Submitted: June 4, 2013.
Court Below— Court of Chancery of the State of Delaware, C.A. No. 7204.
Upon appeal from the Court of Chancery.
Richard L. Renck, Esquire and Andrew D. Cordo, Esquire, Ashby & Geddes, Wilmington, Delaware, Edward T. Joyce, Esquire and Robert Carroll, Esquire, Edward T. Joyce & Associates, P.C., Chicago, Illinois, for appellant.
Bradley R. Aronstam, Esquire and S. Michael Sirkin, Esquire, Seitz, Ross, Aronstam & Moritz, LLP, Wilmington, Delaware, and William Lynch Schaller, Esquire, John M. Murphy, Esquire and Peter P. Tomczak, Esquire, Baker & McKenzie, LLP, Chicago, Illinois, for appellees.
Before STEELE, Chief Justice, HOLLAND, BERGER, JACOBS and RIDGELY, Justices (constituting the Court en Banc).
The defendant-appellant, DV Realty Advisors LLC (" DV Realty" ), appeals from the Court of Chancery's declaratory judgment that the plaintiffs-appellees  properly removed DV Realty as the General Partner of Chicago-based Delaware limited partnership DV Urban Realty Partners I L.P. (the " Limited Partnership" ).
DV Realty raises two issues on appeal: first, that the Court of Chancery improperly found that the Limited Partners believed in good faith that, because of untimely delivered audited financial statements, removing DV Realty was necessary for the best interest of the partnership; and, second, that the " Red Flag Issues" raised by an advisor to the Limited Partnership were not sufficient to support a finding that the Limited Partners removed DV Realty in good faith.
We have concluded that both of DV Realty's arguments are without merit. Therefore, the judgment of the Court of Chancery must be affirmed.
The Parties 
The Limited Partnership is a Chicago-based Delaware limited partnership that invests in residential and commercial real estate in Chicago. The Limited Partners, DV Realty, and Occam-DV, entered into the Limited Partnership Agreement (" LPA" ). The LPA provides the General Partners, and the Managing Partner in particular, with broad discretion to manage the everyday affairs of the Limited Partnership.
Managing Partner DV Realty, a General Partner of the Limited Partnership since 2006, owns 4.9% of the Limited Partnership interests. Jared Davis is the manager of JCJ Family LLC, which is the sole member of DV Realty. Allison Davis, Jared Davis' father, is active in the management of JCJ Family LLC. Non-party Occam-DV was named a General Partner alongside Managing Partner DV Realty. Robert Vanecko (" Vanecko" ) was the manager of Occam-DV.
The Limited Partners are all public pension funds located in Chicago, Illinois. Collectively, the Limited Partners own 95.1% of the Limited Partnership interests. Among the Limited Partners are Policemen's Fund, with John Gallagher as Executive Director; Municipal Fund, with James Mohler as Executive Director; Laborers' Fund, with James Capasso as Executive Director; CTA Fund, with John Kallianis as Executive Director; and Teachers' Fund, with Kevin Huber as Executive Director.
This appeal necessitates our review of four sections of the LPA. Under section 6.1 of the LPA, the General Partners are required to establish an Advisory Committee. Pursuant to section 6.1 of the LPA, an Advisory Committee was formed, which consisted of three members: Blake Eagle, Tariq Malhance, and Steven Rogers. In July, 2007, Rogers resigned but was never replaced. Under section 11.5 of the LPA, the General Partners are also required to provide the Limited Partners with annual audited financial statements. Section 3.2 of the LPA prohibits the use of placement or finder's fees with respect to any of the Limited Partnership's investments. And, section 3.10 specifies the mechanism through which the General Partners can be removed.
The Limited Partners Become Concerned
Beginning in 2007 and continuing until the summer of 2009, certain Chicago Sun-Times articles speculated that Vanecko had improperly used his relationship with his uncle and former Chicago mayor Richard Daley to induce the Limited Partners to invest in the Limited Partnership. A grand jury in the United States District Court for the Northern District of Illinois issued subpoenas to the Limited Partners. The subpoenas demanded " any and all information relating to the investments and/or considerations of investments made ... [in the Limited Partnership]." At the time of trial, no public information relating to the subject of the investigation had been released.
In June, 2009, the General Partners— DV Realty and Occam-DV— had not yet provided the Limited Partners with audited financial statements for the Fiscal Year 2008 (the " 2008 Statements" ). These statements were due by April 30, 2009. The Executive Directors of the various Funds constituting the Limited Partners—
Gallagher, Mohler, Capasso, Kallianis, and Huber (collectively " Executive Directors" )— met to discuss their resulting frustration. Mohler sent an e-mail to the Managing Partners on behalf of the Limited Partners, telling the Managing Partners that under the LPA, the 2008 Statements were due on April 30, 2009. Mohler requested that the Managing Partners immediately notify the Limited Partners when the 2008 Statements would be completed.
In a June 8, 2009 letter, the General Partners informed the Limited Partners that Occam-DV and Vanecko would end their involvement in the Limited Partnership. Vanecko was withdrawing because of alleged mischaracterizations in the press of his involvement with the Limited Partnership. Vanecko opined that his withdrawal would " further the important work of the [Limited] Partnership while minimizing unwarranted distractions from our core purpose."
Despite Mohler's June 5, 2009 e-mail, the 2008 Statements were not completed by August of 2009. On August 25, 2009, four of the Executive Directors sent DV Realty, now the sole General Partner, a letter requesting the 2008 Statements and information relating to the terms of Vanecko's severance. The letter also requested that DV Realty cooperate with each of the Limited Partner's respective consulting firms. The letter warned that continued failure to resolve these issues " may prompt the limited partners to seek remedies available within the limited partnership agreement."
In a September 9, 2009 letter, DV Realty responded to the Limited Partner's renewed request for the 2008 Statements. DV Realty explained that the delay in providing the 2008 Statements centered on the near term expiration of two loans. The Limited Partnership's auditor, Deloitte & Touche LLP (" Deloitte" ), had insisted that " unless these loans were extended, our audit would have a ‘ going concern’ note which is not desirable." DV Realty explained that since it was in the Limited Partnership's interest to not issue an audited statement containing a ‘ going concern’ note, the 2008 Statements had been delayed. The letter also explained that Vanecko was not paid in connection with his resignation. DV Realty assured the Limited Partners that it would cooperate with the consulting firms. On October 14, 2009, DV Realty provided the Limited Partners with the 2008 Statements— 173 days after the due date as required by section 11.5 of the LPA.
The Advisory Committee, long defunct, stopped meeting in late 2009 or early 2010. Malhance resigned from the committee in 2010 and Eagle resigned in 2011. Also in late 2009 or early 2010, Heitman LLC was ...