Texas Business Court Decision – Monday, March 10, 2025
No. 24-BC01B-0010 Primexx Energy Opportunity Fund, LP, et al v. Primexx Energy Corporation, et al. (First Division)
Civil case – Limited Partnerships/Drag-along sales/Partners’ Duties Under the Texas Business Organizations Code.
[Whitehill, Author]
The controlling partner in this limited partnership exercised its partnership agreement drag-along sales right to force an exit event sale to a third party, a sale the plaintiffs, two minority owners, complain was unlawful. Plaintiffs allege the controlling partner and managing general partner breached fiduciary and contract duties and obligations by accepting too low a price, failing to perform due diligence (including whether the sale was fair to the partnership and other partners and whether the business was viable as a stand-alone business), and by not giving timely notice of the sale; they also sued the managing partner’s chief executive for conspiracy and other derivative theory causes of action. The court partially grants defendants’ motion for summary judgment, concluding that under the partnership agreement’s plain text, the controlling partner’s drag-along rights met minimum requirements under the Texas Business Organizations Code, and the evidence conclusively proved that the controlling partner and the managing general partner met their modified statutory and contract duties and obligations; the court will not inject advance notice provisions into the contract where the parties omitted to them; further, the court grants the managing partner and its chief executive summary judgment regarding plaintiffs’ derivative liability theories to the same extent it grants the controlling partner’s motion; the court denies the defendants’ motion for summary judgment on plaintiffs’ claims that the sale proceeds were misapplied under the partnership agreement and that the proceeds were unfairly allocated between the partnership and a “sidecar” business sold in the same transaction; finally, the court directs the parties to provide additional briefing on plaintiffs’ remaining derivative liability theories.
With respect to plaintiffs’ breach of contract claims against defendant HoldCo, it is undisputed that HoldCo waited the required time under the contract to make a sale and that the transaction was arm’s-length; because Hold-Co’s fiduciary duties required it perform in good faith, its contract duty to do so was no greater than its duty to do so under the Texas Business Operating Code, and the court grants summary judgment to HoldCo on the breach of contract claim.
This is a 79-page opinion and covers a multitude of topics, including the summary judgment standard, contract and statutory construction rules, interpretative canons, the weight to be given intermediate appellate decisions in the absence of Texas Supreme Court and Fifteenth Court of Appeals precedents, Chapters 152 and 153 of the Texas Business Organizations Code, the Texas Revised Partnership Act, and fiduciary duties. As this is one of the Business Court’s first merits decisions – as opposed to decisions addressing the court’s jurisdiction – it is worth reading in detail.