Real Cases

It Had Everything

Our own Kirby Hopkins was recently named one of Houston's top Commercial Litigation Attorneys by Houstonia Magazine as voted by members of the Houston Bar - which makes the honor especially pleasing.

'Commercial Litigation’ is not always easy to quickly, concisely define. It’s at once specific (Commercial) and general (Litigation). Neither begins to get across what Kirby and we do as a firm.

Luckily, one of the cases that contributed to Kirby’s honor does all the explaining for us.

Kirby was local counsel in a business dispute that resulted in one of the biggest jury verdicts in Texas in 2021, $32 million.

It was a breach of contract action. A shareholder derivative claim. An employment law claim for non-payment of salary. A corporate claim for breach of fiduciary duty. There were [ample] elements of unethical business practices, fraud, bribery, battery, malice, gross negligence, and intentional self-enrichment.

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194 Hits

Fiduciary Duties, What Are They?

Texas law imposes certain fiduciary duties on a director, officer or manager that are owed to the company they serve. Knowing and understanding these fiduciary duties can help deter potential disputes or claims, which is why it’s important to discuss your options with an attorney. At HCWD, PLLC we are ready to assist you. Contact an attorney who can help.

A fiduciary relationship typically arises when a person or entity places confidence or trust in someone else. The duties that a director, officer or manager owe to a company are the duty of obedience, the duty of care and the duty of loyalty.

Duty of Obedience

The duty of obedience requires a director, officer or manager to refrain from committing an ultra vires act. An ultra vires act is one that goes beyond the scope of the company’s governance or permitted purpose. However, modern laws define corporate powers more expansively than before and allow for broad purpose clauses in the certificate of formation of an entity. This means that if the entity was formed for any legal purpose, the acts of a director, officer or manager are now vert broad. For these reasons, there are few cases where a claim for breach of this fiduciary duty has been upheld.

Duty of Care

The duty of care requires a directors, officer or manager be prudent and diligent in managing the entity’s matters. The standard is that a director, officer or manager must handle their duties with such care as an ordinarily prudent man would, under similar circumstances. Under Texas law, a director must exercise his unbiased or honest business judgment in pursuit of corporate interests. Which means that if a director, officer or manager acts in good faith, without corrupt motives, more than likely, will not be held liable for a breach of this duty. This principle is commonly known as the business judgment rule. The are some ways that a director, officer or manager could defeat this rule, but they would have to prove that the governing person engaged in self-dealing or bath faith practices.

Duty of Loyalty

The duty of loyalty requires that a director, officer or manager must act in good faith and must not allow the individual’s personal interest to prevail over the interests of the company. It is about acting with an extreme measure of candor, unselfishness, and good faith. For example, a director, officer or manager must abstain from self-dealing practices or usurpation of a corporate opportunity. Of course, these examples are not the only limitation that a director or officer would have, but they are the most common examples. It should also be noted that there is a way in which a director, officer or manager can participate in a interested-party transaction. The director, officer or manager must first approach the company and fully disclose a corporate opportunity, the company must then reject or decline the opportunity. The director, officer or manager should then obtain approval from disinterested directors or shareholders to be able to proceed with the opportunity without breaching the duty of loyalty. Otherwise, the director, officer or manager would have to show that transaction was fair to the company at the time of the transaction.

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1046 Hits

Forming the Right Type of Business Organization

What kind of company should I form?

Is an LLC better than a S-Corp?

The answers to these questions will affect your new business for most – if not all – of its life. By the way, if you pose either of those questions on Google you’ll get over 349 million results in just over half a second.

According to the internet, choosing the right way to organize your business is easy and its even easier to file the paperwork needed to formalize the company. Because it’s vital to get it right from the start, it’s anything but simple.

A successful business starts with its organization. The type of entity you choose will dictate how the company runs, is managed, how taxes are paid, how the owners are compensated, and much more.

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7718 Hits

Teach Your Business to Fish Podcast—July 1, 2020

Lee Winkelman joined business coach Michael Krager on his “Teach Your Business to Fish” podcast to discuss how lawyers can add value to small businesses.

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690 Hits

Between The Trees Business Talk - Lee Winkelman

Lee Winkelman joined J.J. Hollie, President of The Woodlands Area Chamber of Commerce, to discuss the new Families First Coronavirus Response Act and other employment law considerations for small businesses during COVID-19.

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1030 Hits

Terms of Use Enforceable?

Today, nearly all successful businesses have websites. As part of the process of building a website, most companies hire an attorney experienced in contracts and business law to draft "Terms of Use" that govern the relationship between the company and any users of its website. These Terms can be extremely important, and can govern everything about the conduct of the user on the website such as IP ownership clauses and licenses, as well as limitations on damages, forum selection clauses, mandatory arbitration, and class waivers in the event of a legal dispute or lawsuit between the parties.

How these contract provisions are presented has a significant impact on whether it is enforceable. There are two types of website licenses, browser licenses and click licenses. In a "browser license" a link to the Terms is typically displayed at the bottom of each webpage. A user is free to visit numerous pages on the website without ever having to visit the page with the Terms. While an attorney experienced in business law may have drafted Terms that are exactly what the business wanted, if they aren't enforceable your business may not be protected to the extent you think it is.

In a "click license" a user must affirmatively indicate that he or she agrees to the contract terms provided by clicking "I Agree" or something substantially similar on the website. While the contract language need not be all on the same page, it should be easily accessible via a prominent hyperlink near the affirmation button. Courts have been nearly universal in accepting such terms as creating a binding contract. Whether a user reads the Terms is largely irrelevant.

Clearly, if you want to have your Terms constitute a binding contract, you should contact attorneys experienced in business law and contracts. Contact the lawyers at Clausen & Centrich for more information.

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289 Hits