Cooke v. Karlseng, No. 05-18-00206-CV, 2019 WL 3812060 (Aug. 14, 2019), is the fourth appeal on a case originally filed in 2006. Thus–as one might expect–the underlying facts are anything but straight forward. But, the only relevant fact for this post is that the original plaintiff brought suit against a former partner for transfer of partnership assets and business to a new entity in 2004 and 2005. Plaintiff filed suit in 2006 asserting harm to his partnership interest as an individual claim. He later added derivative claims in 2014.
The bar against owners asserting individual claims when damages occur to the entity is well known. The plaintiff here creatively–but unsuccessfully–argued that the Texas derivative claims statute allowed him to bring the claims as and individual by arguing: “the question is not whether the injuries are to [plaintiff] or to the corporation. It is whether he can sue individually for those corporate injuries as though they were personal.” Plaintiff concluded that the derivative action statute permitted that procedure. The Dallas Court of Appeals quickly disabused plaintiff of that notion by flatly stating “it does not” and concluding plaintiff had no standing to bring the individual claims leaving the Court to address the 2014 derivative claims.
The defendant argued that the newly added business entities’ claims were barred by the statute of limitations. In response, plaintiff argued that the derivative claims were not new, distinct, or different and, pursuant to Texas Civil Practice and Remedies Code § 16.068, related back to his 2006 filing for purposes of the statute of limitations. While the Dallas COA agreed that the entities’ claims relied on the same facts that Cooke alleged in his individual claims in 2006, the Court concluded that plaintiff could not “simply change hats” and create jurisdiction where none previously existed. The 2014 claims did not have an earlier claim to relate back to and were barred by the statute of limitations. Therefore, the Court of Appeals reversed the trial court’s denial of Defendant’s motion for summary judgment.
By: Darla Gabbitas
You can find the opinion here.