The Texas Legislature has created a new court handling complex commercial disputes in the Lone Star State.
The Texas business court has jurisdiction in two main categories of cases. First, the new court has jurisdiction in certain actions where the amount in controversy is over $5 million or a publicly traded company is involved. These actions include: derivative proceedings, actions regarding a business’s governance and internal affairs, actions asserting a securities or trade regulation claim against a business or its officers, various types of actions against a business’s owners or officers, or an action arising out of the Business Organization Code.
Second, when the amount in controversy exceeds $10 million, the business court has jurisdiction over three additional actions. This includes actions in which a party does or is obligated to pay, receive or lend money and is not a bank, credit union or savings and loan association. Additionally, when the amount in controversy exceeds $10 million, businesses can contractually agree to submit to business court jurisdiction.Finally, the business court has jurisdiction over actions arising from certain violations of law by an organization other than a bank, credit union or savings and loan association in cases exceeding the $10 million threshold.
Parties can file actions directly in either the district court or the business court. If an action filed in the district court is within the business court’s jurisdiction, a party may remove the action to the business court. If an action is filed in business court without the proper jurisdiction, the court may transfer or remand the case to the proper district or county court.
The Texas business court is divided into 11 geographic regions. The first set of divisions cover the metropolitan areas of Dallas, Fort Worth, Houston, Austin and San Antonio. Two judges are to be appointed to each of those five divisions, with one judge appointed to the other six. Business court judges must have prior civil court experience, experience handling complex civil business litigation or experience practicing business transaction law.
In addition to the business court, the Texas Legislature created a new appellate court that handles Texas business court cases and appeals from cases involving government agencies. The Fifteenth Court of Appeals consists of one chief justice and four additional justices initially appointed by the governor. After initial appointment, justices on the Fifteenth Court of Appeals will be elected statewide. This court has exclusive jurisdiction over multiple causes of action, including appeals from business court judgments and orders.
Navigating the procedural, jurisdictional and legal issues associated with such a drastic change to the Texas judiciary will require an experienced hand at the wheel. Litigants will need to be aware of the strategic challenges and advantages posed by the establishment of the Texas business court.
Texas joins the ranks of a number of states with similar specialized courts in hopes of driving business within the state’s borders. Businesses frequently choose Delaware law to govern their contracts due to the Delaware Chancery Court’s reputation for handling complex disputes. With the new business court, Texas hopes to build a similar reputation as an efficient place to handle large transactional disputes. Parties to high-dollar transactions in Texas should familiarize themselves with the new court..