When Corporate Control Is at Stake, Texas Business Court Keeps the Dispute Intact
In a recent decision out of the Texas Business Court’s Eleventh Division—Kassam v. Dosani, Cause No. 24-BC11A-0021—the court refused to let defendants fracture a complex business dispute into smaller pieces. The result? A strong reaffirmation that the Texas Business Court has jurisdiction over multi-entity, high-stakes internal business disputes and will resist procedural tactics aimed at evading that jurisdiction.
The Background
The Plaintiffs—Shabbar and Zain Kassam—brought six claims in their individual and derivative capacities, alleging that the defendants seized control of three interrelated, historically profitable businesses: ZZLS, LLC; MSW23, LLC; and Valley Trading Company, LLC. The allegations included breach of fiduciary duty, alleged mismanagement, and usurpation of operational control by the defendants improper withholding of distributions, mismanagement, denial of access to records, and the removal or transfer of valuable inventory.
The Defendants sought to sever the case into three lawsuits, arguing that the plaintiffs were not members of the same companies and that each claim related to separate acts and entities.
The Defendants also challenged the Texas Business Court’s jurisdiction, asserting that no individual claim met the $5 million threshold.
The Court’s Take
Judge Bullard explained that the Plaintiffs had pleaded a unified scheme rather than a set of disconnected grievances:
“Plaintiffs are not alleging that Defendants committed individual acts at different times for separate purposes. Instead, Plaintiffs are alleging that Defendants, acting in concert at approximately the same time, usurped operational control of the nominal defendants and, in doing so, breached duties owed to, and to the detriment of, Plaintiffs.”
The Court also rejected the idea that the claims should be split merely because different plaintiffs owned different companies:
“That Shabbar, and not Zain, is alleging that Defendants’ misbehavior includes the breach of ZZLS’s operating agreement does not change the reality that the totality of events…originates from a common nucleus of operative and aggregate facts connecting Plaintiffs nearly equally.”
On the jurisdictional question, the Court emphasized that plaintiffs are not required to prove damages with precision at the pleading stage—particularly where control of profitable businesses is at stake:
“Plaintiffs seek not only to recover damages but also to protect the value of the rights of control of the nominal defendants at stake, implicating the entire values of the nominal defendants…Construing the allegations liberally in favor of jurisdiction…the allegations are sufficient to invoke the Court’s jurisdiction.”
Here, the Plaintiffs alleged damages and sought relief implicating the entire value of the LLCs, which are described as historically profitable (with ZZLS alone reporting $42–43 million in annual revenue). The Defendants failed to present evidence that would conclusively show the amount in controversy is insufficient. The Court, construing the pleadings liberally in favor of jurisdiction, found the allegations sufficient to meet the $5 million threshold.
Practical Takeaways
This decision provides a few important takeaways:
- The Texas Business Court looks to substance over form. It will not permit defendants to slice up what is, at its core, a unified dispute about business control and fiduciary duties.
- Jurisdiction can be based on the value of control. Even if damages are not easily quantifiable at the outset, control over high-revenue businesses is enough to invoke jurisdiction—especially where fiduciary duties are in question.
- Think strategically about the Texas Business Court early. If your dispute involves business governance, internal control, or derivative claims across multiple entities, you are likely in Texas Business Court territory.
To read more analyses of opinions from the Texas Business Court, visit TexasBusinessCourts.com.
