Background: The Plaintiff as Master of the Complaint

In Reed v. Rook TX, the Business Court confronted an unusual jurisdictional scenario that exemplified a fundamental principle: the plaintiff is the master of the complaint. Although the Court acknowledged "this is not the kind of case one might typically expect to find in the Business Court," plaintiff Jerry B. Reed had initially pleaded his way into the Court's jurisdiction by alleging claims regarding the Rook defendants' governance, governing documents, and internal affairs.

The Rook defendants removed the case to the Business Court under Section 25A.004(b)(2), which provides jurisdiction over actions "regarding the governance, governing documents, or internal affairs of an organization." Reed moved to remand, but Division 3 denied that motion in Reed I, holding the Court had jurisdiction because Reed's claims concerned "(a) Rook's formation, as effectuated by its governing documents, (b) the legitimacy of Rook's purpose and operations, and (c) whether Reed can recover Rook's lottery proceeds from Rook and/or its interest holders and other payees."

Strategic Amendments Remove Jurisdictional Basis

After the Rook defendants moved to dismiss under Rule 91a, Reed filed a Third Amended Petition, then—five days before the hearing on a renewed dismissal motion—filed his Fourth Amended Petition. This latest pleading strategically eliminated all allegations related to the Rook entities' formation, purpose, and internal affairs. Reed dropped all claims against the Rook defendants except "money had and received" and "expressly disclaims any allegation, legal theory, or request for relief that requires this Court to interpret, apply, or enforce the governance, internal affairs, or governing document" of the Rook entities.

Reed then filed a renewed motion to remand, arguing the Court no longer had subject-matter jurisdiction over the action as pleaded. The Court noted that "although later events generally do not divest a court of jurisdiction once properly acquired," Texas courts have primarily applied this rule in amount-in-controversy contexts, and the issue here was different: Reed had fundamentally altered the nature of his claims.

The Court's Analysis: Three Jurisdictional Bases, Three Failures

The Court systematically rejected each asserted basis for jurisdiction. On supplemental jurisdiction under Section 25A.004(f), the Court held it could not exercise such jurisdiction because the statute requires the plaintiff to "agree[] that the action may proceed in [the Business] court." Reed never provided such consent, and the Court found no basis to imply it from his conduct.

On qualified-transaction jurisdiction under Section 25A.004(b)(1), the Court concluded the alleged prospective contract's consideration value, "determined at the time of the transaction, would be below the minimum" threshold required by statute. The defendants argued Reed was seeking over $52 million in damages, but the Court focused on the consideration value at the time of the alleged transaction, not subsequent damages claims.

On trade-regulation jurisdiction under Section 25A.004(b)(4), the Court held that Reed's "alleged negligence per se claim, if recognized in Texas, would be a tort claim rather than a trade-regulation claim." This distinction proved fatal to the defendants' jurisdictional argument, as the Business Court's trade-regulation jurisdiction does not extend to ordinary tort claims.

Outcome: Remand to State District Court

Having concluded it lacked subject-matter jurisdiction under any of the asserted statutory bases, the Court granted Reed's renewed motion to remand and ordered the case remanded to the 353rd District Court in Travis County, Texas. The opinion demonstrates how a plaintiff can strategically plead out of Business Court jurisdiction by eliminating the specific allegations that initially supported removal—even in a case the Court described as "the exception to the rule in many instances."