Current Month (October 2026)
Texas Business Court Reinforces Contractual Limits on LLC Fiduciary Duties
By Morgan Smith
In Hinds v. Sandman Offshore, LLC, 2026 Tex. Bus. 63 (11th Div. Sep. 14, 2026), the Texas Business Court reinforced Texas’s strong contractual approach to LLC fiduciary duties. The dispute arose after an oil-and-gas LLC removed one of its co-managers and subsequently expelled him as a member, prompting claims for breach of contract, breach of fiduciary duty, and other alleged misconduct. The plaintiff challenged his removal and expulsion as improper, while the defendants alleged that the plaintiff’s conflicting business interests justified their actions. The court held that an LLC agreement limiting managers to fiduciary duties expressly stated in the agreement foreclosed claims premised on additional duties arising from removal or expulsion of a member. Some claims based on expressly preserved obligations, including willful misconduct, survived. The court also declined to recognize an informal fiduciary relationship despite allegations of a sixteen-year business relationship marked by trust and reliance. The decision underscores the importance of carefully drafting fiduciary duty provisions in Texas LLC agreements.
Texas Business Court Clarifies Removal Timing and Amount in Controversy
By Morgan Smith
In Dhannani v. Batool, 2026 Tex. Bus. 61 (11th Div. Sep. 11, 2026), the Texas Business Court provided additional guidance on removal from district court. The underlying dispute involved allegations that the defendants misappropriated company inventory and funds, withheld business accounts and customer information, and engaged in competing business activities. The plaintiff pursued individual and derivative claims involving fiduciary duties, trade secrets, and company governance, ultimately alleging damages exceeding $5 million. The court held that, where an application for temporary injunction was pending when facts establishing Business Court jurisdiction became discoverable, removal was timely when filed within thirty days after the district court ruled on the application. The court also addressed the $5 million amount-in-controversy requirement, holding that allegations exceeding the threshold shifted the burden to the party seeking remand to demonstrate that the amount was improperly asserted or could readily be established below the jurisdictional minimum. The decision further develops Texas’s emerging Business Court removal jurisprudence.
Second Circuit Expands EFAA’s Reach: Sexual Harassment Claims Can Render Entire Lawsuit Nonarbitrable
By Leslie A. Berkoff, Partner and Chair of Dispute Resolution Practice Group, Moritt Hock & Hamroff LLP
On September 30, 2026, the U.S. Court of Appeals for the Second Circuit joined the Sixth and Ninth Circuits in holding that the Ending Forced Arbitration of Sexual Assault and Sexual Harassment Act (“EFAA”) permits plaintiffs to avoid arbitration of an entire lawsuit, including claims unrelated to alleged sexual misconduct.
Enacted in 2022 in response to the #MeToo movement, the EFAA amended the Federal Arbitration Act to prohibit enforcement of pre-dispute arbitration agreements, at the election of an individual alleging sexual harassment or sexual assault, with respect to a case relating to such disputes. See 9 U.S.C. § 402. Courts have since grappled with whether this protection extends beyond sexual misconduct allegations to otherwise arbitrable claims asserted within the same lawsuit.
In Diaz-Roa v. Hermes Law, P.C., No. 24-3223 (2d Cir. Sept. 30, 2026), the Court concluded that the EFAA’s reference to a “case,” rather than individual claims, renders a pre-dispute arbitration agreement unenforceable as to all claims asserted in an action when the statute is properly invoked, not just the alleged sexual misconduct claims.
In Diaz-Roa, a former executive alleged that her employers terminated her employment after she sought to exercise vested stock options. Her complaint asserted sexual harassment claims alongside breach of contract, tortious interference, conversion, and New York Labor Law claims concerning those options. The defendants did not dispute that the sexual harassment allegations triggered the EFAA. Instead, they argued that the claims concerning stock options, which were unrelated to the alleged harassment, remained subject to arbitration.
The district court rejected that distinction and denied the motion to compel arbitration.
Affirming, the Second Circuit relied on the statute’s plain language, reasoning that Congress deliberately used “case” rather than “claim.” Accordingly, once the EFAA applies, its protections extend to the entire action regardless of whether individual claims independently concern sexual harassment or assault.
The decision aligns with the Sixth Circuit’s ruling in Bruce v. Adams & Reese, LLP, 168 F.4th 367 (6th Cir. 2026), and the Ninth Circuit’s decision in Ding v. Structure Therapeutics, Inc., No. 25-1532 (9th Cir. Aug. 19, 2026). Notably, Diaz-Roa’s conversion claim was the only nonharassment claim remaining on appeal.
Despite this emerging consensus, significant questions remain concerning the EFAA’s application. Courts continue examining whether allegations must satisfy federal pleading standards or merely be nonfrivolous, and whether the statute encompasses sex-based discrimination unrelated to sexual conduct.
These issues may substantially influence the EFAA’s reach and the enforceability of employment arbitration agreements.
For practitioners drafting or enforcing arbitration provisions, Diaz-Roa underscores an important consequence: The inclusion of a qualifying sexual harassment or assault dispute may prevent arbitration of an entire lawsuit, even where its remaining claims involve independent contractual, financial, or statutory obligations.
