Texas Legislature Passes Law Creating New Business Courts

On May 12, 2023, the Texas Senate passed House Bill 19. Once signed by Governor Greg Abbott, Texas will create a new specialized court that will alter how high-stakes business disputes are resolved.

The court will be created effective January 1, 2025, and will adjudicate derivative actions and business disputes involving $10 million or more. Plaintiffs would have the right to file suit directly in the business court, while defendants would have the right to remove a case to the business court, similar to removal procedures in federal court. The business court would also have supplemental jurisdiction over "all matters arising out of or related to" business disputes, except for claims against government entities, personal injury claims, Deceptive Trade Practices Act, or DTPA, claims; and claims under the Family Code, Estates Code, and Title 9 of the Property Code, which the business court could hear only by agreement of the parties.

The business court will first be established in major metropolitan areas and will consist of judges appointed by the governor and confirmed by the Senate to two-year terms. Each judge must have at least 10 years' experience in complex commercial litigation or business transactions, either as a practitioner or civil court judge. Unlike other entry-level courts in Texas, the business court judges will be required to issue written opinions, which is designed to help give the parties more certainty in the litigation process. 

According to its supporters, which include Governor Abbott, the law is intended to vault Texas's judiciary system onto the same legal footing as other specialized, business-centered state legal systems, such as Delaware and New York. Texas litigants will be well served to understand how to invoke or avoid the business court's jurisdiction.

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