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Texas Business Courts
Texas in 2023 created a new system of specialty trial courts (“Business Courts”) to hear significant business related disputes and a special intermediate court of appeals to hear appeals from Business Courts. Legislation to create such courts was passed by the 88th Texas Legislative Session which ended on May 29, 2023 and was signed on June 9, 2023 by Governor Greg Abbott. The Business Courts were created by House Bill 19 (“HB 19”) as a new chapter 25A (“§ 25A.001et seq” or “Chapter 25A”) to the Texas Government Code (the “Government Code” or “Gov.Code”) with judges to be appointed by the Governor with the consent of the Senate. A separate bill (“SB 1045”) amended § 22.201 of the Government Code to create a Fifteenth Court of Appeals(“15th Court of Appeals”) to hear appeals from Business Courts. Both HB 19 and SB 1045 became effective September 1, 2023, but will be operational only for actions commenced on or after September 1, 2024 to allow time for the appointment and confirmation of their judges and adopt procedural rules for the operation of the courts.
Business Courts ... in the Beginning
In 1995, under the leadership of then Chief Judge Judith Kaye, New York State established the Commercial Division of the Supreme Court. Upon its creation, the Commercial Division was one of the first state court trial divisions devoted entirely to business cases.
Enactment of HB 19: Specialized Texas Business Court
Litigation is part of doing business, and costs businesses millions of dollars annually. Thirty states have created specialized courts to address complex business litigation with greater efficiency and consistency. With the passage of House Bill 19 (HB 19) by the 2023 Texas Legislature and Governor Abbott’s signature on June 9, 2023, Texas now has a business court that will open its doors in 2024, becoming the thirty-first state to undertake this judicial innovation.This followed unsuccessful efforts to pass business court legislation in the 2015, 2017, 2019 and 2021 sessions of the Texas Legislature. What made the difference in 2023?The creation of a Texas business court was identified by each of Governor Abbott, Lt. Governor Patrick and House Speaker Phelan as a top legislative priority in 2023. Chief Justice Hecht’s 2023 State of the Judiciary message noted that while the proposed creation of Texas business courts by HB 19 “is not without controversy” . . . “I believe business courts would benefit the Texas justice system, and I support their creation.”Despite strong opposition from Texas trial lawyer organizations, HB 19 was broadly supported by Texas businesses, and received overwhelming legislative approval. The hard work and skillful negotiation of primary authors Representative Andy Murr (R-Kerrville) and Senator Bryan Hughes (R-Tyler), supported by 77 joint and co-authors,produced floor votes in the Texas House of Representatives of 90 to 51 and 86 to 53, and in the Texas Senate of 24 to6, favoring passage of HB 19.The jurisdiction of the Texas business court provided in HB 19 is narrowly tailored to reach disputes between businesses, or among businesses and their owners, directors and management, relating to matters such as breach of contract, breach of fiduciary duty, governance and control disputes, and violations of state and federal securities and trade regulation laws. The minimum amount in controversy for most actions before the business court is set at $5million or $10 million depending on the nature of the specific claims asserted. The amount in controversy requirements do not apply to a limited set of actions - those seeking only injunctive or declaratory relief and cases addressing claims of breach of fiduciary duty, governance and control disputes and securities and trade regulation litigation if a publicly traded company is a party.The Texas business court when fully operational will have statewide jurisdiction, supporting the creation of consistent business case law and court rules, and complementing the state’s innovative business laws as codified in the Business Organizations Code, the Business & Commerce Code, the Finance Code and the Texas Securities Act. The specifics of the business court’s jurisdiction are addressed in more detail in Part II below.
Jurisdiction And Venue In The New Texas Business Court: Practice Pointers For Drafting Business Agreements And Organizational Documents
Every year businesses organized in, having a presence or principal office in, or otherwise actively engaging in business in, the great state of Texas enter into hundreds of thousands of written contracts to govern their business arrangements (“Texas contracts”). Many of these Texas contracts include provisions expressing the parties’ agreements regarding the state, or subdivision of a state, in whose courts any litigation arising in connection with the contract will be conducted (choice of forum) and the specific county, city or court within that forum in which litigation arising in connection with the contract is to be conducted (choice of venue). Those agreements have been formed based upon the parties’ understanding of the laws of Texas and other leading commercial states governing the subject matter jurisdiction and geographic jurisdiction of their courts as established by statute and judicial decision.
Enactment of HB 19 by the 2023 Texas Legislature - Texas Business Courts
Litigation is part of doing business, and costs businesses millions of dollars annually. Thirty states have created specialized courts to address complex business litigation with greater efficiency and consistency. With the passage of House Bill 19 (HB 19) by the 2023 Texas Legislature and Governor Abbott’s signature on June 9, 2023, Texas now has a business court that will open its doors in 2024, becoming the thirty-first state to undertake this judicial innovation. This followed unsuccessful efforts to pass business court legislation in the 2015, 2017, 2019 and 2021 sessions of the Texas Legislature. What made the difference in 2023?
Texas Business Court
Texas in 2023 created a new system of specialty trial courts (the “Business Court”) to hear significant business related disputes and a special intermediate court of appeals to hear appeals from the Business Court. Legislation to create the Business Court was passed by the 88th Texas Legislative Session, which ended on May 29, 2023, and was signed on June 9, 2023 by Governor Greg Abbott. The Business Court was created by House Bill 19 (“HB 19”) as a new chapter 25A (“§ 25A.001 et seq” or “Chapter 25A”) to the Texas Government Code (the “Government Code” or “Gov. Code”) with judges to be appointed by the Governor with the consent of the Senate. A separate bill (“SB 1045”) amended § 22.201 of the Government Code to create a Fifteenth Court of Appeals (“15th Court of Appeals”) to hear appeals from the Business Court. Both HB 19 and SB 1045 became effective September 1, 2023, but became operational only for actions commenced on or after September 1, 2024, which allowed time for appointing judges, arranging facilities, retaining staff and adopting procedural rules. Cases commenced before September 1, 2024, may not be removed to the Business Court. The Business Court is initially seated in the major metropolitan areas of Texas (see map attached as Appendix A) with the expectation that the Texas Legislature will ultimately expand the Business Court for the rest of Texas. The creation of the Business Court followed a long and winding road that commenced in 2015, and has from the beginning been strongly supported by the Texas Business Law Foundation (“TBLF”). Prior efforts stalled in previous legislative sessions due largely to opposition from trial lawyer-focused organizations. HB 19, which ultimately garnered bipartisan support, addresses the growing need for specialized Texas state courts to handle complex business litigation. The Business Court is designed to handle a wide range of business disputes, including contract disputes, fiduciary duty claims, and other corporate governance issues. In creating a dedicated venue for resolving business disputes, the Legislature sought to expedite proceedings, install judges with specialized expertise, deliver more predictable outcomes for business disputes, and ultimately attract more businesses to Texas. Any challenges to the constitutionality of the Business Court will be decided by the Texas Supreme Court, which has been given exclusive and original jurisdiction over any such disputes.
The New Texas Business Courts
House Bill No. 19 (as amended, “HB 19”) was passed by the 2023 Texas Legislature in its Regular Session and was signed into law by Governor Abbott on June 9, 2023. HB 19 became effective on September 1, 2023. 2 HB 19 added a new Chapter 25A to the Texas Government Code that established a business court for the State of Texas. 3 The business court commenced operations on September 1, 2024. This article summarizes many of the provisions of HB 19 but should not be relied on as a complete description of that bill. Efforts to pass some kind of business court legislation started in 2015. Several groups of trial attorneys opposed the legislation in prior sessions. A coalition developed between the 2021 and 2023 sessions of the Texas Legislature to support a business courts bill. The business courts bill was one of Governor Abbott’s top legislative priorities for the 2023 Legislature. The bill was also strongly supported by House Speaker Phelan and Lieutenant Governor Patrick. The business court bills in both the House and Senate were given very low bill numbers, indicating that they were priority legislation sponsored by leadership. HB 19 was originally authored by Representatives Murr, Leach, Landgraf, Meyer and Lujan and then co-authored by 72 other House members. HB 19 was sponsored in the Texas Senate by Senator Bryan Hughes. During the 2023 Session, the bill did face significant opposition, which resulted in numerous amendments on the floor of the House and in Senate Committee after HB 19 was passed by the House. The sponsors and proponents of the bill managed to overcome the opposition to the bill. The bill addresses the growing need for specialized Texas courts to handle complex business litigation. It is hoped that the business court created by HB 19 will result in more predictable outcomes for business disputes and make Texas a more attractive place for resolving business disputes. With the establishment of the business court, Texas joins approximately 30 other states, including California, New York, Illinois, Massachusetts, Pennsylvania, North Carolina, Georgia, Tennessee and Florida, that have established specialized courts to hear business or commercial disputes. Specialization should allow for greater efficiency in the handling of cases by the business court as the judges develop expertise in handling a concentrated docket of business law cases. The business court judges will also not have to balance a large docket of non-business cases, many of which have been granted priority over business law cases by the Texas Legislature in Texas Government Code Secs. 23.101-103.
15th Court of Appeals is Constitutional per the Texas Supreme Court
Attached please find a 39 page unanimous Texas Supreme Court decision affirming the constitutionality of the 15th Court of Appeals.
Final Approval of Rules for the Texas Business Courts
These are the final rules for the Texas Business Law Courts that were approved by the Texas Supreme Court
Cases Pending in Texas State Courts on August 31, 2024 Cannot Be Removed to the New Business Court
There have been reports of some confusion regarding whether cases pending in Texas state courts on August 31, 2024, that otherwise satisfy the jurisdictional requirements of the Texas business court can be removed to the business court after it opens its doors on September 1, 2024.
Amendments to the TRCP, Canon 6, and RJA to accommodate the Texas Business Court have been made
The Texas Supreme Court on June 28, 2024, finalized amendments to (i) the Texas Rules of Civil Procedure (TRCP), Canon 6 of the Code of Judicial Conduct, and Texas Rules of Judicial Administration (RJA) to accommodate the opening of the Texas Business Court and (ii) the Texas Rules of Appellate Procedure (TRAP) to accommodate the opening of the Fifteenth Court of Appeals, which are set to begin receiving cases on September 1, 2024.
Initial Judges Appointed to Five Divisions of the Texas Business Court
Governor Abbott this week announced appointments of the initial judges of the Texas Business Court, created by the 2023 Texas Legislature’s enactment of H.B. 19. The Business Court will begin receiving newly filed cases on September 1, 2024. Pursuant to Art. IV, Sec. 12 of the Texas Constitution, the appointments are effective immediately but are subject to confirmation by a two-thirds vote of the Texas Senate when it next convenes. The judges were appointed to terms that will expire on September 1, 2026, at which time they will be eligible for reappointment by the Governor for successive two-year terms.
Texas Business Courts
Texas in 2023 created a new system of specialty trial courts (“Business Courts”) to hear significant business related disputes and a special intermediate court of appeals to hear appeals from Business Courts. Legislation to create such courts was passed by the 88th Texas Legislative Session which ended on May 29, 2023 and was signed on June 9, 2023 by Governor Greg Abbott. The Business Courts were created by House Bill 19 (“HB 19”)1 as a new chapter 25A (“§ 25A.001 et seq” or “Chapter 25A”) to the Texas Government Code (the “Government Code” or “Gov. Code”) with judges to be appointed by the Governor with the consent of the Senate. A separate bill (“SB 1045”) amended § 22.201 of the Government Code to create a Fifteenth Court of Appeals (“15th Court of Appeals”) to hear appeals from Business Courts. Both HB 19 and SB 1045 became effective September 1, 2023, but became operational only for actions commenced on or after September 1, 2024 to allow time for the appointment and confirmation of their judges and adopt procedural rules for the operation of the courts.