News Detail Banner
All News & Events

Noted with Interest: The New Texas Business Courts: Navigating Jurisdictional and Procedural Rules in a New Venue

January 15, 2025
Business Litigation Reports

           Business is booming.  Especially in Texas.  With no personal or corporate state income tax in Texas, it is no wonder that big name brands—including Amazon, Tesla, HP, and Oracle—are flocking to expand into the Lonestar State.  See Why Texas, Texas Economic Development Corporation, available at:  https://businessintexas.com/why-texas/.  For each of the past 20 years, Chief Executive Magazine has ranked Texas as “the #1 state for business.”  Id.  All of this business naturally has resulted in increased commercial litigation.  But, until recently, the Texas state court system—with its rotating docket assigning judges to particular filings when an issue is filed and lack of any requirement to issue reasoned opinions—was not conducive to expeditious resolutions of complex business disputes.  To try to remedy this, Texas passed House Bill 19 creating the Texas Business Court, which began hearing cases on September 1, 2024.  Understanding how this court works and its procedural nuances is important for anyone doing business in Texas who may have to navigate this new venue.

            The Business Court is divided into 11 divisions that mirror Texas’s current administrative judicial regions and share concurrent jurisdiction with the other state district courts.  Tex. Gov’t Code § 25A.004(b), (c), (d).  Five divisions, spanning the Texas metroplexes, recently began accepting cases on a “trial run” basis before a decision is made about whether to expand the Business Court to the rest of the state.  Tex. Gov’t Code § 25A.002 (e), (m), (c), (j), (f).  These Divisions include the First Division (Dallas), Third Division (Austin), Fourth Division (San Antonio), Eighth Division (Fort Worth), and Eleventh Division (Houston).

            Although the Business Court generally operates under the same rules and procedures governing the general district courts, there are some rules specific to the Business Court that make it unique and a potentially appealing venue for commercial disputes.  Specifically:   

            Judicial Qualifications and Appointment.  All judges in the Business Court must have at least 10 years of experience: (1) practicing commercial litigation; (2) practicing business transaction law; or (3) serving as a civil judge in Texas.  Tex. Gov’t Code § 25A.008(a)(4)(A)-(D).  Business Court judges also differ from other Texas state court judges because they are appointed by the governor to serve two-year terms—not elected by the general populace.  Tex. Gov’t Code § 25A.009(a)-(c).

Removal.  The Business Court has jurisdiction to hear certain enumerated matters (discussed below), and both plaintiffs and defendants can invoke its jurisdiction.  Cases can end up in the Business Court by plaintiffs filing directly in this venue, defendants removing claims to the Business Court (similar to the federal process), or a judge in the general district state court requesting that the action be transferred to the Business Court.  Tex. Gov’t Code § 25A.006(k). 

            Jury Demand.  Jury trials shall be held in any county in which the case was or could have been filed originally in state court, giving plaintiffs the option of bringing their suit in front of the Business Court in a large metropolitan area, while holding the jury trial in a smaller county.  Tex. Gov’t Code § 25A.015(b)-(c).

            Written Opinions.  Business Court judges are required to issue a written opinion when a party requests one in connection with a dispositive ruling or when the issue is “important to the jurisprudence of the state.”  Tex. Sup. Ct. R. 360(a)-(b).  This requirement—which will serve to develop precedential caselaw that can help make future rulings in commercial disputes more predictable—is in sharp contrast to the rules governing the general state courts where judges may—and frequently do—issue rulings on dispositive motions without any explanation or reasoning.

  1. Jurisdiction of the Business Court

            Parties wishing to litigate in the Business Court must fit within its general or supplemental jurisdiction.  The Business Court has three categories of general jurisdiction:

            First the Business Court will have jurisdiction over a matter if any of the involved parties is a publicly-traded company, regardless of the amount in controversy.  Tex. Gov’t Code § 25A.004(c).  This grants publicly-traded companies vast access to the Business Court as both plaintiffs or defendants looking to remove, and could deter small meritless suits against publicly-traded companies.

Second, the Business Court may hear a case if the amount in controversy is over $5 million and the case is any of the following:  (1) a derivative proceeding; (2) a corporate-governance action; (3) an action involving state or federal securities laws or regulations asserted against an organization, a controlling person or senior officer, an underwriter of the issued securities, or the auditor of the organization; (4) an action brought by an organization or its owner alleging an act or omission by an owner, controlling person, or senior officer in that person’s official capacity; (5) an action alleging that an owner, controlling person, or senior officer breached a duty to the organization; (6) an action seeking to hold an owner or governing person liable for an obligation held by the organization; or (7) an action arising out of the Business Organizations Code.  Tex. Gov’t Code § 25A.004(b)(1)-(7).

            Finally, the Business Court may also hear any case that has an amount in controversy over $10 million and is:  (1) an action arising out of a “qualified transaction,” which means a transaction in which the consideration at issue is at least $10 million (other than one involving a loan or advance of money or credit by a bank or other financial institution); (2) an action involving a contract (besides insurance) where the parties agreed that the Business Court would have jurisdiction; or (3) an action concerning a violation of the Finance or Business and Commerce codes by an organization or officer acting on the organization’s behalf (excluding banks and other similar financial institutions).  Tex. Gov’t Code § 25A.004(d)(1)-(3).

            Notwithstanding the above categories, the Business Court has expressly limited its power to hear certain enumerated matters, including those involving governmental bodies as parties and those involving family, property, and insurance law.  Most notably, the Business Court has also excluded from its jurisdiction matters involving non-compete provisions, consumer transactions, and deceptive trade practices.  Tex. Gov’t Code § 25A.004(g).

            Additionally, the Business Court has supplemental jurisdiction over any claim in a lawsuit, as long as at least one other claim in that suit fits within the general jurisdiction of the Business Court and all parties agree to supplemental jurisdiction over the remaining claims.  Tex. Gov’t Code § 25A.004(f).  A party is deemed to agree to the Business Court’s supplemental jurisdiction unless that party moves to sever or otherwise objects within 30 days after the later of: (1) the moving party’s appearance in the Business Court; or, (2) the filing of the first pleading or removal notice.  See Local Rule 2.  If all parties do not agree, any related claims must be litigated in a separate action in the general district courts.  This caveat may act as a hinderance to suits in the Business Court.  For example, if a party objects to supplemental jurisdiction, thereby forcing its opponents to litigate the adjoining claim in a court of general jurisdiction, the court that rules first—either the Business Court or general district court—over any parallel issue of law or fact in the case may create preclusive effect over the later-ruling court.  But these rules could be helpful for a defendant that is a publicly-traded company, as it can remove the claims asserted against it and leave behind any other differently-situated defendants that cannot likewise remove.

  1. The Fifteenth Court of Appeals

            Cases that fall within the Business Court’s general jurisdiction have the added benefit of being able to take appeals to a new Fifteenth Court of Appeals, which have exclusive jurisdiction over an appeal from an order or judgment of the Business Court.  Tex. Gov’t Code § 25A.007(a).  One feature of this new court of appeals is that, like the new district courts, the judges will have expertise in commercial disputes.  In this way, Texas’s commercial disputes venue sets itself apart from other business-dispute courts across the country.  The constitutionality of the Fifteenth Court of Appeals has already been challenged and has been upheld.  See In re Dallas County, Case No. 24-0426.

*          *          *

            Although the Texas Business Court is new and will likely have some growing pains, it is likely to become an attractive venue for both plaintiffs and defendants engaged in business litigation.  This Court offers litigants the benefit of judges with experience in commercial disputes while, at the same time, developing a dependable and clear set of legal precedents governing business law in Texas.  Well-versed in the Texas rules of civil procedure, and eager to practice under the Business Court-specific rules, Quinn Emanuel’s Texas offices are ready to help clients navigate this new venue.