Recent removal rulings clarify Texas Business Court’s jurisdiction

In its first seven months, the Texas Business Court has repeatedly held that it lacks subject-matter jurisdiction to hear cases first-filed before September 1, 2024—regardless of the procedural posture by which the case arrived at the Business Court.

Recent rulings from the First and Fourth Divisions of the Business Court have reiterated that the Business Court lacks authority to hear lawsuits commenced prior to September 1, 2024, even if a party amends after September 1, 2024, to add new claims or parties that would separately satisfy the subject-matter jurisdiction requirements of the Business Court.

The Business Court holds that adding a new claim to a pre-September 1, 2024 action does not confer jurisdiction

In Osmose Utilities Services, Inc. v. Navarro County Electric Cooperative, Cause No. 24-BC0lA-0011, the First Division held that Texas Government Code Chapter 25A’s use of the term “action” refers to the entirety of a lawsuit, rather than any individual claim asserted in a lawsuit.  Based on that determination, the Business Court held that removal is limited to actions filed on or after September 1, 2024, regardless of when any particular claim was first alleged.

Osmose began as a personal injury action filed in Ellis County in September 2022 against multiple defendants including Osmose Utilities Service, Inc. (Osmose) and Navarro County Electric Cooperative, Inc. (NCEC). Though Osmose and NCEC both settled with the plaintiff, Osmose and NCEC filed cross and counterclaims against each other in October 2024. On November 4, 2024, Osmose filed a partial removal to the Business Court, attempting to remove to the Business Court Osmose’s crossclaim and NCEC’s counterclaim. NCEC opposed removal and moved for remand.

The First Division remanded the entire case, including the newly-filed claims, determining that although the Texas Legislature did not define “civil action” or “action” in House Bill 19 (H.B. 19) when it created the Business Court, other divisions of the Business Court have previously held that Section 8 of H.B. 19 limits removal to the Business Court to “civil actions” commenced on or after September 1, 2024, and that “civil action” means the entirety of a lawsuit, and not any individual claim asserted within that suit.

The Business Court holds that adding new claims against new parties to a pre-September 1, 2024 action does not confer jurisdiction

In Tiffany Sebastian, et al. v. T. Bentley Durant et al., Cause No. 25-BC11A-0001, the Business Court’s Eleventh Division held that (1) once a lawsuit has been filed, subsequent pleadings do not “commence” a new lawsuit; and (2) partial removal of an action cannot—absent court-ordered severance—unilaterally divide a commenced action into a new civil action that is removable to the Business Court.

Sebastian began as a divorce proceeding on July 11, 2024, when Ms. Sebastian filed her original petition in the 387^th Judicial District Court of Fort Bend County. Over the following weeks, disputes arose between the Sebastians and Classic¹—a collection of car dealerships where the Sebastians worked and were each part owners. On September 18, 2024, Mr. Sebastian filed a counterpetition for divorce, adding Classic as co-respondents; Mr. Sebastian did not plead any express claims against Classic at the time. Months later, in December 2024, the Sebastians jointly filed third-party derivative claims on Classic’s behalf, adding additional defendants.

On January 2, 2025, Classic and the newly-added defendants (collectively, the Removing Parties) filed a notice of partial removal to the Texas Business Court regarding the individual and derivative claims asserted by the Sebastians. Through the partial removal, the Removing Parties sought to effectuate a severance of the company-related claims from the divorce. The Sebastians opposed removal and sought remand to the district court.

The Removing Parties argued that the Sebastians’ derivative and third party claims constituted new “actions” against new parties that allowed the Business Court to exercise subject-matter jurisdiction. The court considered and rejected the Removing Parties’ argument, determining that Section 8 makes clear that H.B. 19 applies only “to civil actions commenced on or after September 1, 2024.”  Id. at §§ 5, 8, 9 (emphasis added). The Court determined that that “civil action” should be broadly interpreted to refer to a lawsuit as a whole, even when new claims against new parties are added to a suit, even when the new claims against the new parties are otherwise within the subject-matter jurisdiction of the Business Court.

The Removing Parties have since filed a mandamus from the Business Court’s removal petition, which is currently pending as Cause No. 15-25-00019-CV in the 15^th Court of Appeals.

Conclusion

The Business Court’s rulings in Osmose and Sebastian further the Business Court’s strict approach to adjudicating its ability to hear lawsuits filed before September 1, 2024.