The Texas Business Court recently reaffirmed that pleading damages “in an amount of not less than” the applicable, required amount in controversy ($5 million or $10 million) without including specific factual allegations supporting how the damages occurred, is not enough to unlock the Court’s original jurisdiction. In M&M Livestock v. Robinson, the Plaintiffs went back to the drawing board, filing an amended petition connecting specific factual support to satisfy the Court’s $5 million threshold. Through this case, Judge Brian Stagner of the Court’s Eighth Division provides guidance on how the Court applies its minimum jurisdictional requirement and reiterates how supplemental jurisdiction fits in.
Key Takeaways
- The Texas Business Court is taking a fact-driven approach to evaluating whether claims meet its amount in controversy threshold.
- General allegations of harm are not enough. Plaintiffs must plead specific, quantifiable losses tied to their claims.
- Claims that fall below the amount in controversy requirement can still be heard under supplemental jurisdiction if the parties consent.
The Dispute and Plaintiff’s Original Petition
Plaintiffs, John Malouff, individually and derivatively on behalf of ZMDR, LLC d/b/a Republic Foods (“ZMDR”), and his operating company M&M Livestock, LLC (“M&M”) sued Defendants ZMDR, individual managers of ZMDR, and NMD Enterprises, LLC.
In their Original Petition, Plaintiffs generally alleged managerial missteps, gross mismanagement, and depletion of ZMDR’s assets caused their meat processing plant to fail. Plaintiffs also sought to recover for a series of livestock sales by M&M to ZMDR that went unpaid.
Plaintiff brought six claims against Defendants, but specific damages were only included for breach of contract as to the company agreement, breach of contract for the livestock sales, and suit on sworn account as to the livestock sales. Plaintiffs asserted damages “in an amount of not less than $5,000,000” for the breach of ZMDR’s company agreement and over $1.6 million in damages relating to the livestock sales.
Defendants then filed a plea to the jurisdiction, challenging whether Plaintiffs pled facts specific enough to support the Court’s $5 million amount in controversy requirement.
Court’s Analysis
The Court found that Plaintiff’s petition failed to include facts sufficient to satisfy the minimum amount in controversy. As to the alleged breach of ZMDR’s company agreement, damages “in an amount of not less than $5,000,000” without specific allegations explaining how the damages resulted from any purported breach was insufficient. The absence of specific factual support for the minimum amount in controversy is not enough.
Also, the damages sought for the unpaid livestock sales totaling over $1.6 million did not fall within the Court’s original jurisdiction and can only exist under supplemental jurisdiction because it is not a type of claim allowed within the Court’s $5 million original jurisdiction. However, these claims may still proceed under supplemental jurisdiction if the parties consent.
Pointing out the jurisdiction deficiencies in the original petition, the Court allowed Plaintiffs to amend the petition.
Amended Pleadings
In the amended petition, Plaintiffs added significant details, including:
- Asset losses of over $25 million, alleging ZMDR’s assets fell from over $21 million in 2022 to negative $3.9 million by late 2024;
- Allegations of personal liability exceeding $11 million under a guaranty agreement;
- Claims for derivative damages exceeding $19 million that were tied to asset depletion; and
- Loss of equity value for an individual manager’s one-third ownership interest in ZMDR.
The court found these factual allegations sufficient to establish that the amount in controversy exceeds $5 million. As a result, it denied the jurisdictional challenge and confirmed that the Business Court has jurisdiction.
Why This Case Matters
This case offers a direct example of how litigants can properly plead their way into Business Court jurisdiction and the challenges that result when a plaintiff fails to include a clear connection between the amount of damages pled and the harm that caused such damages. It also serves as a reminder to strategically structure pleadings when both statutory and supplemental jurisdiction may be in play.