Texas Business Court Decision – August 12, 2026
No. 26-BC11A-0012 Duncan Carrington, et al v. Aaron Corsi, et al. (Eleventh Division, Judge Adrogue) 26 Tex. Bus. 57 26-bc11a-0012-carrington-v-corsi-2026-tex-bus-57.pdf
Conversion.
Background. Plaintiffs Carrington and Hiller were early investors in Heady Brewing Company, LLC, which owned 8th Wonder Brewery. They held more than 77,000 Class A-1 Units, which carried economic and distribution rights but no voting rights. In May, 2023, the individual defendants (Corsi, Soroka, and Rosenbaum) and the BCI defendants (Meggs, BCHC Merge, Bayou City Hemp Company, and BC Infinity) entered into a Contribution and Exchange Agreement concerning Heady. The individual defendants received Bayou City shares as “Rollover Members,” while plaintiffs were instead allocated interests in a $1.125 million Convertible Promissory Note, of which they collectively received only about 7%. Bayou City later converted the Note into non-voting Class A common stock, with each plaintiff receiving 945 shares. Plaintiffs sued on several theories, including a conversion claim in which they alleged defendants wrongly transferred their Heady units to Bayou City and diluted their value. Defendants moved to dismiss under Rule 91a.
Issue: Whether plaintiffs’ conversion claim has a basis in law where it rests on the alleged wrongful transfer and dilution of uncertificated LLC membership interest, rather than on the conversion of a tangible document embodying those interests. Held: No.
Discussion. The court granted the motions in part, dismissing only the conversion claim. Conversion generally applies only to tangible personal property; intangible rights fall within the “merger exception” only when they have merged into a physical document that is itself converted. Applying Bell v. Bay Area RV Parks, LLC, 722 S.W.3d 176 (Tex. App.-Houston [1st Dist.] 2025, no pet.), the court explained that LLC interests are presumptively uncertificated under Texas Business Organizations Code Sec. 3.201(c) unless the entity’s governing documents state otherwise. Heady’s Company Agreement provided that units “may, but need not be certificated,” and required a managers’ resolution before any certificate could issue – no such resolution or certificate was alleged. Plaintiffs’ argument that their interests were “merged” into the Contribution and Exchange Agreement and then into the Promissory Note failed because they did not allege either document had been converted; the Note was merely consideration from the challenged transaction, not a preexisting document embodying their prior Heady interests. The court distinguishes the Delaware Chancery decision in Bamford v. Penfold, LP, No. CV-2019-0005-JTL, 2020 WL 967942 (Del. Ch. Feb. 28, 2020), noting Bell had already considered and rejected that authority under Texas law, holding that an LLC member could not maintain conversion under the circumstances presented. The court emphasized that its holding was limited to the pleaded facts (an allegation of transfer and dilution of uncertificated membership interest and not conversion of a physical document embodying those interests); “[t]he court does not hold that an LLC membership interest can never support a conversion claim.” Plaintiffs’ conversion count is dismissed with prejudice, but all other relief requested in the motions to dismiss, including costs and attorneys’ fees, is denied.