Chapter 2-14 Dissolution of Partnership—Judicial Expulsion of Partner

• Jurisdiction: United States

2-14 Dissolution of Partnership—Judicial Expulsion of Partner

2-14:1 Overview

There are several methods a partnership may use to expel a partner. They are, in ascending order of difficulty and expense, expulsion according to the partnership agreement, statutory expulsion by a majority-in-interest of the partners, and judicial expulsion. Because judicial expulsion is far more difficult and expensive to accomplish, it is best used as a last resort.

2-14:1.1 Related Causes of Action

Breach of Formal Fiduciary Duty, Breach of Partnership Duty, Wrongful Withdrawal of Partner, Judicial Winding Up of Partnership, Usurpation of Business Opportunity

MUST READ STATUTE

Texas Business Organizations Code Annotated Section 152.502(b)(5)

2-14:2 Elements

(1) Application by the partnership or another partner

• The partnership or a partner must apply for judicial expulsion.⁴³⁰

(2) A judicial decree determining that the partner

• The requisite findings must be made in a judicial decree.⁴³¹

(2)(a) Engaged in wrongful conduct that adversely and materially affected the partnership business

• The partner must have engaged in wrongful conduct that adversely and materially affected the partnership business.⁴³²
• Such conduct might include:

• Failing to pay rents to the partnership when the sole business of the partnership was to lease farmland.⁴³³
• Misappropriating money from a company trust account.⁴³⁴

(2)(b) Willfully or persistently committed a material breach of: (i) The partnership agreement; or (ii) A duty owed to the partnership or the other partners under Sections 152.204-152.206

• The partner must have willfully or persistently committed a material breach of: (i) The partnership agreement; or (ii) A duty owed to the partnership or the other partners under Sections 152.204-152.206.⁴³⁵
• For conduct that constitutes a breach of a duty, see Chapter 2 Breach of Partnership Duty.

(2)(c) Engaged in conduct relating to the partnership business that made it not reasonably practicable to carry on the business in partnership with that partner

• The partner must have engaged in conduct relating to the partnership business that made it not reasonably practicable to carry on the business in partnership with that partner.⁴³⁶
• Such conduct might include:

• Failing to pay rents to the partnership when the sole business of the partnership was to lease farmland.⁴³⁷
• Partner's moral turpitude and criminal fraud, and failure to be honest in court as to the extent of his criminal

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