Overview:
“I’ll see you in court!” may take on a slightly different meaning in Texas following the establishment of a new specialized business court system recently signed into law by Gov. Greg Abbott on June 9.
“I’ll see you in court!” may take on a slightly different meaning in Texas following the creation of a new specialized business court system Gov. Greg Abbott signed into law on June 9.
Legislation creating a separate system of trial and appellate courts to the state’s civil court system for complex business disputes was a key priority for Abbott, Lt. Gov. Dan Patrick and House Speaker Dade Phelan because it provides a more efficient legal process in the business realm.
“It was pretty clear it was going to pass when you had them behind the legislation,” said Dee Kelly Jr., a partner at Kelly Hart & Hallman LLP.
Texas will join 29 other states with a specialized business court system.
Under the existing system, district courts with general jurisdiction hear large business cases along with their other business, Mike Tankersly, a Dallas attorney and a member of the nonprofit Texas Business Law Foundation, said. These business cases often take several years to adjudicate.
“With these more specialized courts, these large, sometimes very complex cases, can be heard more efficiently and effectively,” he said.
The business court’s jurisdiction will be concurrent with the state’s district courts in at least 10 areas of the state and will generally be used in any dispute where the amount at stake exceeds $10 million.
The business courts are scheduled to begin their work on Sept. 1, 2024, barring any legal challenges.
“Texas is now on the same legal footing as other dynamic and business-centric states that already have implemented business courts in their civil justice system; most notable is Delaware’s Court of Chancery,” said Preston Polk, an attorney in Cantey Hanger’s Business Transactions practice, in a statement. “These states, and now Texas, recognize that the business courts provide fair and efficient resolutions to complex business disputes and ensure courts are staffed by qualified and skilled judges.”
Texas A&M University School of Law Professor Neal Newman said some of these disputes can sometimes take five or more years to reach a conclusion.
“These courts would build up some expertise in these areas and that would help dispatch these issues more efficiently,” he said.
Small business advocacy group NFIB said the business court system could help all businesses in the state, large and small.
“Having a competent judge with subject matter expertise will ensure our entrepreneurs have access to fair and timely rulings,” NFIB Texas State Director Annie Spilman said.
Some groups, such as the Texas Trial Lawyers Association testified against the legislation, saying that the specialized courts would create two systems of justice.
But the biggest hurdle to establishing a business court system could be the law that requires the governor to appoint seven judges to two-year terms.
The Texas Constitution requires “district” court judges to be elected, rather than appointed, Texas A&M’s Newman said.
“There could be some challenges to the system as set up in the legislation,” he said.
Supporters like Cantey and Hanger’s Polk believe the system will help Texas maintain its business-friendly status.
“Texas is able to offer a preeminent forum for businesses to resolve disputes expeditiously and with the utmost confidence,” he said. “These specialized business courts are a great new tool and an additional reason to do business in Texas.”
The Legislation
House Bill 19 – Created a new business court to hear business-to-business lawsuits. The business court’s jurisdiction will be concurrent with the state’s district courts in at least 10 areas, including any: action alleging a business owner breached a duty, including the duty of care, loyalty, or good faith; derivative action on behalf of an organization, such as a suit by a class of shareholders; securities action; or action arising out of a transaction in which the amount in controversy exceeds $10 million.
Senate Bill 1045 – Establishes the 15th Court of Appeals to handle business-to-business lawsuits ruled on by the new business court created by HB 19.
Bob Francis is business editor for the Fort Worth Report. Contact him at bob.francis@fortworthreport.org. At the Fort Worth Report, news decisions are made independently of our board members and financial supporters. Read more about our editorial independence policy here.
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