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04/20/89 United Cable Television v. Northwest Illinois Cable

April 20, 1989

UNITED CABLE TELEVISION CORPORATION, APPELLEE

v.

NORTHWEST ILLINOIS CABLE CORPORATION, APPELLANT



SUPREME COURT OF ILLINOIS

538 N.E.2d 547, 128 Ill. 2d 301, 131 Ill. Dec. 172 1989.IL.566

Appeal from the Appellate Court for the Third District; heard in that court on appeal from the Circuit Court of Knox County, the Hon. Stephen C. Mathers, Judge, presiding.

APPELLATE Judges:

JUSTICE WARD delivered the opinion of the court.

DECISION OF THE COURT DELIVERED BY THE HONORABLE JUDGE WARD

This appeal involves the arbitrability of controversies which have arisen between parties to a limited partnership agreement. Northwest Illinois Cable Corporation (Northwest), a general partner, pursuant to an arbitration clause in the partnership agreement, made a formal demand upon United Cable Television Corporation (United), in its capacity as managing general partner, for arbitration of disputes concerning the distribution of profits, the allocation of tax credits and the holding of partnership funds in a non-interest-bearing savings account. When United moved for a stay of arbitration proceedings, pursuant to section 2(b) of the Illinois Uniform Arbitration Act (Ill. Rev. Stat. 1985, ch. 10, par. 102(b)), the circuit court of Knox County denied its application with respect to the dispute regarding the distribution of profits, but granted the stay with respect to the disputes concerning the allocation of tax credits and the holding of funds in a non-interest-bearing account. United appealed from the portion of the judgment denying its motion with regard to the distribution of profits and Northwest cross-appealed from the portions of the judgment which allowed United's motion for a stay. The appellate court held that none of the disputes were arbitrable. (162 Ill. App. 3d 411.) We allowed Northwest's petition for leave to appeal under our Rule 315 (107 Ill. 2d R. 315).

The limited partnership, known as Northwest Illinois Cable TV Company (the Company), was formed in March 1971 for the purpose of acquiring and operating two cable TV systems. The partnership consists of two general partners and one limited partner. Northwest and LVOC Management, Inc. , are general partners. LVOC is a wholly owned subsidiary of United. United is also the limited partner.

The major disagreement concerns the distribution of accumulated profits. A substantial disparity (the exact amount of which is not indicated in the record) between the capital accounts of United and Northwest developed after an amendment to the original partnership agreement altered the terms for the distribution of profits, while retaining the original terms for the allocation of profits. Under the terms of the amendment, which was entered into in December of 1972 and was in effect for 11 years, the amount of profits actually distributed to Northwest was less than the amount of profits being allocated to it. This created the disparity in the capital accounts.

Upon rescission of the amendment in 1983, Northwest claimed that it was entitled to an immediate distribution of the profits accumulated in its capital account. United, however, did not agree to an immediate distribution, contending that the partnership agreement provided for such distribution only at the termination of the partnership.

Although this dispute over the distribution of profits was the principal disagreement between the parties, Northwest also claims that tax investment credits were being improperly allocated and that United's placing partnership funds in a non-interest-bearing bank account constituted a waste of partnership assets. Northwest demanded arbitration of all three disputes pursuant to a clause in the partnership agreement which provides for arbitration:

"[i]n the event that the general partners fail to agree on a matter on which their agreement is required affecting the general policy of the Company (other than the incurring of indebtedness by the Company . . .) that would, in the judgment of either general partner, materially or adversely affect the business or prospects of the Company."

Upon notification by Northwest of its demand for arbitration, United, pursuant to section 2(b) of the Illinois Uniform Arbitration Act (Ill. Rev. Stat. 1985, ch. 10, par. 102(b)), sought a stay of arbitration in the circuit court of Knox County. United contended, as it does here, that none of the disputes were arbitrable under the terms of the partnership agreement's arbitration clause. As stated, the trial court denied United's request for a stay as to the distribution-of-profits dispute, but granted the stay as to the other two disputes.

The appellate court, reversing the trial court in part, held that none of the disputes were subject to arbitration under the partnership agreement because none of the subjects of the dispute affected the "general policy" of the Company. 162 Ill. App. 3d at 413.

This appeal presents the question whether any of the subjects of dispute cited by Northwest are arbitrable under the ...


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