SCOTX rules on limitations period against partners: American Star Energy and Minerals Corp. v. Stowers

Today, the Texas Supreme Court issued its opinion in American Star Energy and Minerals Corp. v. Stowers (no, not that Stowers) and held a limitations period against a partner generally does not commence until after a party obtains a final judgment against a partnership.

At first blush, this opinion strikes me as reaching something of an odd result. A party has the option under the Texas Revised Partnership Act of suing a partnership’s individual partners along with the partnership, but after this case, is there any practical reason to do so? The party can’t seek satisfaction of the partnership debt until the party obtains a judgment against the partnership. Plus, the party generally must give a partnership ninety days to satisfy a judgment before it can go after the partners and their assets. If that’s the case, why would the party sue the individual partners on the front end? I don’t see any real benefit unless the partner assumed liability through a guarantee or is individually liable for the tortious conduct at issue. This case would seem to prolong litigation, not shorten it.

At least the second suit against the partners individually should be straightforward enough. The second suit would have two elements: (1) is there an unpaid judgment against the partnership; and (2) were the partners actually partners at the relevant time? I think in most cases a Court could resolve it on summary judgment.

As an aside, American Star apparently filed the breach of contract suit against the partnership in the mid-1990s. Are these guys giving Jarndyce vs. Jarndyce a run for their money or what?

The bottom line: a party’s cause of action against an individual partner for the debt owed by a partnership doesn’t accrue until ninety days after the partnership fails to satisfy a money judgment against it.


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