The Texas Court of Appeals for the Fifteenth District has issued an opinion deciding an issue of first impression on the Texas Business Court’s jurisdiction that will prove important for commercial litigation in Texas over: Can a plaintiff amend its petition so as to defeat the Business Court’s jurisdiction after removal?
The Fifteenth Court answered, “Yes,” but at the cost of permanently waiving the claims, theories or requests for relief that created jurisdiction. The opinion in In re ColossusBets Ltd., authored by Chief Justice Scott Brister, further confirmed by mandamus review that the Business Court has inherent authority to reconsider its prior decisions — including on the propriety of removal — and that jurisdictional allegations are not necessarily fixed at the time of removal.
The rule announced in the opinion will bear prominently on pleading and removal practice for the Business Court, and it raises further questions for consideration, as discussed below.
The underlying case arose on a unique fact pattern. The plaintiff won a $7.5 million Lotto Texas jackpot in May 2023. He sued a series of defendants alleging that they “rigged” and won $95 million in the Lotto drawing a month before “by purchasing nearly all 25.8 million number combinations,” thus reducing his subsequent jackpot. The petition asserted, among other things, that the defendants formed a legal entity for the purpose of rigging the lottery and misrepresented its formation date.
Relying on those governance-related allegations, two defendants removed the case to the Business Court from the district court in Travis County. The Business Court, with Judge Melissa Andrews presiding, initially denied remand, holding that the case implicated its jurisdiction over actions “regarding the governance, governing documents, or internal affairs of an organization.”
The plaintiff then amended his petition to expressly disclaim “any allegation, legal theory, or request for relief” that would implicate the Business Court’s jurisdiction and renewed his request for remand. On reconsideration, the Business Court concluded that the amendments eliminated jurisdiction and remanded the case.
The defendants petitioned for writ of mandamus in the Fifteenth Court. Writing that the mandamus petition presented an “important question” applicable “to many Business Court cases,” the court agreed that mandamus review was warranted but denied relief.
First, the Fifteenth Court explained, the Business Court has the inherent authority to reconsider prior decisions — including decisions pertaining to jurisdiction and whether to remand a case following removal.
Second, the Fifteenth Court held that the express disclaimer of any ground supporting Business Court jurisdiction in the plaintiff’s amended petition amounted to an “implied waiver,” which sufficed to negate jurisdiction. This waiver “cannot be taken back later,” the Fifteenth Court said, and the defendants “are not harmed by [the plaintiff’s] decision to abandon some of his claims as the cost of returning to Travis County district court.” An implication of this reasoning is that the Business Court’s jurisdiction is not necessarily determined from the plaintiff’s allegations at the time the defendant removes the case.
The opinion in In re ColossusBets raises further questions. While the court made clear that an express disclaimer of the grounds for Business Court jurisdiction will suffice to negate jurisdiction, this holding may not encompass amendments that — for instance — simply omit what previously formed the basis for Business Court jurisdiction. Is a mere omission enough, or need there be an affirmative disclaimer? If so, how express need the disclaimer be? Moreover, is an “implied waiver” finding a prerequisite to negating jurisdiction?
The opinion does not answer these questions outright, and further litigation is likely on them. Perhaps the issue could be resolved by the Business Court asking the plaintiff to stipulate to the waiver of omitted bases and, if the plaintiff refuses, denying remand. Time will tell. But weighing on the future development of the law will be the Fifteenth Court’s clear admonishments that “state law does not reward artful pleading,” and “statutory requirements cannot be circumvented by artful pleading.”
From the point of view of practitioners and Business Court judges, the Fifteenth Court’s decision will create a new and interesting dynamic for removal cases. We raise a handful of practical points here, which seem most likely to arise in removals not based on the Business Court’s “qualified transaction” jurisdiction. When crafting pleadings, plaintiffs may consider how much they want certain claims, theories or relief in a case as opposed to the Business Court as a forum. Before initiating removal, Defendants will want to evaluate the extent to which jurisdiction could be pleaded around. And when issuing scheduling orders, the Business Court might wrestle with how late into proceedings to permit plaintiffs to amend pleadings, in light of potential gamesmanship.
The plaintiff’s briefing in In re ColossusBets raised two other lingering issues about Business Court jurisdiction that the Fifteenth Court did not consider. First, what sort of allegations suffice to trigger the Business Court’s jurisdiction over actions “regarding the governance, governing documents, or internal affairs”? Second, is Business Court jurisdiction properly considered on a claim-by-claim basis, as the plaintiff argued, or rather at the broader “action” level, as multiple divisions of the Business Court have held? These significant jurisdiction questions remain open for another day.
Finally, we note that the defendants in In re ColossusBets have the right to petition for a writ of mandamus from Texas Supreme Court for another level of review. The Fifteenth Court’s decision is not yet final.
Ben Mesches leads the Haynes Boone Appellate Practice Group and is based in Dallas.
Ryan Pitts is an appellate partner at Haynes Boone in Austin.
D.J. Beaty and Shayna Proler also made significant contributions to preparing this article.