Collective Fiduciary Duties and Shareholder Capacity in Texas: Commentary on In re UMTH General Services, L.P.

I. Introduction

The Supreme Court of Texas’s mandamus decision in In re UMTH General Services, L.P., UMT Holdings, L.P., UMTH Land Development, L.P., Hollis M. Greenlaw, Todd F. Etter, Ben L. Wissink, and Cara D. Obert, No. 24-0024 (Tex. Nov. 14, 2025) addresses a recurring and increasingly important question in business-entity litigation: can individual shareholders sue a third party directly based on a contract the third party executed with the corporation (or, here, a real estate investment trust), when that contract includes language stating that the third party is in a “fiduciary relationship to the Trust and its Shareholders”?

The Court holds that such language, standing alone, does not create a personal cause of action in each shareholder nor render shareholders third-party beneficiaries of the contract. Instead, it confirms a fiduciary obligation to the entity and its shareholders collectively, enforceable by or on behalf of the entity through derivative mechanisms, not through thousands of separate individual suits.

At the same time, the Court clarifies and applies the distinction drawn in Pike v. Texas EMC Management, LLC between:

Constitutional standing (injury sufficient for subject-matter jurisdiction), and
Capacity (the legal authority to prosecute a claim that belongs to another legal person — here, the entity).

Ultimately, the Court:

Confirms that the shareholder plaintiffs have constitutional standing to bring suit, but
Holds they lack capacity to assert what are, in substance, derivative claims belonging to the Trust,
Rejects their contention that the advisory contract creates individual fiduciary duties or third-party beneficiary rights in their favor, and
Conditionally grants mandamus relief, directing the trial court to dismiss the shareholder suit with prejudice so that any derivative claims are brought, if at all, in the exclusive derivative forum—Maryland—under Maryland law.

The decision thus cements an important principle in Texas law: language in an advisory or management contract stating that the advisor owes fiduciary duties to a trust and “its shareholders” does not, without more, create individual shareholder causes of action or third-party beneficiary rights; such duties are owed to the entity and shareholders as a collectivity and are enforceable derivatively.

II. Summary of the Opinion

A. Parties and Structure

Entity: United Development Fund IV, a Maryland real estate investment trust (the “Trust”), with over 12,000 shareholders.
Governance documents:
- Declaration of trust: Shareholders’ rights are limited to those granted in the declaration; shareholders have “no interest in the assets of the Trust” and cannot compel distributions or partitions.
- Bylaws: Maryland is designated as the exclusive forum for derivative actions brought on the Trust’s behalf.
Advisor contract: In 2014 the Trust entered into an advisory agreement with UMTH General Services, L.P. (“UMTH”), conferring management authority. The agreement:
- Is “by and between” the Trust and UMTH only;
- States that “[t]he Advisor shall be deemed to be in a fiduciary relationship to the Trust and its Shareholders”; and
- Is governed by Texas law.
Plaintiffs below (the “Shareholders”): Nexpoint Diversified Real Estate Trust and its wholly owned subsidiary, Nexpoint Real Estate Opportunities (the latter being the current record holder of Trust shares).
Defendants/Relators: UMTH and related entities and individuals (officers, managers, trustees of the Trust or UMTH) collectively referred to by the Court as the “Advisors.”

B. The Competing Lawsuits

After criminal investigations of the Trust’s trustees surfaced, Nexpoint filed a derivative action in Maryland in June 2021 alleging mismanagement. Nexpoint later transferred its Trust shares to its subsidiary in December 2021. The Maryland court ultimately dismissed Nexpoint’s derivative claims for lack of standing and subject-matter jurisdiction.

While the Maryland case was pending, Nexpoint and its subsidiary filed a separate, direct action in Dallas County, Texas against the Advisors. They alleged:

Corporate waste and mismanagement;
Improper advancement of legal fees on behalf of Trust management; and
Refusal to disclose requested information.

Critically, they argued that:

The advisory agreement’s statement that UMTH is in a fiduciary relationship with “the Trust and its Shareholders” created individual duties owed to each shareholder, and
They therefore could sue directly, not derivatively, under Texas law as non-signatory but protected parties.

C. Trial Court and Court of Appeals

The Advisors responded with:

A plea to the jurisdiction (challenging standing),
A verified plea in abatement (challenging capacity and seeking abatement/dismissal), and
Special exceptions (challenging the legal sufficiency of the pleadings).

They argued that the claims were inherently derivative, belonged to the Trust, and that the plaintiffs lacked both standing and capacity to sue directly.

The trial court denied all defense motions, and the Advisors sought mandamus relief in the Dallas Court of Appeals, which was denied. The Advisors then petitioned the Supreme Court of Texas for mandamus relief.

D. Holdings of the Supreme Court of Texas

The Court, per Justice Bland, holds:

Standing:
- Under Pike v. Texas EMC Management, LLC, shareholders have constitutional standing to allege loss in the value of their ownership interests, even if the injury is derivative in nature.
- The statutory derivative requirements in the Texas Business Organizations Code (contemporaneous and continuous ownership) do not strip shareholders of constitutional standing when they plead direct financial loss.
- Because the plaintiffs alleged financial loss due to mismanagement and pleaded direct claims, they had sufficient standing for Texas courts to exercise subject-matter jurisdiction.
Capacity:
- To recover individually, shareholders must prove a personal cause of action and personal injury distinct from the corporation’s injury.
- The advisory agreement’s language that the Advisor is in a fiduciary relationship with “the Trust and its Shareholders” does not create personal contractual or fiduciary duties to each shareholder individually.
- The agreement benefits shareholders collectively through the Trust; individual shareholders are neither parties nor clearly designated third-party beneficiaries.
- As a result, the plaintiffs lack capacity to assert these claims directly; the claims belong to the Trust and must be brought derivatively in the proper forum.
Third-Party Beneficiary Status:
- There is a strong presumption against third-party beneficiary status under Texas law.
- General contractual benefits to shareholders as a group are insufficient.
- No language in the advisory agreement “clearly and fully spells out” an intent to grant enforceable third-party rights to individual shareholders.
- Thus, the shareholders are not third-party beneficiaries of the advisory agreement.
Mandamus and Remedy:
- Mandamus is appropriate because:
  - The trial court misapplied the law on capacity and derivative claims; and
  - Allowing the case to proceed in Texas would be an “unnecessary waste” of judicial resources and would defeat the Trust’s exclusive Maryland forum for derivative claims.
- The Court conditionally grants mandamus, directs the trial court to vacate its prior order, grant the plea in abatement, and dismiss the case with prejudice.

III. Detailed Analysis

A. Factual and Procedural Background in Greater Depth

The Trust is organized as a Maryland real estate investment trust and is governed by a declaration of trust and bylaws. Two features of those documents are central:

Limitation of shareholder rights: The declaration states that shareholders are entitled “only to those rights provided in the Declaration” and have “no interest in the assets of the Trust” and “no right to compel any partition, division, dividend or Distribution of the Trust or of its assets.” This text strongly affirms the separateness of the Trust as an entity and the indirect, equitable nature of shareholder interests.
Exclusive derivative forum clause: The bylaws designate Maryland as the exclusive forum for derivative actions on the Trust’s behalf. Thus, suits seeking redress for injuries to the Trust must be brought in Maryland and are governed by Maryland law, particularly as to derivative procedures and demand requirements.

In 2014, the Trust’s board, acting under the authority granted by the declaration, entered into an advisory agreement with UMTH General Services, L.P. to manage investments and operations. The agreement’s relevant features include:

The contract is explicitly between the Trust and UMTH; shareholders are not signatories.
Section language provides: “The Advisor shall be deemed to be in a fiduciary relationship to the Trust and its Shareholders.”
Most duties are framed in terms of the Advisor’s obligations to the Trust itself (e.g., management, recordkeeping, reporting).
The only references to shareholders outside of this clause occur incidentally in provisions for fees, expenses, indemnification, and shareholder recordkeeping and reporting.

Allegations of mismanagement and criminal investigation of trustees led Nexpoint to file a Maryland derivative action in June 2021. During the pendency, Nexpoint transferred its shares to its wholly-owned subsidiary in December 2021. The Maryland court dismissed Nexpoint’s derivative case, reportedly on standing and subject-matter jurisdiction grounds.

Parallel to that, Nexpoint and its subsidiary pursued a new strategy: filing a Texas suit framed as a direct action against the Advisors, arguing that the advisory agreement created individual duties to each shareholder under Texas law, avoidant of the Maryland exclusive-derivative-forum clause. Relators responded that this was a derivative claim clothed as a direct action and that the plaintiffs, as non-signatories, lacked capacity and third-party beneficiary status.

B. Issues Presented

The Supreme Court of Texas addressed two primary legal questions:

Standing: Do the plaintiffs have constitutional standing in Texas to bring their claims, given the derivative nature of the alleged wrongs and the Texas Business Organizations Code provisions governing derivative suits?
Capacity and Cause of Action:
- Does the advisory agreement create a personal cause of action in each individual shareholder, either by establishing fiduciary duties running to them individually or by making them third-party beneficiaries?
- If not, must the claims be treated as derivative, and are the plaintiffs barred by the Trust’s Maryland forum-selection provision and Maryland law?
- Is mandamus an appropriate procedural vehicle to correct the trial court’s refusal to dismiss?

C. Standing vs. Capacity: Application of Pike v. Texas EMC Management, LLC

The Court begins with standing, emphasizing that courts must confirm subject-matter jurisdiction before reaching the merits or capacity questions. This analysis is grounded in:

Pike v. Texas EMC Management, LLC, 610 S.W.3d 763 (Tex. 2020):
- Pike held that a stakeholder in a business organization has constitutional standing to sue for alleged loss in the value of its ownership interest.
- Even when corporate law generally requires that claims for diminution in stock value be brought derivatively on behalf of the entity, that rule is one of capacity and remedy allocation, not of subject-matter jurisdiction.
Texas Right to Life v. Van Stean and Heckman v. Williamson County are relied on for the basic standing framework and the need to take pleaded facts as true in jurisdictional analysis.

Applying Pike, the Court:

Recognizes that, as in Massachusetts v. Davis and Wingate v. Hajdik, diminution in stock value caused by corporate injury generally belongs to the entity and must be pursued derivatively.
Nonetheless holds that an allegation of lost investment value is a sufficient personal injury to satisfy constitutional standing under Texas law.
Clarifies that derivative statutes in the Business Organizations Code (e.g., § 21.552’s contemporaneous and continuous ownership requirements) are capacity and procedural constraints, not jurisdictional bars.

Thus, for the limited purpose of subject-matter jurisdiction, the plaintiffs’ allegations of financial loss are enough. The Court then explicitly separates that question from the distinct and ultimately dispositive question of capacity.

D. The Direct–Derivative Divide and the Nature of the Injury

The central substantive question is whether the claims are properly characterized as:

A direct injury to individual shareholders (e.g., a duty owed to them personally), or
A derivative injury to the entity (diminution of the Trust’s assets or value), for which the Trust is the proper plaintiff.

The Court reiterates classic Texas corporate law principles:

From Massachusetts v. Davis, 168 S.W.2d 216 (Tex. 1942):
“[I]njury to the property of a corporation, or the impairment or destruction of its business, is vested in the corporation.”
From Wingate v. Hajdik, 795 S.W.2d 717 (Tex. 1990):
A shareholder “cannot recover damages personally for a wrong done solely to the corporation, even though he may be injured by that wrong.” To recover individually, a shareholder must prove both “a personal cause of action and personal injury.”

The Court emphasizes that this rule “embodies the principle that where such an injury occurs each shareholder suffers relatively in proportion to the number of shares he owns, and each will be made whole if the corporation obtains restitution or compensation from the wrongdoer.” In other words, if the entity is compensated, the shareholders are made whole indirectly via the value of their shares.

The plaintiffs’ allegations—corporate waste, mismanagement, improper diversion of Trust funds, and advancement of legal fees to management—are quintessential injuries to the entity. They reduce the Trust’s asset base and thereby diminish the value of all shares proportionally. That pattern is a hallmark of a derivative claim.

Given this characterization, the plaintiffs must show either:

A separate, individual duty owed to them (distinct from the duty to the entity); or
Third-party beneficiary rights under the advisory agreement sufficient to give them a direct contractual cause of action.

Absent that, capacity fails, even though standing exists.

E. Fiduciary Language in the Advisory Agreement: Collective vs. Individual Duties

The core contractual provision states:

“The Advisor shall be deemed to be in a fiduciary relationship to the Trust and its Shareholders.”

The shareholders seize on the phrase “and its Shareholders” to contend that the Advisor owes a fiduciary duty to each shareholder individually. The Court rejects this interpretation.

1. Shareholder Collectivity and Corporate Governance

The Court interprets the phrase “the Trust and its Shareholders” as referring to the shareholders collectively, not as a conferral of thousands of individualized fiduciary relationships. Several considerations drive this reading:

Contracting parties: The agreement is explicitly “by and between” the Trust and UMTH. No shareholder is a party, and no shareholder signed the agreement in an individual capacity.
Entity acting for its investors: The Trust’s board, empowered by the declaration, hired the Advisor to manage the Trust’s assets. In that sense, the Trust acts on behalf of its investor base as a collectivity. This is the standard corporate and REIT governance model.
Alignment with core corporate doctrine: Quoting In re Estate of Poe and Ritchie v. Rupe, the Court notes that:
“[A] director cannot simultaneously owe these two potentially conflicting duties” — one to the corporation and another, separate, to an individual shareholder whose interests might conflict with the entity’s.
To impose parallel, individualized duties on the Advisor would create such conflicts on a massive scale.
Unworkability: The Court stresses the “unworkable result” that would follow from recognizing individualized duties to over 12,000 shareholders whose preferences, risk tolerances, and litigation postures might diverge sharply from the Trust as an entity.

Thus, the fiduciary obligation runs to the Trust as an entity and, through it, to its shareholders as a group, but not separately to each shareholder as an individual legal obligee.

2. Distinguishing Close-Company Agreements: Allen and Strebel

The plaintiffs relied on two intermediate appellate decisions:

Allen v. Devon Energy Holdings, L.L.C., 367 S.W.3d 355 (Tex. App.—Houston [1st Dist.] 2012), and
Strebel v. Wimberly, 371 S.W.3d 267 (Tex. App.—Houston [1st Dist.] 2012).

In those cases, members of closely held LLCs were parties to LLC agreements providing that managers owed fiduciary duties “to the company and the members.” The courts there allowed individual members to enforce those duties directly.

The Supreme Court of Texas distinguishes these authorities on two grounds:

Who is a party? In Allen and Strebel, the members themselves were contractual parties, and the very nature of LLC operating or company agreements (especially in closely held entities) often includes direct obligations among the members.
Nature of the entity and agreement: By contrast, the UMTH advisory agreement is between a publicly held REIT and an external advisor. The shareholders—numerous and diffuse—are not signatories, and the Trust’s declaration expressly denies them a direct interest in the Trust’s assets or distribution rights.

Thus, the Court treats the fiduciary language here as part of the broader corporate framework, not as the mutual, member-focused governance agreements found in closely-held LLC cases.

F. Third-Party Beneficiary Doctrine and Its Limits

The plaintiffs alternatively argue that they are third-party beneficiaries of the advisory agreement. The Court undertakes a classic Texas third-party-beneficiary analysis, relying heavily on:

First Bank v. Brumitt, 519 S.W.3d 95 (Tex. 2017);
MCI Telecommunications Corp. v. Texas Utilities Electric Co., 995 S.W.2d 647 (Tex. 1999);
Basic Capital Management, Inc. v. Dynex Commercial, Inc., 348 S.W.3d 894 (Tex. 2011).

Key points from these cases, reiterated by the Court, are:

The “benefits and burdens of a contract belong solely to the contracting parties.”
Texas law strongly presumes against third-party beneficiary status.
To overcome that presumption, the contract must “clearly and fully” express an intent to confer a direct benefit on the third party:
When “the contract’s language leaves any doubt about the parties’ intent, those doubts must be resolved against conferring third-party beneficiary status.”
A foreseeable or even intended indirect benefit to a third party “is not enough.”

In corporate settings, shareholders almost always benefit from corporate contracts, but in a collective and indirect sense. That does not make every shareholder a third-party beneficiary with standing to sue on each contract the corporation (or trust) signs.

Here:

The agreement nowhere states that individual shareholders may sue or enforce UMTH’s obligations.
The Trust’s own declaration disfavors reading shareholders as direct claimants on Trust assets or contracts, further undermining any inference of individual contractual rights.
The fiduciary phrase “to the Trust and its Shareholders,” read in context, remains compatible with the standard entity-centered stakeholder model and does not “clearly and fully” confer individualized enforcement rights.

Consequently, the Court declines to create third-party beneficiary status by implication, echoing Basic Capital, and holds that the shareholders are not third-party beneficiaries of the advisory agreement.

G. The Role of Maryland Law and the Exclusive Forum Clause

Although the advisory agreement chooses Texas law to govern disputes arising under the agreement, the Trust’s internal affairs and derivative litigation are governed by Maryland law, as:

Maryland is the state of formation of the Trust, and
The Trust’s bylaws designate Maryland as the exclusive forum for derivative suits.

The Court cites Kamen v. Kemper Financial Services, Inc., 500 U.S. 90 (1991) for the principle that the law of the state of incorporation governs shareholder derivative litigation, including demand requirements and related issues.

Importantly, the Texas Supreme Court:

Does not decide whether the plaintiffs have any viable derivative remedy in Maryland;
Expressly states that the existence and scope of derivative rights in Maryland are questions for Maryland courts applying Maryland law;
Limits its role to deciding whether Texas courts can and should entertain what are, in essence, derivative claims disguised as direct claims under Texas contract law.

By classifying the claims as derivative in nature and emphasizing the exclusive Maryland forum, the Court foregrounds the importance of respecting corporate governance structures and forum-selection mechanisms chosen in governing documents.

H. Mandamus Relief and Forum-Selection Analogies

Finally, the Court turns to the procedural question: does the Advisors’ lack of an adequate remedy by appeal justify mandamus?

The general mandamus standard, drawn from In re Prudential Insurance Co. of America and Walker v. Packer, requires:

A clear abuse of discretion (including misapplication of law); and
No adequate remedy by appeal.

A mere desire to avoid expense or delay is not enough. However, mandamus is appropriate where:

Proceeding in the wrong forum or under a defective procedural posture would result in a “meaningless waste of judicial resources”;
There is significant risk of forum-shopping and inconsistent adjudications; and
The defect is incurable and strikes at the heart of the proper forum and party structure of the litigation.

The Court analogizes heavily to its prior line of cases enforcing forum-selection clauses by mandamus, such as:

In re AIU Insurance Co., 148 S.W.3d 109 (Tex. 2004);
In re Laibe Corp., 307 S.W.3d 314 (Tex. 2010);
Pinto Technology Ventures, L.P. v. Sheldon, 526 S.W.3d 428 (Tex. 2017);
In re Lisa Laser USA, Inc., 310 S.W.3d 880 (Tex. 2010);
In re J.B. Hunt Transport, Inc., 492 S.W.3d 287 (Tex. 2016).

In those cases, mandamus was used to force transfer or dismissal when a valid forum-selection clause was disregarded by a trial court, because litigating in the wrong forum both wastes judicial resources and undermines the contractual or structural allocation of dispute resolution.

Here, the Court reasons that:

The derivative nature of the claims and the exclusive Maryland forum for derivative suits make Texas an improper forum for this dispute.
Allowing the claims to proceed in Texas as “direct” claims would:
- Undermine the corporate framework that expects entities, not individual shareholders, to manage litigation.
- Enable end-runs around derivative safeguards (like demand and continuous ownership) and forum-selection provisions.
- Encourage forum-shopping and strategic pleading.
The capacity defect is incurable in Texas because the plaintiffs cannot transform an entity-owned claim into a personal one simply by re-labeling or by relying on standard fiduciary language in an advisory contract.

Citing Curtis v. Gibbs and Mower v. Boyer, the Court uses mandamus to direct the trial court not only to sustain the plea in abatement but also to dismiss the case with prejudice, reflecting the conclusion that no amendment could cure the fundamental capacity deficiency.

IV. Precedents Cited and Their Influence

A. Core Corporate-Shareholder Cases

1. Massachusetts v. Davis, 168 S.W.2d 216 (Tex. 1942)

Davis is the classic articulation of the rule that injuries to corporate property or business operations belong to the corporation itself, not to individual shareholders, even though shareholders may be indirectly harmed via stock value.

The Court invokes Davis for:

The proposition that the right to sue for such injuries “is vested in the corporation.”
Support for the derivative nature of claims alleging waste and mismanagement at the entity level.

2. Wingate v. Hajdik, 795 S.W.2d 717 (Tex. 1990)

Wingate reiterates Davis and further clarifies that:

Shareholders generally cannot recover personal damages for wrongs done solely to the corporation; and
To sue individually, they must show a personal cause of action and personal injury distinct from the corporation’s injury.

This rule undergirds the Court’s conclusion that the plaintiffs’ claims—absent individualized contractual rights—must be pursued derivatively on the Trust’s behalf.

3. Pike v. Texas EMC Management, LLC, 610 S.W.3d 763 (Tex. 2020)

Pike provides the crucial doctrinal refinement between:

Standing: A stakeholder alleging diminution in the value of its interest has suffered a personal injury sufficient for constitutional standing.
Capacity: Whether the stakeholder is the correct plaintiff to pursue that injury (or whether the claim belongs to the entity) is a distinct, non-jurisdictional question.

The UMTH decision applies Pike faithfully: it acknowledges that the plaintiffs have standing because they allege lost investment value, but holds they lack capacity because the alleged wrongs are to the Trust and the contract does not grant them individual claim rights.

B. Fiduciary Duties and Collectivity

1. In re Estate of Poe, 648 S.W.3d 277 (Tex. 2022) & Ritchie v. Rupe, 443 S.W.3d 856 (Tex. 2014)

These cases address directors’ fiduciary duties and emphasize that directors owe duties to the corporation and, by extension, to shareholders as a whole, not to individual shareholders except in rare circumstances. They also note the tension and potential conflict when a director attempts to owe separate, conflicting duties to both the entity and particular shareholders.

The UMTH opinion deploys these precedents to argue:

A similar tension would exist if a third-party advisor owed separate, individual fiduciary duties to each shareholder in addition to its duty to the Trust.
Therefore, the more reasonable interpretation of the contract is that it reaffirms standard entity-level fiduciary obligations benefiting shareholders as a group.

C. Third-Party Beneficiary Cases

1. MCI Telecommunications Corp. v. Texas Utilities Electric Co., 995 S.W.2d 647 (Tex. 1999)

MCI is quoted for the presumption against third-party beneficiary agreements and the requirement that any intent to confer third-party rights be “clearly and fully spelled out.”

2. First Bank v. Brumitt, 519 S.W.3d 95 (Tex. 2017)

Brumitt holds that:

Even when a third party is foreseeably or actually benefited by a contract, that does not make them a third-party beneficiary.
Doubts about the contracting parties’ intent must be resolved against finding third-party beneficiary status.

The UMTH Court uses this to underscore that the indirect benefits shareholders receive from corporate contracts do not create direct enforcement rights.

3. Basic Capital Management, Inc. v. Dynex Commercial, Inc., 348 S.W.3d 894 (Tex. 2011)

Basic Capital confirms that courts will not create third-party beneficiary contracts by implication. That principle is applied here to reject the notion that general fiduciary language suffices to confer direct rights on shareholders.

D. Derivative Procedure and Foreign Law

1. In re LoneStar Logo & Signs, LLC, Zauber v. Murray Savings Ass’n, Somers ex rel. EGL, Inc. v. Crane, and Federal/Out-of-State Authorities

These cases are cited to support the interpretation that Texas’s derivative statute (§ 21.552) imposes both:

Contemporaneous ownership (the plaintiff must have been a shareholder at the time of the challenged act or omission), and
Continuous ownership (the plaintiff must maintain that status throughout the suit).

The Court notes that most other jurisdictions and federal law interpret similar rules to require continuous ownership in derivative actions.

However, because the plaintiffs disavow any attempt to sue derivatively in Texas, and Maryland law governs derivative proceedings for this Trust, those Texas derivative provisions are ultimately not dispositive here. Instead, they illustrate that if the suit were properly recognized as derivative, it should be in Maryland under Maryland law.

2. Kamen v. Kemper Financial Services, Inc., 500 U.S. 90 (1991)

Kamen establishes that the internal affairs and derivative procedures of a corporation (or analogous entity) are governed by the law of its state of incorporation. The UMTH Court invokes Kamen to emphasize that:

Maryland law, not Texas law, regulates derivative actions involving this Maryland REIT.
Whether plaintiffs can successfully bring a derivative claim is a Maryland question.

E. Mandamus and Forum Selection

The Court’s mandamus ruling synthesizes a long line of decisions:

In re Prudential Insurance Co. of America, 148 S.W.3d 124 (Tex. 2004) and Walker v. Packer, 827 S.W.2d 833 (Tex. 1992) — setting the standard for mandamus (legal error plus inadequate appellate remedy).
In re AIU Insurance Co., 148 S.W.3d 109 (Tex. 2004), In re Laibe Corp., 307 S.W.3d 314 (Tex. 2010), Pinto Tech Ventures, In re Lisa Laser USA, In re J.B. Hunt Transport — using mandamus to enforce forum-selection clauses and prevent wasteful litigation in the wrong forum.
In re Schmitz, 285 S.W.3d 451 (Tex. 2009) — emphasizing that corporations should be run by boards, not disgruntled shareholders or courts, in line with derivative demand requirements recognized in Kamen.

By analogizing the capacity problem in UMTH to forum-selection violations, the Court emphasizes that:

The corporate governance structure and its allocation of claims and forums is itself a kind of “structural clause” deserving of mandamus enforcement.
Absent mandamus, significant judicial resources could be wasted on a case that ultimately must be dismissed for want of capacity.

V. Complex Concepts Simplified

1. Standing vs. Capacity

Standing asks: “Have you personally been injured in a way the law recognizes?” It goes to whether a court has power to hear the dispute at all.
Capacity asks: “Are you the right person or entity to bring this particular claim?” A person can be injured (and thus have standing) but still be barred from prosecuting the claim because it belongs to someone else (here, the Trust).

2. Direct vs. Derivative Claims

Direct claim: The plaintiff suffers an injury distinct from the company’s injury (e.g., being excluded from a specific contract or distribution promised directly to them).
Derivative claim: The company suffers the primary injury (e.g., its assets are wasted or mismanaged), and shareholders suffer only indirectly through diminished share value. Such claims must be brought on the company’s behalf, not directly by individual shareholders.

3. Fiduciary Duties “to the Trust and its Shareholders”

This phrase, in context, means the advisor owes duties to the entity (here, the Trust), with the understanding that the entity exists for its shareholders as a group.
It does not automatically mean the advisor has 12,000 separate fiduciary relationships, each enforceable via individual lawsuits.

4. Third-Party Beneficiaries

Non-parties to a contract are generally not allowed to enforce it.
To be a third-party beneficiary, the contract must clearly state that the non-party is intended to have enforcement rights.
Being foreseeably or even intentionally benefited by a contract (such as shareholders benefiting when corporate assets are well managed) is not enough.

5. Real Estate Investment Trusts (REITs) vs. Corporations

Texas law treats REITs similarly to corporations for purposes of derivative actions (see Tex. Bus. Orgs. Code § 200.002(a)).
Thus, the usual corporate rules on direct vs. derivative claims apply to this Trust.

6. Mandamus Relief

Mandamus is an extraordinary remedy allowing an appellate court to direct a lower court to act (or stop acting) when:
- The lower court misapplies the law, and
- There is no adequate remedy by normal appeal (e.g., because litigating through trial would be an irreversible waste).
In this case, requiring the parties and the trial court to litigate a case that must ultimately be dismissed for lack of capacity would waste resources and undermine the corporate governance structure.

VI. Impact and Implications

A. For Drafting Advisory and Management Agreements

The decision sends a clear drafting signal:

Boilerplate statements that an advisor is in a “fiduciary relationship to the Trust and its Shareholders” will be treated as describing duties to the entity and shareholders collectively.
Parties wishing to create direct, enforceable rights in individual shareholders (or subsets of them) must:
- Expressly identify those shareholders or classes of shareholders;
- Clearly grant them rights to sue or enforce specific obligations; and
- Do so in a way that does not conflict with, or is not preempted by, the entity’s governing documents and relevant entity law.

B. For Shareholder Litigation Strategy

The decision significantly constrains attempts by shareholders to:

Reframe derivative claims as direct contract claims against third parties (such as advisors, managers, or service providers); and
Circumvent:
- Derivative procedural safeguards (e.g., demand, contemporaneous and continuous ownership), and
- Exclusive forum provisions in governing documents.

Shareholders will need to:

Carefully evaluate whether alleged injuries are truly individual or merely reflective of entity-level harm; and
Bring derivative claims in the proper forum under the law of the state of formation when the injury is to the entity.

C. For Corporate Governance and Third Parties

The Court emphasizes that third parties should be able to rely on the expectation that they are dealing with a single entity, run by its governing board, without exposure to:

Thousands of direct suits;
Conflicting demands from different shareholders; or
Litigation that bypasses derivative demand and forum-selection rules.

This reinforces the predictability and stability of corporate and REIT governance frameworks and provides comfort to advisors, managers, and service providers that they will not suddenly face mass individualized litigation absent express contractual provision and mutual assent.

D. Doctrinal Clarifications in Texas Law

UMTH consolidates and clarifies several important strands of Texas law:

It deepens Pike’s distinction between standing and capacity, especially in the shareholder context.
It confirms that fiduciary language in corporate contracts will presumptively be read as benefiting shareholders collectively through the entity, not as creating individualized obligations.
It integrates third-party beneficiary doctrine with corporate law, making clear that shareholder status alone, even combined with references in contracts, does not confer third-party beneficiary rights without clear and specific language.
It extends the logic of mandamus-for-forum-selection to situations where mischaracterized direct claims seek to evade derivative forums and internal-affairs regimes.

VII. Conclusion

In re UMTH General Services, L.P. is a significant clarification of how Texas courts will interpret:

Fiduciary language in corporate advisory contracts;
The relationship between derivative and direct shareholder claims; and
The interplay between Texas procedural law, foreign internal-affairs law, and exclusive forum provisions in governing documents.

The Court’s central message is that:

Absent an express and unmistakable undertaking to confer individual rights, duties flowing from a third-party advisor to “the Trust and its Shareholders” are owed to the Trust and its shareholders collectively and are enforceable solely via derivative mechanisms in the proper forum.

By holding that the shareholders have standing but lack capacity, and by issuing mandamus to compel dismissal with prejudice, the Court both protects the integrity of corporate governance structures and delineates the limits of contract-based attempts to repackage derivative claims as direct shareholder suits.

The decision will likely be cited in Texas and beyond whenever shareholders seek to use contractual language in third-party agreements to bypass derivative requirements and forum-selection provisions. It stands as a precedent that reinforces the principle that third-party contracts of the entity are usually enforceable by or on behalf of the entity alone, not by individual investors, unless the contract unambiguously provides otherwise.