Overview
On January 3, 2025, the Third Division of the newly created Texas Business Court outlined its procedures for amount-in-controversy jurisdictional limit disputes, adopting a summary-judgment-style burden-shifting framework.[1] In the opinion, the court first clarified that the jurisdictional limit of $5 million for certain business-affairs actions also applied to the court's jurisdiction over certain injunctive and declaratory actions. As a result, litigants cannot sidestep the jurisdictional limits by simply pleading declaratory relief. Second, the court rejected the federal test for amount-in-controversy disputes and instead adopted Texas's plea to the jurisdiction and summary judgment frameworks for resolving them. One key takeaway from the court's test is that a removing defendant might defeat a plea to the jurisdiction by creating a fact issue at the outset of the case only to have a jury determine at trial that there was an insufficient amount in controversy, requiring the case to be remanded and relitigated.
In a case of first impression, Business Court Judge Andrews of the Third Division issued an opinion and order addressing a motion to remand tackling two key issues:
- Do the amount-in-controversy requirements in the Business Court jurisdictional statute apply to the provision that grants jurisdiction over certain injunctive and declaratory actions?
- What is the procedure for challenging an amount-in-controversy on a motion to remand?
Jurisdictional Limits
On the first issue, the removing defendants asserted that because the action involved claims concerning the governance of an entity and because the plaintiff sought injunctive and declaratory relief, the Business Court had jurisdiction over the action under Tex. Gov't Code § 25A.004(e), irrespective of the amount-in-controversy requirement. Section 25A.004(e) grants the Business Court jurisdiction over actions "seeking injunctive relief or a declaratory judgment . . . involving a dispute based on a claim within the court’s jurisdiction under subsection (b), (c), or (d)." Subsection (b) grants the Business Court jurisdiction over actions "in which the amount-in-controversy exceeds $5 million, excluding interest, statutory damages, exemplary damages, penalties, attorney's fees, and court costs," and which involve derivative proceedings, actions related to "the governance, governing documents, or internal affairs of an organization," and other governance-type claims. The court concluded that the $5 million jurisdictional limit from subsection (b) applied to subsection (e)'s provision of jurisdiction over declaratory and injunctive relief where the claims under subsection (b) formed the basis of the claims in the action.
The court also explained that the jurisdictional limits applied to the entire action, not just to individual claims, so there may be situations where individual claim values may be aggregated to achieve the jurisdictional limits.
Procedures for Motion to Remand
On the second issue, the court analyzed both Texas and federal law related to amount-in-controversy jurisdictional challenges. The court rejected federal law and decided to apply existing Texas law on jurisdictional challenges. The court outlined two different tests: one for cases where the plaintiff has already pleaded an amount-in-controversy, and one for removals where the removing party asserts an amount-in-controversy.
For cases where the plaintiff’s petition alleges the amount-in-controversy, “that pleading controls unless (a) a party presents evidence that the amount pleaded is falsely asserted to wrongly obtain or avoid jurisdiction, or (b) a different amount-in-controversy is readily established, such as by statutorily set fees.”
For cases where the plaintiff’s pleadings don’t specify an amount-in-controversy, but the removing party properly states in the notice of removal that the amount falls within the Business Court’s jurisdiction, “those pleadings will be given the same deference in the remand analysis: they will control absent the circumstances described in (a) or (b) above.”
In either case (plaintiff's pleading or removal), if a party presents evidence (in a summary judgment-type procedure or through a no-evidence summary judgment-type procedure) "demonstrating that the amount in controversy is outside the court's jurisdiction, the court will remand the case unless another party presents controverting evidence that, at a minimum, raises a fact issue. If there is a fact issue, the party asserting jurisdiction will bear the burden of proof on the issue at trial." The court then ordered 45 days of discovery and requested briefing and a hearing to determine whether there is a fact issue on the jurisdictional limit.
Key Takeaways
There are two key takeaways from this opinion. First, a party cannot circumvent the amount-in-controversy requirement by bringing a claim for declaratory judgment or an injunction. The jurisdictional amounts will remain a barrier to jurisdiction even if the claim is derivative.
Second, if there is a dispute about the amount-in-controversy, the dispute will be resolved similarly to the summary judgment framework. The party challenging jurisdiction may either bring a no-evidence-type motion challenging that the jurisdictional amount is met (which requires the court to permit discovery) or may bring a traditional-summary-judgment-type motion providing evidence that the jurisdictional amount is not met. In either case, if the responding party asserting jurisdiction creates a fact issue, then the remand motion or plea to the jurisdiction will not be granted, but the party asserting jurisdiction will have to prove jurisdiction at trial.
This creates a small but real risk that a party asserting jurisdiction may go through a lengthy trial only for the jury conclude that jurisdiction does not exist, resulting in the case being remanded or dismissed.[2] This situation is similar to how personal jurisdiction challenges may play out in federal court. If the plaintiff makes a prima facie case of personal jurisdiction, they can avoid a motion to dismiss but must still prove at trial, by a preponderance of the evidence, that the court has personal jurisdiction over the defendant. If the plaintiff fails to do so, then the court has no jurisdiction over the defendant and must dismiss them from the suit.[3]
[1] C Ten 31 LLC ex rel. Summer Moon Holdings LLC v. Tarbox, No. 24-BC03A-0004, 2025 WL 224542, at *1 (Tex. Bus. Ct. Jan. 3, 2025).
[2] One piece of comfort for plaintiffs asserting Business Court jurisdiction is (although it is untested in the Business Court context) that the cause of action will be tolled between the filing of the action in the Business Court and refiling in a general jurisdiction district court, so long as the case is refiled within 60 days of dismissal and "the adverse party has not shown in abatement that the first filing was made with intentional disregard of proper jurisdiction." Tex. Civ. Prac. & Rem. Code § 16.064.
[3] Travelers Indem. Co. v. Calvert Fire Ins. Co., 798 F.2d 826, 831-32 (5th Cir. 1986), on reh’g in part, 836 F.2d 850 (5th Cir. 1988).
