On May 25, 2023, Texas enacted House Bill 19 (HB 19), creating a new Business Court system set to launch on September 1, 2024. This significant legal development aims to streamline the handling of complex commercial disputes by providing a specialized court system dedicated to these matters. For businesses operating in Texas, understanding the intricacies of this new court system is crucial, as it will influence where and how commercial disputes are litigated in the state.

1. Scope of Jurisdiction

Texas's Business Courts will have concurrent jurisdiction with state district courts for specific types of cases involving both foreign and domestic business organizations. The jurisdiction primarily depends on the amount in controversy, excluding interest, statutory damages, exemplary damages, penalties, attorney fees, and court costs.

Cases Over $5 Million:

• Derivative proceedings.
• Governance-related disputes.
• Claims under securities or trade regulation laws.
• Actions involving breaches of duty by owners or managers of organizations.
• Cases involving Texas Business Organizations Code violations.

Cases Over $10 Million:

• Disputes arising from "qualified transactions," such as large loans.
• Certain commercial contract disputes, excluding insurance contracts.
• Violations of the Texas Finance Code or Business & Commerce Code by organizations.

Publicly Traded Companies: Regardless of the amount in controversy, if a publicly traded company is involved and the case meets the above criteria, the Business Court will have jurisdiction.

2. Supplemental Jurisdiction

With all parties and the judge's agreement, the Business Courts can exercise supplemental jurisdiction over related claims, allowing a more comprehensive resolution within a single legal venue.

3. Jurisdictional Limitations

The Business Courts will not handle cases involving:

• Governmental entities.
• Real property liens.
• Specific statutes, such as the Texas Deceptive Trade Practices Act and the Texas Family Code.
• Medical malpractice or personal injury claims.

4. Powers and Location of Business Courts

The Business Courts will possess the same powers as district courts, including issuing various writs and providing equitable relief. The courts will be distributed across eleven divisions aligned with Texas's administrative judicial regions, with initial setups in urban centers like Dallas, Austin, Houston, Waco, and San Antonio. The governor will appoint judges, with each division potentially having up to sixteen judges.

5. Selection and Appointment of Judges

Unlike the elected district court judges, Business Court judges will be appointed by the governor, subject to Senate confirmation. Candidates must meet stringent qualifications, including significant legal experience and residency requirements.

6. Duration and Reappointment of Judges

Business Court judges will serve two-year terms, with the possibility of reappointment. This system aims to maintain judicial expertise and consistency within the court.

7. Filing and Removal Procedures

Initial filing in the Business Court is not mandatory. However, cases can be removed from district or county courts to the Business Court if they meet jurisdictional criteria. The removal process must occur within specified timelines, similar to federal procedures.

8. Written Opinions and Jury Trials

Business Courts will issue written opinions as per rules established by the Texas Supreme Court. Jury trials are permitted, ensuring that parties retain their constitutional rights.

9. Appeals Process

Appeals from the Business Court will be directed to the newly established Fifteenth Court of Appeals, located in Austin. This court will exclusively handle appeals from the Business Courts, providing a streamlined appellate process.

CONCLUSION

The creation of Texas's Business Courts represents a significant shift in how commercial disputes will be handled in the state. By offering a specialized forum for complex business litigation, these courts aim to provide more efficient and consistent outcomes. Businesses and legal practitioners should familiarize themselves with the new system to navigate potential litigation effectively. With the Business Courts set to commence operations on September 1, 2024, now is the time to prepare for this transformative change in Texas's legal landscape.