Conversion Claims Cannot Reach Uncertificated LLC Membership Interests Under Texas Law
Read the Court's Opinion (PDF)
Judge Sofia Adrogué
In Carrington v. Corsi, the Business Court of Texas granted Rule 91a dismissal of plaintiffs' conversion claim arising from an allegedly wrongful transfer and dilution of their LLC membership interests, holding that Texas conversion law does not recognize uncertificated LLC interests as property subject to conversion. The decision applies the First Court of Appeals' reasoning in Bell v. Bay Area RV Parks and rejects plaintiffs' arguments where no physical certificates were alleged to have been issued or converted.
Court Staff Summary
Read the full opinion The plaintiffs' conversion claim is dismissed because it has no basis in law. Texas conversion law does not recognize the alleged transfer or dilution of uncertificated LLC membership interests as conversion of property. Generally, conversion lies only for tangible personal property. An intangible right falls within the narrow "merger exception" only when that right has been merged into a physical document and the document itself is converted.
Background
Duncan C. Carrington and Zachary Hiller brought suit against Aaron Corsi, Ryan Soroka, Sean M. Rosenbaum, Benjamin Meggs, BCHC Merge, LLC, Bayou City Hemp Company, Inc., and BC Infinity, Inc. The plaintiffs alleged, among other claims, that defendants converted their LLC membership interests.
Rule 91a Motions to Dismiss
Multiple defendants filed Rule 91a motions to dismiss under Texas Rule of Civil Procedure 91a, which authorizes dismissal of a cause of action that has no basis in law or fact. A cause of action has no basis in law when, taking the allegations as true and drawing reasonable inferences from them, the allegations do not entitle the claimant to the relief sought. In deciding a Rule 91a motion, the court considers only the challenged pleading and pleading exhibits permitted by Rule 59.
The Court's Ruling on Conversion
The Business Court of Texas granted the motions in part and denied them in part. Specifically, the court granted dismissal of plaintiffs' conversion claim, finding it had no basis in law. The court held that Texas conversion law does not recognize the alleged transfer or dilution of uncertificated LLC membership interests as conversion of property.
The court relied on Bell v. Bay Area RV Parks, L.L.C., 722 S.W.3d 176, 211-16 (Tex. App.—Houston [1st Dist.] 2025, no pet.), in reaching its conclusion. The Motions were granted as to the conversion claim, while all other relief requested in the Motions was denied.
Significance
The decision represents an application of the First Court of Appeals' reasoning in Bell to membership interests in limited liability companies. By granting Rule 91a dismissal, the court determined that plaintiffs failed to state a legally cognizable conversion claim based on the alleged transfer or dilution of their uncertificated LLC interests. The ruling leaves intact plaintiffs' other claims against the defendants.