## Facts

- Brighton Farms, formed in 1972 to acquire and hold land for appreciation, operated as a general partnership after its limited-liability status was revoked in 1999.
- Plaintiffs were minority general partners holding about 47% of the partnership interests; five managing partners conducted partnership business.
- In 1998, the partnership engaged Land Services, Inc. (LSI) and Douglas Barnes to manage the property and find a buyer.
- In 2004, a majority of partnership interests approved a “platting agreement” with LSI (opposed by plaintiffs) under which LSI would perform value-enhancing services and receive 40% of net sale proceeds above $24,000 per acre.
- The partnership later accepted a purchase offer of about $43,560 per acre; LSI received its listing commission and its 40% share under the platting agreement.
- Remaining net proceeds were distributed to partners, and the partnership dissolved.
- Plaintiffs sued LSI, Barnes, and the Barnes Family Foundation alleging wrongdoing (including civil theft and false representation) that, in substance, reduced partnership sale proceeds.

## Issues

1. Whether minority general partners in a Colorado general partnership may bring a derivative-type action on behalf of the partnership against third parties for alleged injury to the partnership.
2. Whether minority partners may instead sue individually, as co-owners or agents, for alleged losses that flow from an asserted partnership-level injury.

## Decision

- The Colorado Court of Appeals affirmed summary judgment dismissing the action for lack of standing.
- The court held Colorado law does not authorize minority general partners to assert a derivative action on behalf of a general partnership against third parties.
- The court held plaintiffs also lacked individual standing because the alleged harm was to the partnership and affected partners only indirectly through distributions.
- Because standing was dispositive, the court did not reach the merits of the civil theft and false representation claims.

## Legal Principles

- Claims alleging injury to a partnership (e.g., diminished sale proceeds from an allegedly improper transaction) belong to the partnership entity, not to individual partners absent a distinct personal injury.
- A lawsuit is treated as derivative in substance when it seeks recovery for partnership-level harm shared proportionally by partners.
- Colorado courts will not create a derivative-action mechanism for general partnerships where the legislature has provided derivative remedies for other entity types but not for general partnerships.
- Dissolution and distribution of assets do not convert a partnership-level claim into an individual partner claim for standing purposes.

## Conclusion

The court concluded that minority general partners could not sue third parties to recover for alleged overpayment and related harms suffered by the partnership because Colorado law provides no derivative action for general partnerships, and the partners alleged no distinct individual injury apart from the partnership’s loss.


Adams v. Land Servs., Inc., 194 P.3d 429 (Colo. App. 2008)