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Crain v. Northern
Analysis
Legal Malpractice Claims Fall Outside Business Court Jurisdiction, Even When Fractured Into Alternative Theories
In Crain v. Northern, the Business Court's Eighth Division dismissed all claims against attorney-defendant Tyler Goldthwaite without prejudice, holding that legal malpractice and fractured malpractice-based claims arising from an alleged attorney-client relationship lack subject-matter jurisdiction. The Court applied Texas's anti-fracturing rule to bar claims styled as breach of fiduciary duty, fraud, negligent misrepresentation, and misappropriation when the crux of each claim was inadequate legal representation.
Texas Shootout Provisions Are Enforceable: Court Orders Specific Performance of Buy-Sell Option Despite Breach Claims
In Crain v. Northern, Division 8 of the Business Court of Texas granted summary judgment enforcing a mandatory buy-sell option clause in LLC company agreements, ordering the offeree to transfer his 50% membership interests to the offeror despite claims of prior breaches and unclean hands. The court rejected arguments that alleged fiduciary duty violations or valuation disputes created fact issues precluding specific performance of the "Texas Shootout" provision.
Derivative Standing Requires Contemporaneous Membership: Business Court Dismisses Claims After Buy-Sell Enforcement
In Crain v. Northern, the Business Court's Eighth Division granted a plea to the jurisdiction dismissing all derivative claims brought on behalf of three LLCs, holding that plaintiff Michael Crain lacked standing under Texas Business Organizations Code Section 101.463 because he was no longer a member when he filed suit following a court-ordered buy-sell transaction with an effective assignment date of December 19, 2024. The March 11 memorandum opinion reinforces the bright-line rule that derivative standing requires membership status at the time of filing, not merely at the time the underlying claims accrued.