Creditors of Insolvent Limited Partnerships Lack Standing to Pursue Derivative Claims

When directors and officers breach their duties, creditors and shareholders have standing to pursue derivative claims on behalf of the corporation. However, the rules governing standing are different when the bankrupt entity is a limited partnership or limited liability company. In a recent case before the United States Bankruptcy Court for the District of Delaware, the Court issued an opinion on this issue, dismissing derivative claims asserted against a former principal of a limited partnership and limited liability companies because the creditors lacked standing to bring the claims on behalf of such entities.

In The Legal Intelligencer article “Creditors of Insolvent Limited Partnerships Lack Standing to Pursue Derivative Claims” by Chairman and CEO Andy Kassner and Senior Attorney Joseph Argentina, the authors take an in-depth look at the details of In re Citadel Watford City Disposal Partners, L.P., et al., Case No. 17-50024-KJC (May 2, 2019). In that case, the Court dismissed derivative claims asserted against a former principal of a limited partnership and limited liability companies because the creditors lacked standing to bring the claims on behalf of such entities.

Read "Creditors of Insolvent Limited Partnerships Lack Standing to Pursue Derivative Claims."