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How to Kill a Perfectly Good Lawsuit with a Motion to Show Authority in Texas.

Eric Fryar
 
 
You and your business partner are fighting. He hires a lawyer and has the company sue you. What's wrong with this picture? Why is our company suing me instead of him? How did he hire a company lawyer without my agreement? How can he use my company (and my money) against me? This happens every day. And, yes, its not right. Your partner didn't have authority to hire the lawyer. The lawyer didn't have authority to sue to. But you can send the lawyer packing and get the suit dismissed using this little known rule.
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Topics: Corporate Lawyers

5 Dangers of Starting a Business with Family Members

Eric Fryar
 
Most people launching a new business will help from family. New businesses borrow start-up capital from Dad. Sis would be a great partner. Let's do this. It's the American dream.  
Makes perfect sense, right? Your family is already inclined to help you. You trust them. They trust you. If your business is successful (and you know it will be), then you are doing them a favor. Who would you rather share the good fortune with than your own family? Generally, starting a business with family members is a bad idea.
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Topics: Closely-Held Businesses

The Real Constitutional Crisis of the Travel Ban

Eric Fryar

How should the courts deal with the travel ban? Pro-Trump or anti-Trump, the legal questions are real and deserve careful thought.

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Topics: Off Topic

What Is Shareholder Oppression in Texas?

Eric Fryar

“[P]eople enter closely-held businesses in the same manner as they enter marriage: optimistically and ill-prepared.” Sooner or later, there is trouble in paradise. Resentments, jealousies, and disagreements always surface. In a corporation, someone always has control. Someone always winds up with the short end of the stick. What is minority shareholder oppression in Texas closely-held corporations? How do we fight it?

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Topics: Shareholder Oppression

New article on Michigan Shareholder Oppression

Eric Fryar

Michigan has a robust statutory remedy for shareholder oppression.

GGerald Mantese, Douglas Toering, and Fatima Mansour have just publised a fascinating new article in the January 2017 issue of the Michigan Bar Journal analyzing recent Michigan appellate decisions applying and fleshing out that remedy.

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Topics: Shareholder Oppression

Fraud Damages: Wrong Date = No Evidence

Eric Fryar

The Danger of Guessing Wrong on the Valuation Date for Fraud Damages

The First Court of Appeals (Houston) issued a new opinion yesterday highlighting the danger of getting the date wrong on your fraud measure of damages. The court held that proving up damages for the wrong date is the same thing as introducing no evidence of damages at all and reversed a $650,000 jury verdict and rendered a take nothing judgment. Plaintiffs need to be aware of this exceptionally harsh trap.

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Topics: Damages, Fraud

Joint and Several Liability for Breach of Fiduciary Duty

Eric Fryar

When may a defendant be held jointly and severally liable for the tortious conduct of another? Civil Conspiracy, Aiding and Abetting, Knowing Participation

The classic statement was given by Professors Prosser and Keeton as follows:

All those who, in pursuance of a common plan or design to commit a tortious act, actively take part in it, or further it by cooperation or request, or who lend aid or encouragement to the wrongdoer, or ratify and adopt the wrongdoer's acts done for their benefit, are equally liable.

W. Page Keeton, et al., Prosser and Keeton on the Law of Torts § 46, at 323 (5th ed. 1984) (quoted in Juhl v. Airington, 936 S.W.2d 640, 643 (Tex. 1996)).

Texas law provides three distinct bases for imposing on one person joint and several liability for the tortious conduct of another: contract, causation, and participatory conduct. Each of these bases involves different legal concepts, different public policies, and different elements and applicability. Unfortunately, Texas appellate courts often confuse the different theories, intermingle the elements, and use the incorrect terminology. The recent Houston [1st Dist.] court of appeals decision, Wooters v. Unitech Int'l, Inc., 01-15-00174-CV, 2017 WL 372165 (Tex. App.—Houston [1st Dist.] Jan. 26, 2017), is an apt example of the failure to distinguish these distinct bases of these different theories of liability. 

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Topics: Fiduciary Duties, Joint and Several Liability

Fryar Law Firm Appellate Victory: Texas Partnership Fiduciary Duty

Eric Fryar

14th Court of Appeals Affirms Victory for Texas Limited Partner Fiduciary Duty Claims

The 14th Court of Appeals (Houston, Texas) today affirmed Fryar Law Firm's $1.7 million judgment in favor of a Texas limited partner for breach of fiduciary duties. The judgment included more than $1 million in punitive damages.

Bruce v. Cauthen, No. 14-15-00693-CV (Tex. App.--Houston [14th Dist.] February 2, 2017). 

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Topics: Fiduciary Duties, Attorney's Fees, Limited Partnerships

Texas Shareholder Oppression in the Legislature

Eric Fryar

Will the Texas Legislature Restore the Shareholder Oppression Claim?

The Texas Supreme Court's Ritchie v. Rupe decision overturned the Texas shareholder oppression doctrine. The implications for Texas law are significant. One commentator has written: "The problem is not simply that Ritchie is bad law. Ritchie is also bad policy—indeed, it may have disastrous economic effects. Although the full impact of the opinion has yet to be seen, this Essay contends that Ritchie is likely to disincentivize investment in close corporations, ramp up the frequency of shareholder oppression, and imperil the financial health of many small businesses."

Politically conservative justices on the Texas Supreme Court and lower appellate courts tend to think in terms of plaintiff vs. defendant--with the politically conservative preference being a pro-defendant, anti-plaintiff outcome. However, that narrow mindset does not always advance justice or a true conservative agenda. Refusing to protect the investments of small business owners is not really pro-business. Therefore, policy thinkers on both the left and the right of the political spectrum have been troubled by the elimination of judicial protection of small business investors, and efforts have been made in the Texas legislature to address the havoc caused by the Ritchie decision.

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Topics: Shareholder Oppression

Forming a General Partnership in Texas

Eric Fryar

When Is a General Partnership Formed Under Texas Law?

There is much confusion over the law governing the formation of general partnerships in Texas. The Texas Revised Uniform Partnership Act, which was codified in the current Texas Business Organizations Code, attempted to provide a fresh, simple, and ultimately practical approach. However, Texas courts continue to mess up the analysis by reading the statute through the lense of the old common law. A recent Fifth Circuit opinion, Derrick Petroleum Services v. PLS, Incorporated,  659 Fed.Appx. 748 (5th Cir. 2016), is a case in point. If the opinion accurately describes the record, then the conclusion reached that no partnership was created seems profoundly wrong.

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Topics: General Partnership
Fryar Law Firm Knows Shareholder Oppression-Knowledge Makes the Difference

About this blog

The Shareholder Oppression Blog provides timely updates and commentary on the development of Texas Shareholder Oppression law in the wake of the Texas Supreme Court's Ritchie v. Rupe decision, together with legal analysis of the rights, duties, and legal remedies in disputes among business owners in all types of closely-held businesses.

Visit Shareholder Oppression complete legal resource

Fryar Law Firm | Shareholder Oppression Attorneys

About the Author

Eric Fryar

Eric Fryar is a Houston, Texas business litigation attorney, whose practice focuses almost exclusively on shareholder oppression and similar disputes among business owners. Recognized as an authority in this area of the law, Eric Fryar has written, taught, and practiced the law the governing shareholder and business owner rights for more than a quarter century. He achieved the largest fraud verdict in the state of Texas for a group of minority shareholders in 2015--one of the largest verdicts in the country that year, and has recently published a law review article in the Texas Journal of Business Law on the future of shareholder oppression litigation in Texas.

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