Posted by Rich Phillips
In its weekly order list on May 29, 2015, the Supreme Court of Texas issued one opinion in an argued case. The Court did not grant any new petitions.
In No. 12-0045, Sneed v. Webre, the Court addressed a shareholder derivative suit in the context of a closely held corporation. In a unanimous opinion by Justice Green, the Court confirmed that the business-judgment rule applies to derivative suits against closely held corporations. But the Court held that because article 5.14(L) of the Business Corporation Act expressly provides that article 5.14's standing, demand, and mandatory dismissal provisions do not apply to derivative suits against closely held corporations, a shareholder in a closely held corporation does not need to establish derivative standing by "by pleading or proving that the directors failed to exercise their honest business judgment in not pursuing the corporate cause of action."
The Court also held that Texas recognizes the concept of "double-derivative standing," in which a shareholder of the parent corporation can maintain a derivative suit on behalf of a wholly owned subsidiary. Where the parent company owns all of the stock of the subsidiary, a shareholder of the parent company is also an equitable owner of the subsidiary.
Starting on Tuesday, June 2, the Court will be holding conference weekly through June 23. Therefore, we anticipate that the Court will issue several more opinions before the beginning of July. We then expect the Court to be relatively quiet until mid-August, ahead of the end of the fiscal year on August 31.