A Texas court has issued a ruling in a business dispute between two partners, Brik A. Stratton and Kenneth M. Hogan, who co-owned a physical therapy clinic and a real estate company. The case, Stratton v. Hogan, was filed under docket number 25-BC04B-0010 and involved claims of conversion and breach of contract. The court's decision affects the ongoing legal battle over their business interests and sets important precedents for similar disputes in the future.
The ruling was delivered by Judge Sharp of the Texas Business Court on July 15, 2026. The court granted Hogan's motion to dismiss Stratton's claim of conversion regarding physical therapy equipment but denied Hogan's motion to dismiss a breach of contract claim related to a $300,000 promissory note. This decision highlights the complexities of business partnerships and the legal standards required to establish claims in such disputes.
Background
The dispute arose from the breakdown of the business relationship between Stratton and Hogan, who jointly owned Stratton Hogan Clinics, Inc. (SH Inc.), a physical therapy business, and Stratton Hogan Real Estate, LLC (SHRE), which managed the business's real estate holdings. After attempts to negotiate a separation of their business interests failed, Stratton filed a lawsuit seeking judicial dissolution of both SH Inc. and SHRE. In response to the partners' request, the court appointed a wind-up supervisor to oversee the dissolution process on June 13, 2025.
Both parties accused each other of breach of fiduciary duty and violation of SH Inc.'s operating agreement. Hogan also brought claims against third-party defendants, including Stratton's separately owned business, Stratton Rehabilitation Clinic, Inc. (Stratton Rehab). In an amended pleading, the Stratton Parties added counterclaims against Hogan, including claims for disparagement and breach of contract related to a $300,000 promissory note. They also alleged conversion of physical therapy equipment.
The Ruling
The court's ruling addressed Hogan's motion to dismiss the counterclaims under Texas Rule of Civil Procedure 91a, which allows dismissal of claims that lack a basis in law or fact. The court granted Hogan's motion to dismiss Stratton's conversion claim, stating, "Stratton does not plead he was owner of the equipment or that he had rights to possess the equipment, as would be required to satisfy the first element of a conversion claim." The court emphasized that Stratton's claims did not demonstrate ownership or harm, which are necessary for a conversion claim.
However, the court denied Hogan's motion to dismiss the breach of contract claim brought by Stratton Rehab regarding SHRE's failure to pay on the promissory note. The court found that Stratton Rehab had provided sufficient factual support for its claim, stating that Hogan's argument regarding SHRE's non-appearance in the suit did not warrant dismissal under Rule 91a.
Impact
This ruling has significant implications for the parties involved and for future business disputes in Texas. By granting the dismissal of the conversion claim, the court clarified the legal requirements for establishing ownership and harm in conversion cases. This sets a precedent for how similar claims may be evaluated in the future, particularly in closely held corporations where ownership rights can be complex.
The court's decision to deny the motion to dismiss the breach of contract claim reinforces the importance of clear contractual obligations in business partnerships. It underscores that parties must adhere to their agreements and provides a pathway for Stratton Rehab to seek recovery for the alleged breach. This aspect of the ruling may encourage other businesses to ensure their contracts are well-defined to avoid similar disputes.
What's Next
The case may still be appealed, particularly regarding the conversion claim. Additionally, the wind-up supervisor continues to oversee the dissolution process of the businesses involved, which may lead to further legal proceedings as the parties seek to resolve outstanding issues related to their business interests.