Background: Co-Manager Dispute in Oil and Gas LLC

Russell Hinds and David Wegner served as co-managers of Sandman Offshore, LLC, an oil and gas company with five members each holding 20% interests. Hinds alleged he was the day-to-day manager who devoted thousands of hours to Sandman and Wyotex Offshore, LLC, an assignee of one of Sandman's leases. In March 2026, Sandman's members removed Hinds as co-manager and expelled him as a member the following month—allegedly without notice or opportunity to be heard. Sandman countered that Hinds engaged in self-dealing by recommending that Wyotex hire his own drilling-services company, EnviroCore, Inc., without disclosing his ownership interest, and that he unilaterally prioritized Wyotex's payments to EnviroCore over lease payments owed to Sandman.

The Fiduciary Duty Framework Under Section 101.401

Judge Sharp's analysis turned on the scope of fiduciary duties permitted under Texas Business Organizations Code Section 101.401, which allows company agreements to "expand, restrict, or eliminate any duties, including fiduciary duties." The Sandman Agreement contained an exculpatory clause providing that managers owed no fiduciary duties "[e]xcept for such duties as may be expressly set forth in this Agreement," which included only the duty not to manage with "gross negligence, willful misconduct, or breach of this Agreement." The court distinguished cases imposing full fiduciary duties on LLC managers where agreements contain no limitation or expressly impose them, citing Davis v. Crawford and Strebel v. Wimberly.

The Court's Restrictive Reading of Contractual Duties

Following this Court's earlier decision in Tall v. Vanderhoef and the Texas Supreme Court's guidance in Pitts v. Rivas, Judge Sharp emphasized judicial restraint in imposing duties the parties contractually disclaimed. The court quoted Pitts for the proposition that imposing fiduciary duties despite contractual disclaimers would "give judges and juries—rather than the parties themselves—the authority to define the parameters of the parties' legal relationship." Applying the Rule 91a standard, the court held that Wegner owed no fiduciary duty merely as a member, as "members of limited-liability companies . . . do not owe formal fiduciary duties to fellow members simply because of their relationship as co-members," citing Bertucci v. Watkins. As manager, Wegner's duties were limited to those expressly preserved in Section 5.10.

"When parties in a longstanding, trusting relationship chose to stringently restrict the obligations owed between them by reducing them to writing, court declines to impose additional informal fiduciary duties to those made express by the agreement."

Additional Holdings on Conversion and Contract Claims

The court also dismissed Hinds's conversion claim, holding that "a LLC member's voting rights were not tangible personal property that could form basis for conversion claim." Regarding Hinds's contract claim based on his expulsion, the court found no viable pleading where the company agreement specified an expulsion procedure and permitted company action without notice. Finally, the court noted that Hinds nonsuited his tortious interference claim before the hearing, consistent with the principle that "a party has no viable claim for tortious interference of a business relationship against a party, not a stranger, to the relationship."

Significance for Texas Commercial Practice

Hinds provides critical guidance for drafting LLC agreements and evaluating fiduciary duty claims under Rule 91a. The decision confirms that carefully drafted exculpatory clauses will be enforced to eliminate common-law fiduciary duties, leaving only those expressly preserved in the agreement. For litigators, the opinion demonstrates that Rule 91a motions can succeed in dismissing fiduciary claims at the pleading stage when the company agreement—attached as a pleading exhibit under Rule 59—clearly limits managerial duties. The decision also clarifies that voting rights in LLCs are intangible and cannot support conversion claims, a holding that may affect how minority oppression claims are pleaded in Texas Business Court. Practitioners should note the court's emphasis on party autonomy in defining contractual relationships and its reluctance to impose duties beyond those the parties negotiated.