ALZADO v

ALZADO

BLINDER, ROBINSON & CO. INC.

752 P.2d 544 (Colo. 1988)

[Combat Associates was a limited partnership formed to finance an exhibition boxing match between Lyle

AIzado, a professional football player, and Mohammed Ali, the world heavyweight boxing champion. A corporation was named as the general partner and plaintiff Blinder-Robinson was the sole limited partner.

Combat Associates agreed to pay Aizado for the match. The fight proved to be a financial debacle. In the ensuing litigation, one issue was whether Blinder-Robinson should be treated as a general partner, which would make it liable to Alzado for his participation. A jury verdict in favor of Alzado on this issue was reversed by an intermediate appellate court. The reversal was upheld on further appeal in the following opinion.]

1 A limited partner may become liable to partnership creditors as a general partner if the limited partner assumes control of partnership business. 5 7 61-108, 3A C.R.S. (1986); see also 5 7-62-303, 3A C.R.S. (1986), which provides that a limited partner does not participate in the control of partnership business solely by doing one or more of the following:

(a) Being a contractor for or an agent or employee of the limited partnership or of a

general partner;

(b) Being an officer, director, or shareholder of a corporate general partner;

(d) Acting as surety for the limited partnership or guaranteeing or assuming one or more specific obligations of the limited partnership or providing collateral for an obligation of the limited

partnership;

(e) Bringing an action in the right of a limited partnership to recover a judgment in its favor pursuant to part 10 or this article;

(f) Calling, requesting, or participating in a meeting of the partners;

(g) Proposing or approving or disapproving, by voting or otherwise, one or more of the following matters:

(I) The dissolution and winding up or continuation of the limited partnership;

(II) The sale, exchange, lease, mortgage, pledge, or other transfer of any assets of the limited partnership;

(III) The incurrence of indebtedness by the limited partnership; (IV) A change in the nature of the business;

(V) The admission or removal of a partner;

(V1) A transaction or other matter involving an actual or potential conflict of interest;

(VII) An amendment to the partnership agreement or certificate of limited partnership; or

(VIII) Such other matters as are stated in writing in the partnership agreement;

(h) Winding up the limited partnership pursuant to section 7-62-803; or

(i) Exercising any right or power permitted to limited partners under this article and not specifically enumerated in this subsection (2).

Early determinations regarding whether a limited partner's conduct constituted control of partnership business were largely fact-specific and did not attempt to state general standards for determining what acts evidence such control. More recent decisions construing section 7 of the Uniform Limited Partnership Act have also failed to provide definitive interpretations of what constitutes "control." . . . Any determination of whether a limited partner's conduct amounts to control over the business affairs of the partnership

must be determined by consideration of several factors, including the purpose of the partnershp, the

administrative activities undertaken, the manner in which the entity actually functioned, and the nature and frequency of the limited partner's purported activities.

. . . The record here reflects that Blinder-Robinson used its Denver office as a ticket outlet, gave two parties to promote the exhibition match and provided a meeting room for many of Combat Associates' meetings. Blinder personally appeared on a television talk show and gave television interviews to promote the match. Blinder-Robinson made no investment, accounting or other financial decisions for the partnership; all such fiscal decisions were made by officers or employees of Combat Promotions, Inc., the general partner. The evidence established at most that Blinder-Robinson engaged in a few promotional activities. It does not establish that it took part in the management or control of the business affairs of the partnership. .

. .

Alzado contends, in the alternative, that the actual management of the partnership's daily business activities is irrelevant to Blinder-Robinson's status for purposes of liability because Blinder-Robinson's power and authority over the partnership assets rendered it liable as a general partner. He finds this alleged unlimited authority in the expense distribution formula contained in section 4.4 of the limited partnership agreement. Alzado cites no authority, and we are aware of none, in support of the theory that provisions of a limited partnership agreement structuring expenses and establishing net profit and loss distribution formulae may themselves render a limited partner liable as a general partner for partnership debts. In theory it may be true that particular provisions of a limited partnership agreement might so circumscribe the general partners' ability to make management decisions

as to constitute conclusive evidence of control by the challenged limited partner. We do not view the terms of the Combat Associates limited partnership agreement as constituting such conclusive evidence.

Alzado finally asserts that Blinder-Robinson fostered the appearance of being in control of Combat Associates, that such actions rendered Binder-Robinson liable as a general partner and that this conduct allowed third parties to believe that Blinder-Robinson was in fact a general partner. The evidence does not support this argument. Certainly, as Vice President of Combat Promotions, Inc., the general partner of Combat Associates, Alzado had no misconception concerning the function and role of Blinder-Robinson as a limited partner only. The Court of Appeals concluded that the evidence failed to establish that Blinder-Robinson

exercised control over the business affairs of Combat Associates. We agree with that conclusion.