SW Legal Educational Publishing

Limited Partner May Not Sue Contractors to Limited Partnership for Losses
Description North Carolina high court held that a limited partner, like a shareholder, may not sue contractors to a limited partnership for causing the limited partnership to fail. The limited partnership itself must sue the contractors; individual partners have no standing to sue for losses.
Topic Business Organization
Key Words Limited Partnership; Losses; Standing
C A S E   S U M M A R Y
Facts Energy Investors Fund, L.P. (EIF) was a limited partner in BCH Energy L.P. EIF invested $16 million in BCH in reliance of BCH's representations that it would build and manage waste-to-energy plants. BCH hired Metric Constructors to construct an energy-generating project. Serious problems caused the project to lose all funds invested. EIF sued, contending that Metric was negligent in its construction. The trial court dismissed the suit, holding that EIF had no basis for suing Metric or other contractors. The appeals court affirmed. EIF appealed to the North Carolina high court.
Decision Affirmed. The lower courts "properly equated the status of limited partners in a partnership to the relation ship that exists between corporate shareholders and the corporation." "EIF did not invest its funds directly and independently in the Project. Rather, EIF invested in the BCH partnership.... That EIF invested an amount different from other limited partners hardly makes for an 'individual injury.' The complaint does not allege a basis demonstrating that the investment, and thus the injury, is peculiar or personal to the limited partner, EIF." "Therefore, EIF lacks standing in its capacity to assert claims which belong to the limited partnership and which have been asserted and pursued by the limited partnership.... any action brought against defendants must be brought by the partnership."
Citation Energy Investors Fund, L.P. v. Metric Constructors, Inc., - S.E.2d - (2000 WL 234827, Sup. Ct., N.C.)

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