Yes! If you are in a partnership, Texas law affords you the right to sue another partner in a variety of circumstances. What type of claim you may bring usually depends on the type of partnership involved and your partnership agreement. You should read your partnership agreement carefully to determine the rights and responsibilities you and your partners have. This article will limit its scope primarily to general partnerships.
General Partnerships
If you are a partner in a general partnership, you may sue another partner for the following:
- A breach of the partnership agreement; or
- A violation of a duty to the partnership or other partners that causes harm to the partnership or the other partners.
Partners in a general partnership owe both a duty of loyalty and a duty of care to each other and to the partnership.[1] In addition, a partner shall discharge the partner’s duties to the partnership and the other partners (1) in good faith; and (2) in a manner the partner reasonably believes to be in the best interest of the partnership.[2] Breach of any of these duties can give rise to liability for which you, as a partner, may sue. However, another partner does not violate these duties merely because his or her conduct furthers their own interest.[3]
Further, in most circumstances, partners owe a fiduciary duty to each other – thus one partner can sue another when that fiduciary duty has been breached.[4] Whether a fiduciary duty exists and to what extent typically depends on the type of partnership involved. For example, managing partners owe the other partners one of the highest fiduciary duties recognized under the law. With respect to limited partnerships, the general partner stands in a fiduciary capacity to the limited partners. However, limited partners generally do not owe a fiduciary duty to each other, unless a particular partner exerts operating control over the limited partnership.
If you are successful in proving that a fellow partner has breached a fiduciary duty or the partnership agreement, you may be awarded actual damages or various types of equitable relief. These include constructive trust, rescission, restitution, and forfeiture of compensation or other consideration. Additionally, courts have recognized a right to exemplary damages in appropriate cases where the partner’s breach of fiduciary duty was willful or intentional.
Written by*:
Travis C. Headley
WATTS GUERRA, LLP
4 Dominion Drive, Bldg 3, Suite 100
San Antonio, Texas 78257
Phone: (210) 447-0500
Email: theadley@guerrallp.com
* This information is provided to supply relevant information concerning a partner’s right to sue and should not be received as legal advice. Legal advice is only given to persons or entities with whom Watts Guerra LLP has established an attorney-client relationship.
[1] Id. at §§ 152.205 – 206.
[2] Id. at §§ 152.204.
[3] Id.
[4] This article discusses claims for breach of fiduciary duty in more detail.
© Watts Guerra LLP 2015
