Gusinsky v. Reynolds et al

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IN THE UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF TEXAS
DALLAS DIVISION
VLADIMIR GUSINSKY, derivatively on
behalf of Nominal Defendant
SOUTHWEST AIRLINES CO.,
Plaintiff,
v.
CHRISTOPHER P. REYNOLDS,
DAVID CUSH, DAVID J. GRISSEN,
DAVID P. HESS, DOUGLAS H.
BROOKS, GREGG A. SARETSKY, LISA
M. ATHERTON, PATRICIA A.
WATSON, PIERRE R. BREBER,
RAKESH GANGWAL, ROBERT E.
JORDAN, ROBERT L. FORNARDO,
SARAH FEINBERG, EDUARDO F.
CONRADO, and ELAINE MENDOZA,
Defendants.
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Civil Action No. 3:25-CV-1816-K
MEMORANDUM OPINION AND ORDER
Before the Court is Nominal Defendant Southwest Airlines Co. (“Southwest”)
and Defendants’ Motion to Dismiss Under Rule 12(b)(1), 12(b)(6), 23.1, and Based
Upon Statutory Bar and Bylaw and Brief in Support (the “Motion”) (Doc. No. 17),
the Appendix Supporting Defendants’ Motion (the “Appendix”) (Doc. No. 18),
Plaintiff Vladimir Gusinsky’s Opposition to Defendants’ Motion (the “Response”)
(Doc. No. 31), Defendants’ Reply Brief in Support of the Motion (the “Reply”) (Doc.
No. 44), and Plaintiff’s Verified Stockholder Derivative Complaint (the “Complaint”)
(Doc. No. 1). Having carefully considered the Motion, the Response, the Reply, the
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Complaint, and appropriate portions of the Appendix, as well as the applicable law and
the relevant portions of the record, the Court finds that Plaintiff’s derivative claims are
barred by Texas Senate Bill 29 (“SB 29”). Accordingly, the Court GRANTS the
Motion and DISMISSES WITH PREJUDICE Plaintiff’s derivative claims against
Defendants.
I. 	Factual Background
Plaintiff Vladimir Gusinsky is a shareholder of Southwest. See Doc. No. 1 at 10,
¶26 (all citations to CM/ECF assigned page number unless otherwise noted). Gusinsky
“is [the] beneficial owner of 100 shares of Southwest common stock” and has owned
Southwest common stock since 2022. Id. Defendants are members of Southwest’s
Board of Directors (the “Board”). Id. at 10–12, ¶¶28–43.
Southwest previously implemented its “Bags Fly Free” policy. Id. at 13, ¶49.
Under this policy, passengers could check up to two bags without additional fees. Id.
According to Plaintiff, “Southwest’s adherence to its founding principles and Bags Fly
Free 	has allowed [Southwest] to achieve 	sustained profitability and 	shareholder
returns.” 	Id. 	at 	14, 	¶49. 	In 	September 	of 	2024, 	Southwest 	published 	research
purportedly establishing the profitability of the Bags Fly Free policy. Id. at 2, ¶2.
Southwest executives stated that if the Bags Fly Free policy ended, Southwest would
sustain an “[a]nnual EBIT loss” of approximately $300 million. Id. at 3, ¶2 (chart
demonstrating financial impact of the Bags Fly Free policy).
However, in 2024, Elliott Investment Management L.P. (“Elliott”) purchased
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Southwest 	stock 	worth 	approximately 	$1.9 	billion, 	an 	11% 	ownership 	stake 	in
Southwest. Id. at 3, ¶3. Upon notifying Southwest, Elliott sent a presentation to
Southwest’s Board. See id. at 14, ¶50. In this presentation, titled “Stronger Southwest,”
Elliott argued that “Southwest’s leadership has written off key commercial innovations
and revenue opportunities across the airline industry for the last 15 years[.]” Id. at 15,
¶51. Elliott stated that Southwest did not implement policies Elliott believes are
commonplace in the airline industry, including assigned seating, basic economy, and
checked bag fees. Id. (emphasis added). Elliott’s message to Southwest’s Board called out
Defendant Robert E. Jordan, Southwest’s CEO, arguing that Southwest’s Board needed
new directors from outside the company. See id. at 14, ¶50.
Worried about a takeover attempt, Southwest’s Board adopted a “poison pill,”
which provided current shareholders the opportunity to purchase Southwest stock at a
discount in the event a single shareholder acquired at least 12.5% stock ownership in
Southwest. Id. at 15, ¶52. In July of 2024, Defendant/CEO Jordan stated that
Southwest had no immediate plans to rescind its Bags Fly Free policy. Id. at 16, ¶54
(“[B]ags [F]ly [F]ree is cited as the number one issue in terms of why customers choose
Southwest”). Southwest stated that Elliott “dismissed” Southwest’s efforts to negotiate
and “unilaterally” decided to publicly declare its plan to overhaul most of Southwest’s
Board. Id. at 17, ¶56.
Southwest 	continued 	to 	push 	back 	against 	Elliott, 	claiming 	that 	Elliott
“refus[ed] to engage” with Southwest’s 2024 Investor Day proposals and “has remained
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entrenched in demanding a supermajority of the Board and immediate CEO change.”
Id. at 18–19, ¶59. Southwest spoke boldly about Elliott: “The [Southwest] Board has
repeatedly sought to [advance Southwest’s business], but acquiescing to a single
Shareholder’s demand for absolute control of [Southwest] is not a compromise.” Id. at
19, ¶59. In September of 2024, Ryan C. Green, Southwest’s Executive Vice President
of Commercial Transformation, stated that change to or elimination of the Bags Fly
Free policy would be “value destructive.” Id. at 21–22, ¶61.
In October of 2024, Elliott requested a shareholder meeting “to consider
proposals to remove, without cause, eight members of the Board and replace with
director nominees selected by Elliott, in an apparent effort to secure full control of the
Board.” Id. at 29, ¶67. Southwest opposed the move. See id. at 29–31, ¶68. However,
Southwest and Elliott later entered into a “Cooperation Agreement” that (1) withdrew
Elliott’s request for a shareholder meeting, (2) terminated the poison pill, and (3)
appointed six new directors, five of whom Elliott selected. Id. at 31, ¶69. Southwest
also announced that “two incumbent directors would not stand for re-election” and
“seven other directors, including the Chairman of the Board,” would ‘accelerate’ their
retirement[.]” Id.
Plaintiff alleges that, after Southwest’s Board changed, Defendants approved
new policies that “directly conflicted with [Southwest’s] previous data-supported,
customer-centric business model.” Id. at 32, ¶70. Importantly, Defendants approved
the elimination of the Bags Fly Free policy. Id. at 32, ¶71. Plaintiff alleges that
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Defendants’ action “was intended solely to further entrench current management at
the expense of the best interests of [Southwest] and was in breach of [fiduciary duty].”
Id. at 33, ¶74. Unhappy with Defendants’ decision to eliminate the Bags Fly Free
policy, Plaintiff served a demand letter on Defendants. Id. at 35–36, ¶78. In his demand
letter, Plaintiff alleged that Defendants breached their fiduciary duties to Southwest
by eliminating the Bags Fly Free policy and “entrench[ing] themselves.” Id. at 36, ¶78.
On May 16, 2025, Defendants amended Southwest’s bylaws (the “Amended
Bylaws”). Id. at 36, ¶79. Pertinent to the present Motion, the Amended Bylaws state
that “[n]o shareholder may institute or maintain a derivative proceeding unless that
shareholder . . . beneficially owns at least three (3) percent of the outstanding shares
of the corporation.” Id. Two days before Defendants adopted the Amended Bylaws,
Governor Greg Abbott signed SB 29 into law, effective immediately. Doc. No. 17 at 7.
In part, SB 29 authorized Texas corporations to institute a stock ownership threshold
requirement for shareholder derivative actions. See T EX . B US. O RGS. CODE ANN. §
21.552(a)(3) (provision added by SB 29). On June 27, 2025, Defendants responded
to Plaintiff’s demand letter by refusing to take any action on the demand. See Doc. No.
1 at 37, ¶80.
Subsequently, Plaintiff filed this derivative suit against Defendants in federal
court, alleging that Defendants breached their fiduciary duties to Southwest by
“fail[ing] to act in the best interests of [Southwest], eliminat[ing] the Bags Fly Free
policy, approv[ing] the 2025 Proxy Statements, and adopt[ing] the [Amended Bylaws]
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to entrench themselves.” Id. at 42, ¶105. Specifically, Plaintiff claims that Defendants
breached their fiduciary duties by (1) eliminating the Bags Fly Free policy while
knowing that the policy’s elimination would harm Southwest and (2) by subsequently
adopting the Amended Bylaws in order to shield themselves from accountability for
eliminating the policy. Id. at 42, ¶¶105–106. Plaintiff also seeks a declaratory judgment
that the Amended Bylaws are unlawful and unconstitutional. See id. at 43, ¶¶109–111.
Along with that, Plaintiff makes an as-applied constitutional challenge to SB 29 and
Texas Business Organizations Code Section 21.552(a)(3), claiming that SB 29 and
Section 21.552(a)(3) violate the Texas Constitution. See Doc. No. 41 (Plaintiff’s Rule
5.1 Notice of Constitutional Question). Plaintiff alleges that SB 29 and the Amended
Bylaws violate the Texas Constitution’s prohibition against retroactive application of
law, its open courts provision, and Texas contract law. Doc. No. 1 at 43, ¶109.
In response to Plaintiff’s Complaint, Defendants filed the present Motion, to
which Plaintiff filed his Response and Defendants filed their Reply. Therefore, the
Motion is now ripe for determination.
II. 	Legal Standard
Defendants move for dismissal under Federal Rules of Civil Procedure 12(b)(1),
12(b)(6) and 23.1. However, the Court will determine the present Motion only under
Rule 12(b)(6).
In considering a motion to dismiss under Rule 12(b)(6), the court must
determine whether the plaintiff has sufficiently stated a claim upon which relief may
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be granted. F ED . R. CIV. P. 12(b)(6). The court must presume all well-pleaded facts in
the complaint to be true and it must resolve any ambiguities or doubts regarding the
sufficiency of the claims in plaintiff’s favor. Kane Enters. v. MacGregor (USA), Inc., 322
F.3d 371, 374 (5th Cir. 2003); Campbell v. Wells Fargo Bank, 781 F.2d 440, 442 (5th
Cir. 1986). However, “[t]hreadbare recitals of the elements of a cause of action,
supported by mere conclusory statements, do not suffice.” Ashcroft v. Iqbal, 556 U.S.
662, 663 (2009); see Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555 (2007) (although
the court must take as true all of the factual allegations in the complaint, it is not bound
to accept as true a legal conclusion couched as a factual allegation). In reviewing a
motion to dismiss under Rule 12(b)(6), the court may only consider “the complaint,
any documents attached to the complaint, and any documents attached to the motion
to dismiss that are central to the claim and referenced by the complaint.” Lone Star
Fund V (U.S.), L.P. v. Barclays Bank PLC, 594 F.3d 383, 387 (5th Cir. 2010).
A plaintiff must plead “enough facts to state a claim for relief that is plausible
on its face.” Twombly, 550 U.S. at 570; see Kane Enters., 322 F.3d at 374 (plaintiff must
plead specific facts, not mere conclusory allegations, to avoid dismissal for failure to
state a claim). If a plaintiff pleads facts which allow the court to reasonably infer that
the defendant is liable for the alleged misconduct, the claim is facially plausible. See
Twombly, 550 U.S. at 570. While facial plausibility is not a “probability requirement,”
it mandates “more than a sheer possibility that a defendant has acted unlawfully.” Iqbal,
556 U.S. at 678; see Twombly, 550 U.S. at 556 (“[f]actual allegations must be enough
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to raise a right to relief above the speculative level”). In other words, the alleged facts
must nudge the plaintiff’s claims “across the line from conceivable to plausible.”
Twombly, 550 U.S. at 570. “[W]here the well-pleaded facts do not permit the court to
infer more than the mere possibility of misconduct, the complaint has alleged—but it
has not ‘show[n]’—‘that the pleader is entitled to relief.’” Iqbal, 556 U.S. at 679
(quoting F ED . R. CIV. P. 8(a)(2)).
Because Plaintiff filed this case in federal court on the basis of diversity of
citizenship jurisdiction under 28 U.S.C. § 1332 (see Doc. No. 1 at 9, ¶23), the Court
will apply Texas substantive law. See Block v. Tanenhaus, 867 F.3d 585, 589 (5th Cir.
2017) (“[u]nder the Erie doctrine, federal courts sitting in diversity apply state
substantive law and federal procedural law”) (quoting Gasperini v. Ctr. for Humanities,
Inc., 518 U.S. 415, 427 (1996)).
III. 	Analysis
Defendants argue that Plaintiff’s claims must be dismissed as a matter of law
because 	SB 	29, 	which 	in 	part 	added 	Texas 	Business 	Organizations 	Code 	§
21.552(a)(3), and the Amended Bylaws bar the claims. See Doc. No. 17 at 15.
Specifically, Defendants argue that “[b]ecause [Plaintiff] [] admits that he is suing
solely in a derivative capacity, and because the [Amended Bylaws] [were] adopted
before he filed this action on July 10, 2025, his suit is facially barred by statute and by
the [Amended Bylaws].” Id. Further, Defendants argue that Plaintiff’s as-applied
constitutional challenges to SB 29 and the Amended Bylaws are “entirely groundless.”
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Id. at 19.
In response, Plaintiff argues that Defendants’ adoption of the Amended Bylaws
was a breach of their fiduciary duty, SB 29 and the Amended Bylaws violate the
retroactivity prohibition in the Texas Constitution, and enforcement of the Amended
Bylaws against Plaintiff violates principles of Texas contract law. See Doc. No. 31 at
18–28. For the following reasons, the Court GRANTS Defendants’ Motion.
A. 	SB 29’s Ownership Threshold
Governor Greg Abbott signed SB 29 into law, to have immediate effect, on May
14, 2025. Doc. No. 17 at 7; see also S.B. 29, 89th Leg., Reg. Sess., at § 27 (Tex. 2025)
(legislation takes immediate effect upon approval of two-thirds of all members elected
to 	each 	house). 	The 	portion 	of 	SB 	29 	at 	issue 	here 	amends 	Texas 	Business
Organizations Code § 21.552(a). See S.B. 29, 89th Leg., Reg. Sess., at § 13 (Tex. 2025).
Pursuant to the amendments enacted by SB 29, publicly listed companies may adopt
restrictions on derivative proceedings. See TEX . B US. ORGS. CODE A NN. § 21.552(a)(3).
Specifically, public companies may limit the right of their shareholders to institute a
derivative proceeding to shareholders who “beneficially own[] a number of the common
shares sufficient to meet the required ownership threshold to institute a derivative
proceeding in the right of the corporation identified in the corporation’s certificate of
formation or bylaws, provided that the required ownership threshold does not exceed
three percent of the outstanding shares of the corporation.” Id.
On May 16, 2025, two days after SB 29 went into effect, Defendants adopted
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the Amended Bylaws. See Doc. No. 1 at 7, ¶13; Doc. No. 18 at 246–280 (Fifth
Amended and Restated Bylaws of Southwest (herein referred to as the “Amended
Bylaws”)). The Amended Bylaws include a provision titled “Derivative Proceedings,”
which closely mirrors Texas Business Organizations Code § 21.552(a)(3). See Doc. No.
1 at 36, ¶79. This provision, challenged by Plaintiff, states that “[n]o shareholder may
institute or maintain a derivative proceeding unless that shareholder is a Shareholder
(as defined in Section [21].551(2) of the Texas Business Organizations Code) that
beneficially owns at least three (3) percent of the outstanding shares of the corporation.” Id.; Doc.
No. 18 at 267–68 (emphasis added). Plaintiff served his written shareholder demand
on Defendants on April 28, 2025, prior to the enactment of SB 29 and adoption of the
Amended Bylaws. Doc. No. 1 at 35–36, ¶78. However, Plaintiff filed his Complaint
against Defendants on July 10, 2025, after enactment of SB 29 and adoption of the
Amended Bylaws. See id. Defendants argue that Plaintiff’s claims are barred by SB 29
and the Amended Bylaws because a written demand letter does not constitute a
“derivative proceeding” under the Texas Business Organizations Code. See Doc. No. 17
at 15–18.
The Court finds that, absent other grounds, SB 29 bars Plaintiff’s claims as a
matter of law. SB 29 applies “only to a derivative proceeding instituted on or after the
effective date of [SB 29].” S.B. 29, 89th Leg., Reg. Sess., at § 26 (Tex. 2025) (emphasis
added). So, SB 29 only applies to derivative proceedings instituted on or after May 14,
2025. See Doc. No. 17 at 7 (effective date of SB 29 is May 14, 2025). Defendants
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adopted the Amended Bylaws, including the share ownership threshold, on May 16,
2025. Id.
The Texas Business Organizations Code defines “derivative proceeding” as a
“civil suit in the right of a domestic corporation[.]” TEX . B US. ORGS. CODE ANN. §
21.551(1) (emphasis added). Because the Texas Business Organizations Code does not
define the term “suit,” the Court looks to the term’s plain and ordinary meaning. See
Hogan v. Zoanni, 627 S.W.3d 163, 169 (Tex. 2021) (quoting EBS Sols., Inc. v. Hegar,
601 S.W.3d 744, 758 (Tex. 2020)); see also T EX . G OV ’ T CODE ANN. § 311.011(a)
(“[w]ords and phrases shall be read in context and construed according to the rules of
grammar and common usage”). Courts often look to dictionaries for plain and ordinary
meaning. Cascabel Cattle Co., L.L.C. v. United States, 955 F.3d 445, 451 (5th Cir. 2020).
“Suit” is defined as “[a]ny proceeding by a party or parties against another in a court
of law.” Suit, B LACK’ S LAW D ICTIONARY (12th ed. 2024); see also Thomas v. Oldham, 895
S.W.2d 352, 356 (Tex. 1995) (“[t]he term ‘action’ is generally synonymous with ‘suit,’
which 	is 	a 	demand 	of 	one’s 	rights 	in 	court”). 	Therefore, 	the 	term 	“derivative
proceeding,” which Texas law defines as a “civil suit,” is indisputably a shareholder
lawsuit brought on behalf of a corporation in a court of law.
It is inapposite, then, to incorporate a written demand into the term “derivative
proceeding.” Plaintiff served his written demand on Defendants prior to SB 29’s
enactment. See Doc. No. 1 at 35–36, ¶78. However, a written shareholder demand is
delivered to a corporation’s board of directors, not a court of law. Further, the Texas
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Business Organizations Code expressly distinguishes between a written demand letter
and a derivative proceeding. See T EX . B US. ORGS. CODE ANN. § 21.553(a) (“[a]
shareholder may not institute a derivative proceeding until the 91st day after the date a
written demand is filed with the corporation”). “[D]ifferent words within the same
statute should, if possible, be given different meanings.” Cascabel Cattle, 955 F.3d at
451 (quoting BNSF Ry. Co. v. United States, 775 F.3d 743, 755 n. 86 (5th Cir. 2015));
Malouf v. State ex rels. Ellis, 694 S.W.3d 712, 727 (Tex. 2024). Section 21.553(a)
differentiates between two distinct events in the same sentence: (1) a written demand
served on a corporation, and (2) the institution of a derivative proceeding at least 90
days after the demand. See T EX . B US. ORGS. CODE ANN. § 21.553(a) (emphasis added).
Different words within the same statute, much less the same sentence, are presumed
to mean different things, and nothing in the record or the statute indicates that this
presumption is inapplicable here. See Malouf, 694 S.W.3d at 727. The statute plainly
assigns different meanings to the terms “written demand” and “derivative proceeding.”
Based on the foregoing, the Court agrees with Defendants that “SB 29’s plain
language 	belies 	any 	legislative 	intent 	to 	allow 	lawsuits 	by 	[below-threshold]
shareholders who sent demand letters but did not file suit before SB 29 became
effective.” Doc. No. 17 at 17. SB 29 applies to derivative proceedings instituted on or
after SB 29’s effective date. See S.B. 29, 89th Leg., Reg. Sess., at § 26 (Tex. 2025).
Because a derivative proceeding is a lawsuit filed in court, a written demand cannot
“institute” a derivative proceeding. Rather, the filing of the derivative lawsuit institutes
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such proceeding. See In re Life Partners Holdings, Inc., Consol. Case No. DR-11-CV-43-
AM, 2012 WL 12875942, at *2 (W.D. Tex. May 9, 2012) (shareholder complied with
Texas law by filing derivative suit after corporation rejected demand) (emphasis added).
In fact, written demand and institution of a derivative proceeding are two different
events that occur at different times. See T EX. B US. ORGS. CODE A NN. § 21.553(a). To
quote Defendants, the timing of Plaintiff’s written demand “is of no moment.” Doc.
No. 17 at 15.
SB 29 was enacted and took immediate effect on May 14, 2025. See id. at 10–
11. Defendants adopted the Amended Bylaws on May 16, 2025, two days after SB
29’s enactment. Doc. No. 1 at 7, ¶13. The Amended Bylaws prohibit shareholder
derivative suits if the shareholder owns less than 3% of Southwest common stock. Id.
Plaintiff admits that he owns 100 shares of Southwest common stock, far below the
threshold set by the Amended Bylaws. Id. at 10, ¶26; 38, ¶85 (three percent ownership
of Southwest common stock equates to about 17 million shares). Because he falls far
below this threshold and did not institute the present derivative proceeding until after
the effective date of SB 29 and adoption of the Amended Bylaws, Plaintiff’s claims
against Defendants are BARRED as a matter of law absent other grounds for non-
enforcement of SB 29 and the Amended Bylaws.
B. 	Defendants’ Fiduciary Duty
Plaintiff seeks declaratory judgment that the Amended Bylaws are invalid, in
part because Defendants violated their fiduciary duties by adopting the Amended
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Bylaws. See id. at 43, ¶109; 42, ¶106. Specifically, Plaintiff claims that “[a]s a result of
the conduct of Defendants [], there is a controversy regarding the validity of the
Amended Bylaws as it relates to Plaintiff, due to [Defendants’] violation of their
fiduciary duties[.]” Id. at 43, ¶109. Defendants argue that Plaintiff’s request for
declaratory judgment “is itself a derivative claim” barred by SB 29. Doc. No. 17 at 19.
The Court agrees with Defendants. A director’s fiduciary duties “run to the
corporation, not to individual shareholders or even to a majority of shareholders. In re
Poe, 648 S.W.3d 277, 287 (Tex. 2022) (emphasis added). Thus, a breach of fiduciary
duty claim against a director “may be advanced only in a shareholder’s derivative suit.”
Gearhart Indus., Inc. v. Smith Int’l, Inc., 741 F.2d 707, 721 (5th Cir. 1984). However,
the Court has already determined that Plaintiff’s derivative claims are barred by SB 29
and the Amended Bylaws. Using a breach of fiduciary duty allegation to invalidate the
Amended Bylaws does not get Plaintiff around SB 29’s statutory bar.
C. 	Retroactivity
Plaintiff argues that SB 29 is unconstitutional as applied to him because Texas
Business 	Organizations 	Code 	§ 	21.552(a)(3) 	violates 	the 	Texas 	Constitution’s
prohibition against retroactive application of laws. See Doc. No. 41. Plaintiff also alleges
that the Amended Bylaws are invalid because Defendants adopted them in violation of
the retroactivity prohibition. Doc. No. 1 at 43, ¶109. Conversely, Defendants argue
that the prohibition is inapplicable because SB 29 “does not retroactively bar an
already-pending lawsuit or extinguish an already-vested right,” but instead only applies
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to derivative proceedings instituted on or after SB 29’s effective date. Doc. No. 17 at
23–24.
The Texas Constitution states that “[n]o bill of attainder, ex post facto law,
retroactive law, or any law impairing the obligation of contracts, shall be made.” Tex.
Const. Art. I, § 16 (emphasis added). The prohibition against retroactivity serves two
purposes: (1) it “protects the people’s reasonable, settled expectations,” and (2) it
“protects against abuses of legislative power.” Robinson v. Crown Cork & Seal Co., Inc.,
335 S.W.3d 126, 139 (Tex. 2010) (citing Landgraf v. USI Film Prods., 511 U.S. 244,
265–66 (1994)). To show that a statute is retroactive, a plaintiff must show that he
“had a reasonable and settled expectation that he could recover money damages” from
the defendant. Hogan v. SMU, 688 S.W.3d 852, 860 (Tex. 2024). Both Plaintiff and
Defendants brief a three-factor test for 	determining whether a law violates the
retroactivity prohibition. See Robinson, 335 S.W.3d at 145. Referred to herein as the
“Robinson factors,” the Court must consider three factors in determining whether SB
29 is retroactive: “[1] the nature and strength of the public interest served by the
statute as evidenced by the Legislature’s factual findings; [2] the nature of the prior
right impaired by statute; and [3] the extent of the impairment.” Id. There is a “heavy
presumption against retroactive laws.” Id. at 146 (emphasis added).
Applying the Robinson factors to SB 29, the Court finds that SB 29 does not
violate the retroactivity prohibition. First, the Court finds that SB 29 serves a
significant public interest. SB 29’s Bill Analysis states that the statute is “a bold step
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toward making Texas the corporate law capital of America by modernizing the Texas
Business Organizations Code.” Senate Comm. on State Affairs, Bill Analysis, Tex. S.B.
29, 89th Leg., R.S. (2025). The Bill Analysis further markets SB 29 as legislation that
will allow Texas to catch up to states like Delaware and Nevada, who have long-
standing, sophisticated corporate statutes. See id. Through SB 29, the analysis says,
executives around the country will notice that “Texas is ready for sophisticated business
disputes.” Id. Clearly, SB 29 is meant to bring corporate business to Texas and provide
statutory incentive to incorporate and conduct business here, and Plaintiff does not
dispute that objective. Further, SB 29 “sets fair thresholds for shareholder actions.” Id.
SB 	29 	is 	yet 	another 	example 	of 	the 	well-recognized 	concept 	that 	“corporate
relationships are largely matters governed by statute and contract.” Ritchie v. Rupe, 443
S.W.3d 856, 891 (Tex. 2014). The Court finds that the public interest served by SB
29 is strong, so the first Robinson factor weighs against retroactivity.
Second, the Court finds that the statute does not impair a prior right of Plaintiff.
“[A] cause of action for breach of directors’ fiduciary duties belongs to the corporation
and cannot be brought by a stockholder in his own right, nor can the shareholder
directly prosecute the suit in the name of the corporation. Gearhart, 741 F.2d at 721
(emphasis added); see also Setliff v. Zoccam Techs., Civ. Action No. 3:21-CV-2025-B,
2022 WL 504395, at *10 (N.D. Tex. Feb. 18, 2022) (Boyle, J.) (“[d]irectors and
officers of a corporation owe a fiduciary duty to the corporation and this duty might
come into conflict with the best interests of individual shareholders”). The Texas
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Business Organizations Code expressly states that a derivative proceeding is a suit
brought “in the right of a domestic corporation.” T EX . B US. O RGS. CODE A NN. §
21.551(1); see also § 21.552(a)(2) (to bring a derivative proceeding, shareholder must
adequately represent corporation’s interest “in enforcing the right of the corporation”).
Further, any recovery in a derivative action belongs to the corporation, not the
shareholder-plaintiff. Johnson ex rel. MAII Holdings, Inc. v. Jackson Walker, L.L.P., 247
S.W.3d 765, 779 (Tex. App.—Dallas 2008, pet. denied); see also Christian v. ICG
Telecom Canada, Inc., 996 S.W.2d 270, 274 (Tex. App.—Houston [1st Dist.] 1999, no
pet.) (“[i]n a derivative action, the plaintiffs seek recovery for the corporation”). If any
“prior right” is impaired, it is a right belonging to Southwest, not Plaintiff. Accordingly,
the second Robinson factor also weighs against retroactivity.
Third, the Court finds that the extent of any impairment on Plaintiff is
negligible. The Court agrees with Defendants that SB 29 governs a right that rests with
Southwest, not Gusinsky. See Doc. No. 17 at 25; Gearhart, 741 F.2d at 721. The only
impairment Plaintiff faces is the inability to bring a derivative action in the right of
Southwest. See T EX . BUS. ORGS. CODE ANN. § 21.551(1) (emphasis added). Ultimately,
Plaintiff must show that he had a “settled expectation” to recover monetary damages
from Defendants. Hogan, 688 S.W.3d at 860. However, even if Plaintiff were to prevail
at trial, he would not be entitled to any monetary damages awarded by the jury. See
MAII Holdings, 247 S.W.3d at 779. The Court finds that the third Robinson factor, and
the entire Robinson test, weigh against a finding that SB 29 retroactively applies to
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Plaintiff.
Plaintiff also argues that SB 29 violates the retroactivity prohibition because at
the time of SB 29’s enactment and the Amended Bylaws’ adoption, his “fiduciary duty
claims [were] accrued and [] pending.” Doc. No. 31 at 23. However, Plaintiff’s claims
were indisputably not “pending” at the time SB 29 went into effect and Defendants
adopted the Amended Bylaws. For a cause of action to be “pending,” the plaintiff must
have filed suit by or before the effective date of the challenged statute. See Satterfield v.
Crown Cork & Seal Co., Inc., 268 S.W.3d 190, 207 (Tex. App.—Austin 2008, no pet.)
(emphasis added); 211 (“[b]ecause [plaintiff’s] common law claims of negligence and
strict products liability accrued and were pending in the trial court when the Statute took
effect,” plaintiff’s claims could not be retroactively extinguished); Pending, B LACK’ S L AW
D ICTIONARY (12th ed. 2024) (“[r]emaining undecided; awaiting decision <a pending
case>”). Plaintiff filed his Complaint in this Court on July 10, 2025. See Doc. No. 1.
Because he had not filed suit by or before SB 29’s effective date, Plaintiff’s claims were
not “pending” such that the retroactivity prohibition applies.
Accordingly, the Court finds that SB 29 and the Amended Bylaws do not violate
the 	Texas 	Constitution’s 	prohibition 	against 	retroactivity. 	Plaintiff’s 	as-applied
constitutional challenge fails.
D. 	Texas Contract Law
Plaintiff also alleges that he is entitled to declaratory judgment that the
Amended Bylaws are inapplicable to him because they violate principles of Texas
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contract law. Doc. No. 1 at 43, ¶109. In his Response, Plaintiff argues that the
Amended Bylaws are “unreasonable because he would be entirely deprived of his day
in court and a remedy,” they are the “product of fraud or overreaching,” and they were
“implemented for an improper purpose.” Doc. No. 31 at 27–29.
The Court finds Plaintiff’s “contract” argument unpersuasive. “[A] corporation’s
charter 	creates 	a 	contractual 	relationship 	between 	the 	corporation 	and 	its
shareholders.” SMU v. S. Cent. Jurisdictional Conf. of The United Methodist Church, 716
S.W.3d 475, 487 (Tex. 2025). So too do the bylaws of a corporation give rise to a
contractual relationship between the corporation and its shareholders. See Butorin on
behalf of KBR Inc. v. Blount, 106 F. Supp. 3d 833, 842 (S.D. Tex. 2015). Plaintiff does
not dispute that Southwest’s Certificate of Formation and its Amended Bylaws create
a contractual relationship between him and Southwest. See SMU, 716 S.W.3d at 487.
Plaintiff also does not dispute that he, as a Southwest shareholder, was on notice that
Defendants could amend the bylaws without shareholder approval. See Doc. No. 18 at
275, § 4 (“the Board of Directors may amend or repeal these Bylaws, or adopt new
bylaws”). Further, Plaintiff does not argue that Defendants’ power to amend the bylaws
in this fashion was otherwise curtailed by Southwest’s shareholders.
Plaintiff’s only proffered argument on this point is that the Amended Bylaws
“constituted unfair surprise to Plaintiff, specific to the [Amended] Bylaw clause,
because the [Amended Bylaws] [were] adopted less than three weeks after Plaintiff
served the Demand, apparently because of the Demand.” Doc. No. 31 at 28–29
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(emphasis original); see also Doc. No. 1 at 37, ¶ 82 (“the Board appears to have adopted
the Amended Bylaws in response to Plaintiff’s demand”). The Court finds this argument
equally unpersuasive because SB 29 went into effect two days before Defendants adopted
the Amended Bylaws. See Doc. No. 17 at 7 (emphasis added). Plaintiff ignores this
important date in the timeline, but the Court will not. The Court believes it is just as
likely 	that 	Defendants 	adopted 	the 	Amended 	Bylaws, 	including 	the 	percentage
ownership requirement, in response to the statute, passed two days prior, giving them
the authority to do so.
The Court does not find that Plaintiff’s “contract” argument negates the bar that
SB 29 and the Amended Bylaws place on his claims against Defendants.
E. 	Open Courts and “Federal” Arguments
Plaintiff also alleges, in conclusory fashion, that SB 29 and the Amended Bylaws
violate the Texas Constitution’s open courts provision and are “irreconcilable with
federal [law].” Doc. No. 1 at 38, ¶87; 43, ¶109. However, Plaintiff’s Response provides
no argument, or even passing reference, to these allegations. When a plaintiff’s
response or opposition to a motion to dismiss fails to provide argument in support of
a claim, the plaintiff abandons that claim. See In re Dallas Roadster, Ltd., 846 F.3d 112,
126 (5th Cir. 2017) (citing Black v. N. Panola Sch. Dist., 461 F.3d 584, 588 n. 1 (5th
Cir. 2006)); see also Bearden v. USDA, RHS, Civ. Action No. 3:23-CV-01204-E, 2023
WL 6462861, at *2 (N.D. Tex. Oct. 2, 2023) (Brown, J.) (“a party’s failure to defend
a claim in her response to a motion to dismiss constitutes abandonment”); Vela v. City
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of Houston, 276 F.3d 659, 678–79 (5th Cir. 2001) (defendant abandoned affirmative
defense 	by 	not 	providing 	argument 	in 	support 	of 	such 	defense 	in 	defendant’s
opposition to summary judgment). Plaintiff’s Response provides no argument for either
his open courts or federal law allegations. Therefore, he has abandoned those theories
of recovery, and in this instance, defenses against the bar created by SB 29 and the
Amended Bylaws.
F. 	Plaintiff’s Request for Leave to Amend
Plaintiff requests that, should the Court grant the Motion (as it does herein),
Plaintiff be given leave to amend, “including by repleading his claims as direct claims
if the Court finds the [Amended] Bylaw[s] bar[] his derivative action.” Doc. No. 31 at
31. However, Plaintiff asserts a breach of fiduciary duty claim and a request for
declaratory judgment based on his fiduciary duty claim and other constitutional and
contractual theories that the Court has disposed of herein. It is well-established that a
breach 	of 	fiduciary 	duty 	claim 	against 	a 	corporation’s 	directors 	belongs 	to 	the
corporation, not the plaintiff-shareholder. See Gearhart, 741 F.2d at 721. Accordingly,
the Court DENIES Plaintiff’s request for leave to amend.
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IV. 	Conclusion
For the foregoing reasons, the Court finds that SB 29 and the Amended Bylaws
bar Plaintiff’s claims as a matter of law. Accordingly, the Court GRANTS Defendants’
Motion and DISMISSES WITH PREJUDICE Plaintiff’s claims against Defendants.
SO ORDERED.
Signed March 17th , 2026.
____________________________________
ED KINKEADE
UNITED STATES DISTRICT JUDGE
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