Texas Business Courts: A New Frontier

by: Nadia I. Gire

In a significant development for the Texas legal landscape, Governor Greg Abbott recently signed House Bill 19 into law. This landmark legislation paves the way for the establishment of specialized business courts in Texas, designed to efficiently resolve large, complex business disputes. These courts, set to officially launch on September 1, 2024, will play a vital role in enhancing the state’s judicial system. Below, we explore key aspects and implications of this innovative legal framework.

Specialized Jurisdiction

One of the central features of the business courts is their exclusive focus on cases involving substantial amounts in controversy. The legislation grants business courts concurrent jurisdiction with district courts for specific actions exceeding $5 million, with exceptions applying to cases with the amounts in controversy exceeding $10 million. This approach aims to relieve overcrowded dockets in other courts by offering a specialized venue for resolving substantial and intricate business disputes.

Furthermore, the significant amount in controversy requirement allows the Business Courts to set fees for filings and actions, ensuring the courts are adequately funded to fulfill their mandated duties. To facilitate the swift resolution of complex cases, the Business Courts are empowered to conduct remote proceedings when practical, but they may also utilize existing court facilities when necessary.

Limited Jurisdiction Over Specific Categories

The business courts are divided into 11 divisions based on the Administrative judicial regions, covering the entire state. They will have jurisdiction over actions exceeding $5 million in categories such as:

  • Corporate governance and derivative proceedings.
  • Actions by an organization or owner against the organization or owner concerning acts or omissions in their organizational capacity.
  • Actions against owners, controlling individuals, or managerial officials of an organization for breaching duties to the organization.
  • Actions seeking to hold owners or governing individuals of an organization liable for its obligations.
  • State and federal securities-related actions against owners, controlling individuals, or managerial officials.
  • Actions arising from the Business Organizations Code.

In specific circumstances, the business courts will gain jurisdiction only when the amount in controversy surpasses $10 million, such as in actions related to qualified transactions, certain contractual or commercial transactions, and actions arising from the Finance Code or Business and Commerce Code. The court can also exercise supplemental jurisdiction over related claims with the consent of all parties involved.

Governor-Appointed Judges

The appointment of judges for the business courts is unique. The Governor, with the advice and consent of the Senate, will appoint two judges to the First, Third, Fourth, Eighth, and Eleventh Divisions, which include Dallas, Austin, San Antonio, Fort Worth and Houston, and one judge to the remaining divisions. These judges will serve two-year terms and are eligible for reappointment, with no current limit on the number of terms.

Appeals

The Texas Legislature has taken steps to address appeals related to business court matters. Governor Abbott signed into law S.B. 1045 on June 9, ushering in the creation of the Fifteenth Court of Appeals, headquartered in Austin. Set to be established on September 1, 2024, this new court will eventually comprise five justices, initially appointed, and subsequently, elected through statewide races.

The Fifteenth Court of Appeals will hold exclusive jurisdiction over appeals stemming from orders or judgments issued by the business court, as well as original proceedings associated with actions or orders originating from the business court. Furthermore, it will exercise exclusive intermediate appellate jurisdiction over specific categories of cases that may be connected to civil litigation. These include matters involving the state or state-related entities, officers, or employees in the executive branch, arising from official conduct, with certain exceptions. Additionally, cases in which a party challenges the constitutionality or validity of a state statute or rule, with the attorney general’s involvement, fall under the court’s purview.

Crucially, the statute clearly stipulates that cases or proceedings properly filed within the jurisdiction of the Fifteenth Court of Appeals may not be transferred to other courts of appeals by the Texas Supreme Court for the purpose of docket equalization. This provision ensures that cases before the Fifteenth Court of Appeals will remain within its purview, preserving the court’s exclusive role in handling these specific legal matters.

Conclusion

The introduction of the Texas business courts marks a significant shift in the state’s legal landscape, offering a dedicated forum for the efficient resolution of large, complex business disputes. By providing specialized jurisdiction, the business courts aim to expedite the resolution process, reduce case backlog, and enhance the predictability of outcomes. As these courts begin operating in September 2024, they will undoubtedly impact the way Texas businesses navigate complex legal matters.

If you have any questions or required more information regarding business courts or this article, please contact info@wilkinsgire.com.  

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