## Facts

- Pinnacle Data Services, Inc. (PDS), Joseph Gillen, and Charles Baldridge formed MJCM, L.L.C. in 1997, with ownership interests of 50% (PDS), 25% (Gillen), and 25% (Baldridge).
- MJCM’s governance was set out in (1) internal “Regulations” signed by the parties and (2) Articles of Organization filed with the Texas Secretary of State, identifying MJCM as member-managed.
- The members agreed to be compensated through profit distributions rather than salaries and bonuses.
- As the business became profitable, the members disagreed about management.
- At an August 29, 2000 meeting, Gillen proposed amendments converting MJCM from member-managed to manager-managed, with Gillen as manager.
- The Regulations stated amendments to the Articles required approval by at least 66⅔% of the ownership interests, but also stated that if the Regulations conflicted with the Articles, the Articles controlled.
- The Articles allowed amendment by an affirmative vote of two-thirds of the members.
- Gillen and Baldridge voted to adopt the amendments (two of three members), after which Gillen removed PDS’s principals from their MJCM roles, hired employees, and paid salaries to himself and Baldridge.
- PDS sued Gillen, Baldridge, and MJCM asserting multiple theories, including declaratory relief, member oppression, and unjust enrichment; the trial court granted a combined traditional and no-evidence summary judgment dismissing all claims.

## Issues

1. Whether summary judgment was proper on PDS’s claims for declaratory relief, member oppression, and unjust enrichment, given the asserted conflict between the Regulations and the Articles regarding amendment voting requirements.
2. Whether the trial court granted more relief than requested in the summary-judgment motion by dismissing all claims.

## Decision

- The court of appeals affirmed the summary judgment for Gillen, Baldridge, and MJCM.
- The Articles controlled over conflicting provisions in the Regulations because the Regulations expressly provided that the Articles govern in the event of conflict.
- The August 29, 2000 amendments were validly adopted under the Articles’ two-thirds-of-members voting standard.
- PDS failed to produce evidence raising a genuine issue of material fact on member oppression and unjust enrichment after the no-evidence challenge.
- The judgment did not exceed the relief requested because the motion sought dismissal of all claims and the trial court dismissed all claims.

## Legal Principles

- When an LLC’s internal regulations provide that the articles of organization control in the event of conflict, courts enforce the articles as the superior governing document.
- An amendment is valid if adopted in compliance with the voting procedure set out in the controlling formation document, even if a separate internal document contains a different voting threshold.
- On a no-evidence motion for summary judgment, once the movant challenges elements of a claim, the nonmovant must produce competent evidence raising a genuine issue of material fact; conclusory assertions and disagreement with lawful governance actions are insufficient.
- A trial court does not grant excessive relief by rendering judgment coextensive with a summary-judgment motion that seeks dismissal of all pleaded claims.

## Conclusion

The court upheld governance amendments converting the LLC to manager-managed because the Articles’ amendment procedure controlled over inconsistent internal regulations, and it affirmed dismissal of PDS’s declaratory, oppression, and unjust-enrichment claims due to the absence of evidence creating a fact issue and because the judgment matched the relief sought.


Pinnacle Data Servs., Inc. v. Gillen, 104 S.W.3d 188 (Tex. App.—Texarkana 2003)