Judge Brian Stagner
The Business Court [Eighth Division] has caught out Defendants who tried to use the Declaratory Judgment Act to recover attorney’s fees by filing requested declarations that merely reiterated Plaintiffs’ claims.
CRS Mechanical, Inc.; CRS Mechanical of Nebraska, Inc.; and Chris Allensworth v. Norfolk Cold Storage LLC f/k/a TVG Capital Holdings, LLC; and Jon Tryggestad (No. 25-BC08B-0001; 2025 Tex. Bus. 46; November 14, 2025) arose from the alleged partnership between the parties for the renovation and operation of a cold-storage-facility in Norfolk, Nebraska. According to CRS, the parties agreed that Norfolk would buy the old facility at a foreclosure sale. the deal tipulated that CRS would perform the renovations, Norfolk would fund it, and Allensworth would get an ownership interest in a new entity to run it. Allegedly as the result of Norfolk’s representations to Plaintiffs, CRS abstained from bidding at the foreclosure sale and enforcing a lien on the property. Norfolk did acquire the property but excluded Plaintiffs from all ownership and operations. Plaintiffs sued for breach of fiduciary duty, knowing participation, and common-law fraud.
Defendants filed a verified denial and a counterclaim for a declaration that no contract existed between the parties, the CRS’s mechanic’s liens, were never valid because they didn’t comply with Nebraska law, and to the extent that the liens were valid they lapsed and became void due to this failure to comply. Defendants requested attorney’s fees, expert fees, and associated costs. Plaintiffs responded that the counterclaim constituted “an impermissible attempt to recover attorney’s fees under the Declaratory Judgment Act because each declaration merely duplicates issues already before the Court.” Plaintiffs filed a traditional motion for summary judgment on the counterclaim.
In an opinion by Judge Stagner, the court granted the motion. Under the Declaratory Judgment Act, fees cannot be shifted from one party to another haphazardly. Texas law clearly bars a defendant from bringing a declaratory judgment counterclaim that merely apes defenses to the plaintiff’s claims. Instead, “a DJA counterclaim is permissible only if it has greater ramifications than the issues already before the court.” Such a claim “has greater ramifications if it seeks affirmative relief,” that is, “if it alleges ‘that the defendant has a cause of action, independent of the plaintiff’s claim, on which [the defendant] could recover benefits, compensation or relief, even though the plaintiff may abandon [their] cause of action or fail to establish it’” (citations omitted). Here Defendants’ counterclaim sought no independent benefit or remedy and thus failed the test.
The Defendants first requested declaration that the parties had no contract merely reiterated the issues presented in Plaintiff’s claims for breach of fiduciary duty and knowing participation. Whether a partnership agreement existed was a threshold question essential to the disposition of these claims. No new controversy was introduced, nor any new benefit sought. Furthermore, this declaration sought no affirmative relief, and therefore couldn’t support the award of attorney’s fees as a matter of law.
Similarly, the second and third requested declarations seeking to invalidate the CRS liens “directly overlap[ped] Plaintiff’s’ fraud and damages theories.” Plaintiffs argued that Defendants’ misrepresentations resulted in the expiration of the liens as well as their non-enforcement. Consequently, Defendants’ “declarations operate as classic defensive denials—not affirmative relief. This “repackaging” did not comport with the DJA, which bars the award of attorney’s fees for declaratory claims of this nature. Finally, even if the declarations weren’t subsumed by the earlier claims presented by Plaintiffs, the business court (as well as any other Texas court) lacks subject-matter-jurisdiction to adjudicate title to real property in other states, and therefore could not grant Defendants’ relief in any event. Additionally, a suit involving real property, including one to quiet title or remove encumbrances, have to be filed in the county where the property is located. Because Defendants sought to quiet title to real property located in Nebraska, the court lacked jurisdiction on all fronts.
The Court granted summary judgement to Plaintiffs on Defendants’ counterclaim for attorney’s fees, expenses, and other costs.
