Judge Brian Stagner
In a suit in which two sisters fell out over one of them’s conduct of an LLC they owned equally, the Fort Worth (Eighth Division) Business Court has ruled that the aggrieved sister’s lawsuit in the business court for involuntary termination of the LLC could proceed independently of an earlier lawsuit filed in Parker County to recover proceeds of the unauthorized sale of property.
Elizabeth Martens v. Lamkin Land & Cattle Company, LLC and Stephanie Ezzell (No. 25-BC08B-0009; 2025 Tex. Bus. 32; August 14, 2025) arose a dispute between sisters stemming from the alleged mismanagement of the LLC Lamkin Land & Cattle Company. Sisters, Plaintiff Elizabeth Martens and Defendant Stephanie Ezzell, were 50/50 owners of the LLC after their parent’s family partnership dissolved. The two couldn’t agree on the election of a manager (not an auspicious beginning for the new entity). Plaintiff maintained that Defendant unilaterally appointed herself Manager, depriving Plaintiff of information regarding the LLC and a voice in its operation. Plaintiff further alleged that Defendant sold LLC property without informing her, committed tax fraud, depleted LLC assets, and personally used LLC funds. Plaintiff originally filed suit in Travis County district court for failure to distribute available funds, breach of contract, abuse of discretion, unjust enrichment, money had and received, and constructive trust. She also filed for an application for the appointment of a receiver. Three of these claims were preserved after the court ruled against Plaintiff on her application for appointment of a receiver, claims for constructive trust, unjust enrichment and money had and received. Shortly thereafter, the case was transferred to Parker County district court, which in February 2025 denied her application for appointment of a receiver and claims for constructive trust, unjust enrichment, and money had and received.
Martens sought Defendants’ consent to file a motion for leave to amend her petition to add a request for the involuntary termination of the LLC under § 11.314, BOC. Defendants said they would oppose such a motion, to which Martens responded by filing suit in the Business Court. The new lawsuit concerned the mismanagement of the LLC, with Martens alleging tax fraud, the unauthorized sale of property, the depletion of assets, and personal use of LLC funds. Her sole claim was for the involuntary termination of the LLC, on the basis that Ezzell’s conduct had “unreasonably frustrated its economic purpose.” Defendants filed a Motion to Dismiss, Plea to the Jurisdiction, and Plea in Abatement. They contended that Marten’s claim for involuntary termination was compulsory, and therefore belonged to the Parker County lawsuit. Defendants also alleged that the claim’s substance dates it to 2022, precludingBusiness Court jurisdiction (which didn’t exist prior to September 1, 2024). Alternatively, they requested abatement under the dominant jurisdiction principle. Martens responded that dominant jurisdiction did not apply, nor was Business Court jurisdiction precluded because the second case was filed after the Business Court’s creation.
In an opinion by Judge Stagner, the court denied Defendants’ Motion to Dismiss and Plea to the Jurisdiction. The plea to the jurisdiction hinged on a two-fold argument; (1) that the involuntary termination claim is compulsory, and (2) that the Business Court lacks jurisdiction over actions commenced prior to September 1, 2024. Plaintiff did not dispute the effective date of the court’s jurisdiction, but she argued, and the court agreed, that the claims in the two cases were distinct. The Parker County case solely concerned Plaintiff’s claim for half of the proceeds generated by the sale of real property. The business court claim, on the other hand, solely sought involuntary termination of the LLC under the BOC and the disposition of four other tracts of land. Although Defendants attached several exhibits to their motion from the Parker County case, “none demonstrate[d] that Martens’s claim to terminate the LLC arose before September 1, 2024 or was required to be brought in the Parker County case.” Since the cases were distinct, the court denied Defendants’ motions.
Alternatively, Defendants asserted dominant jurisdiction in their plea in abatement. Judge Stagner’s cogent and thorough opinion here should be Exhibit 1 for why we needed the business court. The opinion carefully traces the doctrine’s development over the past 50 years, from which emerged the rule that “two courts should not similtaneously adjudicate the same controversy between the same parties, and because the first court’s jurisdiction is exclusive, any conflicting orders from the second court are void.” A corollary to this rule holds that “a trial court may, in its discretion, abate for reasons of comity, convenience and orderly procedure, considering ‘the practical results to be obtained, dictated by a consideration of the inherent interrelation of the subject matter of the two suits.” Dolenz v. Cont’l Nat’l Bank of Fort Worth, 620 S.W.2d 572 (Tex. 1981). SCOTX subsequently adopted the compulsory counterclaim rule (TRDP 97) as the standard trial courts should apply when determining whether two suits are “inherently interrelated.” Wyatt v. Shaw Plumbing Co., 760 S.W.2d 245 (Tex. 1988), overruled on other grounds by J.B. Hunt, 492 S.W.3d at 292-93. Finally, in In re J.B. Hunt Transport, Inc., 492 S.W.3d 287 (Tex. 2016), SCOTX determined that two lawsuits stemming from the same trucking accident, one filed in Waller County and the other in Dallas County, were inherently interrelated under the compulsory counterclaim rule. But, as Judge Stagner pointed out, lower courts may also use a “logical relationship” test, which is satisfied when “the same facts, which may or may not be disputed, are significant and logically relevant to both claims.”
Ultimately, the Court concluded that the Defendants’ plea in abatement, only two paragraphs long, was deficient because the two suits are factually and substantially removed from each other. Defendants claimed that both cases “center[ed] on Ezzell’s alleged mismanagement of the LLC.” Plaintiff responded that the two cases make entirely distinct claims supported by independent factual bases, “pointing to the six alleged thefts in 2025 that form part of her termination claim” and that were not part of her Parker County case. largely due to the six alleged thefts that comprise the 2025 termination claim. The court agreed, holding that the two cases were not inherently related, and that the relationship between the property sale litigation and the suit arising from Ezzell’s mismanagement of the LLC was too attenuated for one claim to be compulsory to the other. Applying the compulsory counterclaim rule, the court concluded that two of the rule’s requirements were not met: Plaintiff’s termination claim was not mature in 2022, when the Parker County suit was filed, and that claim does not “arise out of the transaction or occurrence that is the subject matter” of the Parker County claims. Even under the logical relationship test, the court added, the same facts were not significant and logically relevant to both claims, but were distinct and could be fully litigated independently with no preclusive effect. Finally, the court considered the convenience and efficiency of abating the business court suit pending the outcome of the Parker County case, but found none because any decision in Parker County would have no effect on the business court case. As Judge Stagner rightly observed, abatement “is a procedural tool, not an end in itself” and would merely delay the court’s disposition of the involuntary termination claim (which would, of course, defeat the purpose of the business court).
We continue to be impressed by the promptitude and efficiency of the business courts. They move with all deliberate speed, hold the parties’ feet to the fire to move things along, and produce superb scholarly, clear, and instructive rulings. It’s all very impressive, especially in view of the fact that the court just turned one-year old.
TCJL Intern Satchel Williams researched and prepared the first draft of this article.
