JCA

Article by: Law Clerk Jose De Luna

In 2023, Texas House Bill 19 created eleven new Texas business courts throughout the state. In June 2024 judges were appointed to five of the divisions and the final set of court rules were approved by the Texas Supreme Court. Additionally, the Fifteenth Court of Appeals was established to have exclusive jurisdiction over the business courts decisions. In September 2024, ten judges for the Dallas, Austin, San Antonio, Houston, and Fort Worth Division were sworn in. The first cases were filed in September. The remaining six divisions are expected to open their chambers in 2026 and operate out of more rural locations.

What This Means for Texas Businesses

            Texas joins the list of about 25 states that have adopted similar court systems. The courts have partisan support, as they are found in Florida and New York alike. The creation of the courts signals Texas’ commitment to pro-business attitudes. The courts will decrease the swell of cases in the judicial system and will alleviate the burden of existing courts. This should allow Texas businesses to resolve legal matters more quickly and resume focus on their day-to-day operations.

Furthermore, the courts will be comprised of judges with experience handling complex commercial litigation. This should provide more reliability and consistency in decisions, along with improved communication between the judges and juries.

The courts should also serve as a cheaper alternative to arbitration, which is often preferred for businesses with complex commercial disputes, due to the panels’ expertise. Additionally, the fees and costs of arbitration tend to be higher than those of state courts, along with increases in attorney’s fees.

While the new courts have broad support, there are some points of concern. The appointed judges will serve on two-year limits. While this may be a win for judicial reform activists, others are concerned that this is too short a tenure and may lead to judges having to withdraw from the bench in the middle of long and complex litigation. Other states, for example, have up to 12-year terms.

The Courts’ Jurisdiction

The Business Courts will have jurisdiction of matters where the controversy exceeds $5 million and involves:

1. A derivative proceeding;
2. Governance or internal affairs of an organization;
3. Claims under state or federal securities or trade regulation laws;
4. Actions brought against an owner or manager of an organization for an omission;
5. Actions against an owner or manager of an organization for breaching the duty of loyalty or good faith;
6. Actions against an owner or governing person of an organization to hold them liable for obligations of the organization; or
7. Actions arising out of the Business Organizations Code

Regardless of the dollar amount in dispute, the courts will have jurisdiction when it involves a publicly traded company and any of the above claims.

The Business Courts will have jurisdiction of maters where the controversy exceeds $10 million and involves:

1. An action arising from a qualified transaction;
2. An action arising from a contract and the parties agreed to business court jurisdiction, excluding insurance contracts; or
3. An action arising from the Finance Code or Business and Commerce Code.

Looking Ahead

For over a century states like Delaware, with extremely business-friendly court systems, have been safe havens for corporations. The opening of business courts in states like Texas signals a new chapter for commercial litigation. Large companies, such as Telsa, have even reincorporated in Texas, and may very well go on to measure the extent of Texas’ pro-business environment.