Another party has tried to get out from under the jurisdiction of the Business Court by alleging that a plaintiff was forum shopping or faking its pleadings to invoke the court’s jurisdiction.
Pradera SFR, LLC v. American Housing Ventures, LLC (2026 Tex. Bus. 25; May 12, 2026) arose out of dispute between the owner of a real estate development and the development manager of a community of rental homes in San Antonio. The project was completed in 2020, but in 2021, Pradera and American Housing were sued for copyright infringement by Kipp Flores Architects, which had previously worked with American, in connection with the project. This underlying litigation triggered the dispute between Pradera and American over who bore responsibility for the problem. The Development Agreement between them obligated American “to perform the duties of a sophisticated development manager, act in good faith, act in Pradera SFR’s best interest, and manage project architects and plans in compliance with the law, including federal copyright law.” The agreement also contained an indemnity provision requiring American to indemify Pradera “for losses arising from AHV’s defaults, gross negligence, or willful misconduct.”
During development, American approached Kipp Flores to be the architect for the project’s drawings and plans. Pradera and Kipp Flores, however, couldn’t agree on a contract. American later engaged another architecture firm, KTGY, as architects for the project, and they prepared the drawings an plans for the project. Pradera alleged that during discovery in the underlying copyright infringement lawsuit, it found out that American had shared Kipp Flores’s copyrighted plans with KTGY and instructed the firm to use them for the project. It further alleged that the derivative plans were used to build the project’s rental homes and incorporated into the project’s marketing materials. Pradera represented that American knew about the issue several years before Kipp Flores sued, but didn’t disclose the potential issue with the plans to Pradera until the lawsuit hit.
Mediation resulted in a settlement agreement. Pradera, however, asserted that under the agreement, it retained certain indemnity claims against American. The retained claims were limited “to the extent of remaining coverage under the [insurance] policy, with any recovery limited to any proceeds received by [American] from [the insurer].” The agreement further contained a forum selection clause specifying the U.S. District Court of the Western District of Texas, and in 2024, Pradera sued American in that court to enforce the agreement and assert its retained indemnity claims. American moved to dismiss, which the federal court did without prejudice because it declined to exercise jurisdiction over Pradera’s state-law indemnification claims. According to Pradera, that foray cost it an additional $500,000 in attorney’s fees. Pradera then filed suit in the Business Court. American responded by filing a plea to the jurisdiction.
Pradera argued that the insurance proceeds limitation “was the product of either mistake, fraudulent inducement, or mutital mistake.” The Development Agreement required American to maintain CGL coverage with limits of $5 million per occurrence and $5 million annual aggregate throughout the term of the agreement. It also mandated American to carry blanket contractual liability coverage, including coverage for its indemnity obligations to Pradera. There were two policies involved, one a First Mercury policy that left a gap of more than a year (April 2017 to May 2018), the second which constituted separate “non-project-specific” coverage for American’s “general business activities.” When Pradera sued it in federal court, American tendered the defense to the second insurer, USIC. The insurer declined, stating that the policy excluded coverage for advertising injury.
In an opinion by Judge Barnard, the court denied American’s plea to the jurisdiction. It argued that the claims in Prandera’s petition didn’t meet the statutory amount in controversy threshold of $5 million because the Settlement Agreement limited potential recovery to the insurance proceeds available under the USIC policy, which were either the $2 million limit or zero, based on the insurer’s denial of coverage. Initially, Prandera pleaded damages in excess of $5 million, meeting its statutory burden. The problem, however, was that “[w]hether the limitation in [] the Settlement Agreement is enforceable, and whether that provision may be rescinded or reformed based on fraudulent inducement or mistake, presents a merits question that cannot be resolved through a plea to the jurisdiction.” In addition to that, Pradera alleged a claim based on American’s failure to provide insurance as required by the Development Agreement, another merits claim.
Based on the posture of the dispute, consequently, “the allegations contained in the pleadings control the court’s jurisdictional analysis” (citations omitted). American had no answer for this. It tried to argue that Prandera was forum shopping, or that the federal court’s dismissal without prejudice somehow translated to the Business Court’s jurisdiction. It further argued that Prander’s pleadings constituted “sham pleading intended to manufacture jurisdiction in the Business Court.” Whatever, the court responded, none of that is relevant to the amount in controversy determination—which is based on Plaintiff’s pleading alone, absent evidence of fraud. The court thus denied the plea.
