On Sept. 14, 2026, Judge Stacy Rogers Sharp issued a decision in Russell A. Hinds v. Sandman Offshore, LLC, addressing the duties LLC members and managers may owe one another in connection with a member’s removal and expulsion. The decision provides guidance on the enforcement of company agreement provisions limiting fiduciary duties and governing notice and removal procedures.

Background: Sandman Offshore Removed Its Day-to-Day Managing Member

Sandman Offshore, LLC is an oil and gas company with five members, each holding a 20% interest. Members Russell Hinds and David Wegner served as co-managers, with Hinds acting as the day-to-day manager. In March 2026, Sandman’s members removed Hinds as co-manager and expelled him as a member the following month for alleged self-dealing, without advance notice or a hearing. Hinds filed suit, and Sandman and Wegner filed counterclaims.

According to the counterclaims, Hinds engaged in self-dealing by recommending that a related entity hire a drilling-services company he owned without disclosing his ownership interest. Sandman further alleged that Hinds then acted unilaterally to prioritize payments to that company over lease payments to Sandman. Hinds responded, contending that the members had always known about his ownership and accused Wegner of orchestrating his removal out of personal animus.

Sandman and Wegner each filed partial motions to dismiss Hinds’ claims under Texas Rule of Civil Procedure 91a. Sandman moved to dismiss Hinds’ breach-of-contract and conversion claims. Wegner moved to dismiss Hinds’ contract and breach-of-fiduciary-duty claims to the extent they were based on Hinds’ removal and expulsion as Sandman manager and member. He also moved to dismiss the remaining claims against him in their entirety. Hinds also moved to dismiss the defendants’ counterclaims; that motion was taken under advisement and is not addressed here.

The court addressed the defendants’ partial motions to dismiss Hinds’ claims.

The Court’s Key Holdings

Fiduciary Duties: Limited by Contract

Hinds brought two breach-of-fiduciary-duty claims against Wegner: one related to Hinds’ removal as manager and member, and the other related to Wegner’s alleged acts or omissions in managing the company that constituted willful misconduct. The court granted Wegner’s motion in part and denied it in part as to these claims.

First, the court explained that members do not owe fiduciary duties to fellow members simply because of their co-member relationship. The court explained that the Texas Business Organizations Code allows company agreements to expand, restrict, or eliminate fiduciary duties.

Section 5.10 of Sandman’s company agreement (the “Sandman Agreement” or “Agreement”) limited managerial liability to acts of “gross negligence, willful misconduct, or breach of this Agreement” and stated that managers “shall not be subject to any duties (including fiduciary duties)” except those set forth in the Agreement. The Agreement did not have a notice requirement prior to removal. The court therefore dismissed Hinds’ fiduciary-duty claims based on the expulsion and removal because the Agreement expressly permitted this company action without notice and set forth the removal process. The court concluded that no fiduciary duty required advance notice.

Second, the court rejected Hinds’ argument that his 16-year business relationship with Wegner, marked by “mutual trust, reliance on one another’s judgment, and personal confidence,” created an informal fiduciary relationship, particularly given that Hinds and Wegner were equal “co-managers and co-members.”

Third, Hinds’ claims alleging willful misconduct in Wegner’s management of the company and alleged usurpation of corporate opportunities and diversion of Hinds’ royalty interest survived dismissal because willful misconduct fell within the Sandman Agreement’s exceptions.

Finally, the court dismissed Hinds’ claim for breach of the implied covenant of good faith and fair dealing. The court concluded that the claim requires a “special relationship,” and, as with Hinds’ informal fiduciary-duty claim, found that the pleading negated the existence of such a relationship.

Breach of Contract: Agreements Will Be Enforced as Written

The court dismissed Hinds’ breach-of-contract claims in part based on alleged procedural failures that the Sandman Agreement did not require, refusing to impose notice or hearing requirements the parties had not bargained for.

The court also rejected Hinds’ argument that the defendants breached the Agreement by expelling him without valid “cause.” The court held that Sandman’s majority had determined that Hinds’ conduct constituted “conflicting business activity,” which provided cause for expulsion.

Hinds’ claim that Sandman breached the Agreement by refusing to honor his demand for a special meeting, as required by Section 5.7, survived based on his allegation that he requested the meeting in the manner required under the Agreement.

Fraud Claims: No Duty to Disclose

The court dismissed Hinds’ claims against Wegner for fraud by nondisclosure and constructive fraud. Both claims hinged on Wegner having a duty to disclose his plans for Hinds’ expulsion. Because the Sandman Agreement permitted action without notice, the court concluded no such duty existed. Having concluded that Hinds’ claims failed as a matter of law, the court did not reach Wegner’s justifiable-reliance defense.

Conversion: Uncertificated LLC Interest Did Not Support Claim

The court dismissed Hinds’ conversion claim, which alleged that the defendants wrongfully took his LLC interest. The court recognized that LLC membership interests are unquestionably personal property, but found no allegations that stripped Hinds of that interest. It also concluded that his membership interest was presumptively uncertificated personal property because nothing in the Sandman Agreement indicated otherwise. Because Hinds’ voting rights were intangible and not merged into a physical document, his conversion claim failed.

Tortious Interference: Claim Could Not Proceed Against Co-Member

The court assumed without deciding that a claim for tortious interference with existing business relationships exists under Texas law. It concluded that the claim could not proceed against Wegner because he was a party to the business relationship between Hinds and Sandman, while the claim required interference by a stranger to that relationship.

Practical Considerations for Texas Businesses

The decision highlights several considerations for Texas businesses:

1. LLC agreement provisions may define the scope of duties. The decision illustrates that Texas courts may enforce provisions restricting or eliminating fiduciary duties. Business owners may wish to consider the scope of duties established or waived under an LLC agreement.
2. Notice provisions may affect removal procedures. The decision illustrates that courts may decline to impose procedural protections not included in the parties’ agreement.
3. Longstanding relationships may not establish fiduciary duties. Even decades of trusted business dealings will not, standing alone, give rise to informal fiduciary obligations.
4. Majority determinations carry weight. When an agreement empowers a majority to make “for cause” determinations, courts may defer to those findings.
5. Conversion claims require tangible property. Uncertificated LLC interests may not support conversion claims in Texas.