DALLAS GAS PARTNERS, L.P., Plaintiff-Counter Defendant-Appellant
PROSPECT ENERGY CORPORATION, Defendant-Counter Claimant-Appellee
Dallas Gas GP, L.L.C.; Thomas P. Muse; David W. Nelson, Third Party Defendants-Appellants.
[Copyrighted Material Omitted]
Jason Aron Itkin, Esq., Micajah Boatright, Arnold & Itkin, L.L.P., Houston,
TX, for Plaintiff-Counter Defendant-Appellant.
Neil Kenton Alexander, Jr., Esq. (argued), Porter & Hedges, L.L.P., Houston, TX, for Defendant-Counter Claimant-Appellee.
Richard L. LaGarde (argued), Roger N. Chrisco, Attorney, Mary Ellis LaGarde, LaGarde Law Firm, P.C., Houston, TX, for Third Party Defendant-Appellant Thomas P. Muse.
Jason Aron Itkin, Esq., Micajah Boatright (argued), Arnold & Itkin, L.L.P., Houston, TX, for Third Party Defendant-Appellant Dallas Gas GP, L.L.C.
Melissa Lorber, Attorney, Craig T. Enoch (argued), Enoch Kever, P.L.L.C., Austin, TX, for Third Party Defendant-Appellant David W. Nelson.
Appeals from the United States District Court for the Southern District of Texas.
Before DENNIS, CLEMENT, and SOUTHWICK, Circuit Judges.
EDITH BROWN CLEMENT, Circuit Judge:
In this breach of contract case, appellants Dallas Gas Partners, L.P., Dallas Gas GP, L.L.C., Thomas Muse, and David W. Nelson contend that a contract's release and covenant not to sue did not bind individual limited partners or authorize recovery of attorneys' fees in the case of breach. The district court granted summary judgment in favor of appellee Prospect Energy Corp., included attorneys' fees in its award, and held that appellants were jointly liable. We affirm.
FACTS AND PROCEEDINGS
Tom Muse, David Nelson, and Jeffrey Weiss, along with two other partners, formed Dallas Gas Partners, LP (" DGP" ) pursuant to Texas law on July 20, 2004, under the name MNW Acquisition, LLP. The five individuals were DGP's limited partners; its general partner was another partnership, MNW Partners, LLC (" MNW Partners" ), which consisted of Muse, Nelson, and Weiss.
On July 29, DGP signed a purchase and sale agreement to buy Gas Solutions, Ltd. (" Gas Solutions" ), a gas processing plant. As part of the agreement, DGP agreed to pay a non-refundable $500,000 deposit by September 3 and pay the balance by September 23. DGP attempted to finance the purchase by securing a loan from Prospect Energy Corp. (" Prospect" ). DGP and Prospect signed a non-binding letter agreement on September 3, in which Prospect agreed to lend DGP almost 95% of the purchase price, subject to due diligence. The agreement included an exclusivity provision that prevented DGP from negotiating with other lenders during the agreement period. After conducting due diligence, Prospect informed DGP on September 21 that its diligence raised serious concerns and that it decided not to loan DGP the money. After DGP threatened to sue, the two entities traded proposals and counter-proposals for resolving the dispute. Prospect eventually accepted DGP's proposition that Prospect pay DGP $3.295 million as reimbursement for DGP's expenses and in exchange for DGP assigning Prospect its right to buy Gas Solutions.
To implement this proposal, DGP assigned the contract to purchase Gas Solutions
to DGP's general partner, MNW Partners, which Muse, Nelson and Weiss alone owned and managed. Muse, Nelson, and Weiss then sold their individual membership interests in MNW Partners to Prospect, thus transferring the contract to Prospect.
B. Relevant documents
The parties memorialized this transaction in three documents on September 23. The first document— the " Unanimous Written Consent of the Partners of [DGP]" — was signed by the five DGP limited partners  and approved the assignment of the contract to purchase Gas Solutions to MNW Partners.
The second document, the " LLC Membership Interest Purchase Agreement," was signed by Muse, Nelson, Weiss, and Prospect CEO John F. Barry. It was
entered into by and among Thomas P. Muse, a resident of the State of Texas (" Muse " ), David W. Nelson, a resident of the State of California (" Nelson" ), and Jeffrey Weiss, a resident of the State of Texas (" Weiss " ) (individually a " Seller " and collectively, the " Sellers " ) and PEC White Oak LLC, a Delaware limited liability company (" Purchaser " ).
In addition to recording the transfer of the individual membership interests in MNW Partners to Prospect in return for $3.295 million, the agreement included a " Mutual Release" by which " [e]ach of the signatories ... including, without limitation, any parties acknowledging or consenting to this Agreement," among other things, released all claims and rights arising out of and " covenant[ed] not to institute, maintain or prosecute any action, claim, suit, proceeding or cause of action" relating to the letter agreement. The release specified that " [i]n any litigation arising from or related to an alleged breach of [the Mutual Release], this Agreement may be pleaded as a defense, counterclaim or crossclaim." A separate section of the agreement limited the recovery from a " claim otherwise asserted in litigation under or pertaining to this Agreement" to " actual damages." The agreement also included a New York choice-of-law provision.
The final document was the " Consent and Agreement of Limited Partners of [DGP]." Signed by each of the five DGP limited partners, it provided that:
[E]ach of the undersigned, being a limited partner of the Partnership, hereby acknowledges, consents to and approves of:
(i) the assignment of the Partnership [of its right to purchase Gas Solutions]; [and]
(ii) the transfer and assignment by each of Thomas P. Muse, David W. Nelson and Jeffrey Weiss of their respective member interest in MNW ...