Pepper Law, PLC was recently successful in having the Business Court, located in Davidson County, pierce the veil of a limited partnership to hold the limited partner personally liable for a judgment rendered years earlier against the limited partnership. No Tennessee appellate court has yet addressed whether or not the veil of a limited partnership can be pierced, and the decision of the Business Court is believed to be the first time a Tennessee court has ruled on the issue.
Tennessee has long-recognized that the corporate veil of a corporation may be pierced such that an individual may be held liable for the debts of the corporation. As well, in a 2012 opinion, the Court of Appeals of Tennessee ruled that the veil of a limited liability company could be pierced in the case of Edmunds v. Delta Partners, L.L.C., 403 S.W.3d 812.
In arguing that the piercing of the veil of a limited partnership to hold a limited partner individually liable was warranted, we relied upon several non-Tennessee cases. Of particular weight in the Business Court’s decision was the opinion of the bankruptcy court for the Southern District of New York in In re Adelphia Commc’ns Corp., 376 B.R. 87 (2007). In the case before the Business Court, the limited partnership against whom we had earlier obtained a judgment, and for which we sought to pierce the veil to hold its limited partner liable, was a Delaware limited partnership. In the Adelphia case, the limited partnership at issue was also a Delaware limited partnership.
In the Adelphia case, the court pointed out that there was nothing in the Delaware Limited Partnership Act which prohibited the piercing of the veil of a limited partnership. The Business Court approved of the reasoning in the Adelphia case, noting that Tennessee appellate decisions had approved of Tennessee courts looking to Delaware courts for guidance on corporate law. In addition to the bankruptcy court in the Adelphia case, appellate courts in New Jersey and Virginia have ruled that the veil of a limited partnership may be pierced to hold a limited partner liable.