By the Interested Director Provision in the Texas Business Organizations Code
By LaCrecia Perkins and Ladd Hirsch

“The only way to get rid of temptation is to yield to it.” -Oscar Wilde

“I generally avoid temptation unless I can’t resist it.”  -Mae West

“That which is hateful to you, do not do unto your neighbor.”  -Hillel the Elder

Temptation is powerful.  We all know this well, which is why these quotes by author and bon vivant Oscar Wilde, and actress and legendary sex symbol Mae West evoke nods of agreement.  But giving into temptation can result in significant harm to ourselves and others.  That is why more than 2000 years ago, the revered Jewish religious leader and biblical sage, Rabbi Hillel, implored his followers to treat others as they would want to be treated.

In the modern business world, temptation wins out when managers and majority members of Texas limited liability companies (“LLCs”) exploit their controlling power for their own benefit to the detriment of the company’s minority investors.  These self-serving actions by governing persons may result in breach of fiduciary duty claims being filed against them, causing these governing managers or members to turn to the Texas Business Organizations Code (“TBOC” or the “Code”) in search of a legal defense.  The TBOC does not provide governing persons with a “get out of jail free card,” but the Code does contain an “Interested Director” provision that may be helpful to LLC majority owners and managers who have to defend against breach of fiduciary duty claims.  See TBOC § 101.255.  This post evaluates the scope and the limits of the TBOC’s Interested Director provision.
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Hospitality – the friendly and generous reception and entertainment of guests, visitors, or strangers in which the host receives the guests with goodwill.

It is a common complaint that companies now provide a disappointing level of customer service.  But merely providing good service is not enough for a business to be assured of success. In a superb article on the Skift[1] hospitality website, 6 Basic Lessons in Hospitality From Danny Meyer, Deanna Ting summarizes a discussion held with Mr. Meyer at New York University in which he encourages businesses to go beyond service to providing customers with remarkable hospitality.  Mr. Meyer is a renowned restauranteur and the force behind acclaimed New York based restaurants such as Shake Shack, The Modern, Gramercy Tavern, and Union Square Café.

Ms. Ting’s article reviews six lessons from Mr. Meyer on hospitality, which have broad importance for entrepreneurs.  This post considers lessons for business owners from all types of industries from the discussion with Mr. Meyer at NYU and from his New York Times best-selling book, Setting the Table: The Transforming Power of Hospitality in Business.  Mr. Meyer explains it this way:
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Recognized by Texas Bar Today’s Top 10 Blog Posts

By Sean Brown and Ladd Hirsch

The majority owners of private Texas limited liability companies (LLC’s) enjoy a mixed blessing when they also manage their companies.  Majority owners have the power to direct their private companies as they deem fit, but when they disregard the interests of minority owners, they may breach their fiduciary duties to the company.  The members of member-managed LLCs and the managers of manager-managed LLCs owe their companies the fiduciary duties of care, loyalty and obedience under Texas law, which does not permit them to disclaim their fiduciary duty of loyalty.  This post discusses significant legal and business issues faced by managers of Texas LLCs in guiding their companies to success while striving to maintain good relations with their minority owners.

Three significant legal and business challenges that LLC managing owners confront are: (i) the degree of control and extent to which minority owners are permitted to block major company decisions, (ii) whether majority owners have total discretion over profits distributions or whether a minimum requirement exists that requires profits distributions and (iii) the level of financial reporting requirements and related issues of transparency.  In regard to these challenges, majority owners who do not unfairly exploit their control over the business, issue profits distributions when appropriate and engage in open communications are more likely to foster harmonious relations with all company owners through both good times and bad.
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In her thoughtful column in the January edition of the Texas Bar Journal titled, “Do You Suffer From Impostor Syndrome,” lawyer coach Martha McIntire Newman, focuses on a topic that has too long flown under the radar.  Ms. Newman describes this condition as “a state of chronic self-doubt that causes lawyers to fear they will be exposed as incompetent even though the evidence of their success is obvious to their colleagues and clients.”  TBJ, Jan. 2019, p. 56. TopLawyerCoach.com   This anxiety causes even “successful lawyers to second-guess themselves no matter how well they perform.”

The Impostor Syndrome discussed in Ms. Newman’s column is not limited to the legal field.  We have encountered many business owners, executives and entrepreneurs who have struggled, at times, with crippling self-doubt.  Ms. Newman quotes former Starbucks CEO Howard Schultz: “Very few people, whether you’ve been in that [CEO] job before or not, get into the seat and believe today that they are now qualified to be the CEO.  They’re not going to tell you that, but it’s true.”  For business leaders who face doubts resulting from the Impostor Syndrome, this post offers three suggestions to consider in addition to the sage advice provided by Ms. Newman.
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Most private company investors are not tax experts, but developing a working knowledge of the potential for the business to generate phantom income is critical to avoiding unwelcome, tax consequences. What is phantom income exactly, and why does it matter?  This Blog post focuses on answering that question to avoid ghoulish tax surprises appearing after Halloween.
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Since 2014, Energy Transfer Partners LP (“ETP”) has been fighting to hold on to the $535 million judgment it obtained that year against Enterprise Products Partners (“Enterprise”).  Our blog post earlier this year analyzed ETP’s efforts to persuade the Dallas Court of Appeals that ETP and Enterprise, two sophisticated companies in the energy industry, had entered into an unwritten partnership agreement, or as Enterprise referred to it on appeal—a partnership by ambush in disregard of the parties’ written agreements.  
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Based on our personal experience handling Business Divorce matters for both majority owners and substantial minority investors in private companies, we have learned firsthand that there are two sides to every story and every Business Divorce matter is unique.  But, we continue to be surprised by instances of outlandish behavior and self-serving conduct by majority owners that are reported to us by minority partners in the business. 
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The season finale of the hit reality TV show The Bachelor attracted more than 8 million viewers. My wife and teenage daughters help make up this devoted fan base, and watch every episode. Yet, when I question them about whether the subject of a pre-nup agreement has ever come up on the show, I get eye rolls, and comments like, “Dad, don’t be such a downer.”  Assuming that the Bachelor and his new fiancé do make it to the altar, however, the show also does not mention that marriages in the US still have just a 50% chance of lasting despite the continuing decline in the national divorce rate.
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The legal tension is building.  Private Texas companies and their owners are awaiting a court decision that may force them to say “Howdy, Partner” to companies with whom they have no written partnership agreement. The case on which business eyes are focused is ETP v. Enterprise Products Partners, which is before the Dallas Court of Appeals after a jury awarded $535 million in early 2014.  The case has been described as a corporate form of common law marriage to a company that the jury determined was jilted in favor of another. This is the hottest partnership case the Lone Star State has seen in years.
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Picking the devil you know in selecting a business partner may seem like a good strategy.  But the list of celebrities who have suffered financially in their dealings with business partners is striking with losses totaling millions of dollars in some cases.  Uma Thurman lost $1 million. Sting lost $9.8 million. Billy Joel lost $90 million.  And celebrities are not the only ones who have suffered negative results because they, like so many people, picked poor business partners.  Fortunately, there are steps that anyone entering into a long-term relationship with a business partner can take to avoid the financial consequences of a disastrous partnership.
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