Texas Supreme Court Conditionally Grants Mandamus in Net Worth Evaluation Dispute

In Re Martin Lee Kay, 24-0149, June 13, 2025.

On appeal from 14th Court of Appeals District, Harris County, Texas

Synopsis

The Texas Supreme Court conditionally granted mandamus directing the court of appeals to reconsider whether relator Martin Lee Kay conclusively proved the adequacy of his proposed alternate security to supersede a roughly $54 million judgment. The Court declined to disturb the trial court’s net-worth finding based on Entera stock valuation but held the court of appeals abused its discretion by treating alternate security as categorically unavailable to Kay.

Relevance to Family Law

Although this dispute arises from post-divorce contract and fiduciary claims, the decision has immediate application in family-law practice where large property awards, division-of-assets disputes, or sizeable post-judgment monetary liabilities are at stake. The opinion clarifies that challenging a trial court’s net-worth finding requires a record focused on valuation and credibility, but that litigants with substantial illiquid holdings retain the right to propose nontraditional security (escrow, blocked accounts, certificates, letters of credit, or other negotiated forms) to suspend enforcement.

Family-law practitioners should therefore be proactive both in valuing complex assets that commonly appear in high-asset divorces (closely held equity, partnership interests, restricted stock) and in structuring and preserving record evidence of any alternate security offered to supersede a money judgment.

Case Summary

Fact Summary

Laura Yosowitz obtained a roughly $54 million judgment against her ex-husband, Martin Lee Kay, following trial. Kay sought to supersede the judgment and filed an affidavit of net worth asserting roughly $754,373, depositing cashier’s checks equal to half that asserted net worth, and offering to tender his 8,277,500 shares in a privately held startup, Entera Holdings, Inc., as alternate security.

The parties litigated the valuation of Kay’s Entera shares at a multi-day bond hearing. Kay’s experts contended the restricted, unregistered shares had no marketable value due to transfer restrictions and failed attempts to sell or pledge the shares to institutional investors; Yosowitz’s experts relied on appraisal figures (including discounts already baked into a prior Entera-commissioned valuation), GAAP principles, and rejected an additional marketability discount.

Crediting Yosowitz’s experts, the trial court found Kay’s net worth was roughly $147 million and ordered a $25 million bond or cash; the court also implicitly rejected Kay’s offer to tender the stock certificate as alternate security.

Issues Decided

The Supreme Court addressed whether (1) the trial court abused its discretion in calculating Kay’s net worth and thereby in setting supersedeas security above statutory caps tied to net worth, and (2) the court of appeals erred by ruling that Rule 24.2(e) or other authority categorically precluded Kay from providing alternate security in lieu of a bond.

Rules Applied

The Court applied the statutory framework for suspending execution of money judgments under TEX. CIV. PRAC. & REM. CODE §§ 52.006–.007 and the Texas Rules of Appellate Procedure governing supersedeas, chiefly Rules 24.1–24.4 and 24.2(e). It reiterated the mandamus standard (In re Prudential Ins. Co. of Am.; In re Garza; In re Ill. Nat’l Ins. Co.) that relief requires a clear abuse of discretion. The opinion also engaged valuation principles (including GAAP, discounts for lack of marketability, and evidence regarding transfer restrictions and attempted liquidity efforts) in assessing the trial court’s factual findings.

Application

The Court framed the dispute as two separate legal inquiries: (1) whether the record supported the trial court’s valuation-based net-worth finding and resulting security amount, and (2) whether alternate security was categorically foreclosed as a matter of law.

On the factual question, the Supreme Court declined to disturb the trial court’s credibility determinations: The trial court credited Yosowitz’s experts as credible and found Kay’s experts’ methodology and testimony lacking, emphasizing the trial court’s role as the factfinder.

On the legal question, however, the Court found the court of appeals overstepped by concluding that the text or structure of Rule 24.2(e) permits alternate security only for debtors with net worth under $10 million. The Supreme Court held that Rule 24 permits alternate security and that a bright-line categorical exclusion was improper. The Court therefore conditionally granted mandamus, remanding to the court of appeals to determine in the first instance whether Kay had conclusively demonstrated the adequacy of his proposed alternate security.

Holding

The Supreme Court held that while there was no basis to disturb the trial court’s factual finding of Kay’s net worth (the trial court did not abuse its discretion in valuing Kay’s Entera shares), the court of appeals abused its discretion by declaring that alternate security was categorically unavailable to Kay. The Court conditionally granted mandamus relief and directed the court of appeals to evaluate whether Kay conclusively established that his offered alternate security (e.g., tendering the stock certificate or another arrangement) was adequate to suspend enforcement of the judgment.

Practical Application

For family-law litigators representing high-asset clients, the case underscores two lessons. First, when the client’s net worth depends on illiquid, restricted, or closely held interests, prepare to litigate valuation aggressively: Present admissible valuations, document failed liquidity attempts, and develop expert testimony addressing governance and transfer restrictions and appropriate marketability discounts.

Second, do not assume Rule 24 bars alternate forms of security because of a high net worth; instead, preserve and develop a detailed, legally grounded proposal for alternate security (escrow arrangements, blocked accounts, certified shares in custodian control, letters of credit, or trustee-controlled instruments), ensure the trial court rules on the adequacy of that offer, and preserve the record for immediate mandamus review if the trial court summarily rejects the offer as categorically impermissible.

Checklists

Gather Your Evidence

• Collect share purchase agreements, subscription agreements, transfer-restriction clauses, and company bylaws or shareholder agreements.
• Preserve emails and communications reflecting attempted sales, offers, or refusals from institutional investors, brokers, or potential lenders.
• Obtain prior third‑party appraisals and underlying transaction documents (purchase price, financing round terms).

Valuation and Experts

• Engage valuation experts who can (a) explain GAAP vs. market approach distinctions, (b) quantify appropriate discounts for lack of marketability and transfer restrictions, and (c) reconcile differing valuation methodologies.
• Prepare rebuttal cross-examination materials addressing any gaps in opposing experts’ discounting rationale or reliance on stale data.

Structuring Alternate Security

• Prepare a concrete, legally enforceable alternate-security proposal: escrow agreement, blocked bank account, letter of credit, custodian‑held stock certificate with precise transfer conditions, or third‑party guaranty.
• Include documentary mechanisms ensuring funds or instruments are immediately accessible to satisfy judgment if appeal fails (trigger events, notice provisions, enforcement mechanics).

Preserve the Record and Seek Rulings

• Offer alternate security on the record and obtain a ruling; if rejected, make a proffer explaining adequacy and why it satisfies statutory purposes.
• Request written findings or clarifying orders on why alternate security was rejected; secure a full transcript and exhibits of the bond hearing.

Appellate and Mandamus Strategy

• If trial court rejects alternate security as unavailable or inadequate, file a timely mandamus under Rule 24.4 rather than waiting for final appeal.
• Be ready to show that the trial court’s legal ruling (categorical unavailability) is an abuse of discretion even if factual valuations are sustained.
• Tie any mandamus petition to the governing statute and appellate rules, and emphasize that mandamus review is authorized for post-judgment supersedeas orders.

Citation

In re Martin Lee Kay, No. 24-0149, Slip Op. (Tex. June 13, 2025).

Full Opinion

The full opinion is available here: Supreme Court of Texas Opinion — In re Martin Lee Kay, No. 24-0149 (June 13, 2025)