Texas Business Courts

The Texas Business Courts, officially operational since September 1, 2024, were established to adjudicate complex business disputes within the state. This specialized court system aims to provide a streamlined and efficient forum for resolving intricate commercial matters.

Establishment, Rationale, and Structure

The creation of the Texas Business Courts was formalized through House Bill 19, signed into law by Governor Greg Abbott on June 9, 2023. The system is structured into eleven geographical divisions, corresponding to the state’s existing Administrative Judicial Regions. As of its inception, five divisions are operational, located in Dallas, Austin, San Antonio, Fort Worth, and Houston.

Each of these divisions is staffed by two appointed judges, selected for their expertise in complex commercial litigation. The remaining six divisions are slated to commence operations on September 1, 2026, unless otherwise directed by future legislative actions.

The primary rationale for establishing the Texas Business Courts stemmed from concerns that traditional district courts, which handle a wide variety of civil and criminal cases, were ill-equipped to efficiently manage complex commercial disputes. Many district courts lacked judges with specialized expertise in corporate governance, securities regulation, and business law, leading to inconsistent rulings and prolonged litigation.

Additionally, the high volume of cases in district courts often resulted in delays for business disputes, which require swift resolution to minimize economic uncertainty. By creating a specialized forum, lawmakers sought to provide businesses with a more predictable and expedient legal process, similar to models adopted in other states.

Jurisdiction and Case Management

The Texas Business Courts have jurisdiction over a range of complex business disputes, including derivative actions, certain securities cases, corporate governance issues, breaches of fiduciary duty, violations of the Texas Business Organizations Code, and significant commercial transactions where parties have consented to the courts’ jurisdiction.

In their initial four months of operation, the courts received 56 case filings across the five active divisions. The Eleventh Division in Houston experienced the highest volume, with 29 cases, followed by the First Division in Dallas with 15 cases. The remaining divisions reported comparatively fewer filings.

Texas Business Court of Appeals

To complement the Texas Business Courts, the legislature also established the Texas Business Court of Appeals through Senate Bill 1045, signed into law in June 2023. This appellate court, also called the Fifteenth Court of Appeals, was designed to hear appeals from the Business Courts, ensuring that complex commercial cases receive specialized appellate review rather than being adjudicated by generalist courts.

The Texas Business Court of Appeals consists of five judges, appointed by the governor and confirmed by the Texas Senate. The court sits in Austin but has jurisdiction over cases statewide. Unlike existing Texas courts of appeals, which are regionally based, this court operates as a centralized body solely focused on business-related appeals.

Supporters of the Business Court of Appeals argue that it will provide greater consistency in commercial law rulings, reducing the risk of conflicting appellate decisions across different regions of Texas. However, critics contend that the appointment process could lead to concerns about judicial independence and political influence over business litigation.

Comparison to Other States

The establishment of the Texas Business Courts aligns the state with others that have specialized forums for business litigation, most notably Delaware’s Court of Chancery. Established in 1792, Delaware’s Court of Chancery is renowned for its expertise in corporate law and its bench trial system, where cases are decided by judges without juries.

In contrast, the Texas Business Courts preserve litigants’ rights to jury trials, adhering to the procedural rules governing district courts. Additionally, while Delaware’s Court of Chancery primarily handles equitable matters, the Texas Business Courts address a broader spectrum of legal and equitable issues within their jurisdiction.

Legislative History

The journey to establish the Texas Business Courts was marked by multiple legislative attempts over several years. Prior proposals included the creation of a Judicial Panel on Complex Cases, a Texas Court of Chancery, a Business District Court, and a Court of Business Appeals.

Despite widespread support in the legal community, it took five legislative sessions before the successful passage of House Bill 19 in 2023, due to competing priorities at the legislature.

Issues and Controversies

Since their inception, the Texas Business Courts have encountered several issues and controversies:

• Jurisdictional Challenges: A significant legal debate has emerged regarding the courts’ jurisdiction over cases initiated before their operational date. In several rulings, including Tema Oil and Gas v. ETC Field Services and XTO Energy v. Houston Pipe Line, the courts determined that they lack jurisdiction over cases filed before September 1, 2024, leading to remands to the original district courts.
• Constitutional Questions: The unique structure of the Texas Business Courts, particularly concerning judicial appointments and their statewide jurisdiction, has prompted discussions about their alignment with the Texas Constitution. These constitutional challenges are anticipated to result in legal proceedings that may influence the courts’ future operations.
• Operational and Procedural Concerns: Stakeholders have raised questions about the courts’ procedural rules, including filing fees and motion practices. The Business Courts’ filing fee is set at $2,500, significantly higher than the $350 fee in district courts, which may impact accessibility for some litigants.

As the Texas Business Courts continue to develop, they remain a focal point for discussions on the efficacy of specialized judicial forums and their role in the broader legal landscape.