Highlights
HKH represented a Rockwall-based dental practice in an arbitration dispute brought by a former partner seeking substantial liquidated damages after the partnership was terminated. HKH argued that the termination was justified under the contract and that the liquidated damages provision was unenforceable under Texas law. The arbitrator denied the plaintiff’s claims in their entirety.
Attorneys
Trey Volentine
Practice Type
Business Litigation & Partnership Dispute
Time
6 Months
The Challenge
HKH’s client, a general dental practice in Rockwall, Texas, entered into a joint venture with an oral surgery practice. The oral surgeon would perform procedures at the client’s facility, and the two practices would share revenue. The partnership agreement included a liquidated damages provision requiring the terminating party to pay a significant sum if the contract was ended without cause. However, the agreement also defined several grounds for termination with cause, including the failure to obtain insurance credentialing.
During the credentialing process, serious concerns about the oral surgeon’s background surfaced, and the insurance provider refused to credential him. Without credentialing, the partnership was unworkable. HKH’s client terminated the agreement, citing the credentialing failure as a contractual basis for cause.
Despite the clear contractual justification, the oral surgeon filed suit in arbitration seeking the full liquidated damages amount plus attorney’s fees, costs, and interest. The case posed a steep challenge: Texas courts strongly favor freedom of contract between sophisticated business entities, and arbitration awards are notoriously difficult to appeal. Arbitrators are also known for splitting the difference between parties rather than ruling decisively for one side.
Legal Strategy
Trey Volentine built a two-pronged defense. First, HKH challenged the enforceability of the liquidated damages provision. Under Texas law, such a clause must reflect damages that were difficult to estimate at the time of signing and must represent a reasonable forecast of those damages. Texas is also a “second look” jurisdiction, meaning courts can invalidate the provision if actual damages fall far short of the stated amount. Through testimony, HKH showed the damages figure was inserted at the last minute without any supporting analysis. It was an arbitrary number, not a reasonable estimate.
Second, HKH argued that even if the provision were valid, the termination was justified under the contract’s own terms. The agreement explicitly listed the failure to obtain insurance credentialing as grounds for cause, and that is exactly what occurred.
Results
The arbitrator denied the plaintiff’s claims in their entirety. HKH’s client owed nothing. In arbitration, where partial awards and split decisions are common, a complete defense verdict is a rare and significant outcome.
Trey Volentine’s thorough preparation and command of Texas contract law delivered a decisive win, allowing the client to move forward without any financial liability from the failed partnership.