In the News

Texas Court of Appeals Rules in Favor of Dykema Client in Construction Bankruptcy Case

September 4, 2018

Dykema is proud to announce that it successfully represented Sterling Commercial Credit LLC and CM Sterling LLC (Sterling) in the Thirteenth District of the Texas Court of Appeals. The Dykema team on the case consisted of Aaron Kaufman (lead) and Melanie Fry.

Dakota Utility Contractors, Inc., a subcontractor, sued Sterling, a family-owned and -operated financial service provider specializing in short-term commercial lending, alleging that Sterling received and misapplied its borrower’s construction “trust funds” in violation of the Texas Construction Trust Fund Act. The Dykema team argued on behalf of Sterling that the Texas Construction Trust Fund Act did not apply to Sterling, because the account “factoring” provided by Sterling in this case was merely one type of commercial financing that places Sterling squarely within one of several lender exemptions to liability under the Act.

The trial court granted summary judgment in favor of Sterling in 2016. This August, in a well-reasoned opinion, the Thirteenth District of the Texas Court of Appeals affirmed the trial court’s judgment in favor of Sterling.

Kaufman noted that this decision is significant because it was one of the first appellate decisions to affirm the lender exemption for factoring companies, providing comfort to commercial lenders like Sterling and making these alternative forms of capital more readily available in the construction industry.