Two people start a company together. Six years later, one of them learns the other has been working a sizeable real estate deal without him, and the relationship ends. The one who was left out sues his co-owner personally. He pleads breach of contract, quantum meruit, civil conspiracy, misappropriation of confidential information, fraud, negligent misrepresentation, and fraud by nondisclosure.
Every claim is dismissed.
Not because a court decided nothing happened. Because the claims were never his to bring, and because his response to the summary judgment motion was filed late and struck.
That is the short version of a Memorandum Opinion the Business Court of Texas signed on October 7, 2026. If you co-own a company in North Texas and you are heading toward a fight with your partner, it is worth understanding what went wrong here, because almost none of it was about the underlying facts.
The ruling: Crain v. Northern
The case is Michael D. Crain v. William “Will” Northern, cause number 25-BC08A-0014, published as 2026 Tex. Bus. 72. It was decided by Judge Jerry D. Bullard in the Eighth Division of the Business Court of Texas, which sits in Fort Worth.
Crain and Northern formed Northern Crain Realty, LLC in 2020, along with two subsidiaries, Northern Crain, LLC and Northern Crain Property Management, LLC. The opinion refers to all three as the NC Entities. The relationship broke down over what the court described as a lucrative real estate opportunity involving the acquisition of Woodhaven Country Club.
By the time Northern’s summary judgment motion was heard, two things had already happened that shaped everything after. In March 2026 the court dismissed Crain’s derivative claims for lack of standing. In August 2026 it dismissed his formal fiduciary duty claims. Those two rulings removed the ground that most of his remaining theories were standing on.
Northern then filed a combined traditional and no-evidence motion for summary judgment. The court granted it on every claim, and this October opinion explains why. It is the fifth published opinion in the case.
Individual claims and company claims are not the same thing
This is the distinction the case turns on, and it is the one business owners most often miss.
When a co-owner does something that harms the business, the injury usually belongs to the business. The company lost the opportunity. The company’s confidential information was taken. The company’s money went somewhere it should not have gone. That makes the claim the company’s property, not yours, even though you own part of the company and you are the one who is angry.
A member can sometimes sue on the company’s behalf. That is a derivative action, and it comes with its own requirements. What a member cannot do is take a claim that belongs to the entity, file it in his own name, and expect it to survive.
The court put it directly when it addressed the misappropriation claim, finding that Crain’s allegations were impermissibly derivative. The petition alleged that Northern obtained the NC Entities’ confidential information. Not Crain’s. Once the derivative claims were dismissed for lack of standing, anything that was really the company’s injury had nowhere left to live.
The contract claim failed on who signed what
Crain’s breach of contract claim did not fail because the court found no breach. It failed because the court could not find a contract between the two men.
As the opinion puts it, the only contracts of record are the NC Entities’ Company Agreements. Northern was not an individual party to them. Crain’s own deposition testimony confirmed there was no contract between himself and Northern personally. The court concluded that any remedies for Northern’s alleged breaches would accrue to the NC Entities, not Crain, and granted summary judgment on both no-evidence and traditional grounds. A footnote records that no third party beneficiary arguments were before the court.
The practical lesson is worth sitting with. A company agreement is a contract among the members and the company. It is not automatically a contract between you and your co-owner in their personal capacity for every purpose. If you want your partner to owe you something personally, it has to be in a document they signed personally.
Quantum meruit ran into the company’s own compensation clause
Crain also argued he should be paid for what he put in. The court described his pleaded allegations as bare boned and unsupported, and found that the services he claimed, his time, his expertise and his connections, were directed at the NC Entities and were neither directed at Northern nor intended to benefit Northern.
Then the company agreement finished the claim off. As Crain himself described it in his deposition, no member is to receive compensation for services to the company except if agreed and in writing by unanimous consent of all the members. No such written consent existed.
This is a common and expensive surprise. Owners contribute years of uncompensated work on the understanding that it will be recognised later. The document they signed at formation often says, in plain terms, that it will not be unless everyone agrees in writing. The time to get that writing is when the work is being done.
The fraud claims needed an injury to Crain himself
The court accepted something notable here. It wrote that it is undisputed Northern did not inform Crain of all his actions and intentions concerning the Woodhaven Project. That admission did not rescue the fraud claims.
For fraud and common law fraud, the court found no showing of materiality, falsity, or intent to induce. It made a point that is easy to miss: Crain’s own argument was that Northern sought to keep information away from him. Keeping information away from someone is close to the opposite of making a false statement to induce them to act. And once again, the court found that any injuries suffered would be borne by the NC Entities, not Crain individually.
The negligent misrepresentation claim failed on the same ground plus its own elements. The court found no actionable false representation, no failure to use reasonable care, and no proximate causation, describing Crain’s allegation as unsupported and conclusory.
Fraud by nondisclosure needs a duty to disclose
Silence is only actionable in Texas if you had a duty to speak. The court had already held that Crain and Northern did not have a formal fiduciary relationship, and without that it found no duty to disclose. It added that if any disclosure duty existed, Northern owed disclosure to the NC Entities, not Crain individually, and that nothing before it supported the nondisclosure being material to Crain.
Be careful about how far you take this. Texas law recognises both formal and informal fiduciary relationships, and whether an informal or confidential relationship exists between two co-owners is a fact specific question that this opinion did not resolve. What the opinion does establish is that co-owners of a Texas LLC should not assume a personal fiduciary duty runs between them by default. If you are relying on one, you are relying on something that has to be proved.
Conspiracy had nothing left to attach to
Civil conspiracy in Texas is a derivative tort. It needs an underlying wrong and it needs at least one other person.
Crain had neither by the time the motion was heard. The co-defendant, Tyler Goldthwaite, had been dismissed earlier, leaving no identified co-conspirator. The court found that the conspiracy allegation in Crain’s Second Amended Petition was no more than a recitation of the elements, with no identified overt act, and concluded that it was left with unreasonable inferences from other facts and circumstances which, alone, do not raise more than a mere suspicion of conspiracy.
The deadline that decided the case
This part of the opinion is doing more work than any of the substantive analysis, and it is the part every business owner in litigation should read.
Northern filed his combined motion on May 29, 2026. Crain filed his response on June 27, 2026, roughly twenty nine days later. Under the rules of civil procedure the nonmovant has twenty one days. Crain filed without the movant’s consent, without leave of court, and without the good cause showing the case law requires. Northern moved to strike on June 29.
At a hearing on July 15, 2026, the court sustained the objection, granted the motion to strike, and refused to consider Crain’s response at all. It then granted the combined motion.
Understand what that means against a combined motion. A no-evidence motion shifts the burden to the party resisting it to come forward with evidence on the challenged elements. If your response is struck, you have produced nothing. There is no record for the court to weigh, and the motion is granted on that basis alone.
The court relied on established authority that a late response filed without leave is not considered, and that getting leave requires an affirmative showing of good cause rather than an explanation offered after the fact. If you need more time, the motion for leave goes in before the filing, not after it.
What to do before you are in this position
Five things come out of this opinion that are worth acting on while nothing is on fire.
Settle whose claim it is before you file. Sit down with counsel and separate the harms to you personally from the harms to the company. That single question determines who the plaintiff is, what has to be pleaded, and whether the case survives a plea to the jurisdiction. Getting it wrong is not a drafting problem you can fix later, as this case shows.
Know what the derivative route requires. It is not simply a different caption. For Texas corporations, the Business Organizations Code requires a written demand on the company before suit and a waiting period, and the Texas Supreme Court has held that a shareholder can no longer avoid a demand by proving it would have been futile. Closely held entities have a separate path. Limited liability companies have their own parallel set of provisions, and which ones apply to your entity is worth confirming against the statute rather than assumed.
Put personal obligations in personally signed documents. If your partner is promising you something, and not promising the company something, the promise belongs in an agreement they sign in their own name.
Get the compensation writing at the time. If your company agreement conditions member compensation on unanimous written consent, obtain it while the work is being valued and the relationship is good.
Calendar every deadline the day a motion is served. Twenty one days is not long, and the consequence of missing it in a no-evidence posture is not a scolding. It is the case.
Where this fits in the Business Court
The Business Court of Texas has been operating since September 1, 2024, and it issues written opinions, which is part of why rulings like this one are useful to businesses that are not parties to them. The Eighth Division sits in Fort Worth. Appeals from the Business Court go to the Fifteenth Court of Appeals.
If you are weighing whether a dispute of yours belongs in that court at all, that is a separate question with its own dollar thresholds and claim categories, and we have written about it in How Business Litigation Works in Texas: A Plain-Language Overview and in more detail elsewhere on this site.
What is still unsettled
A few honest caveats.
Whether an informal or confidential relationship between co-owners can supply a duty to disclose was not decided here. The court addressed the absence of a formal fiduciary relationship, which it had already ruled on separately.
The opinion names eight claims in the motion but organises its analysis under seven headings, because two fraud theories are treated together. Descriptions of the case that say seven claims and descriptions that say eight are both defensible depending on what is being counted.
This is a trial court opinion in one case, on one record, where the nonmovant’s evidence was never considered. It tells you a great deal about how these claims are analysed and very little about how the same facts would have come out on a complete record.
If you want help working out whether a pending or threatened dispute with a co-owner belongs to you or to your company, or reviewing the compensation and dispute resolution language in your company agreement before the next disagreement starts, the litigation attorneys at Hanshaw Kennedy Hafen work with companies across Frisco, Plano, McKinney, and the surrounding North Texas communities. Visit our Litigation page to learn more.
Related reading
- What Happens When a Texas Business Partnership Breaks Down?
- Does Your Texas Business Dispute Belong in the Business Court?
- Can a Texas LLC Remove a Member Without Notice? What a New Business Court Ruling Says
- Can a Texas Shareholder Sue the Board Without Asking First? What a New Business Court Ruling Says
About the author: Hastings L. Hanshaw is a founding partner of Hanshaw Kennedy Hafen in Frisco, Texas. He is a business litigation and trial lawyer who has tried cases in state and federal courts across Texas.