The Houston Business Court has determined that it lacks jurisdiction over a contract dispute between oil and gas companies because the amount in controversy did not reach the jurisdictional threshold.
OWL AssetCo1, LLC v. EOG Resources, Inc. (No. 25-BC11B-0027; 2025 Tex. Bus. 30; August 5, 2025) arose from a dispute between OWL and EOG over produced water. The parties entered into an agreement under which EOG agreed to deliver produced water meeting certain specifications and to indemnify OWL for injury caused by EOG’s failure to deliver the water. This agreement soured when three separate spills of produced water caused OWL to allegedly incur millions of dollars in costs, prompting OWL to file a breach of contract suit in Harris County district court against EOG seeking monetary relief of more than $1 million. EOG countersued for breach of contract and declaratory judgment, seeking more than $10 million for OWL’s alleged failure to take dedicated volumes of produced water. EOG claimed liquidated damages of $929,129.00 in credits for liquidated damages and an additional $6,453,000 in credits for OWL’s failure to rectify the breach. EOG simultaneously removed the case to the Harris County business court without OWL’s agreement.
EOG argued that the business court had jurisdiction because the action arose from a qualified transaction in which the amount in controversy exceedrf $10 million, a figure EOG calculated by aggregating OWL’s millions in compensatory damages along with EOG’s millions in credits owed. EOG further asserted jurisdiction over its declaratory judgment action under § 25A.004(e). OWL filed a motion challenging removal, arguing that the business court lacked jurisdiction because (1) the amount in controversy did not exceed $10 million but only $8.22 million, the amount spent on remediating the three spills, and (2) the amount in controversy must be determined solely by OWL’s claims in the original suit, not EOG’s counterclaims. And because the court lacked jurisdiction over the underlying suit, it didn’t have jurisdiction over EOG’s declaratory judgment action, either.
The court requested the parties to address the effect of HB 40, which lowered the court’s jurisdictional threshold to $5 million, effective September 1, 2025 as to actions commenced on or after that date. and prompted discussion on its pertinence to this question of jurisdiction. In addition to reiterating that the court could aggregate OWL’s and EOG’s claims to reach the jurisdictional threshold, EOG urged the court simply to stay the action until HB 40 took effect and then dismiss OWL’s motion to remand as moot.
In an opinion by Judge Bullard (sitting by assignment), the court determined that it lacked jurisdiction because the amount in controversy did not exceed $10 million. As established by EOG’s pleadings, the amount in controversy was in fact a minimum of $8.2 million, the amount EOG claimed it cost to remediate the three spills, or about $9.1 million, which takes into account EOG’s alleged liquidated damages. Consequently, whether or not the court aggregated OWL’s and EOG’s damages claims, it still wouldn’t exceed the jurisdictional threshold. EOG argued that since OWL’s petition did not contain affirmatively establish an amount in controversy outside the court’s jurisdiction, OWL failed to negate jurisdiction. The court rejected this argument on the basis that OWL attached an affidavit to its motion establishing that the amount in controversy was outside the business court’s jurisdiction (citing C Ten, 2025 Tex. Bus. 1). Under C Ten, when OWL produced that evidence, “the burden shifted to EOG to present controverting evidence raising a fact issue on the amount in controversy to avoid remand.” EOG didn’t do that.
EOG further asserted that the amount in controversy should be determined “by the amount at stake in the action as a whole and, thus, includes the damages claimed and relief demanded in its counterclaims in the aggregate.” Pointing out that C Ten “[did] not hold that an action necessarily includes aggregated counterclaims for the purpose of calculating the amount in controversy,” the court observed that EOG produced no Texas authority in support of its position, only a U.S. 5th Circuit opinion from 1960. In any event, SCOTX has held that “the ‘matter in controversy’ includes all of the damages the plaintiff seeks to recover from the defendant at the time suit is filed.” United Servs. Auto. Ass’n v. Brite, 215 S.W.3d 400, 401 (Tex. 2007). But, as previously noted, even if the court did consider EOG’s counterclaims, it wouldn’t add up to $10 million, and EOG’s claim for future damages due to OWL’s anticipatory brief was unripe. Moreover, EOG’s argument that its counterclaim for declaratory judgment should be folded into the amount in controversy calculation didn’t fly because it was based on “the value of the indemnity obligation in the agreement,” derived from “provisions in the agreement requiring the parties to obtain various insurance policies with limits in the aggregate that exceed” $10 million.
Considering the burden-shifting standard, OWL has provided sufficient evidence in the form of an affidavit to establish that the amount in controversy is out of the Court’s reach. EOG’s duty is then to affirmatively controvert the existence of a fact issue through their evidence in order to avoid remand. They have not presented such evidence, therefore remand is necessary. EOG’s aggregate relief argument further fails to take hold because of their misplaced reliance on federal authority, and failure to cite any relevant Texas case law. EOG’s counterclaim was removed from the analysis and its arguments negated.
As to the HB 40 issue, the court determined that it “presently” lacked jurisdiction over the action and that the bill “[did] not change this current reality.” With no other statutory basis on which to base jurisdiction, the court “[was] required to remand this case to the district court as soon as practicable.” Additionally, the court had no independent basis for exercising jurisdiction over EOG’s declaratory judgment claim because there was no underlying jurisdiction (EOG also failed to discuss the issue in its brief). The court granted OWL’s motion to remand.
TCJL Intern Satchel Williams researched and prepared the first draft of this article.
