Texas Business Dispute Blog

Monday, November 30, 2015

LISTEN TO MOM, AND KEEP ALL OF YOUR EMAILS NICE: EARLY LESSONS FROM ANDREWS KURTH ADVERSE JURY VERDICT

A Texas jury just issued a large verdict in a case against the Houston-based law firm of Andrews Kurth LLP in a case that involved a business dispute between two brothers.  While it is too soon to reach any final conclusions, the magnitude of the jury’s award—more than $167 million—provides us with an opportunity to consider some important lessons for both lawyers and family business owners.  Chief among those are to remember the sage advice we received from our mothers: if you don’t have anything nice to say, don’t say it at all (even in an internal email to co-counsel).


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Monday, November 16, 2015

Additional Thoughts on Positive Culture: A Memorable Visit to Texas A&M University


The importance of culture is by no means limited to for profit companies – culture is also critical at not for profit firms, universities and trade groups.  One of my favorite blog posts on culture was written several years ago by a friend, Jeff Whittle, shortly after he returned from watching his college team play at Texas A&M University on a football weekend.  Jeff visited the campus to see his team (the University of Florida) play the Aggies, and his post highlights the remarkable warmth and friendly hospitality he experienced throughout his stay.  The powerful and emotional connection that Texas A&M alums feel toward their school is easy to understand after reading Jeff’s post.  A&M’s culture and its people make it a special place.
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Wednesday, November 11, 2015

Positive Private Company Culture (Part 3): The Real Deal Matters in the Real World

Sincerity is everything. If you can fake that, you’ve got it made.” George Burns

We smile as we read George Burns’ famous quote because authenticity is such a key to success, we know some companies will attempt to fake it.   In the business world where clients crave authenticity, however, false attempts at sincerity are a major turnoff.

How do we know that a company gets sincerity?  The small things often provide the best clues.  My brother-in-law, Jeff Frankel, owns a Mexican restaurant, Mattito’s, and it was obvious he was doing the right thing the first time I visited when the waiters quickly refilled the chips and salsa without being asked. At Mattito’s, diners are greeted with a friendly warmth that cannot be faked. The food is always great, and is served promptly. Jeff treats his employees like family, many of whom have worked at Mattito’s for years. They enthusiastically respond to his genuine appreciation.  These “small things” spell success for Jeff, and his restaurants receive glowing reviews.  It is therefore no surprise that Jeff will soon be opening his fifth Mattito’s location in the Dallas/Fort Worth area (across from Vista Ridge Mall).


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Wednesday, November 4, 2015

Building A Positive Company Culture 101: A Critical Asset Not on the Balance Sheet (Part 2)

I came to appreciate the importance of a positive business culture when I first started practicing law as an associate attorney more than 30 years ago – well before the advent of smart phones, tablet computers and even the internet.

An organization’s culture is not set by decree; it is established through the (often subtle) actions of its leaders.  At my firm, the name partner and co-founder built our culture through the way that he treated people.  He insisted that everyone at the firm call him by his first name and he would stop you in the hall (always with a smile) if you called him by his last name.  Despite his busy schedule, he made the time throughout the year to call everyone – from senior partners to receptionists and mail room clerks – to wish them a happy birthday on their special day.  He lived out our culture by being approachable and showing that success would be based on merit, not rank. His remarkable openness, warmth and personal attention set the tone for the firm, which resonated both internally and externally.


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Tuesday, October 27, 2015

Company Culture 101:A Critical Asset Not on the Balance Sheet (Part 1)

While I was waiting on a delayed flight at the airport last week, a stranger sitting next to me made things more interesting by starting up a conversation with an intriguing question.  His question to me went like this:

Question

I busted my ass this week checking out installations for my company all over town, and I even drove to one place I heard about that wasn’t even on the list they gave me. The problem is that while I was at this place, I was in a hurry and accidentally locked the keys in the rental car, and they charged me an extra $100 to come unlock it.  Do you think that I should submit this extra charge as a business expense to my company or cover it myself?

A number of responses came to mind, including, why are you asking me—a stranger—for my opinion.  But, here is a summary of some of the thoughts that I shared with him.


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Tuesday, October 20, 2015

Optimizing Value for Clients as Settlement Counsel in Divorce Cases


As Settlement Counsel for a divorcing spouse in family law cases, our role is to negotiate, structure and implement a Business Divorce that optimizes the value of the divorce settlement.  This Business Divorce settlement may be structured to take several different forms, but often includes continued co-ownership of assets by the couple following divorce with an extensive set of protective measures to govern future conduct and provide for a redemption at a later point.  From a business perspective, forcing a sale or division of all of the assets in the marital estate at the time of the divorce is equivalent to a liquidation, which often results in a negative financial outcome.  More specifically, requiring a division or sale of all of the marital assets can substantially drive down the value of the investments and also require expensive, protracted fights over valuation.

Recently, we had the opportunity to discuss Business Divorce concepts at a lunch meeting of the Family Law Section of the Houston Bar Association.
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Monday, October 5, 2015

Red Flags for Minority Investors in Private Companies 101: Smoke v. Fire

Minority investors in private companies accept significant risks in making non-control investments, including both business risk and management risk.  Examples of business risk are many and include increased competition, changes in government regulations and gaining or losing patent protection.  The focus of this Post, however, is on the risks minority investors are exposed to from majority owners who exploit their control over the company.  Specifically, this Post reviews red flags indicating that the company’s management is acting other than in the best interests of the company and its investors.


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Thursday, September 17, 2015

Negotiating a Business Divorce in Family Law Cases 101:

Deferred Gratification and Other Key Business Considerations

People marry out of love, and notions of romance are inconsistent with a view of the marital unit as a business entity. Yet, if the marriage falters and the couple seeks a divorce after they have accumulated significant assets, business concepts may play a large role in their divorce proceeding.  This Post focuses on some significant business issues that frequently arise when couples divide business assets in a divorce proceeding.


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Tuesday, September 8, 2015

Private Equity Investment 101: All That Glitters Is Not Gold

Majority owners of successful private companies are typically focused on growing their businesses.  Maintaining a robust growth rate requires owners to reinvest in their companies, however, which in turn, often creates a need for a capital infusion.  When the need for capital to invest in the business exceeds the cash flow that the company is generating, an investment from a private equity (PE) firm may be the answer.  In return for its investment in the business, the PE firm will obtain a minority ownership stake in the company.

An investment by a PE firm can be transformative for a growth company, but this type of investment also comes with potential pitfalls that majority owners should consider carefully.  In this Blog Post, we review key concerns that majority owners will want to address in structuring the terms of a PE investment in their company.


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Monday, August 24, 2015

Employee Ownership 101: Pitfalls for Employees as Minority Owners in Private Companies

On the face of it, the grant of minority ownership interests to key employees in private companies should be a win-win for both emerging companies and also for key employees of the business.  The company offers an equity stake to key employees, but pays them modest, below-market compensation to help launch and grow the business.  The employees agree to accept the low level of compensation, but they are incentivized by the minority ownership interest they receive in the business in hopes of obtaining significant financial rewards in the future when the company is ultimately sold, merged or goes public.  Drilling down a bit, however, problems may arise here, particularly for the employees who are granted a minority ownership interest in the business, but have no employment contract and no provisions to protect them in regard to their minority ownership stake in the company.


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Wednesday, August 5, 2015

Valuation 101: The Buck Stops Here—Valuing a Minority Interest in a Private Texas Company With a Contractual Buy-Sell Provision

As we discussed in our post on February 5, 2015, the wise investor recognizes the critical importance of a “corporate prenup” and will therefore insist on securing some form of buy-sell agreement before investing in a limited partnership, limited liability company, or closely held corporation.  The buy-sell agreement is a contractual exit strategy that benefits both majority and minority owners.  It provides majority owners with a contractual means to buyout the interests of minority owners and provides minority owners with the ability to cash-out of their investment. The importance of securing a buy-sell agreement became even more essential for minority owners last year, however, when the Texas Supreme Court decided in Ritchie v. Rupe to suddenly eliminate the right of minority shareholders to secure a court-ordered buyout as a remedy for oppression by the majority owners.


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With offices in Houston and Dallas, Diamond McCarthy LLP assists a variety of clients with their Texas Business Divorce matters throughout Texas, including Austin, San Antonio, Midland, Fort Worth, Galveston, Amarillo, Abilene, and Waco.



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