The Texas Business Court continues to shape the landscape of corporate litigation in Texas, and a recent decision may offer guidance for interpreting drag-along transfer provisions in Texas limited liability company (LLC) governance documents. In the second decision in as many days in Energy Founders Fund, LP v. Daskevich, Judge Brian Stagner of the Eleventh Division (Houston) issued an opinion and order on April 10, 2026, interpreting a drag-along provision under a Texas LLC agreement.

Although the ruling is specific to the terms of the company agreement in this dispute, the opinion and order provide important guidance for companies, investors, and practitioners drafting and applying drag-along provisions and highlight the importance of distinguishing between company actions and member actions.

Background and Key Facts

The dispute centered on the sale of membership units of Gage Western, LLC, which was a Texas LLC governed by a company agreement that vested management authority in a three-member board of directors — a Class A director, a Class B director, and a management director. Under the company agreement, drag-along obligations could be triggered in a qualifying transaction with “Board Approval;” board approval required only a simple majority vote; and entry by Gage Western or its subsidiaries into any “material agreement to which any Member or its Affiliate is a party” required approval by both the Class A and Class B directors.

Energy Founders Fund, LP (EFF) and affiliated Class A members held a majority ownership interest in Gage Western, while Phillip and Cris Daskevich held a minority stake through Class B units.

In August 2024, EFF gave a required right of first offer notice, stating its intention to sell its units to a newly formed entity and asserting that the transaction would trigger the agreement’s drag-along provisions — effectively requiring all members to sell their units on the same terms. The opinion states that the board voted two-to-one in favor of the “transfer,” with the Class B director (Phillip Daskevich) dissenting and asserting that the transaction also required Class B director approval.

The Legal Issue

The parties agreed that Section 9.2 of the company agreement governed unit transfers, including drag-along transactions, and required board approval. However, they disagreed on whether Section 7.2(c)(ii) applied to the present transaction and imposed an additional approval requirement.

The Daskeviches argued that, because Gage Western was taking action by approving the transfer and transaction pursuant to an agreement to which a member was a party, both approval provisions under the company agreement applied, which would give the Class B director the ability to veto the transaction. EFF argued that the proposed transaction was not subject to the additional Class B director approval, because the members — not Gage Western — were transferring their units.

The Court’s Analysis

The court granted summary judgment to EFF and rejected the Daskeviches’ interpretation, on the following grounds:

• Plain Language Controls: Section 9.2 identifies the subject (transfers of membership units), the decision maker (the board), and the voting standard (majority vote). Article 9 does not cross-reference Section 7.2 or carve out special approval rights for particular directors. The court found that Section 9.2 is self-contained and requires only board approval for membership transfers.
• Different Actors, Different Rules: Section 7.2(c)(ii) regulates actions taken by “the Company or any of its Subsidiaries,” while Section 9.2 governs when a “Member shall Transfer” units. Although Section 7.2(c)(ii) required Class B director approval for the company to “enter into any material agreement,” the court’s analysis seemed to focus on the distinction between “company actions” or “member transfers” — not the presence of the company’s entry into a relevant agreement. The court noted that the company was neither the buyer nor seller of EFF’s units and concluded that Section 7.2 did not apply. As the court noted, “When parties intend layered approval rights, they say so.”
• Avoiding Surplusage: If Section 7.2(c)(ii) applied to every transfer, it would render Section 9.2 meaningless. Courts seek to give effect to every provision in a contract rather than interpreting one that swallows another.
• Contractual Protections Exist — But Not a Veto: The court acknowledged the Daskeviches’ fairness concerns but noted that the company agreement provides minority protections through a right of first offer, which allows existing members to match a proposed sale before units may be dragged into a transfer to a third party. This provides economic protection against unfair valuations — but not veto rights.

Practical Takeaways

For LLC Members and Investors:

• Minority members who desire veto rights over important transactions should consider the express scope of protective provisions. Courts may read such rights narrowly.
• Rights of first offer provide economic protection but will not be interpreted as a veto or consent right over subject transactions.

For Drafters and Counsel:

• When parties intend layered approval requirements, they must say so explicitly. Courts will enforce what the contract says — not what parties later wish it said.
• Parties should consider how transfer provisions and special approval provisions interact, and draft accordingly to avoid ambiguity.

For Business Litigators:

• Contract interpretation disputes involving unambiguous LLC agreements may see summary judgment, as this case demonstrates.
• Arguments sounding in “fairness” will not persuade courts to rewrite clear contractual language in LLC governance documents.