. App. 3d 1095 (Ill. App. 2009) (de novo review of denial of motion to compel arbitration)
- United Cable Television Corp. v. Northwest Illinois Cable Corp., 128 Ill. 2d 301 (Ill. 1989) (limited arbitration clause construed narrowly)
- Ozdeger v. Altay, 66 Ill. App. 3d 629 (Ill. App. 1978) (broad arbitration clause covers related disputes)
- State Farm Mut. Auto. Ins. Co. v. Hanover Dev. Corp., 73 Ill. App. 3d 326 (Ill. App. 1979) (if scope reasonably in doubt, arbitrators decide)
- In re Liquidation of Medcare HMO, Inc., 294 Ill. App. 3d 42 (Ill. App. 1997) (final receivership orders can permit appellate review of earlier interlocutory rulings)
- School District No. 46 v. Del Bianco, 68 Ill. App. 2d 145 (Ill. App. 1966) (arbitrability questions and limits on compelled arbitration)