Texas Business Court
1. What is the Texas Business Court and Why Was it Created?
Beginning September 1 of this year, the new Texas Business Court started hearing cases and changed the judicial landscape of Texas as we know it. The Business Court is a unique statewide trial court that was legislatively created to resolve complex business disputes and is comprised of appointed judges who have extensive experience in the types of cases that are tried before the Court.[1] The new system was created by House Bill 19 and is divided into eleven divisions, with each court sitting in one of the state’s major urban areas such as Dallas, Austin, San Antonio, Fort Worth, and Houston.[2] These cities respectively house divisions 1, 3, 4, 8, and 11 which are fully operational and each have two appointed judges, while the rest of the divisions are not yet up and running.[3] Texas is the thirtieth state to adopt a specialized forum to hear business cases.[4]
2. What Cases Does the Texas Business Court Have Jurisdiction over?
Just like it sounds, the Texas Business Court was established to preside over a variety of business-related cases. This includes disputes stemming from piercing the corporate veil to securities litigation. There are essentially three main groups of cases over which the Business Court has limited concurrent jurisdiction with state district courts.
Group 1: Cases with an amount in controversy exceeding $5 million.
The Business Court have jurisdiction over cases in which the amount in controversy exceeds $5 million and involve:
“a derivative proceeding;
an action regarding the governance, governing documents, or internal affairs of an organization;
an action in which a claim under a state or federal securities or trade regulation law is asserted against: (A) an organization; (B) a controlling person or managerial official of an organization for an act or omission by the organization or by the person in the person’s capacity as a controlling person or managerial official; (C) an underwriter of securities issued by the organization; or (D) the auditor of an organization;
an action by an organization, or an owner of an organization, if the action: (A) is brought against an owner, controlling person, or managerial official of the organization; and (B) alleges an act or omission by the person in the person ’s capacity as an owner, controlling person, or managerial official of the organization;
an action alleging that an owner, controlling person, or managerial official breached a duty owed to an organization or an owner of an organization by reason of the person ’s status as an owner, controlling person, or managerial official, including the breach of a duty of loyalty or good faith;
an action seeking to hold an owner or governing person of an organization liable for an obligation of the organization, other than on account of a written contract signed by the person to be held liable in a capacity other than as an owner or governing person; and
an action arising out of the Business Organizations Code.”[5]
Group 2: Cases with an amount in controversy exceeding $10 million.
The Business Court also have jurisdiction over cases where the amount in controversy exceeds $10 million if the case qualifies as:
“an action arising out of a qualified transaction;
an action that arises out of a contract or commercial transaction in which the parties to the contract or transaction agreed in the contract or a subsequent agreement that the business court has jurisdiction of the action, except an action that arises out of an insurance contract; and
[subject to exclusions], an action that arises out of a violation of the Finance Code or Business & Commerce Code by an organization or an officer or governing person acting on behalf of an organization other than a bank, credit union, or savings and loan association.”[6]
Group 3: Cases where a publicly traded company is a party.
The Business Court further have jurisdiction over cases where one of the parties is a publicly traded company.[7] This is true regardless of the amount in controversy, so long as the action’s subject matter falls within the jurisdiction of the Business Court discussed in groups one and two.[8]
In addition, the statute details which cases fall under the Court’s supplemental jurisdiction and which cases are excluded from the court’s jurisdiction altogether.[9] To get a case into the Business Court, the filing party must plead facts to establish proper venue in a county in one of the eleven divisions of the Business Court, and the Court will then assign the case to that division.[10] The Business Court serves the entire state of Texas, but is divided into divisions or subsets that each serve specific counties and comport with the existing Administrative Judicial Regions.[11] Thus, the filing party must plead facts showing venue is proper in a county within the division they are filing in. Venue can be established by law or, if a contract specifies a county of venue, established by contract.[12] If venue is improper in the division the party files in, the Court can: 1) transfer the case to the appropriate division if it is operational or 2) upon the consent of the filing party, transfer the action to a district court if the proper division is not yet operational.[13] A case can also be removed to the Business Court from the district court if jurisdictional requirements are met, and the Business Court can likewise remand cases back to the district court.[14]
3. What Unique Characteristics Exist in the Texas Business Courts’ Jurisprudence?
While the Texas Business Court may have a few defining attributes, the same rules applicable to district courts also apply to the Business Court.[15] However, parties may start to prefer the Business Court over traditional district courts due to the requirement that the judges come to the bench with an arsenal of experiences in the specific types of cases the court will hear. The statute requires, among other things, the judges to have ten or more years’ experience in:
“practicing complex civil business litigation;
practicing business transaction law;
serving as a judge of a court in Texas with civil jurisdiction;” or
a combination of the above-mentioned experiences.[16]
The Business Court also preserves the parties’ right to a jury trial—a right that not all state’s business courts safeguard.[17] Additionally, the Texas Supreme Court recently approved a rule which obligates a Business Court judge to issue a written opinion in connection with a dispositive ruling at the request of either party.[18] A business court judge may also “issue a written opinion in connection with any order.”[19] Nonetheless, the statute contemplates that each court will be outfitted with staff attorneys who will likely assist their judges in writing opinions which is similar to federal courts but dissimilar to district courts where judges typically issue conclusions of law and findings of fact rather than opinions.[20]
Out of all its unique characteristics compared to well-established Texas district courts, the Texas Business Court’s most distinctive feature is arguably that all appeals will be handled by the newly established Fifteenth Court of Appeals.[21] Despite many efforts, the Texas Supreme Court has struck down all challenges to the new court and affirmed its constitutionality.[22] In In re Dallas County, Dallas County challenged the new court of appeals as unconstitutional contending that its “geographic range unconstitutionally covers the entire state; that its jurisdictional scope is unconstitutional for various reasons; and that its new justices will be unconstitutionally installed because they will not be elected until November 2026 despite having been appointed in September 2024.”[23] The Texas Supreme Court held the new court of appeals was constitutional in all aspects.[24] Constitutional challenges have also been asserted against the Business Courts, opposing the fact that the judges are appointed rather than elected in violation of the Texas Constitution. It seems likely that these challenges will continue to surface as the Business Court makes waves in Texas law. For now, the Business Court and the Fifteenth Court of Appeals are here to stay.
4. Conclusion
Though questions will undoubtedly continue to linger around the Texas Business Court and what effect it will have on practicing law in Texas, the court’s creation is a monumental step toward making Texas even more business-friendly and unclogging overwhelmed district court dockets. Armed with experienced judges and limited jurisdiction, the Business Court has enormous potential to resolve cases quickly and efficiently while preserving the integrity of Texas’s judicial system.
[1] Tex. Gov. Code § 25A.008–25A.009.
[2] Memorandum from the State of Texas Office of Court Administration on Creation of the Business Court of Texas, Effective September 1, 2024 to the Texas District and County Clerks (Aug. 13, 2024), creation-of-tx-business-court-memo-to-dist-cty-clerks.pdf.
[3] Id.
[4] Adolfo Pesquera, The Business Courts Are Coming—Can They Meet Expectations?, LAW.COM: Texas Lawyer (July 20, 2023, 3:20 PM), https://www.law.com/texaslawyer/2023/07/20/the-business-courts-are-coming-can-they-meet-expectations/?slreturn=20241209150609.
[5] § 25A.004(b).
[6] Id. at § 25A.004(d).
[7] Id. at § 25A.004(c).
[8] Id.
[9] Id. at § 25A.004(f)–(h).
[10] Id. at § 25A.006(a).
[11] Memorandum from the State of Texas Office of Court Administration on Creation of the Business Court of Texas, Effective September 1, 2024, supra note 2.
[12] Id.
[13] Id. at § 25A.006(c).
[14] Id. at § 25A.006(d).
[15] Id. at § 25A.015.
[16] Id. at § 25A.008.
[17] Id. at § 25A.015(a); see How Does the Delaware Chancery Court Work?,Delaware Court Records (last visited Dec. 10, 2024), https://delawarecourtrecords.us/chancery-court/ (“Delaware Chancery Court is a non-jury trial court.”).
[18] Tex. R. Civ. Pro. 360(a).
[19] Tex. R. Civ. Pro. 360(b).
[20] § 25A.017(i).
[21] Id. at § 25A.007.
[22] In re Dall. Cnty., 697 S.W.3d 142 (Tex. 2024).
[23] Id. at 146.
[24] Id.