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Governance & Fiduciary Duties
Internal affairs, officer and director duties, derivative claims, and control disputes in Texas entities
Certificate of Formation Controls Over Conflicting Bylaws in Nonprofit Governance Dispute
Joel Reese | Jul 28, 2026
In Sri Shirdi Sai Baba Temple of Austin v. Lam, Division 3 granted summary judgment for defendants, holding that a nonprofit corporation's certificate of formation stating it "will have no members" and vesting management in the board controls over 2025 bylaws purporting to convert the entity to a member-managed corporation. The court rejected any jurisdictional bar from the church-autonomy doctrine, finding the dispute presented a non-ecclesiastical issue of corporate governance decidable by neutral application of Texas corporate law.
Drag-Along Rights and Modified Fiduciary Duties Survive Summary Judgment Challenge in Private Equity Partnership Dispute
Joel Reese | Jul 28, 2026
In Primexx Energy Opportunity Fund, LP v. Primexx Energy Corporation, 2025 Tex. Bus. 9, the Texas Business Court addressed whether a partnership agreement could contractually limit—to the greatest extent permitted by law—a partner's statutory duties of loyalty and care under the TBOC when exercising drag-along rights to force a sale. The court held that while these duties cannot be eliminated, Texas's freedom of contract principles permit partners to expressly limit them, and the case centered on the enforceability of those limits.
Derivative Standing Requires Contemporaneous Membership: Business Court Dismisses Claims After Buy-Sell Enforcement
Joel Reese | Jul 28, 2026
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.
Board Approval Alone Suffices for Unit Transfers Under Company Agreement; Special Director Consent Not Required
Joel Reese | Jul 28, 2026
In Energy Founders Fund v. Daskevich, Division 11 granted summary judgment holding that a company agreement's Section 9.2 required only majority board approval—not dual-director consent under Section 7.2(c)(ii)—to transfer membership units, including a 100% equity sale triggering drag-along rights. The court applied plain-language contract interpretation principles, finding no ambiguity in the LLC agreement's governance provisions.
Rule 166(g) Adjudication Requires Statutory Compliance for LLC Membership Claims
Joel Reese | Jul 28, 2026
In Quintero v. Urban Infraconstruction LLC, the Texas Business Court's First Division used Rule 166(g) to adjudicate legal issues before trial, applying a standard akin to summary judgment where reasonable minds cannot differ on the outcome. The court ordered partial judgment after examining the pleadings, briefing, summary judgment record, and taking judicial notice of the parties' previous testimony.
Church Autonomy Doctrine and Associational Standing Collide in Nonprofit Governance Dispute
Joel Reese | Jul 28, 2026
In Jeremiah Counsel Corp. v. Young, the Texas Business Court's Eleventh Division confronted whether an incorporated association of church members has standing to challenge amendments eliminating congregational voting rights, and whether the First Amendment's church autonomy doctrine bars judicial review of those governance changes. Judge Dorfman's opinion navigates the boundary between constitutional religious autonomy and statutory obligations under the Texas Business Organizations Code for a 94,000-member nonprofit church corporation.
Drag-Along Rights Turn on Present Control, Not Post-Closing Governance Arrangements
Joel Reese | Jul 28, 2026
In Energy Founders Fund v. Daskevich, the Texas Business Court held that a buyer was not an "Affiliate" under a company agreement's drag-along provision where the selling member possessed no equity, voting authority, or management power over the buyer before closing, notwithstanding negotiated post-closing governance rights. The court rejected the argument that contingent future control relationships can retroactively create affiliate status, emphasizing that the agreement's definition requires actual possession of present governance power.
Advancement Rights Governed by Agreement in Effect When Conduct Occurred, Not When Suit Filed—But Claims Must Arise 'By Reason Of' Director Service
Joel Reese | Jul 28, 2026
In Energy Founders Fund v. Daskevich, the Business Court denied a director's motion to compel advancement of legal fees, holding that while the company agreement in effect during the director's service governs advancement rights—not a later amendment eliminating those rights—the claims against him did not arise "by reason of" his director service as required by the agreement's advancement provision. The decision clarifies that advancement is a conduct-based contractual right distinct from indemnification, but its scope is limited to claims causally connected to the director's corporate role.
Membership Interests Cannot Be Severed from the Company Agreement That Creates Them
Joel Reese | Jul 28, 2026
In Camino Real Developers v. RivenRock, the Texas Business Court granted summary judgment on the question of whether a purchaser of a 50% LLC membership interest could acquire ownership while disclaiming the obligations imposed by the company agreement. The court held that a membership interest is inseparable from the contractual framework that defines it, concluding that the interest and the agreement are legally inseparable.
Joint Venture Claims Fail Without Allegations of Profit-and-Loss Sharing; No Fiduciary Duty Pass-Through from Corporate Manager to Individual Officers
Joel Reese | Jul 28, 2026
In Enosis Investments v. Jensen, the Business Court's Third Division granted early resolution under Rule 166(g), holding that plaintiffs failed to plead a joint venture because they did not allege an agreement to share both profits and losses, and that written company agreements disclaiming joint ventures and containing integration clauses independently defeated the claim. The court further held that while a manager of manager-managed LLCs may owe fiduciary duties to the LLCs, a corporate manager's fiduciary duty does not pass through to its individual officers and owners absent grounds for piercing the corporate veil.
Punitive Damages Waivers Enforceable in Bond Trustee Disputes; Terminated Trustees Retain Confidentiality Duties
Joel Reese | Jul 28, 2026
In Preston Hollow Capital v. Truist Bank, the Texas Business Court held that the Trust Code does not bar enforcement of contractual punitive damages waivers in bond financing arrangements and that such waivers extend to related contracts within the same financing structure. The court further ruled that a trustee who resigns and is replaced must continue to protect confidential information obtained during the trust relationship, limiting discovery on post-termination breach claims.
Motion for Reconsideration Denied: Business Court Reaffirms That Lawful Exercise of Drag-Along Rights Is Not Bad Faith
Joel Reese | Jul 28, 2026
In Primexx Energy Opportunity Fund, LP v. Primexx Energy Corp., the Business Court denied plaintiffs' motion to reconsider summary judgment, clarifying that its prior opinion did not permit bad faith conduct merely because defendants relied on contractual drag-along provisions. The court emphasized that its analysis focused on whether genuine issues of material fact existed regarding whether defendants failed to act in good faith when exercising their drag-along rights under the partnership agreement.