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Subsequently, within and without the bankruptcy proceedings,
the parties engaged in prolonged and lengthy litigation. In
particular, Admiral sued the limited partners who had defaulted
on the outstanding investor notes, contending that it had become
the holder of the aforementioned notes. The limited partners, in
turn, countersued Admiral, alleging that they had been
fraudulently induced to enter the partnerships and that Admiral
had been party to the fraud.
On November 10, 1989, Admiral and the representatives of the
limited partners, executed a Settlement Agreement. The preamble
to the Settlement Agreement states that Admiral and the investors
were "parties to certain lawsuits" which, at the time of the
agreement, were "pending in the United States District Court for
the District of Arizona and/or the Arizona Superior Court in
which Admiral has asserted claims against Investors and Investors
have asserted claims against Admiral."6 Under the terms of the
Settlement Agreement, an investor was given until December 31,
1989, to elect one of two options. The first option was as
follows:
Commencing on the later of (i) January 1, 1990, or
(ii) the effective date of any enacted statutory
provisions amending the Internal Revenue Code to
provide for preferential treatment with respect to the
6It appears that at least some of the limited partners in
the various partnerships were parties to a suit against Admiral,
but the record does not disclose whether all of the limited
partners involved in this proceeding were parties to such
lawsuit.
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