Case Alert: IN RE Martin Lee KAY, Relator (Texas Supreme Court)

By Michael P. Granata June 14, 2025 Posted in Industry News Tagged in Divorce

Background: This mandamus petition stems from a $54 million judgment awarded to Laura Yosowitz against her ex-husband, Martin Lee Kay, for breach of their divorce agreement and fiduciary duties. Kay sought to suspend enforcement of the judgment pending appeal by posting security, as required by Texas law.
Issues:
  1. Net Worth Dispute: Kay argued the trial court erred in calculating his net worth at $147 million, primarily based on the valuation of his 8,277,500 shares in Entera Holdings, Inc. Kay’s experts valued the shares at $0 due to legal restrictions and low marketability, while Yosowitz’s experts, using GAAP, valued them significantly higher. The trial court adopted Yosowitz’s valuation, requiring a $25 million bond to supersede the judgment.
  2. Alternative Security: Kay offered his Entera stock certificate as alternative security, which the trial court rejected. The court of appeals affirmed, holding that alternative security was only available to debtors with a net worth under $10 million.
Supreme Court Ruling:
  • Net Worth: The Supreme Court of Texas found no abuse of discretion in the trial court’s net worth determination, as it relied on credibility assessments of expert testimony, which cannot be resolved in a mandamus proceeding.
  • Alternative Security: The court held the court of appeals erred in ruling that alternative security is only available to debtors with a net worth under $10 million. Texas Rule of Appellate Procedure 24 and related statutes allow trial courts discretion to accept alternative security for debtors with higher net worths. The court of appeals’ categorical denial was an abuse of discretion.
Outcome: The Supreme Court conditionally granted mandamus relief, directing the court of appeals to determine whether the trial court abused its discretion in rejecting Kay’s Entera stock certificate as alternative security. The Court noted that tendering the valued property (e.g., the stock certificate) into the court’s registry generally constitutes adequate alternative security unless specific circumstances suggest otherwise.
Status: The case was remanded to the court of appeals for further consideration, with the writ to issue only if the court fails to comply.