08-11-2026
James Mastendrea was Whitestone REIT’s CEO. The employment agreement between the two parties outlined specific provisions defining what would constitute “cause” for terminating Mastendrea’s employment.
Several years into his tenure, Mastendrea met with the CEO of a company that was interested in purchasing Whitestone and negotiated terms based on his understanding that he had authority to do so. However, Whitestone’s board fired Mastendrea for violating his employment agreement, citing his alleged breach of confidentiality and for acting “willfully and wantonly” in a manner materially adverse to the company's interests.
Mastendrea then sued Whitestone for breach of contract. The company argued it did not need to establish that the grounds for termination were correct. Instead, its burden was to demonstrate a reasonable belief that those grounds existed.
The Texas Court of Appeals rejected Whitestone’s argument. The court held that employment agreements should be viewed like any other contract. Because the contract limited Whitestone’s right to terminate at will, it bore the burden of establishing cause to fire Mastendrea under the agreement. Whitestone failed to show that Mastendrea violated the terms of his employment contract, and the company did not connect its reasons for termination to the employment contract’s specific language. The Texas Court declined to apply a reasonableness test to the contract, which would require only that the employer acted in good faith.
Employer Takeaways: Organizations in all jurisdictions should take note of this decision and carefully review executive employment agreements for clarity and strategic forethought. The Texas court evaluated legal precedent outside of the state, aligning itself with legal authority holding that “cause” was an objective concept and that a “good-faith erroneous belief” that early termination was justified was legally insufficient.