Gilmur R. Murray, Esq. (#111856)
Derek G. Howard, Esq. (#118082)
Alex J. Luchenitser, Esq. (#177367)
THE MILLS LAW FIRM
300 Drake's Landing, Suite 155
Greenbrae, California 94904
Telephone: (415) 464-4770

Attorneys for Plaintiff Dwight E. Wininger
On Behalf of Himself and All Others Similarly Situated

In accordance with the Court's order of March 23, 1998, plaintiff files this status report. Plaintiff submits that, as a result of the Delaware Supreme Court's March 19, 1998 opinion, the proposed "Plan of Withdrawal and Dissolution" ("the Proposed Plan") is effectively dead.

The Proposed Pro-Plan Intervenors' statements about the meaning of the Supreme Court's ruling are inaccurate and highly misleading. See "Pro-Plan Intervenors' Ex Parte Request to be Added to the Service List; and Response to Plaintiff's Counsel's Letter of March 19, 1998" at 2-3. For instance, the Proposed Pro-Plan Intervenors claim that the Supreme Court "did not hold that the Plan is in violation of the partnership agreement." Id. at 2-3. Because the Delaware Chancery Court concluded that the Proposed Plan did violate the partnership agreement as a necessary part of its granting a preliminary injunction, and because the Supreme Court considered the legal issues raised by that grant de novo before affirming (slip op. at 8), it is difficult to understand what else the Supreme Court could have decided.

More specifically, the Supreme Court determined that the partnership agreement is, at best, ambiguous (though the Supreme Court stated that there was some appeal to plaintiffs' view that the agreement unambiguously supports plaintiffs' interpretation). Slip op. at 13. The Supreme Court further held that ambiguous provisions in a limited partnership agreement must be construed against the general partner (pursuant to the principle of contra proferentem), unless the agreement was the product of bilateral negotiations between the limited partners and the general partner, in which case it would be appropriate to consider extrinsic evidence in construing the agreement. Slip op. at 14-18. The Supreme Court then stated:

This was not a bilateral negotiated agreement. Rather, it appears that the General Partner solicited and signed on 1,850 investors to the Agreement that those investors had no hand in drafting. Based on that premise, the principle of contra proferentem applies. Accordingly, ambiguous terms in the Agreement should be construed against the General Partner as the entity solely responsible for the articulation of those terms. On remand and final hearing on a permanent injunction, the trial court should determine whether these plaintiffs actually did engage in negotiations with the General Partner on the issues in question here.

Slip op. at 16-17. Thus, to have any hope of prevailing on remand, the defendants would have to make a threshold showing that the partnership agreement was the product of negotiations between the general partner and Delaware plaintiffs Wininger and Charlebois.

In addition, defendants have represented to this Court that they would withdraw the Proposed Plan if the Delaware Supreme Court affirmed. In their opposition to a motion to compel discovery filed by plaintiff, defendants stated, "If the Delaware Supreme Court affirms the Chancery Court's issuance of a preliminary injunction then the Plan will never be implemented . . . ." Declaration of Alex J. Luchenitser in Support of Plaintiff's Ex Parte Motion for Enlargement of Time, filed March 12, 1998, Ex. C at 1. At a discovery conference held before U.S. Magistrate Judge Bernard Zimmerman on March 5, 1998, defendants confirmed that they would withdraw the Proposed Plan if the Delaware Supreme Court affirmed, regardless of the grounds on which the affirmance was based. Id., Ex. E at 3-5.

Given the above-described circumstances, plaintiff expects the defendants to withdraw the Proposed Plan shortly. Once the Proposed Plan is withdrawn, the Proposed Pro-Plan Intervenors' motion to disqualify plaintiffs' counsel will be rendered moot, because the alleged conflict between the plaintiff and limited partners who supported the Proposed Plan will no longer exist. The Proposed Pro-Plan Intervenors' attempts to participate in this action will also be rendered moot, because the subject of their proposed intervention is the Proposed Plan. In the future, plaintiff may seek appropriate injunctive and/or declaratory relief to ensure that the requirements of the federal securities laws and the Rollup Reform Act are complied with if another liquidation Plan is proposed.

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