## IN THE SUPREME COURT O F TEX AS

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. 13-0014

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### C A R D IA C 

### P E R F U S IO N 

### S E R V IC E S 

### , I N C


### . A N D 

### M IC H A E L 

### J O U B R A N 

### , P E T IT IO N E R S 

### ,

v . 

### R A N D A L L 

### H U G H E S 

### , R E S P O N D E N T

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O N P E T I T I O N F O R R E V I E W F R O M T H E C O U R T O F A P P E A L S F O R T H E F I F T H D I S T R I C T O F T E X A S

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P ER CURIAM

I n this case the trial court conclude d based on jury finding s that Michae l J oubran, an office r, direc tor, and majority share holder of Cardiac Perfusion Service s, I nc. (CPS), eng ag ed in “oppre ssive conduct to the rig hts of [R andall] Hug hes,” a minority share holder. The court order ed J oubran and
CPS to buy out Hug hes’s shares for $300,000, the amount the j ury found t o be their “fa ir value.” The Dallas Court of Appea ls aff irmed. I n Ritchie v. Rupe , ___ S.W .3d ___ (Tex. 2014), this Court declined to rec og nize a common-law cause of action for share holder oppression and conclude d that th e o n l y statutory reme dy for “oppre ssive” actions is a reha bilitative rec eiver ship. We there fore

reve rse in part and aff

irm in part the court of appea ls’ judgme nt, and we rema nd to the trial court in the intere st of justice.J oubran founded CPS and hired Hug hes as his first employ ee. A y ear later, J oubran, as the

sole share holder, voted to offe r Hughe s 10% of CPS ’s t otal share s for $25,000. Hug hes acce pted the offer and purcha sed t he shares, and the parties enter ed int o a written buy -sell agree m ent. The buy -sell ag ree ment restric ted the sale or transfe r of any share s and requ i re d ea ch share holder to
p u rc h as e t he other share holder’s share s upon “the sever ance of [t hat] share holder’s employ ment rela tionship with [C PS] ,” with the price to be calc ulated using the share s’ book value as o f the
prec eding fiscal y ear . A dispute later arose betwee n the parties, and Hug hes’s employ ment with CPS terminated in Aug ust 2006. The day afte r Hug hes’s employ

ment terminated, CPS and J oubran sued Hug hes for brea ch of fiduciar

y duties and for tortious interfe renc e with a contra ct, and also reque sted decla ratory relief
in the form of an order

decla ring that (1) the buy -sell agr eeme nt g overne d J oubran’ s obliga tion to purcha se Hug hes’s share s, and (2) the amount J oubran owed to Hug hes for the purcha se of his stock should be re d u ced by the damag es that Hug hes’s wrong ful conduct cause d to CPS

. Hug hes filed
counter claims ag ainst J oubran alleg ing (1) brea ch of fidu ci ar y d u t i es “as office r and direc tor” of
CPS , and (2) brea ch of fiduciar y duty “as majority share holder.” Hu gh es alleg ed that J oubran “eng ag ed in oppressive conduct toward Hug hes[] and unfairly squeezed Hug hes out of [C PS] ,” and
reque sted that the court require CPS to buy out his share s for their fair value as of the date J oubran
“wr ong fully

squeezed Hug hes out of the c orpora tion.”
On J oubran’ s and CPS ’s claims for af fi rm at i v e relief

, the jury found that Hug hes did not
t o rt u o u s l y interfe re with any contra ct or brea ch any fiduciar y duties. Wit h reg ard to Hug hes’s
counter claim aga inst J oubran for breach of fiduciar y duties, the j ury found t h at n o re l at i onship of

2trust and confide nce betwee n J oubran and Hug hes that would support the exis tence of any

“informa l” fiduciary duties. The jury did find, howeve r, that Joubran (1) suppre ssed pay ment of 1 profit distributions to Hug hes, (2) paid himself excessive compensa tion from CPS ’s corp o r a te funds, (3) improperly paid his family members using CPS funds, (4) improperly used CPS funds to pay his
persona l expenses, (5) wrong fully used his control of CPS to lower the value of Hug hes’s stock, and (6) ref used to let Hug hes examine CPS ’s books and rec ords. The jury also found that the fair value of Hug hes’s shar es wa s $300,000.
Ba sed on the jury ’s finding s, the trial court issued finding s of fac t and conclusions of law in which it conclude d that J oubran eng ag ed in “oppre ssive conduct to the rig hts of Hug hes.” The court conclude d that J oubran was not entitled to a decla ration of his rig ht to purcha se Hug hes’s share s for “book value” under the buy -sell ag ree ment, and instead, as an equitable reme dy , order ed J oubran to buy out Hug hes’s share s for their “fa ir value” of $300,000. The final judgme nt order ed that CPS and
J oubran take nothing on their claims ag ainst Hug hes, that Hug hes take nothing on his claim ag ainst
J oubran for brea ch of fiduciar y duties, and that, as an eq u i t able reme dy for oppressive conduct,
J oubran and CPS rede em Hug hes’s share s for $300,000. The court als o awa rded Hug hes prejudg ment interest, postjudg ment interest, and attorney ’s fe es. The c ourt of appe als aff irmed.

A s t h e c o u r t o f a p p e a l s c o r r e c t l y a c k n o w l e d g e d i n t h i s c a s e , t h i s C o u r t h a s n e v e r r e c o g n i z e d a f o r m a l f i d u c i a r y 1 d u t y b e t w e e n a m a

j o r i t y a n d m i n o r i t y s h a r e h o l d e r i n a c l o s e l y h e l d c o r p o r a t i o n . A n i n f o r m a l f i d u c i a r y d u t y “ a r i s e s s e p a r a t e a n d a p a r t f

r o m b u s i n e s s r e l a t i o n s h i p s . ” S e e R i t c h i e ,

_ _ _ S

. W

. 3 d a t

_ _ _ n . 2 7 ( c i t i n g M e y e r v
. C a t h e

y , 1 6 7 S

. W

. 3 d 3 2 7 , 3 3 0

– 3 1 ( T e x . 2 0 0 5 ) ) ( “ I n f o r m a l f i d u c i a r y d u t i e s ‘ a r i s e f

r o m “ a m o r a l , s o c i a l , d o m e s t i c , o r p u r e l y p e r s o n a l r e l a t i o n s h i p o f t r u s t a n d c o n f i d e n c e . ” ’

. . . I n f

o r m a l f i d u c i a r y d u t i e s a r e n o t o w e d i n b u s i n e s s t r a n s a c t i o n s u n l e s s t h e s p e c i a l r e l a t i o n s h i p o f t r u s t a n d c o n f i d e n c e e x i s t e d p r i o r t o , a n d a p a r t f r o m , t h e t r a n s a c t i o n ( s ) a t i s s u e i n t h e c a s e . ” )

. 3We need not rea ch the issue of whether the evidenc e is leg ally sufficie nt to support the jury ’s

finding s and the trial court’s conclusion that J oubran eng ag ed in oppressive conduct beca use, even if he did, T exas la

w does not a

uthorize the buy -out order as a reme dy

. I n Ritchie , we clar ified that

a claim for share holder oppression is only available under section 11.404 of the Texas Business Org anizations Code, and that t h e o n l y reme dy available under that statute is a reha bilitative

rec eiver ship. ___ S.W .3d at ___.
Be cause a buy -o u t o rd er is not available under a common-law claim for share holder oppression or under the rec eiver ship statute, and beca use no alterna tive claim supports the trial court buy -out order , we reve rse that part of the trial court’s judgme nt. Howeve r, “[w]e have broad discretion to rema

nd for a new trial in the interest of justice wher e it appea rs that a party may have
proce eded under the wrong leg al theory .” Boyles v. Kerr , 855 S.W .2d 593, 603 (Tex. 1993); see also id. (“Rema

nd is pa rticularly appropr iate whe re the losing party may have prese nted his or her case in relianc e on controlling prec edent that was subsequentl y o v er ru led.”)

. When we declined in Ritchie to follow the Texas courts of appea ls’ decisions rec og nizi ng a common-law cause of action for share holder oppression, we did so in part beca use of the ade q u acy of other exis ting leg al protec tions. ___ S.W .3d at ___. We noted that a minority share holder in a closely held corpor ation
may rec over equitable relief , in som e ca s es i ndividually as well as on behalf of the corpor ation, throug h a deriva tive ac t i o n fo r brea ch of fiduciar y duties under section 21.563(c) of the Business Org anizations C o d e. See id. at ___ (“[T]he L eg islature has enac ted specia l rules to allow its shar eh o l d er s t o m o re easily bring a deriva tive suit on behalf of the corpor ation,

. . . [a] nd when justice require s, the court may trea t a deriva tive action on behalf of a closely held corpor ation ‘as a
4direc t action broug ht by the share holder for the share holder’s own benef it,’ and awa

rd any rec overy direc tly to that share holder.” ); see also T E X
. B U S
. O R G S
. C O D E § 21.563(c) . Although w e express

no opinion on whether Hug hes may succe ssfully pursue such a claim under t h e fa cts of this case , justice requir es that we rema nd to provide him an opportunity to do so.
Acc ording ly , we g rant the petition for revie w and, without hear ing oral arg ument, aff

irm in part an d re v er s e in part the court of appea ls’ judgme nt, and rema nd the case to the trial court for further proce eding s. See T E X
. R. A P P
. P

. 5 9

. 1

. The court of appea ls aff irmed the trial court’s judgme nt on J oubran’ s and CPS ’s claims ag ainst Hug hes for tortious interfe renc e and brea ch of fiduciar y duties and on Hug hes’s claim for brea ch of “informa l” fi d u ci ary duties. No party has challeng ed those holdings, and we aff irm those parts of the court of appea ls’ judgme nt. We reve rse the part of the court of appea ls’ judgme nt aff irming the trial court’s buy -out order and denial of
J oubran’ s and CPS ’s reque st for decla ratory judgme nt, and in the interest of justice, we rema nd the

case for f urther pr ocee dings c onsistent with thi s opinion.

OPI NI ON DEL I VERED: J une 27, 2014

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