A Brief Primer on Texas’ New Business Court

On May 25, 2023, the Texas Legislature enacted into law Chapter 25A of the Texas Government Code, which became effective on September 1, 2023 and will apply to all applicable civil actions filed on or after September 1, 2024. Meaning, civil litigants in Texas will soon need to know and be aware of the Texas Business Court’s mechanisms and jurisdictional reaches.

As can be guessed, the Texas Business Court will be a singular statutory court; but what is less obvious is that it will consist of eleven judicial “divisions,” which shall encompass the same counties that already comprise each administrative judicial region. Tex. Gov’t Code §§ 25A.002, .003(c). According to the statutory scheme passed by the legislature, the governor will bear the responsibility to appoint sixteen (16) judges across the state: two judges per division in the First, Third, Fourth, Fifth, and Eleventh (predominantly urban areas) and one judge per division in the Second, Fifth, Sixth, Seventh, Ninth, and Tenth. An important distinction between these judges and district court judges in Texas is that Business Court judges will hold two-year terms after appointment and following advice and consent from the Texas Senate. This is a major change from district court judges, who are elected by general election.

The Business Court will enjoy concurrent jurisdiction with civil district courts over specific areas of business litigation, such as:

1. When the amount in controversy exceeds $5 million for the following:

  • Derivative proceedings;
  • Actions related other governance, governing documents, or internal affairs of an organization;
  • Actions involving claims under state or federal securities or trade regulation laws against organizations, controlling persons, managerial officials, underwriters of securities, or auditors;
  • Actions by organizations or owners against owners, controlling persons, or managerial officials owed to an organization or its owners;
  • Actions seeking to hold owners or governing persons of an organization liable for the organizations’ obligations, excluding those arising from specific written contracts; and
  • Actions arising from the Texas Business Organizations Code.

2. When the amount in controversy exceeds $10 million for the following:

  • Actions arising from qualified transactions as defined by section 25A.001;
  • Actions arising form contracts or commercial transactions where the parties agreed in the contract or a subsequent agreement that the Business Court has jurisdiction; and
  • Actions arising from violations of the Finance Code or Business & Commerce Code by an organization or its officers or governing persons, excluding banks, credit unions, or savings and loan associations.

3. When the action involves a publicly traded company, regardless of amount in controversy or the theory of liability.

4. The Business Court may exercise supplemental jurisdiction consistent with jurisprudential standards of supplemental jurisdiction, but only by agreement of all parties. The court’s supplemental jurisdiction also operates on disputes normally excepted from the court’s primary jurisdiction:

  • Actions against or by a governmental entity;
  • Actions to foreclose on real or personal property liens;
  • Claims arising out of Texas Business & Commerce Code Chapter 15, Chapter 17, Property Code Chapter 53 and Title 9, and any claims arising out of the Estates, Family, or Insurance Codes;
  • Claims related to consumer transactions as defined by Texas Business & Commerce Code section 601.001; and
  • Claims related to the duties and obligations under an insurance policy.

Importantly for the plaintiff’s bar to note, medical malpractice claims, personal injury claims/wrongful death, and legal malpractice cases are never permitted in Texas Business Courts. Tex. Gov’t Code § 25A.004(h). With that in mind, a practitioner may remove any action filed in any business court pertaining to these matters or can move to transfer a removed action by establishing lack of jurisdiction on this basis. All appeals from a business court decision will be heard by the Fifteenth District Court of Appeals, which will be newly created to have exclusive jurisdiction over those appeals.

As the enaction has not yet come into effect, there are more rules and procedures for one to note that will no doubt take shape once the courts begin to hear cases. Ideally, this will help complex matters proceed more smoothly and hopefully, it will not be used as a means for litigants to forum shop their prospective lawsuits.

If you or someone you know has been injured or killed by the negligence of another, please contact an attorney at Abraham, Watkins, Nichols, Agosto, Aziz & Stogner by calling 713-222-7211 or toll free at 1 800-870-9584.