Give Me Shelter: The Appropriateness of Inter-Partner Contribution Agreements

To date, all U.S. jurisdictions have adopted some version of an LLP statute. Bromberg AR, Ribstein LE: Bromberg and Ribstein on Limited Liability Partnerships, The Revised Uniform Partnership Act, and The Uniform Limited Partnership Act (2001), NY, Little, Brown: '1.01(e); 2002. Many have adopted statutes similar to the Revised Uniform Partnership Act's model LLP statute, which provides limited liability for all partnership debts and obligations. Bromberg & Ribstein, '3.03. For example, California (Cal. Corp. Code ”16100 Corp. to 16962 Corp.), Connecticut (C.G.S.A. ”34-300 to 34-434), Delaware (Del. Code Ann., tit. 6 Del. C. '15-101 to 6 Del. C. '15-1210), New Jersey (N.J. Rev. Stat. NY, Little, Brown: '42:1A – 1-42:1A-56) and Texas (Vernon's Ann. Civ. St. art. 6132b-1.01 REV. CIV. STAT. To 6132b-11.04 Rev. Civ. STAT.) are among the states that have adopted versions of R.U.P.A. (For a complete listing of all the states that have adopted the R.U.P.A., see Bromberg & Ribstein, Ch.8.)

Such a statute would read that:

An obligation of a partnership incurred while the partnership is a limited liability partnership, whether arising in contract, tort, or otherwise, is solely the obligations of the partnership. A partner is not personally liable, directly or indirectly, including by way of contribution or otherwise, for such a partnership obligation solely by reason of being or so acting as a partner. R.U.P.A. '306(c).

While these statutes offer additional protection for individuals, the protection is not absolute. Some statutes do not protect LLP partners from certain type of claims, such as contract-based claims, and most maintain partner liability for participation in or supervision of negligent or wrongful conduct. (See, for example, Louisiana's partial-shield LLP statute at La. Rev. Stat. Ann. '9:3431. See also Delaware's statute, which reads in relevant part, that limited liability 'shall not affect the liability of a partner in a limited liability partnership for such partner's own negligence, wrongful acts, or misconduct, or that of any person under his direct supervision and control.' De. Code Ann. tit. 6 Del. C. '1515(c). See also the application of New York's LLP statute in Schuman v. Gallet, Dreyer & Berkey, L.L.P., 719 N.Y.S.2d 864 (1st Dep't 2001); N.Y.Jur.2d Bus. Rel. '2276; 67 Apr. N.Y.S.B.J. 38 (1995). This is in addition to the lawyer's ethical duty to monitor others in their firm.) Partners remain responsible for liabilities incurred and contracts entered into before the law firm registered as an LLP. Bromberg & Ribstein, '3.11(b). Therefore, despite the apparent barrier created by LLP statutes, creditors will probably always try to pursue LLP partners individually, either by characterizing their liability as direct rather than supervisory or by suing the partnership with contribution by individual partners. Bromberg & Ribstein, '3.08(b).