≡ Menu

A brother-in-law — a real piece of work, judging by the state supreme court’s opinion — started a real-estate business with three other family members. He was “a difficult partner,” as the trial court put it; even though the business was profitable, he sued to try to expel the other family members — and essentially had his head handed to him. The state supreme court’s opinion is interesting both for its entertainment value and for the court’s review of case law on a not-uncommon legal question. See Barkalow v. Clark, No. 19-1970 (Iowa May 14, 2021). Here are the facts of interest:

  1. Meet the family: Two brothers, the Clarks, were married to sisters; a third sister was married to an outsider, whom we’ll call Brother-in-Law, and who seems to be the main character in our little drama.
  2. Brother-in-Law was into real estate; he wanted to buy houses near the University of Iowa stadium, but he didn’t have the money. So Clark Brothers 1 and 2, plus a third brother, put up the money, and the four of them formed an LLC.
  3. All three Clark brothers loaned Brother-in-Law the money for him to buy into the LLC; this loan was done on an oral agreement without any kind of written promissory note. (Brother-in-Law never got around to repaying the Clark brothers for the money they’d loaned him until years later when things were getting seriously antagonistic.)
  4. Brother-in-Law and Clark Brothers 1 and 2 were active in the LLC’s business; Clark Brother 3 was more of a passive investor.
  5. Brother-in-Law took money out of the business for “management fees,” even though (the court trial found) everyone had orally agreed that they wouldn’t be paid for working in the business.
  6. As time went on, additional capital contributions were needed for the business. The three Clark brothers each put in extra money, but Brother-in-Law refused to do so, apparently preferring to use his funds for other business interests that he owned completely instead of just partially.
  7. Consequently, under the LLC operating agreement, the Clark brothers acquired extra ownership interests in the LLC, and as a result, Brother-in-Law’s interest was diluted down to 0.595% from his original 25%. The Clark brothers offered to buy out Brother-in-Law at undiscounted fair market value for his full 25% share. Brother-in-Law refused.
  8. Eventually the relationship between Clark Brothers 1 and 2 and Brother-in-Law soured to the point that — even though the LLC was profitable and making money — Brother-in-Law (who now owned just 0.595% of the company) filed a lawsuit against all three Clark brothers, seeking to expel them from the LLC and to dissolve it; only Clark Brothers 1 and 2 counterclaimed against Brother-in-Law, while Brother 3 tried to be a peacemaker.

After a five-day (!) bench trial, the trial judge ordered dissolution of the LLC and restoration of Brother-in-Law’s diluted capital position back to its original 25%; the judge did also order Brother-in-Law to repay more than $153K for wrongful conversion of LLC assets. (Brother 3, the peacemaker, had previously supported the 25% restoration; to me it sounds as though the trial judge was likewise trying to keep peace in the family.)

Brother-in-Law might have been OK with the trial’s outcome on balance, but he doubtless changed his mind after the appeal. The state supreme court noted (at 15):

[Brother-in-Law] contributed no money to [the LLC], not even the funds for his original capital position. He expected the Clark brothers to finance everything. He blocked efforts to obtain outside financing. He chose to pledge his own assets as collateral for an expansion of his personal real estate holdings, not for the use or benefit of the LLC in which he was only a 25% participant

Slip op. at 15. The supreme court:

  • affirmed the trial court’s order that Brother-in-Law repay $153K for wrongful conversion; and
  • reversed both the dissolution of the LLC and the restoration of Brother-in-Law’s 25% capital position; the court held that statutory requirement for judicial dissolution had not been met, because it was still reasonably practicable for the LLC to continue carrying on the business. (The supreme court’s opinion has a nice discussion of how previous courts had addressed this issue, with extensive citations from various jurisdictions; see slip op. at 18.)

So for his trouble, it seems that Brother-in-Law is now:

  • stuck with his diluted 0.595% share of the LLC;
  • also stuck with his brothers-in-law controlling the LLC, inasmuch as between them they own the remaining 99.405% of it; and
  • ordered to repay the LLC for the $153K that he took out of the business.

Karma, I guess — this could almost be an episode of one of those family-reality shows (I won’t mention any names), couldn’t it?


I’m hived, says the judge

In a letter decision about a contract’s forum-selection provision, Vice-Chancellor Sam Glasscock addressed a separate forum-selection provision in a related agreement, which stated: “any litigation necessary to enforce any of the provision of [the Settlement Agreement] shall be venued [22] in the Circuit Court . . . in Madison, Dane County, Wisconsin.” (Emphasis added, alterations by the court.) VC Glasscock drily footnoted:

22. I understand that in the free-swinging twenty-first century, verbs and nouns are not binary concepts, and each is free to dabble in the other’s pond. Some such usages ring like a cracked bell, nonetheless. I confess, the verbal form of “venue” is one: hearing it makes me break out in hives (or, consonant with this locution, I’m hived).

NB Alternatives Advisers LLC v. VAT Master Corp., No. 2020-0930-Sg (Del. Ch. Apr. 22, 2021) (granting permanent injunction against litigation outside the agreed exclusive forum) (emphasis added).

(Hat tip: Chris Lemens in a blog comment.)


The pandemic and Zoom-only classes of recent semesters have led to some enhancements in how I do Socratic-method teaching in my contract-drafting classes at the University of Houston Law Center (and in a new mini-course for the Rice University Jones Graduate School of Business). This approach can also work for in-person classroom settings, not just in Zoom classes.

Here’s how it works:

  • For each issue, I pre-build a Google Doc with a fact pattern, some questions, and spaces for small groups of students to collaborate in writing answers. See the excerpt below from an actual Google Doc:
  • The Google Doc is set to allow anyone having the link to comment — not to edit. That way:
    • The students’ comments are shown in different colors.
    • Students can participate without being logged into Google — and if they’re not logged in, then their comments are anonymous, which some students prefer.
  • When we’re ready for Socratic discussion of that particular issue, I send students to small groups — in Zoom breakout rooms or “turn to your neighbor” if in person — to discuss and collaboratively write answers to the questions in the Google Doc. See the different-colored student comments in the example below.
  • Importantly: I don’t join any breakout room — instead, while still in the main Zoom meeting, I “lurk” in the Google Doc. As I see students write answers in the Google Doc, I add my own real-time corrections and comments in [BRACKETED ALL-CAPS]. That gives students instantaneous feedback — visible to all students.

Each group can see each other group’s comments; that’s fine with me, because that way the groups can learn from each other.

When I see that the breakout groups have answered the questions, we come back to the main Zoom room and discuss the questions and answers in committee-of-the-whole format. This lets me “participate” in each breakout room more-or-less simultaneously.

Students seem to like this approach, both at UHLC and in my just-concluded Rice course, where the students said in a feedback form that:

  • “Discussions helped confirm everyone else was as lost. However, feedback from professor immediately was useful”
  • “[I]t was a good mechanism to keep people on task instead of wandering discussion within the breakout. Also it forced the breakouts to think through their answers as they wrote them out” 

(Emphasis added.)

Comments and suggestions are welcome.


Author’s note: In the past few days I’ve said yes to invitations to be a panelist for three different Webinars in the next couple of months. For one of those Webinars, I just finished writing up some suggestions for the panel format, based on experience. I’m migrating the suggestions to this blog post so that I can reuse them in the future.

I’ve been speaking at conferences for more than 35 years. Too often, a so-called “panel discussion” is just a series of speeches by talking heads, often leading audience members to tune out or even walk out.

A better panel-discussion format is described below; it works well for both audiences and presenters. I’ve been using this format, typically as a panelist and often as panel chair too, for going on 25 years, for the American Bar Association’s Section of Intellectual Property Law; the Association of Corporate Counsel (ACC); the Licensing Executives Society (LES) USA/Canada; the International Association for Contract and Commercial Management (IACCM); and the State Bars of Texas and California. (I’m pretty sure I’ve done such panels multiple times for each of these organizations.)

Here’s how it works:

  1. In advance, the panelists do a 45- to 60-minute conference call to figure out the following:
    • what “thumb-sucker” (open-ended) questions to pose during the presentation; and
    • for each question: which panelist will take the lead in answering the question, along with some notes about the likely answer as brainstormed by the panelists.
  2. After that advance prep call, a designated “scribe” panelist (usually me) compiles the agreed questions, the notes, and the lead-presenter designations, into an outline.
  3. The scribe-panelist circulates the outline to the other panelists.
  4. A few days before the presentation, the panelists do a 15- to 30-minute panelist conference call to review and fine-tune the outline.
  5. The scribe-panelist emails the final draft of the outline to the other panelists.
  6. At the presentation: For each of the agreed questions in the outline (as time permits): One of the panelists (let’s call her “Alice”) addresses the question to the panelist designated to take the lead in answering that question (let’s call him “Bob”).
  7. Bob answers the question — and then Alice and other panelists Carol, Dave, etc., can chime in with any other observations or insights that they want to add. Discussion among the panelists might well ensue.
  8. For some questions, the panel might also ask audience members, “Does anyone else have any experience along these lines?” That often provokes audience input.
  9. For some questions, before the lead panelist answers the question, she might tell the audience, “Please turn to your neighbor and discuss the question among yourselves.” (For Webinars, that can be done via breakout rooms.)

The above format is quite popular with audiences, presenters, and conference organizers:

  • Audiences like this format because they get to participate, and true panel discussions are more useful (and entertaining) than a series of talking heads.
  • Presenters like this format because it lets them draw on their existing expertise without requiring them to spend a lot of time preparing formal speeches.
  • Conference organizers like the fact that such a panel discussion can be ended on time, because the content is divided into “chunks” (the questions), and the panelists can simply stop when time is up.



In litigation, parties will sometimes file motions whose prospects of success are questionable at best. Such a motion might be a Hail-Mary pass when it appears that the case is going badly for the moving party. And on the other side of the coin: Parties sometimes oppose meritorious motions for little reason other than, let’s make them work for it.

(Sometimes such motions are filed out of fear of being second-guessed. A hard-headed client, looking to point fingers somewhere else after a loss, might say to counsel, after the fact: You should have filed a motion for [whatever]; sure, the odds of success were low, but now we’ll never know. No lawyer likes to hear that from the client; likewise, no business executive wants to hear that question from her superiors — or worse, from her board of directors.)

The Hail-Mary pass motivation might have been at work in a recent Federal Circuit case:

  • A party, Benton Energy Services (BESCO) was sued for breach of contract (and on other grounds) by Cajun Services.
  • For months, the parties did “discovery,” and eventually each party filed motions for summary judgment.
  • But then — with trial just weeks away — BESCO filed a motion to compel arbitration, as called for by the parties contract.
  • It’s not a big stretch to speculate that BESCO felt that its prospects at trial were not so great, and so it wanted to try for a fresh start in an arbitration proceeding.
  • Cajun opposed BESCO’s motion to compel arbitration, on grounds that under well-established precedent, BESCO had waived its right to arbitration. The trial court agreed and denied the motion to compel.
  • BESCO lost the ensuing jury trial.

BESCO appealed the trial judge’s refusal to compel arbitration, but the appeals court affirmed, holding that the trial judge had not clearly erred. See Cajun Serv. Unlimited, LLC v. Benton Energy Serv. Co., No. 2020-1367, slip op. (Fed. Cir. Mar. 12, 2021) (nonprecedential). (Hat tip: Chael Clark of Carlton Fields.)

We don’t know what was going through the minds of BESCO and its counsel when they belatedly moved to compel arbitration. But it’s easy to imagine that they might have thinking something like the following: Things aren’t looking great for us; there’s not much percentage in trying now to compel arbitration, but it’s probably our best shot — and the worst that can happen is that the judge says no. (To reiterate: We don’t know whether this actually was BESCO’s or its counsel’s thinking.)

This attitude brings to mind the saying attributed to Walter Gretzky, father of hockey legend Wayne Gretzky: You miss 100% of the shots you don’t take. In the litigation context, Gretzky père‘s saying could be paraphrased as: You’ll be denied on 100% of the motions (and oppositions) that you don’t file.

The problem, of course, is that in situations like this, taking the shot inflicts extra burden, expense, and delay on the other party and the court — often to no real purpose.

Oh, sure: The applicable rules typically exhort lawyers and parties to play nice, and judges have the power to impose sanctions when they don’t.

But in the real world, sanctions seldom happen, so any fear of being sanctioned is often outweighed by the fear of losing (and/or the fear of being second-guessed).

So: How to combat this take-the-shot tendency? One possibility — by no means a panacea — might be for contract drafters to include a prevailing-party attorney-fee clause for motion practice, perhaps along something like the following lines:

Attorney Fees in Motion Practice

(a) This provision is agreed to as an incentive for the parties to amicably resolve any subsidiary- or ancillary dispute that is brought before a tribunal in a case (each, a Motion).

(b) The prevailing party in the Motion will be entitled to recover its Dispute Expenses for the Motion unless the Tribunal, for good cause, rules otherwise; the Tribunal’s decision on the attorney-fee recovery issue for the Motion is final and nonappeable.

(c) Motion-related Dispute Expense recoveries may not be recaptured as part of a later recovery of Dispute Expenses for the overall action.

Such a clause would not be a cure-all: In a Hail-Mary pass situation, a party that thought it might be losing the case could cold-bloodedly decide that filing a sketchy motion was worth the risk.

But even so: A contract’s attorney-fees clause for motion practice would at least cause counsel to think twice before filing a motion, or before opposing a meritorious motion by the other side.

And suppose that a client’s decision-makers were indeed of the hard-headed breed mentioned above, implacably convinced of the rightness of their cause: They just might start to rethink their view if they were to be forced to pay attorney fees after losing in motion practice.

{ 1 comment }