The Business Court has granted Defendants’ Rule 91a motion to dismiss Plaintiffs’ conversion claim based on a restructuring of LLC members’ interests in a Houston brewery.
Duncan C. Carrington and Zachary Hiller v. Aaron Corsi, Ryan Soroka, Seaan M. Rosenbaum; Benjamin Meggs; BCHC Merge, LLC; Bayou City Hemp Company, Inc.; and BC Infinity, Inc. (2026 Tex. Bus. 57; August 12, 2026) arose from a series of dealings involving investors in a brewing company. In 2011, Carrington invested $50,000 in exchange for 50,000 Class A Units. In 2014, he bought another 7,500 newly issued Class A-1 Units, and Hiller invested $25,000 in exchange for 25,000 Class A-1 Units. None of these Units carried voting rights, which were reserved for Class B members. In May 2023, individual defendants Corsi, Soroka, and Rosenbaum and the BCI defendants Meggs, BCHC Merge, Bayou City Hemp, and BC Infinity concluded a Contribution and Exchange Agreement of Interests concerning the the brewery. The individual defendants were designated “Rollover Members” and received Bayou City shares. Plaintiffs were allocated interests in a $1.125 million Convertible Promissory Note, of which Plaintiffs allege they got “only approximately” seven percent.
In August 2023, Bayou City notified Plaintiffs that it had elected to convert their Promissory Note into Bayou City stock, while Plaintiffs each received 945 shares of non-voting Class A Common Stock. Unhappy about this turn of events, Plaintiffs filed a lawsuit in the Business Court, alleging that Defendants converted Plaintiffs’ interests in the brewery by negotiating and executed the Contribution and Exchange Agreement, giving the Units to Bayou City, and grossly diluted the value Plaintiffs received by way of the Convertible Promissory Note. The brewery’s amended and restated company agreement provided that the members’ interests “shall be represented by Units, which may, but need not be certificated,” and separately allowed designated officers to sign certificates “if any,” but only when issuance had been auhorized by a resolution of the managers. Plaintiffs’ amended petition, however, didn’t allege that the brewery’s managers adopted such a resolution or that the brewery issued a certificate for Plaintiffs’ interests.
Defendants moved to dismiss Plaintiffs’ conversion claim under Rule 91a. In an opinion by Judge Androgué, the court granted the motion. The issue came down to “the kind of property that can be converted,” which under Texas law means only tangible personal property (citations omitted). An intangible right can be coverted only when the “merger exception” applies. This exception works when the intangible right “has been merged into a physical document and the document itself is converted” (citations omitted). But the exception didn’t apply here because Plaintiffs didn’t allege “dominion over any tangible property.” The brewery’s company agreement didn’t alter the statutory presumption under the BOC that LLC membership interests are uncertificated nor that the brewery’s interests are certificated. As Plaintiffs conceded, the managers didn’t adopt a resolution stating otherwise, issue certificates for Plaintiffs’ units, nor took or exercised dominion over any certificates. And neither the contribution and exchange agreement nor the promissory note embodied Plaintiffs’ interests so that they could have tangible form.
The court held that under the facts as alleged, Texas law didn’t recognize Plaintiffs’ theory of conversion. It thus granted Defendants’ Rule 91 motion to dismiss for failure to state a claim.It denied, however all other relief requested by the motions, including costs and attorney’s fees.
