David A. Skeels v. Jonathan T. Suder, Michael T. Cooke, and Friedman, Suder & Cooke, P.C.

In the
Court of Appeals
Second Appellate District of Texas
at Fort Worth
___________________________
No. 02-18-00112-CV
___________________________

DAVID A. SKEELS, Appellant

V.

JONATHAN T. SUDER, MICHAEL T. COOKE, AND FRIEDMAN, SUDER &
COOKE, P.C., Appellees

On Appeal from the 236th District Court
Tarrant County, Texas
Trial Court No. 236-284262-16

Before Gabriel, Birdwell, and Womack, JJ.
Opinion by Justice Birdwell
 OPINION

I. Introduction

This appeal arising from an acrimonious dispute between an incorporated law

firm and a departing shareholder primarily concerns the applicability of one of the law

firm’s governing resolutions to the firm’s attempted redemption of the departing

shareholder’s shares in the absence of a specific document or agreement expressly

setting forth the redemption price of those shares. Also at issue is the validity of a

sanctions order against the departing shareholder for the content of his pleadings and

his conduct in the underlying litigation. Because we hold that the law firm’s attempted

redemption of the departing shareholder’s shares was not authorized by the Texas

Business Organizations Code (TBOC), we reverse the trial court’s judgment as to the

parties’ competing claims for declaratory relief and related attorney’s fees. Because

this reversal necessitates remand of the departing shareholder’s common law claims

and the trial court’s sanctions award, we also remand the remainder of the case to the

trial court.

II. Factual And Procedural Background

Walker C. Friedman, who is not a party in this case, incorporated Friedman &

Young, a Professional Corporation, in 1992 under the Texas Professional Corporation

Act. The corporation’s name changed several times along with its shareholders.

Eventually, Friedman and shareholders Jonathan T. Suder and Michael T. Cooke

changed the firm’s name to Friedman, Suder & Cooke, P.C. (FSC).

2
 In 2007, FSC hired appellant David A. Skeels as an associate attorney. He

became a shareholder in January 2011, and FSC purported to issue him 1,000 shares. 1

Skeels did not pay any consideration or make any capital contribution in exchange for

his shares; instead, he contends that he paid for that status in “sweat equity”: his prior

work for the firm that yielded positive trial outcomes and financial results.

FSC did not have a written agreement regarding shareholder compensation;

instead, the firm employed a unique compensation system for the shareholders who

worked on certain cases (the Team), mostly contingency-fee cases, with Suder and

Cooke. Revenue from the Team’s cases was shared equally among all shareholders on

the Team regardless of whether the shareholder had personally worked on a case. 2

FSC paid Skeels a fixed monthly draw amount. But at the end of the year, if Skeels’s

percentage of the Team’s net revenue exceeded what he had been paid in monthly

draws, he would be paid that excess.

In February 2014, in anticipation of an upcoming audit, FSC’s seven

shareholders––including Skeels––signed a resolution (the Resolution) “to ratify,

confirm and memorialize in writing a policy and practice of [FSC], and a right

possessed by” Friedman, Suder, and Cooke individually “before any current

shareholder [other than those three] became a shareholder.” To further that policy,

the shareholders resolved that,

1
The firm did not issue physical stock certificates until February 2014.
2
Not all of FSC’s shareholders were part of the Team.

3
 [n]otwithstanding the number of shareholders, or the number of shares
issued to any shareholder, [Friedman, Suder, and Cooke], collectively,
have been entitled, and shall continue to be entitled, to take affirmative
action on behalf of [FSC], and veto any vote or action taken by or on
behalf of [FSC], and/or by any other shareholder, whether individually,
or collectively.

Suder later described the Resolution as reflecting and memorializing “the way things

were done around the firm” because Friedman, Suder, and Cooke individually “were

the founding persons who incurred all the risk and expense in forming the firm.”

According to Suder, the shareholders entered into the Resolution rather than

designating different classes of stock or different amounts attributable to the stock. 3

Skeels eventually became dissatisfied with the Team’s compensation system and

with Suder in particular. FSC claims that Skeels began planning to leave the firm as

early as April 2015 although Skeels claims that he simply began negotiating for

opportunities at another law firm to increase his leverage to negotiate better

compensation at FSC. Skeels and another FSC shareholder started discussing these

issues with each other and a competing law firm. In December 2015, Suder and

Cooke discovered these communications after finding emails among Skeels, the other

FSC shareholder, and an attorney with the competing law firm. Suder and Cooke

terminated Skeels’s employment with FSC that month. At the time, the Team was

expecting a contingency fee from a case Skeels had worked on that was on appeal (the

3
Cooke likewise explained that the Resolution was prepared so that the younger
shareholders could never outvote the three controlling shareholders, who would keep
control of the firm.

4
Lightning Ballast case), but which had a petition for writ of certiorari pending at the

United States Supreme Court. FSC did not calculate that fee as part of the Team’s

2015 revenue, but Skeels knew the fee was likely to be paid in 2016 and had not

wanted to leave the firm until then.

In January 2016, Skeels personally wrote a letter to Cooke, as “Shareholder,

Director, and President” of FSC, requesting to examine and copy FSC’s books,

records, documents, and information “to evaluate and determine [his] rights in

connection with [his] involuntary termination” from FSC. In response, FSC’s lawyer

sent Skeels’s lawyer “an index of materials which are given to all FSC lawyers at the

end of each year in a notebook prepared by the firms’ bookkeepers and managers”

that, according to the letter, “Skeels [had] received . . . each year that he was employed

at FSC.” The attorney represented that the information “largely cover[ed]” Skeels’s

request.

FSC’s attorney also sent Skeels’s attorney a letter asking Skeels to voluntarily

surrender his shares in FSC in exchange for a mutual release. However, he warned

that if Skeels did not do so, FSC would, “pursuant to the Resolution,” formally

redeem the shares “at the value consistent with [FSC’s] practice for all departing

shareholders . . . since it began its existence.” The letter said that although FSC could

redeem those shares immediately, it intended to follow the procedure in TBOC

Section 21.305, which it invoked in the letter, setting the redemption date as

March 11, 2016, for a redemptive price of “zero[,] . . . consistent with the value that

5
other departing shareholders received in connection with their departure from the

firm.” Tex. Bus. Orgs. Code Ann. § 21.305.

Skeels’s counsel rejected the offer on February 18, 2016. In the rejection letter,

he alluded to the Lightning Ballast fee, stating that Skeels expected to be compensated

for his part, asserting that he “did most of the work on that case.” Skeels’s counsel

disputed that FSC’s redemption letter could properly serve as notice under

Section 21.305; he also opined that Skeels’s shares were “not redeemable” under

Section 21.305 but that even if they were, they had more than zero value.

Skeels sued FSC as an individual and sued Suder and Cooke derivatively as a

shareholder. In his original forty-one-page petition––which contained a twenty-one-

page factual background complaining primarily about Suder––Skeels brought a

derivative breach of fiduciary duty claim against both Suder and Cooke under TBOC

Section 21.563, asserting that FSC is a closely-held corporation. Id. § 21.563 (defining

“closely held corporation” as a corporation with fewer than thirty-five shareholders

and no publicly traded or quoted shares and also setting forth specific rules for

derivative actions by shareholders). Skeels alleged that Suder and Cooke had breached

their duty of loyalty and good faith to FSC and to Skeels by terminating his

employment and failing to provide him full disclosure. Skeels also brought claims

against FSC for

• mandamus relief to allow him to examine and copy FSC’s books, records,

minutes, and documents so that he could “evaluate and determine his rights in

6
 connection with his involuntary termination from FSC and issues and

proposals regarding his separation from FSC,” see id. § 21.218(b);

• a declaratory judgment that neither TBOC Section 21.305 nor the Resolution

authorized “FSC to serve notice of redemption . . . of Skeels’[s] 1,000 shares of

FSC, . . . to redeem . . . Skeels’[s] . . . shares,” or to require Skeels to surrender

his FSC stock certificate, see id. § 21.305;

• temporary and permanent injunctive relief prohibiting FSC from requiring

Skeels to voluntarily return his 1,000 shares or seeking any further redemption

of those shares; and

• attorney’s fees under TBOC Section 21.218(b) and the Uniform Declaratory

Judgments Act, Tex. Civ. Prac. & Rem. Code Ann. § 37.009.

Skeels signed the petition, verifying “that every statement contained in Paragraphs I,

II, III, IV, VI, VIII, and IX [was] within his personal knowledge and true and

correct.” Paragraph III contained the derivative claims against Suder and Cooke.

Visiting Senior Judge Jeff Walker was assigned to hear the suit. He issued an

ex parte temporary restraining order for Skeels but ultimately denied a temporary

injunction. All of the appellees answered, raised affirmative defenses, and requested

sanctions for groundless pleadings brought in bad faith “for the purpose of

harassment.”

Two weeks after Skeels filed his original petition, he filed an amended petition,

in which he expanded his derivative breach of fiduciary duty claim to include

7
allegations that Suder and Cooke were being paid “far in excess of what was

reasonable for [their] position and level of responsibility,” that they “withheld

dividends” from Skeels, and that they had mismanaged FSC by mismanaging the

Team. Skeels also added an individual breach of fiduciary duty claim against both

Suder and Cooke for injuries to him as a minority shareholder. Skeels further added a

claim against FSC for the “wrongful attempt to redeem his shares.” Skeels verified his

first amended petition, but the verification did not include the factual allegations in

the paragraphs alleging the derivative claims and individual claims against Suder and

Cooke.

After filing his amended petition, Skeels retained new counsel, and the trial

court allowed his former counsel to withdraw. Skeels’s new counsel filed a second

amended petition that omitted the individual and derivative breach of fiduciary duty

claims against Suder and Cooke but that retained the mandamus, declaratory

judgment,4 and injunctive claims against FSC along with the attorney’s fees request.

Skeels added new claims against FSC for breach of an alleged contract by terminating

his employment in 2015 to avoid paying his share of the Team’s 2016 net profits and

for promissory estoppel by breaking its alleged promise to pay him 12.5% of the

Team’s yearly profits for so long as he was a shareholder regardless of whether he had

worked on any of the Team’s cases.

4
He shortened his request for declaratory relief, asking only for a declaration
“that the attempted redemption of [his] shares was void and/or had no legal effect on
[his] ownership in FSC.”

8
 Skeels added an unjust enrichment claim against both Suder and Cooke

individually––pleaded in the alternative to his breach of contract and promissory

estoppel claims against FSC––for “conspir[ing] to obtain an unfair advantage or

benefit by terminating [his] employment at the end of 2015, in order to avoid sharing

the [Team’s] net profits.” Skeels also alleged that FSC had failed to observe corporate

formalities and sought a judgment for the imposition of individual liability on Suder

and Cooke, jointly and severally with FSC, because “the [complained-of] acts of [FSC]

. . . were the acts of . . . Suder and Cooke individually.”

In response to the second amended petition, FSC filed an amended answer, in

which it claimed that Skeels had brought the mandamus action for an improper

purpose because of his long-standing “animosity toward one or more Defendants.”

FSC alleged that “[t]he true point of [Skeels’s] suit is to attempt to harass and

embarrass [FSC, Suder, and Cooke], and disrupt [FSC’s] business in order to extract

compensation that is not due to [Skeels] and/or to force the purchase of shares in

FSC at a grossly inflated price.” FSC also filed a counterclaim for a declaratory

judgment that the Resolution is a “governing document,” as defined in the TBOC,

which “authoriz[es] all of the actions taken by FSC of which Skeels complains.” FSC

also filed a motion for partial summary judgment on Skeels’s breach of contract,

promissory estoppel, and unjust enrichment claims, which the trial court denied.

The parties entered into an agreed scheduling order that included expert-

designation deadlines. After those dates had passed, FSC filed a motion in which it

9
(1) asserted that Skeels was purporting to provide lay testimony at trial as to the

valuation of shares in FSC, (2) argued that such testimony was more properly expert

testimony but that Skeels had not timely designated himself as an expert and was not

qualified as an expert, and (3) asked the trial court to prohibit Skeels from testifying as

to the value of the shares. The trial court granted the motion after a hearing but set a

new expert-designation deadline. Skeels timely designated an expert, Lamar Casparis,

to testify about the value of his shares. Appellees then filed a motion to strike

Casparis’s testimony, challenging his methodology and continuing to argue that the

valuation of Skeels’s shares was not at issue in the case. The trial court granted this

motion on the Friday immediately preceding the Monday, September 11, 2017 trial

date.

During the same hearing––in the context of urging that Casparis’s proposed

testimony was not relevant to any issue in the case––FSC argued that “whether the

[R]esolution is a governing document that allowed [FSC] to cancel the share” is “a

purely legal issue” to be determined by the trial court and not a jury. The trial court

agreed but did not sign any order that day.

Skeels’s counsel appeared for trial on September 11, 2017, but also filed a

verified motion for continuance because of a family emergency. The trial judge denied

the motion, but he recessed the trial until September 18, 2017, and signed an order

ruling that “the Resolution . . . authoriz[ed] all of the actions taken by [FSC] of which

10
[Skeels] complains in his Second Amended Petition.” The order reserved a

determination of attorney’s fees and costs for “a later date.”

When the parties reconvened on September 18, 2017, Skeels’s counsel told the

trial court that because his remaining claims were premised on shareholder status, no

claims remained to be tried in light of the trial court’s legal ruling for FSC. Thus, the

only matter the parties tried that day was appellees’ sanctions motion. After two days

of hearing evidence, the trial court took the matter under advisement.

On October 26, 2017, the trial court adopted appellees’ twenty-seven-page

proposed findings of fact and conclusions of law related to sanctions, which

ultimately concluded that Skeels should pay Suder and Cooke $20,000 in sanctions.

The trial court signed a final judgment the same day; that judgment incorporated the

sanctions order, rendered a take-nothing judgment for Skeels, rendered a declaratory

judgment for FSC on its counterclaim, and assessed court costs and $100,000 in

attorney’s fees against Skeels.

The trial judge denied a timely motion for new trial after a hearing but signed

an amended judgment changing the sanctions award to $10,000 for Suder and $10,000

for Cooke. Skeels then filed this appeal.

11
III. The Resolution Did Not Authorize FSC To Unilaterally Redeem Shares

In his first issue, Skeels contends that the trial court erred by awarding

declaratory relief to FSC because the Resolution5 did not give the firm authority to

redeem Skeels’s shares or, if it did, to redeem them for $0. He also argues that the trial

court should have granted his converse declaratory judgment on this question of law:

that the attempted redemption was invalid. To answer this question, we must construe

provisions of the TBOC.

A. Applicable law

FSC is a professional corporation.6 Professional corporations are addressed

specifically in Chapter 303 of the TBOC and are subject to the requirements

governing professional entities in general set forth in TBOC’s Title 7, in which

Chapter 303 is located. Tex. Bus. Orgs. Code Ann. §§ 301.001, .003(4), 303.001–.006.

But professional corporations are also subject to Titles 1 through 3 of the TBOC,

5
The trial court also rendered a declaratory judgment that the Resolution is a
governing document as defined in the TBOC, but Skeels does not challenge that part
of the trial court’s ruling. He contends that even though the Resolution is a governing
document, it nevertheless did not authorize the attempted redemption.

Although FSC is a professional corporation, it has never been designated a
6

“close” corporation under the TBOC (which is defined differently than “closely held
corporation”); therefore, Subchapter O of Chapter 21, applicable to close
corporations only, does not apply here. See Tex. Bus. Orgs. Code Ann. §§ 3.008,
21.701(1), 21.702(a), 21.705–.07.

12
including Chapter 21 governing “for-profit corporations,” except to the extent that

Chapter 21 conflicts with Title 7. Id. §§ 301.002, 303.001. 7

Shareholders of a professional corporation must be licensed in the “same

professional service” rendered by the professional corporation. Id. §§ 301.003(5),

.004(2), .007(a). If a shareholder loses that status, he must “promptly relinquish” his

ownership interest in the entity. Id. § 301.008(b). At that time, the professional

corporation “shall purchase or cause to be purchased the ownership interest,” upon a

“price and terms . . . [that] may be provided by the governing documents of the entity

or an applicable agreement.” Id. § 301.008(d). If only one person owns all of the

entity’s outstanding ownership interests, that person can act as a “managerial official

or owner” of the entity only for the time it takes to wind up the entity’s affairs.

Id. § 301.008(e). But if a shareholder of a professional corporation with more than one

shareholder remains licensed but dies, becomes incompetent or bankrupt, resigns,

withdraws, retires, or is expelled from the professional corporation, the entity

7
Before 1960, no state allowed lawyers or other professionals to incorporate,
but now all states allow it. Christopher C. Wang, Breaking Up Is Hard To Do: Allocating
Fees From The Unfinished Business Of A Professional Corporation, 64 Univ. Chic. L. Rev.
1367, 1372 (Fall 1997). Initially, significant tax advantages attached to the formation
of a professional corporation; now, “the primary advantage of the professional
corporation is the limited liability it affords to its members.” Id. at 1372–73; see also 20
Tex. Prac. Bus. Orgs. § 24:1 (noting that professional corporations historically
developed to benefit from tax-advantageous retirement plans for professionals).
Although a professional corporation possesses significant corporate attributes, as a
practical matter it often functions as a partnership in the law firm context, in terms of
the relationship among the shareholders and compensation. Id. Texas law expressly
allows this type of management by shareholder agreement. See Tex. Bus. Orgs. Code
Ann. § 21.101(a)(12).

13
continues to exist and need not wind up its affairs Id. § 303.005. Moreover, no

provision in the TBOC requires the professional corporation to redeem or repurchase

the shares of a departing shareholder who is still licensed to practice the professional

services the entity provides.8 Thus, FSC was not required to redeem Skeels’s shares

upon terminating his employment with the firm.

8
Texas law comports with other states’ laws in this respect, and courts in those
states have declined to compel redemption of a licensed, departing shareholder’s
shares in the absence of a statute, corporate document, or specific agreement
requiring such a redemption. See, e.g., McCormick v. Dunn & Black, P.S., 167 P.3d 610,
619 (Wash. Ct. App. 2007) (“The courts do not have the power to make a stock
redemption agreement where the parties failed to do so.”), review denied, 163 Wash. 2d
1042 (2008); Corlett, Killian, Hardeman, McIntosh and Levi, P.A. v. Merritt, 478 So.2d 828,
829–35 (Fla. Dist. Ct. App. 1985), review denied, 488 So.2d 68 (Fla. 1986); Berrett v.
Purser & Edwards, 876 P.2d 367, 371 (Utah 1994) (refusing also to allow potential for
disciplinary rules infraction––unethical fee-splitting––to dictate statutory
interpretation); Trittipo v. O’Brien, 561 N.E.2d 1201, 1204–08 (Ill. App. Ct. 1990),
appeal denied, 136 Ill. 555 (1991). But cf. Vinall v. Hoffman, 651 P.2d 850, 851 (Ariz.
1982) (holding opposite based on more broadly worded statute that has since been
repealed as acknowledged in Fearnow v. Ridenour, Swenson, Cleere & Evans, P.C., 138
P.3d 723, 730 (Ariz. 2006)). Thus, in these states, “[i]f an attorney-shareholder leaves
. . . and nothing in [a corporate document or applicable agreement] provides for an
automatic redemption of shares, the attorney may end up holding shares that are
valueless because of the lack of a market for them.” Wang, supra, at 1395; see Ritchie v.
Rupe, 443 S.W.3d 856, 885–86 (Tex. 2014) (explaining that shareholder status does not
change nature of at-will employment in absence of agreement to the contrary).

But by not requiring such a redemption, statutory schemes such as Texas’s
merely kick the can down the road. Under the TBOC, if the departing shareholder
ever becomes unlicensed, or an unlicensed person later “succeeds to the ownership
interest” of the licensed shareholder––such as by inheritance—the professional
corporation must “purchase” the shares at a price and on terms “provided by the
governing documents of the entity or an applicable agreement.” Tex. Bus. Orgs. Code
Ann. § 301.008(c), (d).

14
 A shareholder of a professional corporation may freely transfer his shares to

the entity, 9 another of the entity’s shareholders, or another licensed member of the

same profession unless the professional corporation has limited the right of transfer in

a governing document or “an applicable agreement.”10 Id. § 301.009. Any transfer

restrictions must be noted on the stock certificate representing the shares or

incorporated by reference in the manner provided by Chapter 21. Id. § 303.003. But see

id. § 21.213 (providing that restriction not noted on stock certificate is “specifically

enforceable against a person other than a transferee for value from the time the

person acquires actual knowledge of the restriction’s existence”).

A transfer of shares from a shareholder to the entity can be accomplished by

repurchase or redemption. “Repurchase involves a willing sale from the shareholder

to the corporation” while “[r]edemption . . . involves a forced sale to the

corporation.” Elliot M. Kaplan & David B. Young, Corporate “Eminent Domain”: Stock

Redemption and Reverse Stock Splits, 57 UMKC L. Rev. 67, 68–69 (1988); Herring Bancorp,

Inc. v. Mikkelsen, 529 S.W.3d 216, 226 (Tex. App.—Amarillo 2017, pet. denied) (op. on

reh’g) (distinguishing redemption––“an involuntary disposition of a security pursuant

9
A corporation in general may “acquire its own ownership interests, regardless
of whether redeemable, and hold the ownership interests as treasury ownership
interests or cancel or dispose of the ownership interests.” Id. § 2.101(9).
10
The TBOC defines a governing document as the entity’s certificate of
formation or “the other documents or agreements adopted by the entity . . . to govern
[its] formation or . . . internal affairs.” Id. § 1.002. The TBOC does not define
“applicable agreement.”

15
to a pre-existing agreement or right to acquire (purchase) that security in accordance

with the terms and provisions of that agreement or right”—from repurchase––“a

voluntary disposition of a security on terms and conditions to be negotiated at the

time of the disposition and acquisition”). “A redemption by the corporation of its

stock is, in a sense, a repurchase of it for cancellation.” Russell Stanley Q. Geronimo,

Unbundled Shares: Circumventing Corporate Nationality Rules Through Swaps, Options, and

Other Devices, 19 Asian-Pac. L. & Pol’y J. 84, 120 (2018); see Tex. Bus. Orgs. Code Ann.

§ 21.251(a), (b). Repurchase can result in unfairness to a minority shareholder if he is

not given the same opportunity to dispose of his stock at a price as favorable as a

majority shareholder, but the opportunities for abuse are greater with redemption

because of its involuntary nature. 11 See Herring Bancorp., 529 S.W.3d at 223 n.7; Kaplan,

In discussing the status of a minority shareholder in a closely-held
11

corporation, the Supreme Court of Texas described this potential for abuse thusly:

[M]inority shareholders in closely held corporations have “no statutory
right to exit the venture and receive a return of capital” like partners in a
partnership do, and “usually have no ability to sell their shares” like
shareholders in a publicly held corporation do; thus, if they fail to
contract for shareholder rights, they will be “uniquely subject to
potential abuse by a majority or controlling shareholder or group.”
Unhappy with the situation and unable to change it, they are often
unable to extract themselves from the business relationship, at least
without financial loss.

Those in control of a closely held corporation may use various
“squeeze-out” or “freeze-out” tactics to deprive minority shareholders
of benefits, to misappropriate those benefits for themselves, or to induce
minority shareholders to relinquish their ownership for less than it is
otherwise worth. The types of conduct most commonly associated with

16
supra, at 69. Therefore, corporations must strictly comply with stock-redemption

related statutes or contract provisions. Cotten v. Weatherford Bancshares, Inc., 187 S.W.3d

687, 703 (Tex. App.–-Fort Worth 2006, pet. denied), disapproved of on other grounds by

Ritchie v. Rupe, 443 S.W.3d 856, 871 & n.17 (Tex. 2014).

To fully understand the TBOC’s applicability to share redemption in

professional corporations, we must understand its scheme for stock redemption

applicable generally to for-profit corporations. The TBOC sets forth redemption

procedures for for-profit corporations in Chapter 21. Under that chapter, a for-profit

corporation may issue redeemable shares only “if authorized by the corporation’s

certificate of formation.” Tex. Bus. Orgs. Code Ann. § 21.154(a)(1). A corporation

such tactics include (1) denial of access to corporate books and records,
(2) withholding payment of, or declining to declare, dividends,
(3) termination of a minority shareholder’s employment,
(4) misapplication of corporate funds and diversion of corporate
opportunities for personal purposes, and (5) manipulation of stock
values.

....

Of course, shareholders may also prevent and resolve common
disputes by entering into a shareholders’ agreement to govern their
respective rights and obligations. Importantly, the Legislature has
granted corporate founders and owners broad freedom to dictate for
themselves the rights, duties, and procedures that govern their
relationship with each other and with the corporation.

Ritchie, 443 S.W.3d at 879–81.

17
may not redeem shares that have not been so designated. Id. §§ 21.303, .304(a). 12

Chapter 21 also expressly contemplates a transfer of value––either in the form of a

payment or the issuance of indebtedness––when a for-profit corporation redeems

shares.13 Id. § 21.002(6)(A) (defining a distribution as a “transfer of property, including

cash, or issuance of debt, by a corporation to its shareholders in the form of . . . a

purchase or redemption, directly or indirectly, of any of its own shares”), §§ 21.302–

.303, § 21.304 (“A distribution by a corporation that involves a redemption of

outstanding redeemable shares of the corporation subject to redemption may be

related to any or all of those shares.”), § 21.308 (providing that corporate

indebtedness arising from distribution or issued in a distribution “are at parity with

the corporation’s indebtedness to its general, unsecured creditors”); see Redemption,

Black’s Law Dictionary (11th ed. 2019) (defining “redemption” as “[t]he act or an

instance of reclaiming or regaining possession by paying a specific price” or “[t]he

reacquisition of a security by the issuer”).

Chapter 21 nevertheless gives corporations broad authority to enter into
12

shareholder agreements to govern the corporation “as if [it] were a partnership or in a
manner that would otherwise be appropriate only among partners and not contrary to
public policy” and to enter into shareholder agreements governing “the authorization
or making of distributions.” Tex. Bus. Orgs. Code Ann. § 21.101(a)(5) (making a
shareholders’ agreement on redemption “subject to Section 21.303”), (a)(12), § .303,
§ .104 (“A shareholders’ agreement that complies with this subchapter is effective among
the shareholders and between the shareholders and the corporation even if the terms
of the agreement are inconsistent with this code.” (emphasis added)).

Section 21.304, entitled “Redemptions,” is in the Subchapter entitled,
13

“Distributions and Share Dividends.”

18
 A for-profit corporation’s board of directors, or shareholders if acting as the

board of directors,14 may authorize a stock redemption and in doing so must

determine “the maximum amount that may be distributed.” Tex. Bus. Orgs. Code

Ann. § 21.302. But Chapter 21 prohibits a distribution “if the corporation would be

insolvent” afterward or the distribution exceeds the corporation’s surplus. 15 Id.

§§ 21.301(1)(B), .303(b).

Redemption under Chapter 21 takes effect by call and written notice.

Id. § 21.304(c). A redemption notice must include “the redemptive price” set by the

board of directors and “the place at which the shareholders may obtain payment of

the redemptive price.” Id. § 21.305(a)(3), (4). If the corporation deposits money with a

bank or trust company appointed and acting as the corporation’s transfer agent and

gives payment instructions according to the statutory procedure, the redemption takes

14
Although a corporation ordinarily is managed by a board of directors, Ritchie,
443 S.W.3d at 868 n.12, the shareholders may by agreement dispense with the board
and manage the corporation through one or more shareholders or manage the
corporation “as if [it] were a partnership or in a manner that would otherwise be
appropriate only among partners and not contrary to public policy,” Tex. Bus. Orgs.
Code Ann. § 21.101(a)(2), (12); see Nolana Open MRI Ctr., Inc. v. Pechero, No. 13-13-
00552-CV, 2015 WL 601916, at *9 (Tex. App.—Corpus Christi–Edinburg Feb. 12,
2015, no pet.) (mem. op.).
15
The right of a corporation to reacquire its own shares is commonly limited by
provisions designed to protect the rights of creditors; thus, statutes frequently provide
that a corporation may not acquire its own stock if such an acquisition would reduce
its net assets below its stated capital or would render the corporation incapable of
paying its debts as they fall due. Elliot M. Kaplan & David B. Young, Corporate
“Eminent Domain”: Stock Redemption and Reverse Stock Splits, 57 UMKC L. Rev. 67, 70
(1988).

19
effect on the date of that deposit and giving of payment instructions, unless the

corporation’s certificate of formation provides otherwise. Id. § 21.306. The

shareholder has no further right related to the shares other than the right to payment

of the distribution amount (or the right to convert the share, if any) upon surrender of

the share certificate. Id. §§ 21.306(c)–.307.

In contrast to Chapter 21, Section 303.004 of the TBOC specifically addresses

redemption of shares by a professional corporation. Section 303.004 provides,

(a) A professional corporation may redeem shares of a
shareholder, including a deceased shareholder.

(b) The price and other terms of a redemption of shares may be:

(1) agreed to between the board of directors of the
professional corporation and the shareholder or the shareholder's
personal representative; or

(2) specified in the governing documents of the
professional corporation or an applicable agreement.

Id. § 303.004.16

Section 303.004 thus sets forth a more expansive ability to redeem

professional-corporation stock than does Chapter 21 for for-profit corporations

generally. Professional corporations may redeem shares even if those shares are not

designated redeemable. But in doing so, Section 303.004(b) provides three ways in

This section thus appears to authorize a professional corporation to redeem
16

shares even if they were not designated as redeemable in its certificate of formation.
Compare id. §§ 3.007, 303.004, with id. §§ 21.303–.304(a). This makes sense in light of
Chapter 303’s requirement that shares of a no-longer-licensed professional must be
repurchased.

20
which the price and terms of such a redemption can be determined: (1) as agreed to

between the board (or governing person or body) and the departing shareholder,

(2) as set forth in a governing document, or (3) as set forth in an applicable

agreement. Not included in this list is redemption on a price and terms set unilaterally

by the board (or governing body or person).

Skeels contends that these three methods of determining the price and terms of

redemption described in Section 303.004 are the exclusive methods by which to

redeem shares in a professional corporation and that FSC has not shown its authority

to redeem his shares under any method described in that section. FSC contends that

the Resolution gave Friedman, Suder, and Cooke collectively the power to redeem

shares under TBOC Chapter 21 rather than Section 303.004 and that even if it did not

and Section 303.004 applies to redemption of Skeels’s shares, it properly redeemed

the shares under Section 303.004(b).

B. Construction of the Resolution

The TBOC broadly authorizes a corporation’s shareholders to enter into

agreements with each other that, if otherwise effective, limit or are inconsistent with

other provisions of the TBOC. See id. §§ 21.101, .104, .110. Construction of such an

agreement’s terms, as with other contracts, is a question of law if the terms are

unambiguous. MCI Telecomms. Corp. v. Tex. Utils. Elec. Co., 995 S.W.2d 647, 650–51

(Tex. 1999); Rubinstein v. Lucchese, Inc., 497 S.W.3d 615, 625 (Tex. App.—Fort Worth

2016, no pet.); see also Fishman v. C.O.D. Capital Corp., No. 05-16-00581-CV, 2017 WL

21
3033314, at *11 (Tex. App.—Dallas July 18, 2017, no pet.) (mem. op.) (applying

ordinary contract-construction principles to shareholder agreement); Wibbenmeyer v.

TechTerra Commc’ns, Inc., No. 03-09-00122-CV, 2010 WL 1173072, at *4 (Tex. App.—

Austin Mar. 26, 2010, pet. denied) (mem. op.) (same); In re Martin Patrick Evan, Ltd.,

No. 14-05-00349-CV, 2005 WL 7877689, at *2–3 (Tex. App.––Houston [14th Dist.]

June 1, 2005, orig. proceeding) (per curiam) (mem. op.) (same). The court’s goal in

interpreting a contract is to ascertain the parties’ true intent as expressed by the plain

language they used. See Great Am. Ins. v. Primo, 512 S.W.3d 890, 893 (Tex. 2017). The

court must examine the entire agreement to try to harmonize and give effect to all

contractual provisions so that none will be meaningless. MCI Telecomms., 995 S.W.2d

at 652. In doing so, we give a contract term its plain and ordinary meaning unless the

contract indicates the parties intended to give it a different meaning. Reeder v. Wood

Cty. Energy, LLC, 395 S.W.3d 789, 794–95 (Tex. 2012).

Reading the Resolution as a whole––giving effect to all its words––we discern

that nothing in it purports to allow Friedman, Suder, and Cooke collectively to take

action inconsistent with any specific provision of the TBOC or the TBOC in general,

nor does it evidence an intent that FSC as an entity would not be bound by any

particular TBOC provision, including Section 303.004. By its own terms, the

Resolution shows nothing more than an intent that any affirmative action that could

properly be taken by FSC would be decided by Friedman, Suder, and Cooke

collectively and that those three could veto any action or purported action taken by

22
any other shareholders or group of shareholders on FSC’s behalf. While the language

of the Resolution gives Friedman, Suder, and Cooke broad powers vis à vis the other

firm shareholders, in no way does it purport to allow those three to take any action

they decide to take contrary to the TBOC or any other law. In the absence of any

such provision, we conclude that the propriety of FSC’s attempted redemption of

Skeels’s shares is governed by Section 303.004.

FSC urges us that the surrounding circumstances of the execution of the

Resolution dictate otherwise because part of Friedman, Suder, and Cooke’s intention

in retaining the “sole ability to control firm operations” was to also retain the sole

ability to control “who would become, and remain, a shareholder,” citing Cooke’s

testimony at the temporary injunction hearing that the Resolution simply

memorialized the firm’s then-current custom: the “ultimate power and control

existed” with Friedman, Suder, and Cooke. But that fact reinforces our construction

of the Resolution’s plain language: that it relates to the relationship among the

shareholders vis à vis the taking of action that the firm was authorized to make but

that it did not purport to authorize Friedman, Suder, and Cooke individually to take

any action inconsistent with the TBOC, including Section 303.004.

C. Section 303.004 limits methods of redemption for professional
corporation’s stock

FSC also argues that if Section 303.004 applies to the redemption of Skeels’s

shares, it nevertheless complied with that section because Section 303.004(b)’s use of

23
permissive language––“the price and other terms . . . may be . . . agreed to . . . or . . .

specified”–-means that professional corporations need only choose whether they want

to redeem stock in accordance with that subsection. See Tex. Bus. Orgs. Code Ann.

§ 303.004(b) (emphasis added).

A statute that uses the word “may” is permissive rather than mandatory unless

there is something in the statute to show a legislative intent that “may” is mandatory.

See Dallas Cty. Cmty. Coll. Dist. v. Bolton, 185 S.W.3d 868, 874 (Tex. 2005); see Tex.

Gov’t Code Ann. § 311.016(1). We agree that the “may” in Section 303.004(b) is used

permissively but only in the context of that section, which lists three separate ways to

designate the price and terms of a redemption of professional-corporation stock: the

price and terms may be set forth in an agreement between the corporation’s

governing body and the departing shareholder; they may be set forth in a governing

document; or they may be set forth in an “applicable agreement.” Tex. Bus. Orgs.

Code Ann. § 303.004(b). Nothing in this section indicates that redemption is

authorized by any other method, such as the provisions applicable to for-profit

corporations set forth in Chapter 21.17 Thus, even though Section 303.004(b) uses the

17
Nothing in the statutory scheme evidences an intent for professional
corporations to use the Chapter 21 redemption procedure as a gap-filler in the event a
professional corporation has not specified a redemption price and terms in a
governing document or applicable agreement and is having difficulty coming to an
agreement with a particular shareholder whose stock it wants to redeem. This is
unlike, for example, Delaware law that provides for a gap-filler: if no redemption price
for stock is specified in the professional corporation’s certificate of formation or a
shareholder agreement, it is redeemed for book value. Del. Code Ann. tit. 8, § 631.

24
permissive word “may”––when read in context with the larger Chapter 21 and

Chapter 303 scheme––it does so only among the three choices specifically described

in that subsection.

Not only is this interpretation of Section 303.004(b) in keeping with the general

directive to strictly interpret redemption statutes, it also is in keeping with a legislative

recognition of the need to provide more flexibility to a professional corporation and

its shareholders vis à vis the entry and exit of shareholders as well as to provide some

protection for shareholders from the abuses that can occur in closely-held

corporations. See note 11, supra. Moreover, that Section 303.004(b) is intended to

contain an exclusive list, any one of which may be chosen by the professional

corporation, is bolstered by Section 303.008, which lists only two ways in which the

price and terms “may” be set for a repurchase of the ownership interest of a

professional-corporation shareholder (or the successor to that person’s interest): in a

governing document or applicable agreement. Tex. Bus. Orgs. Code Ann. § 303.008.

Both of these sections indicate that the legislature intended that a professional-

corporation shareholder’s shares could not be unilaterally redeemed by the governing

body without any input or knowledge of the shareholder of a specific agreement

But the fact that there is no gap-filler provision in the TBOC does not change the
plain language of Section 303.004(b). This gap in the statutory scheme exemplifies the
Catch-22 that can occur and why we encouraged the parties to mediate this dispute
and attempt to come to an agreement before incurring even more attorney’s fees and
costs.

25
otherwise. See generally id. § 21.105 (allowing stock buyer to rescind purchase if he buys

shares without knowledge of valid shareholder agreement’s existence).

D. Section 303.004 did not authorize unilateral redemption

Skeels contends that FSC was not authorized to redeem his shares under

Section 303.004 because (1) he and FSC did not agree to the price or terms of

redemption, (2) no governing document of FSC “specified” the price and terms of

redemption, and (3) no “applicable agreement” set forth the price and terms of

redemption. FSC contends that if Section 303.004 applies to this dispute, it

nevertheless complied with its dictates because the Resolution is an applicable

agreement18 that allows Friedman, Suder, and Cooke collectively to unilaterally set the

price and terms of redemption. FSC and Skeels primarily dispute whether the

Resolution sufficiently “specified” the price and terms of redemption. Thus, we must

determine the meaning of the word “specified” as used in Section 303.004(b).

In construing statutes, our primary objective is to give effect to legislative

intent. Silguero v. CSL Plasma, Inc., 579 S.W.3d 53, 59 (Tex. 2019). We look first to the

plain language as the most reliable guide to that intent, construing the text in light of

the statute as a whole. Id. The statutory terms bear their common meanings, unless

the text provides a different meaning or the common meaning leads to an absurd

FSC had also argued in the trial court that the Resolution is a governing
18

document. The trial judge agreed and issued a ruling to that effect.

26
result. Id. The statutory words must be interpreted considering the context in which

they are used, not in isolation. Id.

Whether the Resolution could be considered an applicable agreement as

opposed to a governing document does not matter for purposes of our analysis

because even if it is either one, Section 303.004(b) requires the redemption price and

terms to be “specified” in either type of document. The term “specified” is not

defined in the TBOC. Merriam Webster defines “specify” as “to mention or name in

a specific or explicit manner.” Webster’s Third New Int’l Dictionary 2187 (2002).

The Resolution itself is general and does not “specify” any topic in particular

other than ultimate governance of the firm by Friedman, Suder, and Cooke

collectively; not only does it not specify a particular price and terms of redemption, it

also does not purport to expressly allow the three controlling shareholders to

unilaterally set the price and terms of share redemption. Cooke admitted at the

temporary injunction hearing that the Resolution did not specify that FSC could

redeem a shareholder’s shares for $0, but in his opinion, it was “intended to give . . .

discretion broad enough to encompass things like that.” But general discretion does

not equate to a specific or explicit description. We cannot construe a resolution using

general language that does not even mention redemption as naming or explicitly

stating the price and terms of redemption. Thus, we hold that none of Section

27
303.004 authorized FSC’s attempted redemption of Skeels’s shares and that the trial

court erroneously granted FSC’s declaratory judgment and denied Skeels’s.19

For these reasons, we sustain Skeels’s first and second issues. As we explain

below, our disposition of these two issues necessitates a remand of Skeels’s remaining

common law and statutory claims, as well as his request for attorney’s fees. We

therefore also sustain his third issue.

IV. Admissibility Of Valuation Testimony Question For Remand

In his fifth issue, 20 Skeels challenges the trial court’s ruling excluding Casparis’s

expert testimony on the valuation of Skeels’s shares. According to Skeels, the

testimony was relevant to prove whether FSC exceeded its statutory redemption

authority by attempting to redeem the shares for only $0. But FSC argues, as it did in

the trial court, that “the value of Skeels’[s] FSC shares has never been relevant to any

of Skeels’[s] claims” and, therefore, that the expert’s valuation opinions were “outside

the pleadings . . . in the case.”

Admissibility of expert testimony is a matter within the trial court’s discretion.

K–Mart Corp. v. Honeycutt, 24 S.W.3d 357, 360 (Tex. 2000); E.I. du Pont de Nemours &

Co. v. Robinson, 923 S.W.2d 549, 558 (Tex. 1995). A trial court abuses its discretion

when its ruling is arbitrary, unreasonable, or without reference to guiding rules or legal

Therefore, we need not––and do not––hold that Section 303.004 does not
19

authorize a professional corporation to redeem shares for $0.
20
We dispose of his fourth issue in the conclusion below.

28
principles. Downer v. Aquamarine Operators, Inc., 701 S.W.2d 238, 241–42 (Tex. 1985).

The test for abuse of discretion is not whether, in the opinion of the reviewing court,

the facts present an appropriate case for the trial court’s action; instead, the test is

whether the trial court acted without reference to any guiding rules and principles. Id.

“The mere fact that a trial judge may decide a matter within his discretionary authority

in a different manner than an appellate judge in a similar circumstance does not

demonstrate that an abuse of discretion has occurred.” Id. at 242.

Texas Rule of Evidence 702, which governs the admission of expert testimony,

provides, “[I]f . . . scientific, technical, or other specialized knowledge will help the

trier of fact to understand the evidence or to determine a fact issue,” a “witness

qualified as an expert by knowledge, skill, experience, training, or education may

testify in the form of an opinion or otherwise.” Tex. R. Evid. 702. A witness’s expert

testimony is admissible if the witness is qualified as an expert, the opinion is relevant

to the issues in the case, and the opinion is based on a reliable foundation. See id.;

Exxon Pipeline Co. v. Zwahr, 88 S.W.3d 623, 628 (Tex. 2002). “Qualified experts may

offer opinion testimony if that testimony is both relevant and based on a reliable

foundation.” Gharda USA, Inc. v. Control Sols., Inc., 464 S.W.3d 338, 348 (Tex. 2015).

Expert testimony is relevant if it is “sufficiently tied to the facts of the case” in a way

that “will aid the jury in resolving a factual dispute.” Robinson, 923 S.W.2d at 556.

However, under Texas Rule of Evidence 402, evidence that is not relevant is

29
inadmissible. Tex. R. Evid. 402; Kia Motors v. Ruiz, 432 S.W.3d 865, 879, 882–83 (Tex.

2014).

The value of Skeels’s shares was not relevant to the elements of his declaratory-

judgment claim, nor are they relevant to his breach of contract or promissory estoppel

claims. See Bell v. Bennett, Nos. 02-10-00481-CV, 02-11-00057-CV, 02-11-00063-CV,

2012 WL 858603, at *15 (Tex. App.––Fort Worth March 15, 2002, no pet.) (mem.

op.). Although Skeels contends that Casparis’s testimony is relevant to the legal

question of whether FSC could redeem his shares for $0, as we have explained, FSC

was not entitled by law to unilaterally redeem his shares at all. Skeels did not––and as

we have explained, cannot––bring a claim to force FSC to redeem his shares, nor did

he bring a claim premised on an alleged agreement to redeem his shares for any price.

However, in response to Skeels’s statutory demand to examine FSC’s books

and records, FSC raised as a defense that Skeels had done so for an improper

purpose. Skeels requested the records in response to FSC’s offer to pay him for his

shares, presumably to evaluate the adequacy of that offer. Whether his shares indeed

have value could conceivably inform the dispute over whether he sought the records

for a proper purpose, as required by Section 21.218 under which he sought the

records. Tex. Bus. Orgs. Code Ann. § 21.218; see also Uvalde Rock Asphalt Co. v.

Loughridge, 425 S.W.2d 818, 820 (Tex. 1968) (noting that corporation is entitled to a

jury trial “in resisting a stockholder’s attempt to inspect the [corporation’s] books and

records” when it “raises by its pleadings a fact issue over whether the stockholder has

30
a proper purpose for wanting to see the books”). Because we must remand that claim

as explained below, we conclude that whether Casparis’s testimony––or even Skeels’s

own lay testimony–-should be excluded on retrial (either because of relevance or for

the other reasons FSC raised in its challenge) is a question better determined by the

trial court. We therefore sustain Skeels’s fifth issue.

V. Reversal Of Declaratory Judgment Necessitates Reversal Of Sanctions

Skeels’s sixth issue challenges the trial court’s sanctions awards to Suder and

Cooke individually. Within this issue, Skeels argues that Suder and Cooke failed to

show good cause that any of his claims were groundless or asserted for an improper

purpose, that the trial court failed to adequately connect the sanctions award to his

conduct, and that $20,000 is an excessive amount for the complained-of conduct. As

we explain below, we need not address most of his complaints. See Tex. R. App. P.

47.1.

A. Standard of review and applicable law

We review the imposition of sanctions for an abuse of discretion and reverse

the trial court’s ruling only if the trial court acted without reference to any guiding

rules and principles, such that its ruling was arbitrary or unreasonable. Cire v.

Cummings, 134 S.W.3d 835, 838–39 (Tex. 2004). The mere fact that a trial judge may

decide a matter within his discretionary authority in a different manner than an

appellate judge in a similar circumstance does not demonstrate an abuse of discretion.

Quixtar Inc. v. Signature Mgmt. Team, LLC, 315 S.W.3d 28, 31 (Tex. 2010) (per curiam).

31
In reviewing the propriety of sanctions orders, we are not limited by a trial court’s

findings of fact and conclusions of law; rather, we must independently review the

entire record to determine whether the trial court abused its discretion. Am. Flood

Research, Inc. v. Jones, 192 S.W.3d 581, 583 (Tex. 2006). But we defer to the trial court’s

factual findings unless no evidence supports them. See Allison v. Conglomerate Gas II

L.P., No. 02-13-00205-CV, 2015 WL 5106448, at *6 (Tex. App.—Fort Worth

Aug. 31, 2015, no pet.) (mem. op.).

Suder and Cooke moved for sanctions under Rule 13,21 which allows the

imposition of sanctions for pleadings that are groundless and also filed either (1) in

bad faith, (2) with the intent to harass, or (3) with the knowledge of their falsity when

made. Tex. R. Civ. P. 13; Nath v. Tex. Children’s Hosp., 446 S.W.3d 355, 362–63 (Tex.

2014). Generally, courts presume pleadings and other papers are filed in good faith,

and the party seeking sanctions bears the burden of overcoming this presumption of

good faith. Id. at 361. A claim is groundless under Rule 13 if it has no basis in law or

fact or if it is not warranted by a good faith argument for the extension, modification,

or reversal of existing law. Id. at 362. In other words, a lawsuit is groundless under

Rule 13 if no arguable basis for the cause of action exists. Attorney Gen. of Tex. v.

21
Although the trial court found that appellees had moved for sanctions only
under Rule 13, it purported to impose sanctions under both Rule 13 and Chapter 10
of the Civil Practice and Remedies Code. See Tex. Civ. Prac. & Rem. Code Ann.
§§ 10.001, .002. Whether the trial court’s decision to do so was proper, however,
because of the different standards for the imposition of sanctions under the Rule as
opposed to the statute, see generally Allison, 2015 WL 5106448, at *5–6, makes no
difference to our analysis; therefore, we do not address that issue.

32
Cartwright, 874 S.W.2d 210, 215 (Tex. App.—Houston [14th Dist.] 1994, writ denied).

This is essentially the same inquiry regarding whether a “claim, defense, or other legal

contention in [a] pleading or motion” is frivolous under Civil Practice and Remedies

Code Section 10.001(2). Tex. Civ. Prac. & Rem. Code Ann. § 10.001(2).

B. Remand appropriate

The testimony and evidence presented at the sanctions hearing focused in large

part on Skeels’s motivation for bringing the claims in his original, first amended, and

second amended petitions. The trial court had already decided the merits of the

declaratory judgment claim and, by default, the remaining common law claims against

FSC, including the alternative unjust-enrichment allegation against Suder and Cooke,22

because––as Skeels’s counsel represented to the trial court––those claims were

premised on Skeels’s remaining a shareholder in the firm.23 But our remand of the

22
The trial court found that there was no basis to bring such a claim against
Suder and Cooke because Skeels had not filed a specific cause of action against either
of them. See Lawry v. Pecan Plantation Owners Ass’n, No. 02-15-00079-CV, 2016 WL
4395777, at *6 (Tex. App.—Fort Worth Aug. 18, 2016, no pet.) (mem. op.) (noting
that unjust enrichment is not an independent cause of action “but rather ‘characterizes
the result of a failure to make restitution of benefits either wrongfully or passively
received under circumstances that give rise to an implied or quasi-contractual
obligation to repay’”). But a careful reading of Skeels’s second amended petition
shows that he alleged FSC failed to observe corporate formalities and that FSC’s
complained-of acts were also the acts of Suder and Cooke individually so that Suder
and Cooke should be jointly and severally liable with FSC.
23
For example, Skeels denies that his breach of contract claim was based on a
promise related to his continued employment; rather, it was based on his continued
status as a shareholder regardless of whether he was employed by the firm: “I’m
entitled to receive income as a shareholder for so long as I am a shareholder.”

33
common law claims returns the suit and parties to the position they were in before the

trial court granted the erroneous declaratory judgment: Skeels’s live pleading asserts

common law and statutory claims based on his shareholder status, to which FSC,

Suder, and Cooke have filed answers seeking Rule 13 sanctions. There has not yet

been a trial on the merits on those claims. 24 Were we to uphold the trial court’s

sanctions award on these untried claims, our decision could be merits-preclusive, see

Dickson v. BNSF Ry., No. 05-14-01575-CV, 2015 WL 6777876, at *7 (Tex. App.––

Dallas Nov. 6, 2015, pet. denied) (mem. op.); thus, because of our disposition of

Skeels’s remaining claims, we also vacate the sanctions award and remand that issue as

well. See Smith v. City of Blanco, No. 03-11-00091-CV, 2013 WL 491022, at *7 (Tex.

App.––Austin Feb. 1, 2013, no pet.) (mem. op.) (remanding sanctions issue in light of

appellate court’s determination that res judicata did not apply to bar claims when

sanctions award was largely based on trial court’s erroneous ruling); 2055, Inc. v.

McTague, No. 05-08-01057-CV, 2009 WL 2506342, at *9 (Tex. App.––Dallas Aug. 18,

2009, no pet.) (mem. op.) (vacating sanctions order for frivolous pleading because of

reversal of trial court’s summary judgment); Houtex Ready Mix Concrete & Materials v.

Eagle Constr. & Envtl. Servs., L.P., 226 S.W.3d 514, 522 (Tex. App.––Houston [1st

Dist.] 2006, no pet.) (holding that trial court abused its discretion by awarding Rule 13

24
Appellees did not file their own notice of appeal challenging the trial court’s
denial of their motion for partial summary judgment, so we may not review the
propriety of that denial on appeal. See Tex. R. App. P. 25.1(c).

34
sanctions for groundless pleading because appellate court reversed part of trial court’s

summary judgment).

The trial court also found that Skeels’s abandoned derivative claims and

individual breach of fiduciary duty claims against Suder and Cooke 25 were groundless

and brought for an improper purpose: “maximizing the embarrassment and

harassment of” appellees. The trial court reasoned that Skeels would not say why

those claims were dropped and did not engage in any discovery on them. But

sanctions on a claim are not warranted just because a plaintiff presents no evidence in

support of the claim. See Dunavin v. Meador, No. 2-07-230-CV, 2008 WL 2780782, at

*7 (Tex. App.––Fort Worth July 17, 2008, no pet.) (mem. op.). And Skeels testified

that he and his then-counsel consulted a corporate-law attorney in evaluating those

claims before filing them. See, e.g., Loeffler v. Lytle ISD, 211 S.W.3d 331, 348 (Tex.

App.—San Antonio 2006, pet. denied) (op. on reh’g) (noting that in determining

groundlessness, court objectively considers whether “the party and counsel made a

reasonable inquiry into the legal and factual basis of the claim at the time the suit was

filed”).

Moreover, because of his shareholder status, Skeels was authorized to bring

both the derivative and breach of fiduciary duty claims. See Tex. Bus. Orgs. Code Ann.

§ 21.563; Sneed v. Webre, 465 S.W.3d 169, 183 (Tex. 2015); Ritchie, 443 S.W.3d at 881–

25
The parties focus their appellate arguments on the propriety of Skeels’s suit in
its entirety, including his claims against FSC. But the trial court awarded sanctions
only to Suder and Cooke individually.

35
82. And because FSC is a closely held corporation, Skeels did not need to show that

he fairly and adequately represented FSC’s interests as a prerequisite to filing suit. See

Tex. Bus. Orgs. Code Ann. §§ 21.552, .563(b). Neither Suder nor Cooke presented

evidence showing that such claims were baseless in law or fact at the time they were

filed, considering Skeels’s then-current shareholder status, or that––considering the

viability of at least the declaratory judgment claim––Skeels’s reason for bringing the

abandoned claims was merely to harass Suder and Cooke.26

Accordingly, we reverse the trial court’s sanctions award in addition to the

remainder of its judgment. We sustain Skeels’s sixth issue.

VI. Conclusion

We reverse the trial court’s declaratory judgment for FSC and render a

declaratory judgment that FSC’s attempted redemption of Skeels’s shares was not

authorized by the TBOC and is, therefore, of no effect. Because the $100,000

attorney’s fees award to FSC was based on the trial court’s disposition of FSC’s

counterclaim for declaratory judgment, we reverse that award as well and remand the

issue of whether attorney’s fees should be awarded to Skeels in light of our rendition

of a declaratory judgment in his favor.27 Likewise, because Skeels’s common law and

statutory mandamus claims were premised on his retaining shareholder status in FSC,

and thus dependent on his prevailing on his declaratory judgment claim, we must

We note that Section 21.563(c) leaves to the trial court the decision of
26

whether to award damages directly to the suing shareholder “if justice requires.” Tex.
Bus. Orgs. Code Ann. § 21.563.

36
remand them for further proceedings. We also reverse the sanctions award of $10,000

each to Suder and Cooke.

/s/ Wade Birdwell

Wade Birdwell
Justice
Delivered: September 24, 2020

27
We need not, therefore, address his fourth issue independently attacking the
attorney’s fees award. See Tex. R. App. P. 47.1.

37