Unlawful Distribution Statute of Limitations For Limited Partnerships

January 16, 2019

We recently received the ruling from a judge concerning application of the statute of limitations for unlawful distributions for limited partnerships set forth in A.R.S. § 29-338.  The statute of limitations set forth in section B of that provision says that any partner who has received a return of any part of his contribution in violation of the Partnership Agreement is liable to the limited partnership for a period of six years.  The defendant tried to assert that the six year figure was a statute of repose.  The court rejected the argument.

Our court compared this statute with A.R.S. § 12-552 which creates a time period in which actions must be brought regarding the construction of real property which showed a clear legislative attempt to limit substantive rights which states “no action unless it may be instituted or maintained more than eight years after the substantial completion of the improvement to real property.”  The court found that by contrast A.R.S. § 29-338(B) does not provide such “extinguishing language.”  The statute reads like one that is a statute of limitations.

This same reasoning should have application to unlawful distributions under the Arizona LLC Act, section 29-706.