Guillaume v. Armstrong, 2026 Tex. Bus. 70 (1st Div.)

2026 Tex. Bus. 70
The Business Court of Texas,
First Division
GARY GUILLAUME, derivatively
and on behalf of COINBASE
GLOBAL, INC.,
Plaintiff,
v.
BRIAN ARMSTRONG, et al.,
Defendants,
and
COINBASE GLOBAL, INC., a
Texas Corporation,
Nominal Defendant.
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Cause No. 26-BC01A-0052
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Syllabus1
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Defendants 	specially 	excepted to 	Plaintiff’s 	derivative 	shareholder
petition on grounds that Texas law applies following Coinbase Global, Inc.’s
reincorporation in Texas and on grounds that Plaintiff’s pleading of demand
futility was insufficient under Delaware law. The Court holds that Texas law
governs the standing and authority of a shareholder to maintain a derivative
action against a Texas corporation even if the action asserts claims that arise
under, and are subject to, the laws of another state.
1 The syllabus was created by court staff and is provided for the convenience of the reader.
It is not part of the Court’s opinion, does not constitute the Court’s official description or
statement, and should not be relied upon as legal authority.

2026 Tex. Bus. 70
The Business Court of Texas,
First Division
GARY GUILLAUME, derivatively
and on behalf of COINBASE
GLOBAL, INC.,
Plaintiff,
v.
BRIAN ARMSTRONG, et al.,
Defendants,
and
COINBASE GLOBAL, INC., a
Texas Corporation,
Nominal Defendant.
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Cause No. 26-BC01A-0052
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Opinion and Order of Dismissal
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¶1 	Before the Court is Defendants’ Rule 91 Special Exception to
Derivative Action Petition and Plaintiff’s opposition thereto. At the core of
Defendants’ 	objection 	is 	Plaintiff’s 	failure 	to 	satisfy 	pre-suit 	demand
obligations 	with 	respect 	to 	Coinbase 	Global, 	Inc. (a 	Texas 	corporation
previously incorporated in Delaware) before filing this shareholder derivative
action. In their briefs, the parties primarily argue about the adequacy (or lack

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thereof) 	of 	Plaintiff’s 	pleading 	of demand 	futility 	under 	Delaware 	law.
Concluding that Texas law applies, the Court holds that Defendants’ special
exceptions are SUSTAINED and the Court DISMISSES the action.
I. 	Pre-Suit Demand Obligations Under Texas Law and Delaware Law
¶2 	Texas 	law 	and 	Delaware 	law 	differ 	on 	the 	requirements 	a
shareholder must meet to bring a derivative action. Texas law requires a
shareholder 	of 	a 	Texas 	corporation 	to 	file 	a 	pre-suit 	demand 	before
commencing a derivative action on behalf of the corporation.1 T EX . BUS . ORGS .
C ODE § 21.553. By statute, “A shareholder may not institute a derivative
proceeding until the 91st day after the date a written demand is filed with the
corporation stating with particularity the act, omission, or other matter that is
the subject of the claim or challenge and requesting that the corporation take
suitable action.” Id. at § 21.553(a). An exception is carved out for closely-held
corporations. Id. at § 21.563.
¶3 	The corporation’s rejection of the demand or irreparable injury to
the corporation (either at present or before expiration of the 90 days) provides
1 To assert a claim for a foreign corporation, a shareholder must abide “by
the laws of the jurisdiction of formation of the foreign corporation.” T EX . BUS .
ORGS . C ODE § 21.562.

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grounds for terminating the 90-day waiting period. Id. § 21.553(b). Failure to
make a demand is never excused. Sneed v. Webre, 465 S.W.3d 169, 184 (Tex.
2015). When a shareholder initiates a derivative proceeding without making a
pre-suit demand, the appropriate remedy is dismissal. See In re Schmitz, 285
S.W.3d 	451, 	459 	(Tex. 	2009) 	(orig. 	proceeding) 	(noting 	that 	pre-suit
requirement is a substantive requirement, not a procedural one).
¶4 	Delaware law, in contrast, requires a shareholder of a Delaware
corporation to either make a pre-suit demand or plead demand futility before
commencing a derivative action on behalf of the corporation. United Food &
Commercial Workers Union v. Zuckerberg, 262 A.3d 1034, 1047-48 (Del.
2021); 	see also D EL . C H. C T . R. 23.1. Pleading 	demand futility requires
particularized allegations as to each individual director and establishing that
a demand would have been futile for at least half of the governing board’s
members. Zuckerberg, 262 A.3d at 1059.
¶5 	Three questions determine whether a demand would have been
futile:
(i) whether the director received a material personal benefit from
the 	alleged 	misconduct 	that 	is 	the 	subject 	of 	the 	litigation
demand; (ii) whether the director faces a substantial likelihood of
liability on any of the claims that would be the subject of the
litigation 	demand; 	and 	(iii) 	whether 	the 	director 	lacks

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independence from someone who received a material personal
benefit from the alleged misconduct that would be the subject of
the litigation demand or who would face a substantial likelihood
of liability on any of the claims that are the subject of the litigation
demand.
Id. “If the answer to any of these questions is ‘yes’ for at least half of the
members of the demand board,” failure to make a demand is excused. Id.; see
also D EL . C H. C T . R. 23.1 (implementing demand requirement).
II. 	Summary of the Parties’ Dispute
¶6 	The parties agree on the relevant facts. First, Coinbase is a Texas
corporation, having reincorporated in this state from Delaware in December
2025. Second, Plaintiff commenced the instant action in the 68th Judicial
District Court, Dallas County, Texas, on April 16, 2026. See generally Pl.’s
Pet. Third, in his pleadings, 	Plaintiff 	contends Defendants’ 	wrongdoing
occurred between April 14, 2021, and June 5, 2023—while Coinbase was
incorporated in Delaware. Id. at ¶ 2. And fourth, no pre-suit demand was made
on Coinbase’s board before Plaintiff commenced this action; instead, Plaintiff
attempted to plead demand futility under Delaware law. Id. at ¶¶ 240-263.
¶7 	In their Special Exceptions, Defendants invoke Texas law and
note, “Under Texas law, Plaintiff’s Petition would be dismissed as a matter of
course because he failed to make . . . a pre-suit demand on Coinbase’s board.”

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Mtn. at p. 1. Defendants nevertheless devoted the remainder of the brief to
arguing why Plaintiff’s petition failed to satisfy the high bar for pleading
demand futility under Delaware law. See generally id. at pp. 6-18.
¶8 	Plaintiff 	responds 	that “Texas law 	does not govern 	demand
futility or inhibit Plaintiff’s ability to bring the derivative claims.” Resp. at p.
10. 	Plaintiff 	argues 	that 	Plaintiff’s 	claims 	arose 	prior 	to 	Coinbase's
reincorporation and that Coinbase represented in a regulatory filing that
reincorporation would not “‘extinguish or adversely affect the standing or
ability’ 	of 	any 	shareholder 	to 	bring 	a derivative 	action 	based 	on 	acts
occurring” before the effective date of the conversion. Id. at p. 11; see also Pl.’s
Pet. at ¶ 241. Thus, Plaintiff asserted that Coinbase should be “treated as a
Delaware corporation.” Resp. at p. 11; see also Pl.'s Pet. at ¶ 242. Plaintiff
further disputed the inadequacy of his pleadings to establish demand futility
under Delaware law. Resp. at pp. 12-25.
III. 	The Internal Affairs Doctrine
¶9 	Because Texas and Delaware law stand in conflict, the Court must
first determine which state’s law applies. “Texas courts apply the internal
affairs doctrine as a conflict of laws principle.” Grynberg v. Grynberg, 535
S.W.3d 229, 233 (Tex. App.—Dallas 2017, no pet.) (also stating that internal

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affairs doctrine is not jurisdictional). The internal affairs doctrine provides
that the formation and internal affairs of a Texas corporation are governed
substantively 	by the laws of Texas (see T EX . BUS . ORGS . C ODE §§ 1.101,
21.002), while the formation and internal affairs of a foreign corporation are
governed substantively by the laws of the state or jurisdiction where the
foreign corporation is incorporated (id. at § 21.562).2 The importance of choice
of law in the circumstances before the Court cannot be overstated: Plaintiff’s
suit must be dismissed if Texas law governs, but not if Delaware law governs.3
¶10 	In this case, Plaintiff contends that his claims are subject to
Delaware 	law 	because 	they 	arose 	while 	Coinbase 	was 	incorporated 	in
Delaware. This Court does not reach a contrary conclusion and assumes—
without deciding—that Plaintiff is correct. However, Defendants’ special
exceptions do not raise a choice-of-law question concerning the merits of the
2 	Texas 	courts 	apply 	Texas 	procedure 	regardless 	of 	the 	applicable
substantive law. In re Mahindra, USA Inc., 549 S.W.3d 541, 547 (Tex.
2018) (orig. proceeding).
3 Even if Delaware law governed and the Court sustained Defendants’ special
exceptions regarding the adequacy of Plaintiff’s demand futility allegations,
Texas courts have historically permitted a plaintiff to replead. See, e.g., In re
Brick, 351 S.W.3d 601, 607–08 (Tex. App.—Dallas 2011, orig. proceeding);
In re Crown Castle Int’l Corp., 247 S.W.3d 349, 354–55 (Tex. App.—Houston
[14th Dist.] 2008, orig. proceeding).

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pleaded claims. Instead, Defendants’ special exceptions present a choice-of-
law 	question 	concerning Plaintiff’s 	standing 	to 	assert 	those 	claims 	for
Coinbase. Accordingly, the Court’s analysis extends beyond a simple adoption
of Delaware law to the asserted claims. Standing 	warrants independent
inquiry—and the Court finds that the internal affairs doctrine resolves that
inquiry.
¶11 	“Standing is a component of subject-matter 	jurisdiction 	that
focuses on the question of who may bring an action.” Moody v. Nat’l W. Life
Ins. Co., 634 S.W.3d 256, 272 (Tex. App.—Houston [1st Dist.] 2021, no pet.).
Standing is thus essential to the Court’s authority to adjudicate this case. See
Tex. Ass’n of Bus. v. Tex. Air Control Bd., 852 S.W.2d 440, 443 (Tex. 1993);
Webre v. Sneed, 358 S.W.3d 322, 328 (Tex. App.—Houston [1st Dist.] 2011),
aff’d, 	465 	S.W.3d 169, 	193 	(Tex. 2015). 	A court has no authority 	to
adjudicate a suit brought by a party lacking standing. Moody, 634 S.W.3d at
272. Standing cannot be waived. Tex. Ass’n of Bus., 852 S.W.2d at 445.
Subject-matter jurisdiction, and thus standing, is a question of law. Moody,
634 S.W.3d at 273.
¶12 	Further, standing is assessed at the time suit is filed. See M.D.
Anderson Cancer Ctr. v. Novak, 52 S.W.3d 704, 711 (Tex. 2001); John C. Flood

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of DC, Inc. v. Supermedia, L.L.C, 408 S.W.3d 645, 650 (Tex. App.—Dallas
2013, pet. denied); Hydroscience Techs., Inc. v. Hydroscience, Inc., 401 S.W.3d
783, 789 (Tex. App.—Dallas 2013, pet. denied, reh’g denied). The primary
inquiry is “whether the party invoking jurisdiction had the requisite stake in
the outcome when the suit was filed.” Davis v. Fed. Election Comm’n, 554 U.S.
724, 734 (2008) (emphasis added).
¶13 	In Texas, standing to bring a derivative proceeding is conferred by
statute. 	See 	T EX . 	BUS . 	ORGS . 	C ODE 	§ 21.552. 	Subject to 	certain 	other
limitations, 	standing 	generally 	requires 	the 	plaintiff 	to 	have 	been 	“a
shareholder of the corporation at the time of the act or omission complained
of” or to have become “a shareholder by operation of law originating from a
person that was a shareholder at the time of the act or omission complained
of,” and that the plaintiff possess the ability to “fairly and adequately
represent[] the interests of the corporation in enforcing the right of the
corporation.” Id. The Texas Business Organizations Code also makes clear
that a shareholder cannot assert derivative claims if a sufficient pre-suit
demand has not been made. See generally Schmitz, 285 S.W.3d 451.
¶14 	Of note, the requirement of a rejected demand or a pleading of
demand futility is substantive and constitutes a component of standing under

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Delaware law. See, e.g., Lebanon Cnty. Emps.’ Ret. Fund v. Collis, 311 A.3d
773, 801–02 (Del. 2023); Drachman v. Cukier, No. 2019-0728, 2021 WL
5045265, at *6 (Del. Ch. Oct. 29, 2021). It is less clear whether pre-suit
demand is a component of standing under Texas law. Texas’ “Standing to
Bring Proceeding” requirement and the “Demand” requirement are found in
separate sections of the Code. See T EX . BUS . ORGS . C ODE §§ 21.552, 21.553.
However, the internal affairs doctrine supports only one conclusion regarding
governing law as to the pre-suit demand requirement, regardless of whether it
is considered a component of standing (and therefore jurisdictional) or not.
Accordingly, the Court need not resolve that question today.
¶15 	At least two courts in Texas have discussed choice of law in the
context of standing to bring a derivative shareholder suit. See Neff v. Brady,
527 S.W.3d 511 (Tex. App.—Houston [1st Dist.] 2017, no pet.); In re Skyport
Glob. Commc’ns, Inc., No. 08-36737, 2011 WL 111427 (S.D. Tex. Jan. 13,
2011). In Neff, the parties disagreed over the application of the laws of
Switzerland or application of the laws of Bermuda to the issue of standing.
Neff, 527 S.W.3d at 523. 	In that case, the appellate 	court declined to
“undertake a conflict-of-law analysis” because “the outcome of the standing
issue 	[was] 	the 	same 	under 	either 	the 	laws 	of 	Bermuda 	or 	those 	of

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Switzerland”—no true conflict of law existed. Id. In Skyport, a bankruptcy
court determined Delaware law applied to the standing issue because “the law
of the state of incorporation at the time a cause of action arises governs
derivative 	claims.” 	Skyport, 	2011 	WL 	111427, 	at 	*25. 	However, 	the
bankruptcy court engaged in no analysis as to why the law governing the
merits of the underlying claim would also apply to standing. This Court does
not find Skyport persuasive.
¶16 	In a derivative suit, the right of action belongs to the corporation.
Grinnell v. Munson, 137 S.W.3d 706, 718 (Tex. App.—San Antonio 2004, no
pet.). The plaintiff in such an action “steps into the shoes of [a] corporation
and usurps the board of directors’ authority to decide whether to pursue the
corporation’s claims.” In re Crown Castle Int’l Corp., 247 S.W.3d 349, 355
(Tex. App.—Houston [14th Dist.] 2008, orig. proceeding). Thus, to assert the
corporation’s rights, the shareholder must maintain his relationship to the
corporation throughout the litigation. 	In re UMTH Gen. Servs., L.P., 725
S.W.3d 424, 429 (Tex. 2025) (orig. proceeding). So, while a claim may accrue
to a corporation, its shareholders acquire no vested right—at the time of
accrual—to assert that claim later in a derivative suit. Thus, there is no logical
reason to conclude that the law applicable to the corporation at the time of

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claim accrual applies to a shareholder’s later act of filing suit, purportedly on
the corporation’s behalf.
¶17 	The internal affairs doctrine, as a general principle, subjects
various acts and omissions to review according to the law of the state of
incorporation as of the date they (do or do not) occur. Consequently, whether an
officer 	or 	director 	had authority 	to 	engage 	in 	a 	particular 	act will 	be
adjudicated according to the law of the state of incorporation at the time the
officer or director engaged in that act. By that same reasoning, a shareholder’s
authority to engage in a particular act—namely, the institution of a suit to
assert rights belonging to the corporation—presents 	an indistinguishable
circumstance, which this Court finds should be governed by the law of the
state of incorporation at the time the shareholder engages in that act. Put
another way, under the internal affairs doctrine, a shareholder’s authority to
assert derivative 	claims should be governed by the law of the state 	of
incorporation 	as 	of 	the 	date 	the 	shareholder 	purports 	to 	exercise 	that
authority. After all, a board majority’s decision to institute an identical suit
on behalf of the corporation would be governed by the same.
¶18 	The Court therefore holds that a shareholder’s 	standing 	and
ability to bring a derivative suit on behalf of a Texas corporation is governed

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by Texas law, even if the asserted claims arise under—and are subject to—the
laws of another state. The benefits of this bright-line rule are clarity and
certainty, 	particularly 	where 	shareholders 	may 	assert 	claims 	arising 	at
different points in time (perhaps before and after a reincorporation), putting
the laws of more than one state at issue.
IV. 	Plaintiff’s Evidence in Support of Delaware Law
¶19 	In opposition to the application of Texas law, Plaintiff relies on
exhibits evidencing representations by Coinbase to regulatory bodies and
shareholders 	concerning 	the legal 	effects 	of its reincorporation. 	Of 	the
statements relied upon by Plaintiff, the most pertinent is a statement in a
regulatory filing that the reincorporation would not “extinguish or adversely
affect the standing or ability of any such person or entity to initiate such a
derivative action or suit on behalf of the Delaware Corporation regarding acts,
omissions 	or 	transactions 	occurring” 	before 	the 	effective 	date 	of 	the
conversion. Resp. Appx. (Ex. 1 Coinbase’s Form 14C Info. Stmt.) at p. 71; see
also id. at pp. 10, 67.
¶20 	First, the Court notes that Plaintiff’s exhibits do not—either
expressly or impliedly—state that Delaware law will continue to govern any
person’s standing or ability to bring a derivative suit. To the contrary, the

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exhibits expressly provide that Texas law will govern the corporation’s affairs
following the reincorporation. Accordingly, Plaintiff’s reading of the language
is overly broad. In its regulatory filings, Coinbase purportedly committed
itself to refrain from extinguishing or adversely affecting the standing or
ability of a shareholder to initiate a derivative action for acts or omissions
occurring prior to its reincorporation. It did not purport to have the laws of
another state govern the corporation after its reincorporation in Texas.
¶21 	Second, taking this language at face value, Plaintiff offers no
argument or evidence as to how the loss of the option to plead demand futility
in lieu of making a pre-suit demand (the chief difference between Delaware
and Texas law as relevant to the issues raised in this case) presented an
adverse effect on Plaintiff’s standing or ability to bring suit. Plaintiff did not
argue that making a pre-suit demand would be impossible, irreparably harmful
to Plaintiff or to the corporation, or even prejudicial, or that the option of
pleading 	demand 	futility 	provided 	Plaintiff 	any 	particular 	advantage 	or
benefit. The record is devoid of any adverse effect on Plaintiff as a result of the
change in Coinbase’s governing law from Delaware to Texas. Plaintiff’s
suggestion that application of Texas law would be inherently adverse to
shareholder derivative standing is conclusory and unavailing.

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¶22 	Third, even if Coinbase’s representation could be read as broadly
as Plaintiff suggests, Plaintiff offers no argument that Texas law would allow
a party to contract around Texas’ pre-suit demand requirement, nor does
Plaintiff present evidence that Coinbase successfully did so. There is no such
carve-out in the bylaws filed with the Court. And by statute, a pre-suit demand
is required, without exception. Sneed, 465 S.W.3d at 184 (“Unlike Texas law
for a century before, the new provision requires presuit demand in all cases; a
shareholder can no longer avoid a demand by proving it would have been
futile.” (quoting Schmitz, 285 S.W.3d at 455)). Further, to the extent (if any)
that pre-suit demand is a component of standing, it cannot be waived. Tex.
Ass’n of Bus., 852 S.W.2d at 445.
V. 	Conclusion
¶23 	Having determined that Texas law governs the issue of Plaintiff’s
standing and authority to assert a derivative action on behalf of Coinbase, and
that Defendants’ special exception asserting the same should be sustained, the
Court next 	considers 	the 	appropriate 	relief 	in 	this 	case. 	By 	statute, 	a
shareholder cannot assert derivative claims if a sufficient pre-suit demand has
not been made. See generally Schmitz, 285 S.W.3d 451. Here, it is undisputed
that Plaintiff made no pre-suit demand. Consequently, under Texas law,

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Plaintiff 	cannot 	prosecute 	his 	derivative 	suit 	on 	behalf 	of 	the 	Texas
corporation and this action must be dismissed.
¶24 	IT 	IS 	THEREFORE 	ORDERED 	that 	Defendants’ 	Special
Exceptions are SUSTAINED as to the application of Texas law, and the
instant action is DISMISSED WITHOUT PREJUDICE.
SO ORDERED.
_______________________
ANDREA K. BOURESSA
Judge of the Texas Business Court,
First Division
SIGNED ON: October 2, 2026.