On May 25, 2023, the Texas Legislature enacted the biggest structural change to the Texas court system in recent memory. House Bill 19 (“HB 19”)—signed by Governor Greg Abbott in June—creates a new “Business Court” system for the Lone Star State. HB 19’s passage comes after four previous legislative efforts to enact a business court system in Texas failed. Texas’s Business Courts will activate on September 1, 2024, and will handle complex commercial disputes with significant amounts in controversy. The purpose is to create an efficient, specialized court for complex, high-value commercial disputes needing timely resolutions—matters that could otherwise languish in overworked district courts with broad dockets that include, among other things, criminal, personal injury, and family law cases. Ideally, specialized business courts also promote consistent interpretations of commercial laws and contracts, thereby leading to more predictable outcomes. Texas is now the 31st state to adopt a business court system of this kind.
Navigating Texas’s new Business Courts will be crucial to companies and practitioners alike. To that end, those with potential matters before these courts should educate themselves on the intricacies of this new avenue for Texas commercial litigation. While the new courts won’t take effect for over a year, we already know much about how they will work. Below are answers to some of the most pressing questions regarding Texas’s forthcoming Business Court system.
1. What kinds of cases will the Business Courts hear?
Texas’s Business Courts will have concurrent—i.e., shared—jurisdiction with the state’s district courts for certain cases involving both foreign and domestic business organizations, whether for profit or not-for profit. Jurisdiction will depend on the amount in controversy, excluding interest, statutory damages, exemplary damages, penalties, attorney fees, and court costs.
a. Cases exceeding $5 million.
Texas’s new Business Courts will have jurisdiction over the following kinds of cases if the amount in controversy exceeds $5 million:
- Derivative Proceedings;
- Actions regarding the governance, governing documents, or internal affairs of an organization;
- Actions in which a claim under a state or federal securities or trade regulation law is asserted against:
- an organization;
- certain controlling or managing persons in their official capacity;
- underwriters of the organization’s securities;
- the organization’s auditor;
- actions by an organization, or an owner of an organization, if the action: (i) is brought against an owner, controlling person, or managerial official of the organization; (ii) which alleges an act or omission by the person in the person’s capacity as an owner, controlling person, or managerial official of the organization;
- Actions 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;
- Actions 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;
- Actions arising out of the Texas Business Organizations Code;
b. Cases exceeding $10 million.
Texas’s new Business Courts will have jurisdiction over the following kinds of cases if the amount in controversy exceeds $10 million:
- Actions arising out of a “qualified transaction,” which typically refers to transactions including loans with a value exceeding $10 million;
- Actions that arise out of a contract or commercial transaction in which the parties agreed in the contract that the Business Court has jurisdiction of the action (not including an action that arises out of an insurance contract);
- Certain actions that arise out of a violation of Texas’s 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.
c. Cases involving publicly traded companies.
If one of the parties to a dispute is a publicly traded company, and if the case meets one of the criteria listed above, the business court will have jurisdiction over the case regardless of the amount in controversy.
2. Will Texas’s Business Courts have supplemental jurisdiction?
Yes. On agreement of all parties and the judge, Texas’s new Business Courts will have supplemental jurisdiction over any other claim related to a case or controversy within the court’s jurisdiction that forms part of the same case or controversy. If no agreement is reached, the claim may proceed in another civil court concurrently with any related claims proceeding in the Business Court.
3. What are the limitations on a Texas Business Court’s jurisdiction?
Unless a claim meets the supplemental jurisdiction requirements described above, a Business Court does not have jurisdiction over the following claims:
- Civil actions:
- Brought by or against a governmental entity; or
- To foreclose on a lien on real or personal property.
- Claims arising out of:
- Texas Deceptive Trade Practices Act, Subchapter E, Chapter 15, and Chapter 17 of the Business & Commerce Code;
- The Texas Estates Code;
- The Texas Family Code;
- The Texas Insurance Code; or
- Claims involving contractor’s or mechanic’s liens Chapter 53, Title 9 of the Texas Property Code.
- Claims arising out of the production or sale of a farm product, as that term is defined by Section 9.102 of Texas’s Business & Commerce Code;
- Claims related to a consumer transaction, as that term is defined by Section 601.001 of the Business & Commerce Code, to which a consumer in Texas is a party, arising out of a violation of federal or state law; or
- Claims related to the duties and obligations under an insurance policy.
Texas’s new Business Courts have no jurisdiction over the following types of cases:
- Claims arising under Chapter 74 of the Civil Practice and Remedies Code—i.e., medical tort liability;
- Claims in which a party seeks recovery of monetary damages for bodily injury or death;
- Claims of legal malpractice.
4. What other powers will the Business Courts have?
Texas’s Business Courts will have all powers provided to the Texas district courts. For example, the Business Courts will have “civil jurisdiction concurrent with district courts in an action seeking injunctive relief or a declaratory judgment[.]” For matters in which the Business Court has statutory jurisdiction, the court has the power to: (1) issue writs of injunction, mandamus, sequestration, garnishment, attachment, and supersedeas, and (2) grant any other relief that may be granted by a district court.
5. Where will the Business Courts sit and when do they open?
HB 19 creates one statewide Business Court judicial district. Within that “district” there are eleven Business Court divisions. The eleven Business Court divisions are geographically aligned with the eleven Administrative Judicial Regions in Texas. Five of the divisions serving urban centers—Dallas, Austin, Houston, Waco, and San Antonio—will become effective September 1, 2024. The remaining six divisions, serving more rural areas, have been deferred to the 2025 Texas Legislature for approval and funding. Assuming funding is approved, the rural divisions will open in 2026.
Texas’s governor will appoint Business Court judges to the Dallas, Austin, Houston, Waco, and San Antonio divisions immediately following HB 19’s effective date of September 1, 2023. Between July 1, 2026 and September 1, 2026—and provided the Texas Legislature ultimately decides to fund the rural divisions—the governor will appoint Business Court judges to the remaining rural divisions.
As a practical matter, a Business Court judge may hold court at any courtroom within the geographic boundary of the division to which the judge is appointed. HB 19 requires that, to the extent practical, a county’s courtrooms and facilities must accommodate the Business Court’s hearings, business, and other proceedings. With the exception of jury trials, a Business Court may conduct remote proceedings, provided the Business Court judge conducts those proceeding from a courtroom or other appropriate facility. Subject to any sealing orders, Business Court proceedings must be public.
6. How many Business Court judges are there?
The governor may appoint up to sixteen judges to the Business Court bench. Each of the five urban divisions will have two judges, and the remaining six rural divisions—if created and funded by the 2025 Legislature—will have one. If necessary, a qualified retired or former judge or justice may be assigned as a visiting judge by the Chief Justice of the Texas Supreme Court. Business Court judges are subject to objection, disqualification, and recusal in the same manner as district court judges.
7. How will Business Court judges be selected?
In contrast to elected civil district court judges, the Business Court Judges will be appointed by the governor, subject to the advice and consent of the Senate. Accordingly, this process mimics the selection and appointment of federal judges. To qualify for a position as a Business Court judge, the candidate must be:
- At least 35 years of age;
- A United States Citizen;
- A resident of a county within the division of the Business Court to which the judge is appointed for at least five years before appointment;
- A licensed Texas attorney with 10 or more years of experience in any of the following:
- Practicing complex civil business litigation;
- Practicing business transactional law;
- Serving as a judge of a Texas civil court; and
Finally, a Business Court judge candidate cannot have had their law license revoked, suspended, or subject to a probated suspension.
To some Texans, the idea of an appointed—as opposed to elected—judge may come as a shock. But Article 5 of the Texas Constitution provides the State Legislature with the power to create new courts with new selection criteria. Section 4 of HB 19 contemplates that any challenge to the constitutionality of the Business Court system is within the exclusive jurisdiction of the Texas Supreme Court. In the event the State’s high court determines that the governor’s appointment of judges to the Business Court is unconstitutional, HB 19 states that the Chief Justice of the Texas Supreme Court shall thereafter appoint judges.
8. How long will Business Court judges serve?
Business Court judges will serve for a period of two years beginning on September 1 of every even numbered year. Judges may be reappointed. HB 19 does not contemplate term limits.
9. Is initial filing in the Business Court system mandatory for plaintiffs?
No. Initial filing in the Business Court system is not mandatory for plaintiffs. Rather, a plaintiff is free to file applicable matters in a state district or county court. If a case is initially filed in the Business Court, the plaintiff must establish that venue is appropriate in one of the counties served by the Business Court division.
10. Are cases removable to the Business Court?
Yes. Defendants can remove cases that meet the jurisdictional qualifications from a district or county court into the Business Court.
If both parties agree, removal may occur at any time during the pendency of the case. If removal is disputed, removal requirements mirror the Federal Rules. Specifically, removal must occur “(1) not later than the 30th day after the date the party requesting removal of the action discovered, or reasonably should have discovered, facts establishing the Business Court’s jurisdiction over the action; or (2) if an application for temporary injunction is pending on the date the party requesting removal of the action discovered, or reasonably should have discovered, facts establishing the business court’s jurisdiction over the action, not later than the 30th day after the date the application is granted, denied, or denied as a matter of law.”
11. Will the Business Courts issue written opinions?
Yes. HB 19 requires that Business Courts are required to issue written opinions based upon to-be-adopted rules of the Texas Supreme Court governing same. To assist Business Court judges in accomplishing this work and otherwise running their courtrooms, HB 19 contemplates that judges will appoint personnel such as staff attorneys, coordinators, and administrative assistants.
12. Will the Business Courts hold jury trials?
Yes. Parties before the Business Courts have a right to a jury trial when required by the Texas Constitution. Jury trials for cases filed in Business Courts will be held in a court in any county in which the case could have been initially filed.
If a case is removed to a Business Court, the jury trial will be held in the county where the case was originally filed. If a contract between parties to a Business Court case contains a venue provision, the jury trial will be held in the county designated by the contract.
13. Are cases from a Business Court appealable?
Yes. Appeals will proceed through the newly-created Fifteenth Court of Appeals, which shall have exclusive jurisdiction over appeals from the Business Court. The Fifteenth will sit in Austin. Justices for this new appellate court will initially be composed of judges selected by the governor. The procedure for appealing a decision from the Business Court is identical to an appeal from a district court.