Background

Angela Yaun sued Battle & Sands Energy Corp. and related defendants in district court, alleging breach of an agreement to pay her a perpetual royalty on frac sand sold from a quarry in Beeville, Texas. According to Yaun's petition, the royalty agreement—"made verbally by both Freeman Sands and Kellie Battle and confirmed in writing by Kellie Battle"—promised her $1.00 per ton on all frac sand sold after she spent "significant time and effort to develop and market [Defendants'] frac sand mine." Her claims included breach of contract, equitable estoppel, quasi-estoppel, fraud, and relief under the Texas Sales Representative Act. Defendants removed to the Business Court under Section 25A.004(d)(1), asserting the dispute involved a qualified transaction with damages exceeding the statutory threshold. Yaun moved to remand, arguing the case involved neither a qualified transaction nor the requisite amount in controversy.

The Jurisdictional Dispute

Yaun's remand motion presented two challenges. First, she contended the royalty dispute did not involve a "qualified transaction" as defined by Section 25A.001(14)—a transaction "under which a party . . . is obligated to pay or is entitled to receive, consideration with an aggregate value of at least $5 million." Second, she argued that even if the agreement qualified, the amount in controversy fell short of what she believed was a $10 million threshold applicable to cases filed in August 2025, one week before HB 40 took effect on September 1, 2025. Yaun submitted a declaration estimating that defendants owed her only approximately $1.6 million to date, with perhaps $4.8 million more accruing over the next 24 months—a total of $6.4 million over three years of a perpetual royalty.

The Court's Analysis

Judge Dorfman rejected both arguments. On the qualified transaction question, the court held that "[t]he alleged agreement plainly meets the definition of a qualified transaction, provided that under its terms Yaun may be 'entitled to receive' consideration that meets the $5 million threshold." The perpetual royalty structure was key: because defendants denied the contract's existence and had paid nothing, "Yaun's damages equate to the dollar amount of consideration that she is entitled to receive under the alleged royalty agreement."

On the temporal question, the court applied HB 40's express retroactivity provision. While HB 40 became effective September 1, 2025, the Legislature made its amendments "applicable 'to civil actions commenced on or after September 1, 2024.'" Accordingly, the $5 million threshold—not the prior $10 million standard—governed this August 2025 filing.

Finally, addressing the amount in controversy, Judge Dorfman applied the C Ten burden-shifting framework. Where a plaintiff's pleadings are silent but the removing party alleges sufficient damages, "the removal notice will control unless (a) a party presents evidence that the amount pleaded is falsely asserted to wrongly obtain or avoid jurisdiction, or (b) a different amount in controversy is readily established, such as by statutorily set fees." Yaun did not allege false pleading. Instead, her own declaration inadvertently supported jurisdiction:

Yaun's best guess, then, is that Defendants could owe her approximately $1.6 million to date should she succeed in proving up her claim, with the possibility of an additional $4.8 million accruing over the next 24 months. This puts in controversy a total of approximately $6.4 million, just for the first three years of the perpetual royalty.

The court concluded that "the evidence before the Court plainly establishes the possibility—plausibility, even—that Yaun's damages claim could satisfy the Business Court's jurisdictional minimum for a qualified transaction under §25A.004(d)(1)."

Significance for Texas Commercial Practice

Yaun offers important guidance on three fronts. First, it confirms that perpetual payment obligations—royalties, earnouts, or similar structures—qualify as "qualified transactions" when the party "is entitled to receive" consideration exceeding the statutory threshold, even if payments accrue over time. Second, it clarifies HB 40's retroactive application: the reduced $5 million thresholds apply to all actions commenced on or after September 1, 2024, regardless of when HB 40 was signed or became effective. Third, it demonstrates how the C Ten framework operates in removal cases where plaintiffs challenge jurisdiction: a removing defendant's good-faith allegation controls unless the plaintiff presents evidence of false pleading or a readily established contrary amount. Here, Yaun's own projections—$6.4 million over three years of a perpetual royalty—undermined her remand effort. Practitioners defending removal should note that even preliminary or conservative damage estimates may suffice to establish "possibility" or "plausibility" at the jurisdictional stage, particularly where ongoing obligations extend indefinitely into the future.