# In re Morningstar Oil & Gas, LLC Supreme Court of Texas, No. 25-0557 **In re Morningstar Oil & Gas, LLC, No. 25-0557, is before the Supreme Court of Texas. Key issue: What must a plaintiff plead to show demand futility in a derivative suit for a Delaware limited partnership: futility as to the general partner as an entity, or director-by-director as to the board of the general partner's delegate?** Practice areas: business organizations ## Key issues - What must a plaintiff plead to show demand futility in a derivative suit for a Delaware limited partnership: futility as to the general partner as an entity, or director-by-director as to the board of the general partner's delegate? - Did Delaware's amendment to 6 Del. C. § 17-403(c) abrogate the entity-based approach, and did the trial court abuse its discretion by overruling the special exceptions to the demand-futility allegations? ## Factual History Bob Simpson founded and chairs TXO Partners, L.P., a Delaware limited partnership formerly called MorningStar Partners, and Vaughn Vennerberg served as its president and as an officer and director until his 2022 termination before TXO's IPO (Brief on the Merits (Real Parties in Interest), PDF p. 20; Brief on the Merits (Relator), PDF p. 23). After the IPO, TXO is governed by its general partner, TXO Partners GP (TXOGP), whose sole member, MorningStar Oil & Gas (MSOG), is 40% owned by Simpson and 20% by his friend Clum, and TXOGP had a seven-member board when Vennerberg sued (Brief on the Merits (Real Parties in Interest), PDF p. 25). Vennerberg's derivative claims allege that Simpson usurped the "Jo Mill Deal" from the partnership for his children's trusts and caused TXO to grant three million employee units to Clum for help with Simpson's divorce (Brief on the Merits (Real Parties in Interest), PDF p. 26). ## Procedural History TXO, MSOG and TXOGP sued for a declaration that Vennerberg is owed no compensation, and he counterclaimed, including derivative claims for TXO, without making a pre-suit demand (Brief on the Merits (Relator), PDF pp. 14-15). The trial court sustained the TXO parties' special exception on February 10, 2025, finding demand futility not adequately pleaded but allowing repleading, and on April 30, 2025, after Vennerberg filed his Fourth Amended Counterclaims, the 352nd District Court of Tarrant County (Judge Burgess) overruled the special exception (Brief on the Merits (Relator), PDF pp. 14, 30-31). The Second Court of Appeals (Fort Worth) denied mandamus in a two-sentence memorandum opinion on June 17, 2025 (Brief on the Merits (Relator), PDF pp. 14-15). The Supreme Court set the case for oral argument. ## Issues Presented - The TXO parties (Brief on the Merits (Relator), PDF p. 18): whether the trial court abused its discretion by denying their special exception and letting the derivative suit proceed, where Vennerberg made no pre-suit demand and bore the burden to show by particularized pleadings that demand on the board would be futile, and his director-by-director pleadings are insufficient under Delaware law. - Vennerberg (Brief on the Merits (Real Parties in Interest), PDF p. 16): whether the trial court abused its discretion where, under Delaware law, he had to plead facts raising a reasonable doubt that demand on the general partner as an entity would be futile, and he pleaded that TXOGP could not impartially consider a demand to sue its own chairman and sole member. ## Standard(s) of Review A Texas trial court has broad discretion in ruling on special exceptions, and if it correctly applies Delaware law, which governs the pleading standard for derivative claims, it does not abuse its discretion (Brief on the Merits (Real Parties in Interest), PDF p. 29). ## Legal Arguments **What Delaware law requires to plead demand futility.** **The TXO parties (Relators):** Delaware requires a partner to make pre-suit demand on the entity's governing body, and demand futility is a substantive requirement of particularized allegations on a director-by-director basis (Brief on the Merits (Relator), PDF p. 31). The Delaware Legislature unambiguously abrogated the "entity approach": before the amendment the analysis looked at the general partner as an entity, and after it the analysis focuses on the delegate, here the directors (Reply Brief (Relator), PDF p. 2). Vennerberg's allegations about each of four directors do not overcome the presumption of independence, and a controller's interest does not dilute a claimant's burden (Brief on the Merits (Relator), PDF pp. 6-7). **Vennerberg (Real Party in Interest):** Delaware law requires a derivative plaintiff for a limited partnership to plead futility as to the general partner as an entity, not its board, under 6 Del. C. § 17-1003, and the Relators do not dispute that he did so (Brief on the Merits (Real Parties in Interest), PDF pp. 27, 29). Alternatively, a majority of the TXOGP board has significant personal and financial ties to Simpson that prevent impartial consideration of a demand (Brief on the Merits (Real Parties in Interest), PDF p. 25). **The remedy.** **The TXO parties (Relators):** The Court should issue mandamus directing the trial court to grant the special exception and dismiss the derivative claims (Brief on the Merits (Relator), PDF p. 59). **Vennerberg (Real Party in Interest):** If the Court grants relief, it should reject dismissal and remand so he can replead demand-futility allegations (Brief on the Merits (Real Parties in Interest), PDF p. 76). ## Stated Reasons the Court Should Take the Case The TXO parties said the case concerns the prerequisites to a derivative claim under Delaware law, a recurring issue for Delaware-formed entities litigating in Texas courts (Brief on the Merits (Relator), PDF p. 14). Vennerberg argued the issue starts and ends with a clear Delaware rule that futility is pleaded as to the general partner, so mandamus is not warranted (Brief on the Merits (Real Parties in Interest), PDF p. 27). ## Practice Area Tags business-organizations ## Procedural Posture/Vehicle Original proceeding (petition for writ of mandamus) after the Second Court of Appeals (Fort Worth) denied relief. Oral argument: December 1, 2026. ## Amicus Involvement - An amicus curiae brief was filed, with a response; they are not summarized here. --- Source: The SCOTX Report, https://scotxreport.com/cases/25-0557. AI-generated summary of the Court's opinion, orders and the parties' briefs, with pin cites to the page of each document; verify against the Court's own documents at search.txcourts.gov.