September 2023 Business Litigation Update

In June, Governor Gregg Abbot signed into law House Bill 19 (HB 19), creating specialized business trial and appellate courts: the Texas Business Courts. These courts will hear specific types of complex commercial disputes. The bill is effective September 1, 2023, but will only apply to lawsuits commenced on or after September 1, 2024.

The purported goal of these business courts is to streamline corporate lawsuits and to create a more robust body of relevant Texas case law concerning complex business disputes, since HB 19 requires that the judges deciding these cases issue written opinions. It is hoped that this results in more legal predictability for businesses operating in Texas.

HB 19 is a significant shift in Texas judicial administration. Below, we highlight some key points to know.

1. There will eventually be 11 business trial courts, but there will only be 5 trial courts at the start — in Dallas, Austin, San Antonio, Fort Worth, and Houston. The additional 6 trial courts will be established over time.
2. There is a new 15th Court of Appeals to handle appeals from the business trial courts.
3. The business courts will hear cases involving corporate governance, contract, and commercial transactions. The monetary threshold for cases to proceed in the business courts varies between $5 million or $10 million depending upon the type of case. But if a publicly traded company is a party to the case, the business courts will be permitted to decide derivative proceedings, breach of fiduciary duty claims, matters of corporate governance, and securities claims regardless of the amount in controversy.
4. The judges presiding over the business courts will be required to have experience with complex business litigation, including a minimum of 10 years of experience practicing in either complex civil business litigation, business transactional law, or serving as a Texas state court judge with civil jurisdiction.
5. A lawsuit pending in the business courts may be tried to a jury “when required by the constitution.”

These business courts are designed to improve the efficiency of Texas’ legal system and ultimately attract more business to Texas. Only time will tell if they deliver on these promises or, instead, create more delay and ancillary litigation as parties fight over whether to be in or out of the business courts. We will be watching these issues closely and will report on any updates.