It has been approximately two months since the newly established Texas business court system began accepting its first filings on September 1, 2024. This article provides a brief introductory overview of this new court system for complex commercial disputes exceeding $5 million or $10 million in certain circumstances. Certain construction and real estate litigation matters could be subject to this new court structure, although cases involving liens may be excluded unless all parties and the presiding judge agree the business court can adjudicate the lien claim.
What are the Texas Business Courts?
In June 2023, the Texas Legislature followed nearly thirty other states and established a statutory business court system by adopting Chapter 25A of the Texas Government Code. These courts were created with the dual intention of providing specialized courts to adjudicate complex business disputes while also relieving the strained dockets of existing civil district courts.
Texas’ business court system is structured around eleven divisions throughout the state and a new intermediate appellate court – the Fifteenth Court of Appeals. The five largest divisions have two trial courts and began hearing cases on September 1, 2024. The remaining six divisions will have one trial court and will not begin hearing cases until 2025. In addition to hearing appeals from courts in each of the divisions, the Fifteenth Court of Appeals will also be the exclusive court for all appeals involving challenges to the constitutionality of state laws.
Who are the Judges?
One perceived advantage of this new court system is the inclusion of experienced judges with experience adjudicating complex commercial cases. Although state judges in Texas are elected by voters, the enabling legislation empowered the Texas Governor to appoint judges to each business court division and the Fifteenth Court of Appeals.
These appointed judges will not face an election until November 2026. This was one of several points in a challenge to the constitutionality of these new courts raised by Dallas County earlier this year. On August 23, 2024, the Texas Supreme Court denied Dallas County’s challenges, upholding the constitutionality of the business courts and the Fifteenth Court of Appeals.
What are the Jurisdictional Limits of the Business Courts?
Texas business courts have the same authority and powers of a district court with whom they also share concurrent jurisdiction over the following types of cases:
- Actions over $5 million and involving:
- Derivative proceedings;The governance, governing documents, or internal affairs of an organization;Claims under state or federal securities or trade law;Claims of breach of a duty, of loyalty, or good faith; or
- Claims under the Texas Business Organizations Code.
- Actions over $10 million and arising out of:
- A qualified transaction involving transactions in excess of $10 million that do not involve banks, credit unions, or savings and loan institutions;
- Agreement by the parties to the jurisdiction of the Business Court; or
- Claims under the Texas Finance Code or Business & Commerce Code.
- Actions involving a party that is a publicly traded company.
- Actions seeking injunctive or declaratory relief.
- Supplemental jurisdiction over claims that are part of the same case or controversy as one or more claims within its jurisdiction if the parties and trial court agree to hear those claims.
Additionally, the Texas Business Courts are unique from its counterparts in other states for two primary reasons. First, cases filed in a district court may be removed to a business court through agreement by the parties or within 30 days of any party learning facts establishing the Business Court’s jurisdiction. Second, parties involved in certain actions before a business court retain the right to a jury trial.
What are the Business Court Rules Governing Actions?
The primary purpose of the Business Court is to provide efficient and timely resolution of complex business disputes. In order to achieve this goal, the Texas Business Court has established succinct set of local rules that differ significantly from the rules governing most district courts.
The most significant differences between Texas Business Courts and Texas District Courts include new certifications and disclosure obligations of the parties, in addition to prescribed limits on the form and length of pleadings.
Click here to view a copy of the local rules of the Texas Business Court.
Business Courts May Only Address Mechanic’s Liens in Limited Circumstances
The Texas Legislature excluded certain actions from the jurisdiction of the business courts including cases involving foreclosures of liens on real or personal property and statutory mechanic’s liens pursuant to Chapter 53 of the Texas Property Code. However, the court maintains supplemental jurisdiction over mechanic’s lien claims if the parties and presiding judge agree the lien claim should proceed in the business court. If the parties cannot agree, the claim may proceed in a court of original jurisdiction concurrently with any related claims pending in the business court.
The supplemental jurisdiction of business courts could be invoked by parties to mechanic’s lien claims if they agree a business court is the most efficient venue for these disputes, particularly if a mechanic’s lien claim is intertwined with breach of contract and other claims that exceed the amount in controversy requirement. This option should be considered on significant claims considering the specialized nature of business courts and the background and experience of the business court judiciary.
Should Litigants Consider Availing Themselves to the Jurisdiction of Texas Business Courts?
It is too early to know definitively whether these courts will become the preferred venue over their district court counterparts, although early reports indicate that these courts have the potential to meet their mission to provide fair, efficient, and timely resolution of complex business disputes. In fact, their potential for cutting in half the amount of time typically involved in these types of actions is so appealing that many Texas-based companies are considering mandating jurisdiction in the forum selection clauses of their major contracts and transactions.
