Limited Partnership Derivative Actions

TEXAS BUSINESS ORGANIZATIONS

§ 153.401. RIGHT TO BRING ACTION.

A limited partner may bring an action in a court on behalf of the limited partnership to recover a judgment in the limited partnership's favor if:

(1) all general partners with authority to bring the action have refused to bring the action; or

(2) an effort to cause those general partners to bring the action is not likely to succeed.

§ 153.402. PROPER PLAINTIFF.

In a derivative action, the plaintiff must be a limited partner when the action is brought and:

(1) the person must have been a limited partner at the time of the transaction that is the subject of the action; or

(2) the person's status as a limited partner must have arisen by operation of law or under the terms of the partnership agreement from a person who was a limited partner at the time of the transaction.

§ 153.403. PLEADING.

In a derivative action, the complaint must contain with particularity:

(1) the effort, if any, of the plaintiff to secure initiation of the action by a general partner; or

(2) the reasons for not making the effort.

§ 153.404. SECURITY FOR EXPENSES OF DEFENDANTS.

(a) In a derivative action, the court may require the plaintiff to give security for the reasonable expenses incurred or expected to be incurred by a defendant in the action, including reasonable attorney's fees.

(b) The court may increase or decrease at any time the amount of the security on a showing that the security provided is inadequate or excessive.

(c) If a plaintiff is unable to give security, the plaintiff may file an affidavit in accordance with the Texas Rules of Civil Procedure.

(d) Except as provided by Subsection (c), if a plaintiff fails to give the security within a reasonable time set by the court, the court shall dismiss the suit without prejudice.

(e) The court, on final judgment for a defendant and on a finding that suit was brought without reasonable cause against the defendant, may require the plaintiff to pay reasonable expenses, including reasonable attorney's fees, to the defendant, regardless of whether security has been required.

§ 153.405. EXPENSES OF PLAINTIFF.

If a derivative action is successful, wholly or partly, or if anything is received by the plaintiff because of a judgment, compromise, or settlement of the action or claim constituting a part of the action, the court may award the plaintiff reasonable expenses, including reasonable attorney's fees, and shall direct the plaintiff to remit to a party identified by the court the remainder of the proceeds received by the plaintiff.

Contact Information

Mailing Address

Chowins Law Firm, PLLC
1011 Surrey Lane #200
Flower Mound, TX 75022

Telephone

(469) 630-2550

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