Savvy Holdings Texas LLC et al v. Smith et al

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IN THE UNITED STATES BANKRUPTCY COURT
FOR THE WESTERN DISTRICT OF TEXAS
SAN ANTONIO DIVISION
IN RE: 	§ 	CASE NO. 26-50088-ALT
§
LUCY COOPER’S, LLC, 	§
§
§
Debtor. 	§ 	CHAPTER 11
SAVVY HOLDINGS TEXAS, LLC 	§
Plaintiff and Counter-Defendant, 	§
§
v. 	§
§
BRAUNDA SMITH, JESSE SMITH, 	§
and LUCY COOPER’S, LLC, 	§ 	ADV. NO. 26-05010-ALT
Defendants, Counter-Plaintiffs, and 	§
Third-Party Plaintiffs, 	§
§
v. 	§
§
RAMIRO MILTON TREVINO and 	§
THOMAS KHERKHER, 	§
Third-Party Defendants. 	§
ORDER REGARDING PLAINTIFF’S MOTION TO COMPEL
IT IS HEREBY ADJUDGED and DECREED that the
below described is SO ORDERED.
Dated: September 02, 2026.
________________________________________
AUBREY L. THOMAS
UNITED STATES BANKRUPTCY JUDGE
________________________________________________________________
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Before the Court are Lucy Cooper’s, LLC’s (the “Debtor”) Amended Answer and
Counterclaims,1 	Braunda 	Smith 	and 	Jesse 	Smith’s 	(“the 	Smiths”) 	Answer 	and
Counterclaims,2 Savvy Holdings Texas, LLC’s (the “Plaintiff”) Motion to Compel Arbitration
and to Dismiss or, Alternatively, Stay Counterclaims (the “Motion to Compel”),3 and the
Debtor’s Response to the Motion to Compel (the “Response”).4 For the reasons set forth herein,
the Court grants in part and denies in part the Plaintiff’s Motion to Compel. Additionally,
the Court dismisses the Smiths’ counterclaims and third-party claims for lack of subject
matter jurisdiction.
Background and Procedural History
On July 24, 2025, the Plaintiff initiated a state court lawsuit (the “State Action”)
against Defendants Braunda Smith, Jesse Smith (the “Smiths”), and the Debtor (collectively,
the “Defendants”).5 The State Action relates to a series of agreements between the Plaintiff
and the Defendants.6 In the Plaintiff’s Original Petition filed in Harris County (the “Original
Complaint”), the Plaintiff sought declaratory relief, requesting that the state court (1) declare
the loan agreements enforceable under Texas law; (2) compel the Defendants to arbitration
of any counterclaims they threatened but had not yet filed against the Plaintiff; and (3) award
damages and attorneys fees to the Plaintiff for the Defendants’ alleged “breaches and tortious
conduct.”7 Notably, when the Plaintiff filed its Original Complaint against the Defendants in
the State Action, there were no claims filed in any court by the Debtor or the Smiths to
compel.8
On January 9, 2026, Lucy Cooper’s LLC (the “Debtor”) filed its voluntary petition
seeking relief under chapter 11 of the Bankruptcy Code.9 The Debtor removed the State
Action to the Southern District of Texas on January 30, 2026,10 which was subsequently
transferred to this Court on February 23, 2026.11 Although the Debtor removed the action to
1 	Docket No. 29. Unless otherwise indicated, “Docket No.” refers to Adv. No. 26-05010-ALT.
2 	Docket No. 30.
3 	Docket No. 35.
4 	Docket No. 40.
5 	Docket No. 1, Ex. A.
6 	Id.
7 	Id.
8 	See Docket No. 1 at 3, ¶ 7 (emphasis added) (“Plaintiff asks the court to liquidate all claims
currently pending in the Removed Action and any forthcoming counterclaims and/or third-party
claims.”); see also id. at 68 (“Counterclaims to be determined”).
9 	Case No. 26-50088-ALT, Docket No. 1.
10 	Docket No. 1.
11 	Docket No. 6.
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this Court, the Debtor and its co-defendants never filed an answer or other responsive
pleading. On March 16, 2026, the Court held a Status Hearing and notified the parties that
it would impose a deadline for the Defendants to file responsive pleadings.12 On May 1, 2026,
the Court entered its Sua Sponte Order directing the Defendants to file a responsive pleading
within 14 days from the date of the Order.13
On May 15, 2026, the Defendants jointly filed their Answer and Counterclaims (the
“Original Answer”) to the Original Complaint.14 Based on how the Original Answer was
drafted, the Court could not decipher which defendant/counterclaimant was asserting which
claim. On May 19, 2026, the Court held another Status Hearing.15 And on May 27, 2026, the
Court entered its Order Setting Deadlines, instructing the Defendants to file separate
answers with any counterclaims by June 9, 2026, to clarify which claims were being asserted
by the Debtor and which claims were being asserted by the Smiths.16
The Debtor filed its Amended Answer and Counterclaims,17 and the Smiths filed their
Answer and Counterclaims on June 9, 2026.18 The Smiths and the Debtor both asserted
counterclaims against the Plaintiff and third-party claims against Third-Party Defendants
Ramiro Milton Trevino and Thomas Kherkher. On June 11, 2026, the Plaintiff filed its
Statement Regarding Consent and the renewed Motion to Compel Arbitration and to Dismiss,
or Alternatively, Stay Counterclaims (the “Motion to Compel”).19 In its Statement Regarding
Consent, the Plaintiff does not consent to this Court’s entry of final order or final judgment
in this adversary proceeding.20
12 	Status Hearing, Audio 1:16:12, Mar. 16, 2026.
13 	Docket No. 13.
14 	Docket No. 19.
15 	Docket No. 14.
16 	Docket No. 24.
17 	Docket No. 29.
18 	Docket No. 30.
19 	Docket Nos. 32, 35.
20 	Docket No. 32. Bankruptcy courts may adjudicate Article III claims when the “parties
knowingly and voluntarily consent to adjudication.” Wellness Int’l Network, Ltd. v. Sharif, 575 U.S.
665 (2015). The “key inquiry” is whether “the litigant or counsel was made aware of the need for
consent and the right to refuse it, and still voluntarily appeared to try the case before the non-Article
III adjudicator.” Id. at 685. A bankruptcy court’s determination of whether a party has consented to
its jurisdiction requires “a deeply factbound analysis of the procedural history” in the proceeding. Id.
at 685.
Here, the Plaintiff originally filed its Original Motion to Compel in the State Action. After
filing its bankruptcy petition, the Debtor removed the State Action to this Court. Notably, the Plaintiff
did not move to remand. After the Debtor filed its Answer and Counterclaims, the Plaintiff filed its
statement regarding consent, stating that it does not consent to the Court’s entry of final orders and
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On July 10, 2026, the Debtor filed its Response and its Motion for Leave to File First
Amended Answer and Counterclaims and to Add Parties (the “Motion for Leave”).21 The Court
set the Motion to Compel and the Debtor’s Motion for Leave for hearing on July 20, 2026.22
At the July 20, 2026, hearing, the Court denied the Debtor’s Motion for Leave because it
failed to comply with Local Rule 7015-1 and because the proposed amended counterclaims
continued to conflate the Debtor with the Smiths, treating them as essentially one and the
same. The Court took the Motion to Compel under advisement.23 -Further, at that hearing,
Debtor’s counsel conceded that, if the Court did not grant the Debtor’s Motion for Leave, the
Motion to Compel should be granted.24 The Court advised the Debtor that it was free to re-
file a motion to amend its pleading so long as the motion complied with Local Rules. To date,
the Debtor has failed to do so.
The Plaintiff’s decision to pre-emptively file its Original Motion to Compel in the State
Action before the Defendants asserted any counterclaims against the Plaintiff, together with
the Defendants’ repeated pleading deficiencies, contributed to the present procedural
quagmire. Additionally, the Motion to Compel does not expressly adopt or incorporate the
Original Complaint by reference.25 The Court will therefore treat the Plaintiff’s pending
Motion to Compel as the live and controlling pleading in this case.
judgment in this case. The Plaintiff, however, has knowingly and voluntarily consented to the Court’s
adjudication of this Adversary Proceeding. The Plaintiff has gone “so far as to affirmatively invoke the
bankruptcy court’s jurisdiction” by filing its motion to compel in this case and seeks a final judgment
from this Court by asking this Court to dismiss counterclaims brought against it. Ward v. Cross Keys
Bank (In re Karcredit, LLC), No. 21-30649, 2022 WL 4103265, at *4 (5th Cir. Sept. 7, 2022) (per
curiam).
To the extent that the Plaintiff disagrees, it may move to withdraw the reference. Fed. R.
Bankr. P. 5011; L. Rule 5011-1; see Mihov v. United States, 655 B.R. 584, 589–90 (S.D. Ind. 2023)
(citation modified) (discussing a motion to withdraw the reference must be “timely” filed “either as
soon as possible or at the first reasonable opportunity after the moving party had notice of the grounds
for withdrawal”).
21 	Docket Nos. 40, 41.
22 	Docket No. 38.
23 	Docket Nos. 47, 54.
24 	Hearing on the Motion to Compel, Audio 10:25:10, July 20, 2026.
25 	See King v. Dogan, 31 F.3d 344, 346 (5th Cir. 1994) (citing Boelens v. Redman Homes, Inc.,
759 F.2d 504, 508 (5th Cir. 1985) (per curiam)) (“An amended complaint supersedes the original
complaint and renders it of no legal effect unless the amended complaint specifically refers to and
adopts or incorporates by reference the earlier pleading.”).
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Discussion
The Plaintiffs seek to compel both the Smiths and the Debtor to arbitration of their
separate counterclaims asserted against the Plaintiff.26 As a preliminary issue, the Court
discusses 	its 	subject 	matter 	jurisdiction 	over 	non-debtor 	litigants 	in 	this 	adversary
proceeding.
I. 	Subject Matter Jurisdiction
This Court “has a ‘continuing obligation to examine the basis for [its] subject matter
jurisdiction,’ which it may raise sua sponte.”27 Because neither the Plaintiff nor the Smiths
are debtors in the underlying bankruptcy and none of the counterclaims or third-party claims
asserted by the Smiths arise under or in title 11,28 the Smiths’ counterclaims and third-party
claims must be at least “related to” the bankruptcy case for this Court to exercise jurisdiction
over those claims.29
A matter is “related to” the bankruptcy case if “the outcome of that proceeding could
conceivably 	have 	any 	effect 	on 	the 	estate 	being 	administered 	in 	bankruptcy.”30 In
determining whether this Court has at least related-to jurisdiction, the Court should “avoid
the inefficiencies of piecemeal adjudication and promote judicial economy by aiding in the
efficient and expeditious resolution of all matters connected to the debtor’s estate.”31 But this
26 	At the July 20, 2026, hearing, the Plaintiff stated that it intends to pursue “claims” against
the Debtor in arbitration. The Plaintiff did not assert any claims for monetary relief in the State
Action. To be clear, this Court is not granting the Plaintiff relief from the automatic stay or compelling
the Debtor to engage in arbitration of the Plaintiff’s undisclosed claims. Further, if the Plaintiff wants
to assert a claim against the Debtor, it had an opportunity to do so by filing a claim in the bankruptcy
case no later than March 20, 2026. Docket No. 11. The Plaintiff failed to do so despite receiving
adequate notice of the filing of this case.
27 	Jettexas Oil, LLC v. Hoge (In re Blue Duck Energy, Ltd.), No. 24-02006, 2026 WL 1871165,
at *1 (Bankr. N.D. Tex. June 29, 2026) (quoting Faulkner v. Eagle View Cap. Mgmt. (In re The Heritage
Org., L.L.C.), 454 B.R. 353, 364 (Bankr. N.D. Tex. 2011)); see also Bass v. Denney (In re Bass), 171 F.3d
1016, 1021 (5th Cir. 1999) (“Federal courts must be assured of their subject matter jurisdiction at all
times and may question it sua sponte at any stage of judicial proceedings.”).
28 	Matters “arising under” title 11 are “those proceedings that involve a cause of action created
or determined by” the Bankruptcy Code. Wood v. Wood (In re Wood), 825 F.2d 90, 96 (5th Cir. 1987).
“Causes of action, which, by their nature, can only arise in bankruptcy cases, are considered ‘arising
in’ cases under title 11.” In re Blue Duck Energy, Ltd., 2026 WL 1871165, at *4.
29 	28 U.S.C. § 1334(b); see Cadle Co. v. Lindsey (In re Walker), 51 F.3d 562, 573 (5th Cir. 1995)
(citation modified) (“It is necessary only to determine whether a matter is at least related to the
bankruptcy”).
30 	Feld. v. Zale Corp. (In re Zale Corp.), 62 F.3d 746, 752 (5th Cir. 1995) (quoting In re Wood,
825 F.2d at 93).
31 	Id. at 750 (quoting Miller v. Kemira, Inc. (In re Lemco Gypsum, Inc.), 910 F.2d 784, 787
(11th Cir. 1990)).
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Court’s related-to jurisdiction is not limitless.32 The Court “has no jurisdiction over a matter
that does not affect the debtor.”33 “Common facts to other core proceedings, convenience of
the parties, cost-savings, and judicial economy are all insufficient considerations to confer
‘related to’ jurisdiction absent a conceivable effect on the bankruptcy estate.”34
A. The Court lacks jurisdiction over the Smiths’ counterclaims against the
Plaintiff.
The Smiths assert the following counterclaims against the Plaintiff: (1) fraud and
fraudulent inducement; (2) breach of fiduciary duty; (3) civil conspiracy; (4) breach of
contract; (5) conversion; (6) unjust enrichment; (7) declaratory relief; and (8) accounting. The
Court lacks subject matter jurisdiction over the Smiths’ counterclaims against the Plaintiff.
The Smiths are not debtors in the underlying bankruptcy, and they allege purely state-law
claims against the Plaintiff. Even if the Smiths prevail on every counterclaim asserted
against the Plaintiff, there would be no conceivable effect on the administration of the
Debtor’s bankruptcy estate.35 The Plaintiff’s liability to the Smiths would not “alter the
debtor’s rights, liabilities, options, or freedom of action (positively or negatively)” or impact
“the handling and administration of the bankruptcy estate.”36 Therefore, the Court lacks
jurisdiction over the Smiths’ counterclaims against the Plaintiff.
B. The Court lacks jurisdiction over the Smiths’ third-party claims against the
Third-Party Defendants.
Although the Smiths nominally assert third-party claims against both Third-Party
Defendants, the Smiths only plead third-party claims specifically against Third-Party
Defendant Kherker.37 The Smiths assert a legal malpractice claim against Kherker for his
alleged breach of fiduciary duty and conflict of interest related to his involvement in the
transactions surrounding the loan agreements.
“Bankruptcy courts usually lack ‘related to’ jurisdiction in connection with third-party
complaints.”38 Again, the Smiths’ claims against the Third-Party Defendants involve
32 	Id. (quoting Celotex Corp. v. Edwards, 541 U.S. 300, 308 (1995)).
33 	In re Zale Corp., 62 F.3d at 752.
34 	In re Black Duck Energy, Ltd., 2026 WL 1871165, at *5 (collecting cases).
35 	See Finley Grp. V. Working Media Grp. Atl., LLC (In re Redf Mktg., LLC), 536 B.R. 646, 663
(Bankr. W.D.N.C. 2015) (finding the same).
36 	Id. (quoting Celotex, 541 U.S. at 309 n.6). Additionally, the Court may not exercise
supplemental jurisdiction over the Defendants’ claims. In re Walker, 51 F.3d at 573.
37 	See Docket No. 30 at 9, ¶ 13. The Smiths issued summons upon both Third-Party Defendants.
Docket No. 31.
38 	Blackstone Claim Servs., Inc. v. McKee (In re Blackstone Claim Servs., Inc.), No. 25-05084,
2026 WL 915043, at *3 (Bankr. W.D. Tex. Apr. 2, 2026) (citing In re Walker, 51 F.3d at 569).
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litigation between two non-debtors. Even if the Smiths prevail on their legal malpractice
claim against Kherker, there would be no conceivable effect on the administration of the
Debtor’s bankruptcy estate. Therefore, the Court lacks related-to jurisdiction over the
Smiths’ third-party claims against the Third-Party Defendants.
C. The procedural posture of this adversary proceeding requires the Court to
dismiss the Smiths’ counterclaims and third-party claims.
The Court must remand the case if it determines, at any time, that it lacks subject
matter jurisdiction.39 But “the procedural posture of this case requires the court to specify
the nature of ‘the case’ to be remanded.”40 Although this case was removed from state court,41
the Smiths’ claims did not exist at the time of removal.42 The Court, therefore, may not
remand claims that were not removed.43 Because the Smiths’ claims were originally filed in
federal court, “remand is not an option.”44 The Court must dismiss the Smiths’ claims without
prejudice to refiling in the proper venue.45
II. 	The Motion to Compel
The Debtor asserts the following state law claims against the Plaintiff: (1) fraud and
fraudulent inducement; (2) breach of fiduciary duties; (3) breach of contract; (4) conversion;
unjust 	enrichment; 	(5) declaratory 	relief; 	(6) tortious 	interference 	with 	contract; 	and
(7) accounting.46 The Plaintiff and the Debtor executed the Loan, Restructuring, and
Management Agreements (collectively, the “Agreements”), which all contain an arbitration
provision purporting to cover all disputes “arising under or relating to” each agreement.47
The Debtor agrees with the Plaintiff’s request to enforce the arbitration provisions relating
39 	28 U.S.C. § 1447(c).
40 	RMP Consulting Grp., Inc. v. Datronic Rental Corp., No. 98-5062, 1999 WL 617690, at *3
(10th Cir. Aug. 16, 1999) (citation modified).
41 	See 28 U.S.C. § 1452(b) (governing removal of claims to bankruptcy courts).
42 	See Docket No. 1 at 3, ¶ 7 (emphasis added) (“Plaintiff asks the court to liquidate all claims
currently pending in the Removed Action and any forthcoming counterclaims and/or third-party
claims.”); see also id. at 68 (“Counterclaims to be determined”).
43 	See First Nat’l Bank of Pulaski v. Curry, 301 F.3d 456, 467 (6th Cir. 2002) (explaining that a
court “may not remand a case that was never removed from state court”).
44 	White v. Comm. Standard Fire & Marine Co., 450 F.2d 785, 786 (5th Cir. 1971).
45 	Fed. R. Civ. P. 12(h)(3); see Scott v. Kirby & Allen, Inc., No. 04-3427, 2006 WL 1207968, at *1
(E.D. La. May 1, 2006) (citation modified) (“A district court may not remand a case that was never
removed from state court. Thus, this case cannot be remanded. The only possibility is dismissal.”).
46 	Docket No. 29 at 9–12.
47 	Docket No. 35, Exs. 1, 2, 3.
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to the state law claims.48 Additionally, the Debtor concedes that without an amended
pleading containing any causes of action derived from the Bankruptcy Code,49 the Court
should grant the Motion to Compel.50 The Plaintiff, however, has not sought relief from the
automatic stay to pursue claims against the Debtor, nor has the Plaintiff filed a proof of claim
in the Debtor’s bankruptcy case. To the extent that the Plaintiff seeks to assert more than
defenses against the Debtor’s counterclaims, it is barred from doing so at this time.
This Court is required to “rigorously enforce agreements to arbitrate, even if the result
is piecemeal litigation,” unless there is a “countervailing policy manifested in another federal
statute.”51 Because all the Debtor’s counterclaims arise from the Debtor’s prepetition legal or
equitable rights, rather than from provisions of the Bankruptcy Code, the Court must enforce
the arbitration agreements pursuant to the Federal Arbitration Act.52 Therefore, the Court
finds that the Plaintiff and the Debtor must arbitrate the Debtor’s counterclaims in
accordance with the Agreements, and this adversary must be stayed until the resolution
thereof.53
Conclusion
For the reasons stated herein,
IT IS THEREFORE ORDERED that the Motion to Compel is granted in part and
denied in part.
48 	Although the Debtor challenges the validity of the Agreements, the Debtor does not
independently attack the validity or enforceability of the arbitration clauses themselves. Docket No. 29
at 9, ¶ 45. The Fifth Circuit has held that:
[W]here parties have formed an agreement which contains an arbitration clause,
any attempt to dissolve that agreement by having the entire agreement declared
voidable or void is for the arbitrator. Only if the arbitration clause is attacked
on an independent basis can the court decide the dispute; otherwise, general
attacks on the agreement are for the arbitrator.
Will-Drill Res., Inc. v. Samson Res. Co., 352 F.3d 211, 218 (5th Cir. 2003).
49 	The Debtor listed claims and attempted several times to amend its answer to assert claims
against the Plaintiff that arise under the Bankruptcy Code. Docket Nos. 41, 53, 56, 57; see also Case
No. 26-50088-ALT, Docket No. 48 at 21, ¶ 1. Those claims are not before the Court and remain
potential claims the Debtor may choose to pursue in a separate proceeding.
50 	Docket No. 40.
51 	Dean Witter Reynolds, Inc. v. Byrd, 470 U.S. 213, 218 (1985).
52 	9 U.S.C. § 2; see Gandy v. Gandy (In re Gandy), 299 F.3d 489, 495 (5th Cir. 2002) (“The FAA
directs courts rigorously to enforce agreements to arbitrate, even if a party opposing arbitration is
asserting a statutory claim.”).
53 	9 U.S.C. §§ 3, 4.
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IT IS FURTHER ORDERED that Defendants Braunda Smith and Jesse Smith’s
counterclaims asserted against Plaintiff Savvy Holdings Texas, LLC and third-party claims
against Third-Party Defendants Ramiro Milton Trevino and Thomas Kherkher are dismissed
without prejudice to refiling in the proper venue.
IT IS FURTHER ORDERED that Savvy Holdings Texas, LLC and Lucy Cooper’s, LLC
shall attend and participate in arbitration of Lucy Cooper’s, LLC’s claims asserted against
Savvy Holdings Texas, LLC to be held in accordance with the Agreements.
IT IS FURTHER ORDERED that this adversary proceeding is hereby abated pending
further orders of this Court.
# 	# 	#
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