## Facts

- Midnight Star Enterprises, L.P. was a South Dakota limited partnership operating a gaming, liquor, and restaurant business in Deadwood.
- The general partner, Midnight Star Enterprises, Ltd. (controlled by Kevin Costner), and limited partners Francis and Carla Caneva held the partnership interests.
- The Canevas managed daily operations and received compensation; disputes arose over management and partner communications deteriorated.
- The general partner terminated the Canevas’ employment and elected to dissolve the partnership under the limited partnership agreement, which required determining the business’s fair market value.
- The general partner retained an accountant who valued the business at approximately $3.1 million using a hypothetical willing-buyer/willing-seller framework.
- The Canevas obtained testimony that a third party had offered $6.2 million to purchase the business.

## Issues

1. Whether the circuit court erred by equating fair market value with a single, solicited third-party offer rather than using a hypothetical willing-buyer/willing-seller standard.
2. Whether the circuit court exceeded its authority in dissolution by ordering the majority partners to buy at the court-set price within ten days or face an open-market sale.

## Decision

- The Supreme Court of South Dakota reversed and remanded.
- The court held the circuit court used an incorrect valuation approach by treating the $6.2 million offer as dispositive of fair market value rather than applying the hypothetical-transaction standard.
- The court held the circuit court erred by ordering a remedy that effectively imposed a forced sale not authorized by the partnership agreement or applicable law.
- On remand, the circuit court was directed to determine fair market value under the proper standard and fashion relief consistent with the agreement and governing statutes.

## Legal Principles

- “Fair market value” in a dissolution valuation requires an objective hypothetical transaction: the price between a willing buyer and willing seller, both informed, and neither under compulsion.
- A single third-party offer may be evidence of value but is not conclusive and may reflect buyer-specific motivations rather than market value.
- In a limited partnership dissolution, courts must operate within the partnership agreement’s dissolution framework and applicable statutes.
- A court may not impose a forced-buyout or forced-sale mechanism that rewrites the parties’ contract or compels disposition of interests absent contractual authorization or a sufficient legal basis.

## Conclusion

The court required that dissolution valuation use an objective hypothetical willing-buyer/willing-seller standard and rejected a judicially imposed buy-or-sell order that functioned as an unauthorized forced sale, remanding for proper valuation and a contract-consistent remedy.


In re Dissolution of Midnight Star Enters., L.P., 724 N.W.2d 334 (S.D. 2006)