By Chris Bankler

In a Rule 166 opinion, Judge Andrea K. Bouressa resolved core business-law issues as a matter of law: LLC membership under the Texas Business Organizations Code, definiteness of an alleged oral partnership, and limitations on fraud and unjust-enrichment claims. The Court entered partial judgment before trial.

Key Takeaway

LLC membership is statutory. Contribution alone is not enough. An alleged oral partnership must contain definite, enforceable terms. And limitations begin when the plaintiff knew — or should have known — of the alleged injury.

LLC Membership Requires Statutory Compliance

Judge Bouressa began with first principles; explaining, “As a matter of law, a limited liability company cannot be a general partnership, nor can a general partnership be a limited liability company.”

The Texas Business Organizations Code defines a member as someone admitted as provided in the governing documents or the statute. Urban LLC’s certificate of formation did not name Quintero. No company record reflected his admission. No unanimous consent admitted him.

Quintero relied on a $10,000 deposit and a balance sheet entry. That was insufficient. As Judge Bouressa emphasized, “Membership is not contingent upon—or proven by—evidence of a capital contribution to the company.”

There was no evidence raising a genuine issue of material fact. Judgment as a matter of law followed.

Alleged Oral Partnership Was Indefinite as a Matter of Law

Quintero alternatively alleged an oral partnership with equal ownership and profit sharing, plus promises to pay school tuition, purchase a ranch, build a house in Mexico, and make charitable donations.

Judge Bouressa reiterated the governing standard, “To be legally binding, a contract must be sufficiently definite in its terms so that a court can understand what the promisor undertook.”

These alleged promises lacked measurable scope, deadlines, or objective standards. Terms such as a ‘ranch’ or a ‘modest house’ provide no judicial benchmark. Because the court could not determine the parties’ obligations, the contract claim failed as a matter of law.

Limitations Barred Fraud and Unjust Enrichment

The fraud claims relating to Urban LLC were barred by the four-year statute. The unjust-enrichment claim was barred by the two-year statute.

By 2016, Quintero knew Urban was formed as an LLC, knew his funds were deposited into an LLC account, knew alleged promises were not being fulfilled, and questioned why he was not treated as a partner.

Because the alleged injury was known or discoverable through reasonable diligence, the discovery rule and fraudulent concealment did not extend limitations.

Conclusion

LLC membership is statutory, not equitable. Oral business arrangements must be definite. Limitations begin when the plaintiff has actual or constructive knowledge of the injury. Judge Bouressa resolved each issue under Rule 166 without sending them to a jury.

The opinions expressed are those of the authors and do not necessarily reflect the views of the firm, its clients, or any of its or their respective affiliates. This article is for informational purposes only and does not constitute legal advice. For more information, please contact Chris Bankler or a member of the Trial & Appellate Litigation practice.

Meet Chris

Chris Bankler focuses on the resolution of disputes for businesses and financial institutions. He counsels clients through the process of complex business litigation, including general business disputes, fraud claims, breach of fiduciary duty cases, and complex business bankruptcy litigation. He has served as litigation counsel in more than 100 cases in state and federal courts, as well as FINRA and AAA arbitrations.