A business partner who diverts company funds, hides financial records, or takes a client relationship for personal gain may be liable for breach of fiduciary duty under Texas law. Kretzer & Arnett, an experienced business litigation firm serving Houston and clients nationally, helps partners evaluate these claims when trust between owners has broken down. Call (713) 600-5190 to discuss whether a fiduciary duty dispute applies to a partnership.
How Do You Sue a Business Partner in Texas for Breach of Fiduciary Duty?
A partner who wishes to sue for breach of fiduciary duty in Texas must show that a fiduciary relationship existed, that the partner breached the duties of loyalty, care, or disclosure owed under that relationship, and that the breach caused measurable harm to the partnership or its owners. The process often begins with a review of the partnership’s records and governing agreements, and, in some cases, a demand for books and records or other pre-suit efforts to resolve the dispute before a civil suit is filed in state or federal court. Texas also gives owners a statutory right to inspect company books and records, for example, Section 101.052 for LLCs, Section 153.552 for limited partnerships, and Section 3.152 for other filing entities, which is often a valuable pre-suit tool for confirming a suspected breach.
Once a lawsuit is filed, the case generally proceeds through the exchange of financial records and depositions during discovery, followed by mediation or settlement discussions, and, if the dispute remains unresolved, a trial before a judge or jury. Partners facing an active threat to company funds or records might also request emergency relief from the court at the outset of the case rather than waiting for the standard litigation timeline to unfold.
Summary of Suing Business Partners and Breaches of Fiduciary Duty
A breach of fiduciary duty claim under Texas law arises when a business partner violates duties of loyalty, care, or disclosure, causing measurable harm to a partnership or its owners.
- Texas general partners owe default fiduciary duties of loyalty and care under Chapter 152 of the Texas Business Organizations Code; a partnership agreement may narrow those duties but cannot eliminate them. Under Senate Bill 29 (2025), limited liability companies and limited partnerships, but not general partnerships or corporations, may now eliminate fiduciary duties entirely through their governing agreements.
- Common breaches of fiduciary duty include diverting business opportunities, misusing partnership funds, concealing financial records, competing against the partnership without disclosure, and withholding distributions owed under a partnership agreement.
- Available remedies in Texas fiduciary duty litigation may include monetary damages, disgorgement of profits, injunctive relief, rescission of transactions, buyouts, or dissolution of the partnership, depending on the facts of the dispute.
Kretzer & Arnett represents business owners, partners, and shareholders throughout Houston and across Texas in business litigation involving breach of fiduciary duty, partnership disputes, and related ownership conflicts.
What Constitutes a Breach of Fiduciary Duty Between Business Partners?
Partners in a Texas business owe each other duties of loyalty, care, and full disclosure in the management of partnership affairs. A breach of fiduciary duty occurs when a partner places personal interests ahead of the partnership or acts in a manner that harms the other owners. Common examples include the following:
- Diverting a business opportunity that belonged to the partnership for personal benefit
- Misusing partnership funds or company accounts for unauthorized purposes
- Concealing financial records, contracts, or material business information from other partners
- Entering into competing business ventures without disclosure or consent
- Withholding profit distributions owed under the partnership agreement
Fiduciary duty disputes are not limited to general partnerships. Corporate officers and directors owe fiduciary duties to the corporation itself, and a controlling shareholder may owe a duty to a minority owner only in limited circumstances, such as when negotiating to buy the minority owner’s shares. s. A minority shareholder who believes a controlling shareholder diverted a corporate opportunity, withheld financial information, or approved a transaction that unfairly benefited insiders may have grounds for a related claim, discussed further on the firm’s page covering shareholder and partnership disputes, even though the underlying business is organized as a corporation rather than a partnership.
Texas partnership law has shifted in recent years. In 2025, the Texas legislature enacted Senate Bill 29, permitting certain limited liability companies and limited partnerships to modify or eliminate fiduciary duties within their governing agreements. General partnerships without such a modified agreement remain subject to the default duties of loyalty and care under Chapter 152 of the Business Organizations Code, meaning most partners in 2026 continue to owe fiduciary obligations to one another absent a contrary written agreement. Governing documents may also exculpate managers or members from liability for certain conduct and provide for indemnification, within the limits Texas law allows.
Elements Required to Prove a Fiduciary Duty Claim in Texas
Texas courts examine several elements before allowing a fiduciary duty claim to proceed. A partner bringing suit generally needs to show the following:
- That a fiduciary relationship existed between the partners, as defined under Chapter 152 of the Texas Business Organizations Code
- That the partner owing the duty breached the duty of loyalty, care, or disclosure
- That the breach proximately caused injury to the partnership or the partner bringing suit
- That damages resulted, whether through lost profits, diverted assets, or diminished business value
Meeting each element often requires financial records, communications, and testimony that document how the breach occurred and the cost to the business. Texas generally applies a four-year statute of limitations to breach of fiduciary duty claims, though the discovery rule may extend that period when a partner conceals the misconduct from the other owners. Partners who suspect a breach may benefit from consulting counsel promptly, as delay can complicate the collection of records and the recall of witnesses.
How Kretzer & Arnett Represents Business Partners in Houston, Texas Fiduciary Duty Disputes
The firm handles business litigation in state and federal courts, pursuing claims through demand letters, discovery, and, when necessary, emergency injunctive relief to prevent the transfer or destruction of partnership assets. The appropriate remedy depends on the dispute itself and the partnership agreement, and may include a negotiated buyout, a formal accounting, or judicial dissolution of the partnership.
Ownership conflicts often accompany a fiduciary duty dispute, particularly when partners disagree over capital contributions, management authority, or the business’s valuation. Partners weighing a buyout under a buy-sell agreement or a formal business divorce may benefit from an early case evaluation. In situations involving an immediate risk to company assets, such as the transfer of funds or the destruction of records, an emergency injunction might be necessary to preserve the value of the business while the underlying claims are resolved.
What Remedies Are Available for Breach of Fiduciary Duty?
A successful fiduciary duty claim could result in several forms of relief, depending on the harm involved. Courts might award the following.
- Monetary damages measured by lost profits or out-of-pocket losses
- Disgorgement of profits the breaching partner gained through the misconduct
- Rescission of a transaction connected to the breach
- Injunctive relief to stop ongoing harm or preserve partnership assets pending trial
- Judicial winding up of the partnership, or a buyout arranged under the partnership agreement or by settlement when continued co-ownership is no longer workable
Under the Texas Civil Practice and Remedies Code, damages in a fiduciary duty case may include lost profits and disgorgement of ill-gotten profits, and, in some instances, exemplary damages when the breach involves fraud, malice, or gross negligence. The Texas Business Organizations Code likewise sets out the statutory duties partners owe one another, providing the legal foundation for many of these claims. Depending on the circumstances, a court may also order an accounting or other equitable relief. An exemplary damages require clear and convincing evidence and are subject to the statutory cap in Section 41.008.
Partners who suspect financial misconduct or a breach of fiduciary duty should not wait to protect their interests, since delay can allow records to disappear and evidence to grow stale. Kretzer & Arnett represents business partners and shareholders throughout Houston and across Texas in fiduciary duty litigation, from initial document review through trial or settlement. Call (713) 600-5190 to schedule a confidential consultation, or contact the firm to discuss the details of a partnership dispute.
Common FAQs Regarding Breaches of Fiduciary Duty That Lead to Litigation
Read further to learn more about partnership disputes and breaches of duty from the following frequently asked questions.
What Is a Breach of Fiduciary Duty Between Business Partners?
A breach of fiduciary duty occurs when a Texas business partner violates duties of loyalty, care, or disclosure owed to the partnership or its owners. Examples include diverting business opportunities, concealing financial information, misusing partnership funds, competing with the partnership without disclosure, or otherwise placing personal interests ahead of the business. These actions may expose the partner to liability under Texas law.
What Must Be Proven to Win a Breach of Fiduciary Duty Lawsuit in Texas?
A successful Texas breach of fiduciary duty claim generally requires proof of a fiduciary relationship, a breach of that duty, resulting damages, and a direct connection between the breach and the harm suffered. Financial records, communications, witness testimony, and business documents frequently play important roles in establishing these elements during litigation.
Can a Business Partner Sue Another Partner for Misusing Company Money?
Yes, a Texas business partner may pursue legal action when another partner improperly uses partnership funds or diverts company assets for personal benefit. Courts may award monetary damages, order repayment of improperly obtained profits, require an accounting of partnership finances, or issue injunctive relief to prevent additional financial harm.
Does Every Texas Business Partner Owe a Fiduciary Duty?
Not every Texas business relationship imposes identical fiduciary obligations, as the governing business structure and organizational documents may affect those duties. While general partnerships typically remain subject to default fiduciary duties under the Texas Business Organizations Code, certain limited liability companies and limited partnerships may modify or eliminate some fiduciary duties through properly drafted governing agreements.
What Remedies Are Available in a Texas Breach of Fiduciary Duty Case?
Texas courts may award several remedies for breach of fiduciary duty, including compensatory damages, disgorgement of profits, rescission of certain transactions, injunctive relief, buyouts, or dissolution of the business relationship. The appropriate remedy depends upon the nature of the misconduct and whether the owners can continue operating the business together.
How Long Do You Have to File a Breach of Fiduciary Duty Lawsuit in Texas?
Texas generally applies a four-year statute of limitations to breach of fiduciary duty claims, although the discovery rule may extend that deadline when misconduct was concealed. Prompt action often helps preserve financial records, electronic communications, and other evidence that may become more difficult to obtain over time.
How Can Kretzer & Arnett Help With a Texas Fiduciary Duty Dispute?
Individuals involved in a Texas fiduciary duty dispute may consider visiting with an experienced attorney at Kretzer & Arnett to better understand available legal options and potential litigation strategies. Kretzer & Arnett represents business owners, partners, and shareholders in Houston and throughout Texas in business litigation involving fiduciary duty claims, partnership disputes, ownership conflicts, and related commercial litigation matters.