Amount in Controversy Excludes Future Royalty Payments and Theoretical Rights in Remand Analysis
Read the Court's Opinion (PDF)
Judge Jerry D. Bullard
In Black Mountain SWD v. NGL Water Solutions Permian, the Business Court granted remand, holding that the amount in controversy for Section 25A.004(d)(1) jurisdictional purposes is limited to actual damages sought for past breaches—here, under $4.5 million in unpaid royalties—and does not include the purported lifetime value of disputed royalty rights under an ongoing agreement. The decision clarifies that the removing party cannot satisfy the $10 million threshold by aggregating theoretical future payments or the value of contested contractual interpretations.
Court Staff Summary
The Court lacks jurisdiction under Section 25A.004(d)(1) because the amount in controversy does not exceed $10 million. The amount in controversy is the actual damages sought by Plaintiff for unpaid royalties on saltwater transported in pipelines subject to the royalty agreement from the date the agreement was signed to the date the action was filed. The uncontroverted evidence establishes that unpaid royalties on the total volume of saltwater transported in these pipelines during this period would not exceed $4.5 million. The amount in controversy does not include the value of the purported right at stake to receive disputed royalties on discarded saltwater for the life of the agreement, as urged by Defendant.
Background: A Royalty Dispute in the Saltwater Disposal Business
Black Mountain SWD, LP and NGL Water Solutions Permian, LLC operate in the oil and gas wastewater services sector. Their relationship is governed by a royalty agreement executed between them. After NGL Permian stopped paying royalties, Black Mountain sued for breach of contract in district court on February 10, 2025, seeking actual damages plus interest and costs.
The Removal and Remand Motion
NGL Permian removed the case to the Business Court without Black Mountain's consent on March 11, 2025, asserting that the amount in controversy exceeded $10 million under Section 25A.004(d)(1). NGL Permian's theory: because the royalty agreement has no termination date, the lifetime value of disputed royalties easily exceeds $10 million. Black Mountain moved to remand on April 10, 2025, arguing the amount in controversy is capped at the value of unpaid royalties on actual saltwater volumes transported through the covered pipelines from the agreement's inception to the filing date. The motion was heard on May 28, 2025.
The Court's Analysis: Actual Damages, Not Theoretical Rights
The Court granted the motion to remand, holding that NGL Permian failed to carry its burden of establishing jurisdiction. The court's syllabus states the holding succinctly:
The amount in controversy is the actual damages sought by Plaintiff for unpaid royalties on saltwater transported in pipelines subject to the royalty agreement from the date the agreement was signed to the date the action was filed. The uncontroverted evidence establishes that unpaid royalties on the total volume of saltwater transported in these pipelines during this period would not exceed $4.5 million.
Critically, the Court rejected NGL Permian's attempt to inflate the amount in controversy by including future payments or abstract contractual rights:
The amount in controversy does not include the value of the purported right at stake to receive disputed royalties on discarded saltwater for the life of the agreement, as urged by Defendant.
The opinion emphasizes that the removing party bears the burden of establishing jurisdiction and that the amount in controversy is determined by the actual damages sought in the plaintiff's pleadings, not by theoretical calculations of future rights under an ongoing contract.
Implications for Business Court Jurisdiction
This decision provides important guidance on calculating the amount in controversy for Section 25A.004(d)(1) purposes in contract disputes involving ongoing relationships. The Court's holding makes clear that defendants cannot manufacture jurisdiction by aggregating speculative future damages or by valuing abstract contractual rights. Instead, the jurisdictional threshold must be met by the actual damages claimed for past breaches as of the filing date. For practitioners, this ruling underscores the importance of carefully pleading damages and the difficulty of removing breach of contract cases to the Business Court without consent when historical damages fall below the $10 million threshold, even when the underlying contract involves potentially valuable long-term rights.