Texas Business Court Opinion Summaries – January 3, 2025

No. 24-BC03A-0004 CTen LLC, etc. v. John Tarbox, et al. 24-bc03a-0004.pdf

[Judge Andrews]

Jurisdiction – Amount in Controversy/Burdens of Proof. The case arises out of a dispute over governance of Summer Moon Holdings after plaintiff purported to remove managers designated by the majority owner; plaintiff brought this action in 21st District Court of Travis County seeking a declaratory judgment that the removal of the officers was effective; the defendant officers then removed the case to the Business Court over plaintiff’s objection. Plaintiff filed a motion to remand for lack of jurisdiction or based on a venue-selection clause in the Company Agreement; this order comes after the filing of a third amended complaint seeking additional items of relief. HELD:

(1) a claim is within the court’s jurisdiction under 25A.004(e) of the Government Code if it is within the jurisdiction granted to the court by the authority of Subsection (b); the scope of the jurisdiction authorized by Subsection (b) is limited to actions in which the amount in controversy exceeds $5 million; thus the phrase “within the court’s jurisdiction under Subsection (b)” incorporates Subsection (b)’s amount-in-controversy requirement;

(2) actions for declaratory and injunctive relief are subject to this amount-in-controversy requirement and the amount in controversy in such actions is measured by the value of the rights at issue;

(3) the court determines whether the amount-in-controversy requirement is met by applying the requirement at the “action” level, considering all claims properly joined before the court, rather than as a per-claim minimum – in other words, it is not necessary for each individual claim to put more than $5 million in controversy to satisfy Subsection (b);

(4) however, the court does not hold that the term action can never refer to less than all claims in a suit regardless of whether the claims are properly joined and within the court’s jurisdiction – Section 25A.004 excludes certain claims from the court’s jurisdiction and provides for supplemental jurisdiction over certain claims; the statute thus contemplates that the court may have jurisdiction over an action but not every claim asserted in the action, and claims over which the court lacks jurisdiction would have to be either dismissed from the action or severed into a separate action for transfer or remand to another court;

(5) applying Texas’s summary-judgment burden of proof schemes, the party moving for remand has the burden of showing that the other party’s amount-in-controversy pleadings are fraudulent or that a lesser amount is readily established; if the moving party meets its burden, the burden then shifts to the non-moving party to raise a fact issue; if there is a fact issue, the non-moving party will bear the burden of proof at trial;

(6) here, the defendants pleaded in their notice of removal to this court that the amount in controversy – the value of the rights at issue – exceeds $5 million and plaintiff has not pleaded otherwise;

(7) a notice of removal need not attach evidence of the amount in controversy; while Texas does not have any precedent on this issue, the Supreme Court has addressed it in Dart Cherokee Basin Operating Co., LLC v. Owens, 574 U.S. 81 (2014), where it held a notice of removal was not deficient under the Class Action Fairness Act where the notice did not include evidence that the amount in controversy exceeded the jurisdictional minimum;

(8) because plaintiff was not aware of its burden of proof as the moving party, the court grants plaintiff’s motion to supplement the record and carries its request for remand; the parties are granted 45 days to conduct discovery on the value of the subject matter of this case, and the court sets a date for an evidentiary hearing;

(9) plaintiff has not shown that the action falls within the scope of a choice-of-venue clause in the Company Agreement or that defendants, as non-signatories, are bound by it; on this record, the request to remand the case based on the venue clause in the Company Agreement is denied;

(10) plaintiff’s motion for attorney’s fees, based on Section 10.001 of the Civil Practice and Remedies Code, is denied; while defendants did not prevail on their argument that there is no amount-in-controversy requirement for a Subsection (e) action, the argument was not without basis in law, and plaintiff presented no evidence that the argument was asserted for the purposes of delay or to increase costs.