Opinion ID: 1280812
Heading Depth: 1
Heading Rank: 5

Heading: Immunity from Personal Liability

Text: 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 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 at the time of occurrence and then failed to take reasonable steps to prevent or cure the errors, omissions, negligence, incompetence, or malfeasance. TEX.REV.CIV. STAT. ANN. art. 6132b-3.08. [4] Appellants argue that § 3.08(a)(1) insulates them from liability because CELLP's debt [5] 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). Although the terms debt and incurred are not defined by the TRPA, a plain reading of the statute's text supports Dillard's proffered 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 LLP partner 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 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. 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 against the 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 against the 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.