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Litigation Pitfalls to Avoid: Lessons Learned from Texas Business Cases

Howry, Breen & Herman, LLP

Business litigation can be a complex and daunting process, especially in the state of Texas. With a constantly evolving legal landscape, it is crucial for businesses to stay informed and prepared for potential pitfalls. In this blog post, we will discuss five key lessons learned from recent Texas business cases that can help your company avoid costly litigation pitfalls.

1. The Importance of Clear and Enforceable Contracts

In the case of Barrow-Shaver Resources Co. v. Carrizo Oil & Gas, Inc., the Texas Supreme Court emphasized the importance of clear and enforceable contracts. The court held that a consent-to-assign provision in an oil and gas lease was unambiguous and enforceable, resulting in a multi-million dollar judgment against the plaintiff. To avoid similar pitfalls, businesses should:

  • Ensure that contracts are clear, concise, and unambiguous
  • Consult with experienced legal counsel when drafting and negotiating contracts
  • Be cautious when entering into contracts with broad or vague provisions

2. Protecting Trade Secrets and Confidential Information

In Tolliver v. Texas Gulf Bank, N.A., the Texas Court of Appeals highlighted the importance of protecting trade secrets and confidential information. The court upheld a judgment against a former employee who had misappropriated trade secrets and breached a confidentiality agreement. To safeguard your business's valuable information, consider implementing:

  • Non-disclosure agreements for employees and third parties
  • Restrictive covenants, such as non-competition and non-solicitation agreements
  • Comprehensive policies and procedures for handling confidential information

3. The Risks of Misclassifying Workers

In Texas Workforce Commission v. Southwestern Bell Telephone Co., the court addressed the issue of misclassifying workers as independent contractors instead of employees. The court held that the company was liable for unpaid overtime wages, emphasizing the risks associated with misclassification. To avoid potential liability, businesses should:

  • Consult with legal counsel to ensure proper classification of workers
  • Regularly review worker classifications and update as necessary
  • Be aware of the potential consequences of misclassification, including back wages, penalties, and litigation costs

4. The Consequences of Breaching Fiduciary Duties

In Chalker Energy Partners III, LLC v. Le Norman Operating LLC, the Texas Supreme Court addressed the issue of fiduciary duties in the context of a failed business transaction. The court held that the defendant had breached its fiduciary duties, resulting in a significant judgment against it. To avoid similar pitfalls, businesses should:

  • Understand the fiduciary duties owed to partners, shareholders, and other stakeholders
  • Ensure that corporate actions are taken in the best interests of the company and its stakeholders
  • Consult with legal counsel to navigate complex fiduciary duty issues

5. The Necessity of Properly Documenting Business Transactions

In W2WTS, LLC v. Integrated Environmental Technologies, LLC, the Texas Court of Appeals emphasized the importance of properly documenting business transactions. The court held that the plaintiff had failed to prove its breach of contract claim due to insufficient documentation. To avoid such issues, businesses should:

  • Maintain accurate and thorough records of all business transactions
  • Implement a system for tracking and organizing important documents
  • Consult with legal counsel to ensure proper documentation of agreements and transactions

By learning from these recent Texas business cases, your company can take proactive steps to avoid costly litigation pitfalls. At Howry, Breen & Herman, LLP, our experienced attorneys can help you navigate the complexities of business litigation and provide valuable guidance to protect your company's interests. Contact us today to discuss your business's legal needs.

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