REVISED MARCH 31, 2010

IN THE UNITED STATES COURT OF APPEALS

FOR THE FIFTH CIRCUIT

No. 09-20261

EVANSTON INSURANCE COMPANY,

Plaintiff

v.

DILLARD DEPARTMENT STORES INC,

Defendant-Third Party Plaintiff-Appellee

v.

DAMON J. CHARGOIS, CLETUS P. ERNSTER, III,

Third Party Defendants – Appellants

Appeals from the United States District Court

for the Southern District of Texas

Before REAVLEY, CLEMENT, and SOUTHWICK, Circuit Judges.

PER CURIAM:

Damon Chargois and Cletus Ernster appeal the district court’s judgment

holding them personally liable to Dillard Department Stores, Inc.for a judgment

originally entered againsttheir law firm partnership. For the following reasons,

we affirm the judgment of the district court. 

United States Court of Appeals

Fifth Circuit

F I L E D

January 15, 2010

Charles R. Fulbruge III

Clerk
No. 09-20261

2

FACTS AND PROCEEDINGS

Damon Chargois and Cletus Ernster formed a law partnership in 2002.

They registered it as a limited liability partnership, known as Chargois &

Ernster, L.L.P. (CELLP), with the State of Texas in 2002. CELLP prosecuted

lawsuits against Dillard Department Stores, Inc. (Dillard’s), alleging that

Dillard’s racially discriminated against its customers. In an attempt to solicit

business, CELLP developed a website in June 2003 which included a link using

the “Dillard’s” name and logo. Clicking this link took visitors to

dillardsalert.com, a separate website documenting acts of alleged racial profiling

by the department stores.

On July 14, 2003, Dillard’s sued CELLP in Texas state court for trademark

infringement and various business torts. It sought damages and an injunction

against CELLP’s use of its trademark. On October 31, 2003, CELLP’s

professional liability insurer, Evanston Insurance Co., filed a declaratory

judgment action in federal district court, seeking a declaration thatits policy did

not insure CELLP against Dillard’s claims. On November 21, 2003, after

voluntarily dismissing the state courtlawsuit, Dillard’s filed a cross-claim in the

Evanston case against CELLP reasserting its allegations and adding federal

cyberpiracy and trademark claims. On January 15, 2004, pursuant to the

parties’ agreement, the court dismissed Evanston’s claims for declaratory relief.

Dillard’s third-party claims against CELLP were all that remained.

OnFebruary 9, 2004, while the litigation continued, Chargois and Ernster

executed a separation agreement that provided for “dissolution” of the

partnership on February 27, 2004. CELLP’s registration as an LLP was not

renewed and, on July 25, 2004, the registration expired under Texas law.

Notwithstanding these facts, the defunct LLP remained a party to the Dillard’s

litigation, and no party was substituted on its behalf. On November 2, 2004, the
No. 09-20261

1 On June 29, 2006, Cletus Ernster, acting individually, filed a lawsuit in

Texas state court against Dillard’s and its counsel. Ernster alleged that in

seeking to collect its judgment, Dillard’s had filed false public records which

interfered with Ernster’s ability to purchase real estate and commence a new

law practice. Dillard’s moved to enjoin proceedings in Ernster’s state lawsuit,

arguing that an injunction was necessary for the federal court to protect and

effectuate its judgment. The district court granted Dillard’s motion. Ernster

appealed and this court summarily affirmed. Evanston Ins. Co. v. Dillard Dep’t

Stores, Inc., 228 F. App’x 478 (5th Cir. 2007) (unpublished). 

3

court entered a final judgment ordering “Chargois & Ernster, L.L.P.” to pay

Dillard’s $143,500.

Dillard’s attempt to collect on the judgment did not succeed.1 On January

10, 2008, in the docket of the Evanston case, Dillard’s filed a third-party

complaint for a declaratory judgment against Chargois and Ernster in their

individual capacities. Dillard’s sought a declaration that the two were

personally liable, jointly and severally, for the 2004 final judgment entered

against CELLP. Both Chargois and Ernster were personally served with the

third-party complaint, and each moved to dismiss. Dillard’s then restyled its

third-party complaint as a first amended complaint, which reasserted the

allegations of personal liability against Chargois and Ernster (hereinafter, the

“2008 action”). Dillard’s filed a motion for summary judgment, to which both

defendants responded with lengthy opposition briefs. The court granted

judgment for Dillard’s in the amount of $143,500 against Chargois and Ernster,

jointly and severally, and each appealed.

STANDARD OF REVIEW

“We review a district court’s grant of summary judgment de novo.”

Goodman v. Harris County, 571 F.3d 388, 393 (5th Cir. 2009). “Summary

judgmentis appropriate ‘ifthe pleadings,the discovery and disclosure materials

on file, and any affidavits show that there is no genuine issue as to any material

fact and thatthe movantis entitled to judgment as a matter of law.’” Id. (quoting
No. 09-20261

4

FED. R. CIV. P. 56(c)). “We consider the evidence in a light most favorable

to . . . the non-movant, but [he] must point to evidence showing that there is a

genuine fact issue for trial to survive summary judgment.” Id. (quotation

omitted).

DISCUSSION

Chargois and Ernster press four main arguments, two of which present

issues of federal law and two of which present issues of Texas law. We consider

the contentions under federal law before turning to the state law issues. 

A. Federal Law

(1) Subject Matter Jurisdiction

Appellants first contend that summary judgment in the 2008 action was

improper because the district court lacked subject matter jurisdiction. They

argue that the court exceeded the bounds of its ancillary, or supplemental,

jurisdiction. See generally Peacock v. Thomas, 516 U.S. 349 (1996); Kokkonen v.

Guardian Life Ins. Co. of Am., 511 U.S. 375 (1994). This argument fails because

it ignores diversity of citizenship as the primary basis for the district court’s

jurisdiction. The parties to the 2008 action are citizens of different states and

the amount-in-controversy exceeded $75,000; thus, the requirements of 28

U.S.C. § 1332 were plainly satisfied and the district court had subject matter

jurisdiction.

(2) Due Process

Appellants next argue that they were denied due process by the court’s

grant of summary judgment in Dillard’s favor. They argue that they did not

participate in the original 2003 lawsuit involving CELLP and that the court’s

imposition of personal liability upon them in 2008 amounts to a denial of due

process. 

They rely on Nelson v. Adams USA, Inc. for the proposition that “‘[t]he

law, atits mostfundamental, does not render judgment simply because a person
No. 09-20261

2 Ernster also argues that an interlocutory order of the district court was

contrary to law. In 2008, the court ordered Ernster to deposit all proceeds from

his cases against Dillard’s into the court’s registry. He argues that contingent

fee contracts for legal services may not be assumed by another party. See In re

Tonry, 724 F.2d 467, 469 (5th Cir. 1984). His argument overstates the scope of

the district court’s order; its terms did not require him to assign contingent fee

contracts but only to deposit “all funds collected in those actions.” Ernster fails

to demonstrate error in the district court’s order.

3 Even though the TRPA expired January 1, 2010, it continues to apply

here. In 2003, the Texas legislature enacted the Texas Business Organizations

5

might have been found liable had he been charged.’” 529 U.S. 460, 471 (2000)

(quoting Ohio Cellular Prods. Corp. v. Adams USA, Inc., 175 F.3d 1343, 1354

(Fed. Cir. 1999) (Newman, J., dissenting)). In Nelson, liability was imposed

upon the individual shareholder of a defendant corporation at the same moment

the pleadings were amended to add that shareholder as a defendant. Id. at 466.

The shareholder had no “opportunity to respond and contest his personal

liability for the award after he was made a party and before the entry of

judgment against him,” and was therefore deprived of due process. Id. at 463.

Chargois and Ernster, on the other hand, had an opportunity to contest their

personal liability for CELLP’s judgment and, in fact, vigorously did so before a

judgment was entered againstthem individually. The Nelson Court emphasized

that “the right to contest on the merits [one’s] personal liability . . . . is just what

due process affords.” Id. at 472. Because Chargois and Ernster had that

opportunity (and, indeed, availed themselves of it), there was no due process

deprivation.2

B. State Law

It is undisputed that CELLP was formed in 2002 and ceased to exist as a

registered LLP on July 25, 2004. Therefore, the Texas Revised Partnership Act

(TRPA) applies to this dispute. See TRPA § 11.03(c) (codified at TEX. REV. CIV.

STAT.ANN.art. 6132b-11.03(c)).3 Appellants advance two main arguments under
No. 09-20261

Code (TBOC), which, effective January 1, 2006, governed domestic entities

formed after that date. See TEX. BUS.ORGS. CODE § 402.001(a)(1). CELLP is not

such an entity because it was formed in 2002 and, more important, no longer

existed when the TBOC became effective. Even if CELLP still existed and were

now subject to the TBOC, the TBOC makes clear that prior law, such as the

TRPA, would have applied to this dispute. See id. § 402.006. 

6

state law. First, they contend that Texas partnership law confers immunity

upon them as individual partners, whether of an LLP or general partnership.

Second, they contend that the statute of limitations bars Dillard’s 2008 action

to hold them personally liable for the judgment against CELLP.

(1) Immunity from Personal Liability

a. TRPA §§ 3.04 and 3.08

As a general matter, the TRPA imposes joint and several liability on

individual partners for all debts and obligations of a partnership. Section 3.04

of the TRPA provides:

Except as provided by Section 3.07 or 3.08(a), all

partners are liable jointly and severally for all debts

and obligations of the partnership unless otherwise

agreed by the claimant or provided by law.

TEX. REV. CIV. STAT. ANN. art. 6132b-3.04. Under this provision, appellants are

liable for the debts and obligations of CELLP unless one of the enumerated

exceptions applies. See, e.g., ROBERT W. HAMILTON ET AL., 19 TEXAS PRACTICE

§ 8.5 (2d ed. 2009) (“In general, each partner is personally liable for all debts and

obligations of the partnership.”). The first exception, § 3.07, concerns the

liability of incoming partners and is not relevant in this case. 

As for the second exception, TRPA § 3.08(a) limits liability for partners of

registered LLPs. It provides:

(a) Liability of Partner. (1) Except as provided in

Subsection (a)(2), a partner in a registered limited

liability partnership is not individually liable, directly
No. 09-20261

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or indirectly, by contribution, indemnity, or otherwise,

for debts and obligations of the partnership incurred

while the partnership is a registered limited liability

partnership.

(2) A partner in a registered limited liability

partnership is not individually liable, directly or

indirectly, by contribution, indemnity, or otherwise, for

debts and obligations of the partnership arising from

errors, omissions, negligence, incompetence, or

malfeasance committed while the partnership is a

registered limited liability partnership and in the

course of the partnership business by another partner

or a representative of the partnership not working

under the supervision or direction of the first partner

unless the first partner:

(A) was directly involved in the specific activity in

which the errors, omissions, negligence,

incompetence, or malfeasance were committed by

the other partner or representative; or

(B) had notice or knowledge of the errors,

omissions, negligence, incompetence, or

malfeasance by the other partner or

representative atthe time of occurrence and then

failed to take reasonable steps to prevent or cure

the errors, omissions, negligence, incompetence,

or malfeasance.
No. 09-20261

4 We note that § 3.08 was amended in 1997 to add subsection (a)(1),

including the key reference to when a debt or obligation is “incurred.” See 1997

Tex. Sess. Law Serv. Ch. 375, § 113. The amendment moved the content of

former subsection (a)(1) to subsection (a)(2). In light of this change, the Texas

Bar Committee’s 1993 comment, which might appear to support a construction

contrary to that adopted here, see TEX. REV. CIV. STAT. ANN. art. 6132b-3.08 bar

committee’s 1993 cmt. (“Subsection (a)(1) clarifies that the partnership must be

a registered limited liability partnership at the time of the errors and omissions

for which partner liability is limited.”), no longer refers to the correct subsection.

5 The parties characterize the 2004 judgment against CELLP as a “debt”

rather than an “obligation.” We assume, without deciding, that this

characterization is correct.

6 Dillard’s does not argue that personal liability should be imposed

pursuant to the exception to liability protection contained in § 3.08(a)(2).

Neither Chargois nor Ernster argues that he cannot be held liable because the

LLP’s debt arose from the malfeasance of the other partner.

8

TEX. REV. CIV. STAT. ANN. art. 6132b-3.08.4 Appellants argue that § 3.08(a)(1)

insulates them from liability because CELLP’s debt5 was incurred when the

infringing website was created in June 2003, at which time CELLP was still a

registered limited liability partnership. Dillard’s, meanwhile, contends that the

debt was incurred when the judgment was entered on November 2, 2004, at

which time the erstwhile LLP had lost its liability-limiting attributes.6

In Texas,“[t]he meaning of a statute is a legal question,” which is reviewed

“de novo to ascertain and give effect to the Legislature’s intent.” Entergy Gulf

States, Inc. v. Summers, 282 S.W.3d 433, 437 (Tex. 2009). “Where text is clear,

text is determinative of that intent.” Id. “We must interpret a statute according

to its terms, giving meaning to the language consistent with other provisions in

the statute.” Dallas County Cmty. Coll. Dist. v. Bolton, 185 S.W.3d 868, 874

(Tex. 2005). “Only when [the legislature’s] words are ambiguous do we resort to

rules of construction or extrinsic aids.” Entergy Gulf States, 282 S.W.3d at 437

(quotation omitted). 
No. 09-20261

9

Although the terms “debt” and “incurred” are not defined by the TRPA, a

plain reading of the statute’s text supports Dillard’s profferred interpretation.

Neither partner was necessarily aware in June 2003 that displaying the

Dillard’s mark on the law firm website would ultimately lead to a partnership

debt. The underlying conduct gave rise to the possibility of a future debt, but to

say that a debt was “incurred” at that time unrealistically distorts the meaning

of the word. After all, CELLP’s conduct may have gone undetected, it may have

been adjudged perfectly innocent, or Dillard’s may have opted not to sue. Under

any of those scenarios, no debt would ever have been incurred, let alone incurred

in June 2003. It was only when the district court entered judgment against

CELLP in November 2004 that a payable debt came into existence. It was then

that CELLP incurred the debt within the meaning of the provision.

Moreover, the neighboring language of § 3.08(a)(2) demonstrates that the

Texas legislature, when it so chooses, is capable of drafting a provision that

focuses on the commission of events that lead to liability, rather than the fixing

of consequent liability from those events. In that provision, the legislature

insulated an LLPpartner from personal liability “arising from errors, omissions,

negligence, incompetence, or malfeasance committed” by another partner “while

the partnership is a registered limited liability partnership.” TRPA § 3.08(a)(2)

(emphasis added). Thus, to decide whether the first partner’s liability is limited

for the second partner’s malfeasance under §3.08(a)(2), a court must look to

when the second partner committed the malfeasance. Had the legislature

intended to enact the same “when committed” approach for § 3.08(a)(1), it could

have used the language from § 3.08(a)(2). See 2A NORMAN J. SINGER ET AL.,

SUTHERLAND STATUTES AND STATUTORY CONSTRUCTION § 46:6 (“[W]hen the

legislature uses certain language in one part of the statute and different
No. 09-20261

7 The statutory text is not ambiguous. Our reference to a rule of

construction, see Entergy Gulf States, 282 S.W.3d at 437, demonstrates that,

even if it were, our conclusion would not differ.

8 The district court did not expressly rely on § 3.08(a) to support its

judgment. Instead its finding of personal liability was based on a conclusion

that Chargois and Ernster continued doing business under the law firm’s name

rather than wind up the partnership, and that, in so doing, they “essentially

ratified the firm’s debts.” Because a summary judgment may be affirmed on any

ground supported by the record, see McIntosh v. Partridge, 540 F.3d 315, 326

(5th Cir. 2008), we need not assess this alternative disposition.

10

language in another, the court assumes different meanings were intended.”).7

It chose, however, to use different language, and created a regime in which

partners could be held individually liable for debts and obligations incurred

when the partnership was not a registered LLP [§ 3.08(a)(1)], but in which

partners would not bear liability for one another’s independent malfeasance

committed while the LLP existed [§ 3.08(a)(2)]. 

Because CELLP’s registration had expired, it was not a valid registered

LLP at the time its debt was incurred. Therefore, § 3.08 does not foreclose

individual liability and § 3.04’s default rule operates to hold appellants

personally liable for CELLP’s debt.8

b. TRPA § 3.05

Appellants further argue that in addition to suing CELLP in 2003,

Dillard’s was required to sue the partners themselves on the trademark and tort

claims in order to later hold them individually liable. They rely on TRPA

§ 3.05(c), which provides:

A judgment against a partnership is not by itself a

judgment against a partner, but a judgment may be

entered against a partner who has been served with

process in a suit against the partnership. 
No. 09-20261

11

TEX. REV. CIV. STAT. ANN. art. 6132b-3.05. This provision is unhelpful to

appellants, however, because Dillard’s does not rely on the 2004 judgment

against the LLP “by itself” to support their individual liability. Instead, it relies

on the 2008 judgment it obtained against them individually.

Appellants’ reliance on Kao Holdings, L.P. v. Young is also unavailing.

261 S.W.3d 60 (Tex. 2008). Construing § 3.05(c), the Texas Supreme Court held

that

its purpose appears to be to make clear that while

partners are generally liable for the partnership’s

obligations, a judgment against the partnership is not

automatically a judgment againstthe partner, and that

judgment cannot be rendered against a partner who has

not been served merely because judgment has been

rendered against the partnership.

Id. at 64 (footnote omitted). Here, the record belies any argument that judgment

againstthe partners was entered “automatically”; instead, Chargois and Ernster

were defendants in a different action that they lost after defending their

individual interests vigorously on the merits. 

Cothrum Drilling Co. v.Partee, cited by appellants, is also distinguishable.

790 S.W.2d 796 (Tex. App. 1990). In Cothrum Drilling, a Texas intermediate

appellate court held that judgment could not be entered against those partners

“who were not served with citation before the statute of limitations had run.” Id.

at 800. That case involved the potential liability of individual

partners—alongside their partnership—for the tort of conversion. It did not, like

this case, involve a separate lawsuit seeking to enforce a preexisting judgment

by holding individual partners liable for the partnership’s debt. 

(2) Statute of Limitations

Finally, appellants assert that Dillard’s 2008 action is barred by the

statute of limitations. The inquiry depends on the nature of Dillard’s cause of
No. 09-20261

12

action. Dillard’s contends that the cause of action is one for debt, that is, to

enforce the 2004 judgment against the partners on the basis of their statutorily

compelled individual liability. Appellants, meanwhile, argue that the causes of

action are for tort and trademark infringement; appellants view the 2008 claims

as identical to those contained in Dillard’s 2003 cross-claim against CELLP.

Dillard’s amended complaint does not contain any allegations of individual

wrongdoing, nor does it identify the individual conduct of either appellant as a

basis for personal liability. If, counterfactually, Dillard’s were suing appellants

for personal wrongdoing in June 2003—the same conduct for which it sued

CELLP—then its cause of action would have accrued at that time and the tort

or trademark limitations period would apply. Instead, Dillard’s seeks to impose

liability on Chargois and Ernster for partnership debt by operation of Texas law.

In Texas, a person must bring a suit for debt “not later than four years

after the day the cause of action accrues.” TEX. CIV. PRAC. & REMEDIES CODE

ANN. § 16.004(a)(3). The cause of action accrued, at the earliest, upon entry of

judgment against CELLPon November 2, 2004. Because Dillard’s filed its thirdparty complaint (which was eventually replaced by its amended complaint) on

January 10, 2008, its action fell within this four-year limitations period and is

not time-barred. 

Relevant case law also supports our conclusion. In re Jones, decided prior

to the TRPA’s enactment, is on point. 161 B.R. 180 (Bankr. N.D. Tex. 1993). In

that case, a trustee obtained a final judgment against a partnership but could

not recover fully from it. The trustee then brought a separate action “against the

partners to collect the remainder of the judgment.” Id. at 183. The court held

that the limitations period “began to run against the partners only when the

district court’s judgment became final,” and that § 16.004(a)(3)’s four-year

limitations period applied. Id. The court reasoned:
No. 09-20261

9

In an effort to contest the relevance of Jones, appellants cite Sunseri v.

Proctor, which required a claimant to sue individual partners within the

limitations period for the underlying wrong. 487 F. Supp. 2d 905, 908 (E.D.

Mich. 2007), aff’d, 286 F. App’x 930 (6th Cir. 2008) (unpublished). The Sunseri

court stated:

Where, as here, a plaintiff obtains a judgment against

the partnership as an entity, but fails to obtain a

binding judgment against a partner’s individual assets,

and consequently cannot enforce thatjudgment against

the partner, the plaintiff must sue the partner based on

the underlying misconduct. While the plaintiff may use

collateral estoppel to prevent the partner from

relitigating the issue of liability, the plaintiff must still

bring suit within the applicable limitations period for

the underlying wrong.

Id. The Sunseri case involved an attempt to enforce a New York judgment in a

Michigan court and “look[ed] to Michigan’s statutes of limitations regardless of

13

Under the entity theory of partnerships, it is logical

that a partner has no liability until the partnership

liability is established. There is nothing wrong in

allowing the partners to be sued along with the

partnership so that once the partnership liability is

established, a judgment can be rendered against the

partnership and the partners. On the other hand, there

is nothing wrong with the partnership being sued and,

if its liability is established, a subsequent suit being

filed against the partners on their personal liability for

the partnership’s obligation.

. . .

Once the liability of the partnership became fixed, the

only issue remaining was whether the Defendants are

partners of [the partnership].

Id. at 183-84 (emphasis added). The Jones situation is nearly identical to this

case: rather than litigate the partners’ liability for the conduct that gave rise to

the debt, the trustee sought to enforce the partnership judgment against them

simply by virtue of their status as partners.9
No. 09-20261

what state’s partnership law applies to the substantive issues remaining in this

suit.” Id. at 909. Jones, on the other hand, construes §16.004, the applicable

Texas statute of limitations, and the predecessor to TRPA § 3.04. In light of

Jones’s close similarity to this case, we incorporate its reasoning in favor of that

of a nonbinding district court decision from a sister circuit.

Meanwhile, Valley National Bank of Arizona v. A.E. Rouse & Co., cited by

appellants, actually undermines their argument. 121 F.3d 1332 (9th Cir. 1997)

(applying Arizona law). There, the Ninth Circuit recognized the viability of a

debt action against an individual partner where a judgment had already been

entered against the partnership. Id. at 1338.

14

Dillard’s debt action to hold Chargois and Ernster personally liable for the

debt of CELLP was not barred by the applicable statute of limitations.

CONCLUSION

For the foregoing reasons, the judgment of the district court is

AFFIRMED.