McBeth v. Carpenter

In McBeth v. Carpenter, 565 F.3d 171 (5th Cir. 2009), a Fifth Circuit case in which the court, "after careful review of the record and Texas law," affirmed a judgment against limited partners for breaching fiduciary duties to other limited partners. 565 F.3d at 177. McBeth and Reynold, the limited partner plaintiffs in McBeth, obtained a verdict against three parties: James Carpenter, Texas Water Solutions (TWS) and Texas Water Management (TWM). Id. at 174. TWS and TWM were limited partners. Id. at 174-75. Both TWS and TWM were entities controlled by Carpenter, and Carpenter further controlled the general partnership entity (not a party to the suit). Id. On appeal, in discussing Texas law the court did not distinguish between the fiduciary obligations of general partners and limited partners. Id. at 177-78. In response to TWS's and TWM's argument that there was no evidence that TWS and TWM exerted any control, the court noted that while the "limited partnership agreement itself specifically stated that the general partner retained exclusive control and management over the partnership," at trial "extensive testimony established that Carpenter was 'the man in control'" and there was "evidence that Carpenter exerted control over the limited partnership not just as general partner . . . but also in his capacity as President of both" TWS and TWM. Id. at 178.