Andrew Haut v. Green Cafe Management, Inc. and Alabama Green, LLC
2012 Tex. App. LEXIS 4613
| Tex. App. | 2012Background
- Haut owned 10% of Green Café Management, Inc. (GCM) and 5% of Alabama Green, LLC; he was not an officer, director, or manager.
- Haut drafted key documents for GCM and Alabama Green, including a shareholders agreement and an operating agreement, while a law student with no license.
- The group considered a lawyer (Coleman) but ultimately Haut performed work in exchange for equity, increasing his ownership from 3% to 10% in GCM and 5% in Alabama Green.
- Haut advised on structure, franchising, and other business matters, asserting financial and legal research as justification for his role.
- After concerns over management, Haut proposed replacing managers and later ceased involvement; he asserted the restaurant later improved under others.
- Trial evidence led a jury to find Haut breached fiduciary duties; the court ordered equitable forfeiture of Haut’s stock and membership interests.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Standing to sue for fiduciary breach | GCM/Alabama Green allege harms to the corporations themselves | Claims arise from internal shareholder/membership disputes | Affirmed: corporations may assert claims for harms to the entities themselves |
| Existence of a fiduciary duty | Haut owed formal or informal fiduciary duty | No such duty as minority holder and no preexisting trust relationship | Affirmed: record supports existence of fiduciary duty under the circumstances |
| Sufficiency of evidence | Evidence supports breach of duty | Evidence insufficient to prove breach | Affirmed: substantial evidence supported breach finding (with partial record presumption)},{ |
| Remedy of equitable forfeiture | Equitable forfeiture warranted due to clear and serious breach | Forfeiture unjustified; consideration of payment amounts | Affirmed: Burrow standard applied; equitable forfeiture warranted on record |
Key Cases Cited
- Wingate v. Hajdik, 795 S.W.2d 717 (Tex.1990) (standing and injury rules for corporate claims)
- Redmon v. Griffith, 202 S.W.3d 225 (Tex.App.-Tyler 2006) (corporate claims belong to the corporation)
- Corona v. Pilgrim’s Pride Corp., 245 S.W.3d 75 (Tex.App.-Texarkana 2008) (counterclaims for harm to corporation)
- Burrow v. Arce, 997 S.W.2d 229 (Tex.1999) (fiduciary may forfeit compensation for breach)
- ERI Consulting Eng’rs, Inc. v. Swinnea, 318 S.W.3d 867 (Tex.2010) (extension of Burrow to non-attorney fiduciaries)
- Burrow, 997 S.W.2d 229 (Tex.1999) ( Burrow establishes standard for equitable forfeit of benefits)
- Schlumberger Tech. Corp. v. Swanson, 959 S.W.2d 171 (Tex.1997) (informal fiduciary duty requires preexisting trust)
- Meyer v. Cathey, 167 S.W.3d 327 (Tex.2005) (define formal vs informal fiduciary duties)
- Osterberg v. Peca, 12 S.W.3d 31 (Tex.2000) (review of unobjected jury instructions)
- Wingate v. Hajdik, 795 S.W.2d 717 (Tex.1990) (standing and injury rules for corporate claims)