In Skeels v. Suder, a departing shareholder of a law firm sued regarding the firm’s decision to redeem his shares for no consideration. No. 21-1014, 2023 Tex. LEXIS 578 (Tex. June 23, 2023). Partners of a law firm entered into a shareholder agreement that allowed certain individuals to take action. The resolution stated:

Notwithstanding

In Eho360 LLC v. Opalich, an employer sued its former employee for breaching fiduciary duties and other related claims regarding the former employee setting up a competing business. No. 3:21-CV-0724-B, 2023 U.S. Dist. LEXIS 45076 (N.D. Tex. March 17, 2023). The employee filed a motion for summary judgment, which the district court denied. The

In Dunn v. Chappelle (In re Alta Mesa Res., Inc.), a bankruptcy trustee sued the officers and directors of a limited partnership and related entities for operating a drilling program despite having lower than expected results. No. 19-35133, 2022 Bankr. LEXIS 2928 (U.S. Bankr. Ct. October 13, 2022). The defendants filed a motion to dismiss. The court granted it in part and denied it in part. The court first analyzed the partnership agreement and held that officers of the partnership’s parent corporation did not owe fiduciary duties to the partnership:Continue Reading Federal Court Dismissed Some But Not All Claims Against Individuals And Entities Arising Out Of Operation Of A Limited Partnership

In In re Mijares, a plaintiff claimed that a defendant defrauded him and breached fiduciary duties owed to him by charging improper, excessive, and unauthorized expenses to their medical practice, causing the plaintiff’s distributions from the practice to be reduced during the roughly six years that they practiced medicine together. Case No. 19-33121-hdh7, Adv. Proc. No. 19-03243,2022 Bankr. LEXIS 1542 (N.D. Tex. Bankr. June 1, 2022). The plaintiff sought a declaration that his claims for fraud and breach of fiduciary duty were not dischargeable pursuant to sections 523(a)(2)(A) and (a)(4) of the Bankruptcy Code. The court found that the plaintiff held a valid claim against the defendant for fraud and that such claim was not dischargeable.
Continue Reading Court Held That Those In Control Of A Limited Liability Company May Owe Fiduciary Duties To The Company And Its Members

In Power v. Power, one brother sued the other brother for breach of fiduciary duty related to their partnership in real estate investing. No. 05-19-01557-CV, 2022 Tex. App. LEXIS 2926 (Tex. App.—Dallas May 3, 2022, no pet. history). The trial court found for the plaintiff, and the defendant appealed.
Continue Reading Partner Had Capacity To Sue Other Partner For Breach Of Fiduciary Duty

In In re Estate of Poe, shortly before his death, Dick, who was the sole director of Poe Management, Inc. (PMI), authorized the corporation to issue new shares that he bought for $3.2 million. No. 20-0178, 2022 Tex. LEXIS 544 (Tex. June 17, 2022). This made Dick the majority owner of PMI, which was the general partner of several Poe-owned businesses. As a result of the purchase, Dick’s death vested control of the family enterprise in the two co-executors of Dick’s estate rather than Dick’s son, Richard, who was PMI’s only other shareholder.
Continue Reading Texas Supreme Court Holds That A Director Of A Corporation Cannot Hold An Informal Fiduciary Duty To A Stockowner

A common complaint of a minority shareholder is the denial of access to the corporation’s books and records. A shareholder enjoys the right to examine and copy certain records of the corporation in which the shareholder owns shares. That right exists by statute, see Tex. Bus. Orgs. Code § 21.218(b), and at common law, see Texas Infra—Red Radiant Co. v. Erwin, 397 S.W.2d 491, 493 (Tex. App.—Eastland 1965, writ ref’d n.r.e.). Section 21.218 provides:

On written demand stating a proper purpose, a holder of shares of a corporation for at least six months immediately preceding the holder’s demand, or a holder of at least five percent of all of the outstanding shares of a corporation, is entitled to examine and copy, at a reasonable time, the corporation’s books, records of account, minutes, and share transfer records relating to the stated purpose. The examination may be conducted in person or through an agent, accountant, or attorney.

Continue Reading Appellate Court Grants Mandamus Relief To Require A Jury Trial On The Issue Of Whether The Inspection Of Books And Records Of A Company Was Sought For A Proper Purpose

David F. Johnson presented “Trust Issues In Divorce Proceedings” on November 17, 2021. This presentation covered trust issues that arise in divorce disputes, such as spouses creating an irrevocable trust, fraud claims to void a trust, conflict of interest issues raised by the same attorney drafting both spouse’s estate/trust documents, characterization of trust assets and

In Hotze v. In Mgmt., LLC, family members sued each other over control of a family business. No. 14-18-00995-CV, 2021 Tex. App. LEXIS 5821 (Tex. App.—Houston [14th Dist.] July 22, 2021, no pet. history). Three of the brothers ended up with greatly increased control of the company after debt the company owed to a partnership formed by the three brothers was partially converted into company stock. Id. Two other brothers and other associated parties filed two lawsuits, bringing both individual and derivative claims, which were consolidated for trial. “A key issue in the case was whether the promissory note between Troika and CECO authorized a partial conversion of debt for stock.” Id. The trial court concluded that it did, and instructed the jury to that effect. The two brothers appealed.
Continue Reading Court Holds That Promissory Note Did Not Allow Partial Conversion To Equity

In Novedea Sys. v. Colaberry, Inc., co-founders of a business discussed terms of a buy-out, but ended up in litigation. No. 6:20-cv-00180-JDK, 2021 U.S. Dist. LEXIS 152372 (E. D. Tex. August 13, 2021). One co-founder sued on his behalf and on behalf of the company against the other co-founder without discussing the suit with the other co-founder or the board of directors. The defendant filed a motion for summary judgment, arguing that the plaintiff did not have authority to file a lawsuit for the company. The plaintiff responded that his “authority derives from his standing “as a longtime manager and corporate officer” of Novedea, or alternatively, as a shareholder bringing a derivative action.” Id.
Continue Reading Court Holds That Shareholder Derivative Suit May Proceed Against An Officer Without A Pre-Suit Demand Where The Case Involved A Closely-Held Corporation