5th Circuit: Texas Partnership Liability Withstands 19th Century SCOTUS Ruling
By Mark Curriden, The Texas Lawbook – (July 4, 2017) – A North Dakota farming couple cannot rely on a 145-yearold court ruling to avoid paying past debts under Texas general partnership liability law, according to a decision by the U.S. Court of Appeals for the Fifth Circuit. John and Dawn Keeley have until Thursday to file a petition for rehearing at the Fifth Circuit for their claims that the U.S. Supreme Court’s 1872 ruling in Frow v. De Le Vega protects them from individual liability from debts accumulated from a now-defunct agribusiness partnership. But Clayton Bailey, a Dallas lawyer for Crop Production Services, says the Keeleys cannot use the 19th century decision to escape $1.3 million owed his client. A three-judge panel of the Fifth Circuit, in a ninepage per curiam decision, agreed in a unanimous ruling issued June 20. “This case demonstrates that business partners need to take specific steps to protect themselves in general partnerships,” says Bailey, who is a partner at Bailey Brauer in Dallas. The dispute dates back to a January 2008, when the Keeleys and another couple from North Dakota, Tom and Mary Grabanski, formed a business partnership to farm property in Northwest Texas. A month later, the partnership, G&K Farms, borrowed an estimated $642,669.55 in seeds, chemicals and fertilizer from Denver-based CPS. “Mr. Keeley agreed to personally guarantee payment and performance of G&K Farms and assumed personal liability for all obligations due to CPS,” court records show. Court documents show that CPS invoiced G&K Farms multiple times in 2008 and 2009, but was never paid. In September 2009, the Keeleys legally signed over their interests in G&K Farms to the Grabanskis. Four years later, Grabanski filed for Chapter 7