Board Approval Alone Suffices for Unit Transfers Under Company Agreement; Special Director Consent Not Required
Read the Court's Opinion (PDF)
Judge Brian Stagner
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.
Court Staff Summary
Granting summary judgment on a claim that a company agreement required only majority board approval to transfer membership units and did not also require the consent of two directors.
Background and Business Context
Energy Founders Fund, LP ("EFF") and defendants Phillip and Cris Curnutt Daskevich were equity holders in Gage Western LLC, governed by a Third Amended and Restated Limited Liability Company Agreement (the "Company Agreement"). The agreement vested management authority in a three-member Board of Directors consisting of a Class A Director (John Donovan, Jr., a Third-Party Defendant in the litigation) and a Class B Director (Phillip Daskevich). EFF initiated a transaction to sell its units, characterizing it as a "Controlling Sale" that would trigger drag-along rights requiring all other members to sell their units on the same terms—effectively transferring 100% of the Company's equity.
The Contractual Dispute
The narrow but consequential question presented was whether the proposed transfer required only "Board Approval" (a simple majority of the Directors on the Board) under Section 9.2, or whether it also required "Special Director Approval" (consent of both the Class A and Class B Directors) under Section 7.2(c)(ii). The board voted on the proposed transfer with a majority in favor, but Daskevich voted against, asserting that Special Director Approval was required. Four motions for partial summary judgment followed, all turning on this single issue of contract interpretation: EFF and Donovan advanced one reading of the Company Agreement, while the Daskeviches urged the opposite view.
The Court's Analysis
The court applied established Texas contract interpretation principles, emphasizing that the objective is to ascertain and give effect to the parties' intent as expressed in the agreement itself. The analysis focused on the contract's plain language. Section 9.2 provides that no member shall transfer units "without prior Board Approval," and the agreement defined Board Approval as a simple majority vote. The court found this language straightforward:
Section 9.2 requires Board Approval and nothing more.
Finding no ambiguity requiring consideration of extraneous evidence, the court granted summary judgment for EFF and Donovan and denied the Daskeviches' cross-motions.
Significance for Texas Commercial Practice
This decision provides important guidance on interpreting governance provisions in LLC operating agreements, particularly regarding the interplay between general transfer restrictions and special approval requirements. The court's emphasis on plain language and defined terms reinforces that parties to sophisticated commercial agreements will be held to the express terms they negotiate. When an LLC agreement specifies different approval mechanisms for different actions—simple majority board approval versus unanimous director consent—courts will not read additional requirements into provisions that clearly specify only one type of approval. The ruling underscores the importance of precise drafting in operating agreements, especially where minority members seek veto rights over fundamental transactions.