Strategic Questions to Consider as Business Courts Open in Texas

Texas’ new business courts are one month away from opening their doors on September 1. Over the last few weeks, Texas has been preparing for that day. Texas Governor Greg Abbott recently appointed the inaugural set of business court judges, and the Texas Supreme Court finalized the business court’s rules and filing fees. Companies that do business in or that otherwise have ties to Texas should also start planning now for the strategic questions that may arise when business courts become an option in just a few short weeks.

Overview

The new business courts will have jurisdiction and powers concurrent with district courts in certain business disputes, such as derivative actions on behalf of companies; certain securities actions; claims alleging breach of a duty by reason of a person’s status as an owner, manager, or controlling person of an organization; and certain actions involving transactions and in which the amount in controversy exceeds $10 million. The business court may have supplemental jurisdiction over other types of claims if the claims form part of the same case or controversy as a claim within the business court’s jurisdiction, but only if the parties and the court agree to proceed in business court.

The creation of business courts gives rise to a host of questions. In the year since the business court bill’s enactment, the Texas Supreme Court’s promulgation of Rules of Practice in the Business Court has answered some of those questions, but has also given rise to others and emphasized the strategic choices that will face Texas litigants. Examples of just a few of those strategic choices follow.

Jurisdiction and Supplemental Jurisdiction

Although the Rules of Practice describe the procedure for removal, remand, transfer, or dismissal of cases depending on the business court’s authority to hear a case (i.e., jurisdiction), they do not provide any additional substantive guidance about the scope of the business courts’ jurisdiction. Such guidance will be particularly critical where a single dispute may involve claims both within and outside the business courts’ jurisdiction. For example, can claims be aggregated to satisfy the minimum amount in controversy for certain claims? What if an action involves some claims that are within the business court’s jurisdiction and others that are not? What counts as being “part of the same case or controversy” for purposes of supplemental jurisdiction? The Rules of Practice do not provide any guidance, instead focusing primarily on the business court’s authority to hear the action, rather than particular claims within the action. Parties (and business court judges) will be writing on a blank slate when deciding those questions.

Additionally, because all parties and the court must agree to the business court exercising its supplemental jurisdiction, litigants will have to consider whether it is to their advantage to agree to supplemental jurisdiction. Again, the Rules of Practice do not provide any guidance about the circumstances in which a business court should agree to the parties’ request to exercise supplemental jurisdiction. How business court judges exercise that discretion may be critical in deciding where to pursue cases.

Venue

Business courts are also likely to have significant venue implications, as a venue may determine whether a business court is able to hear the case. The business courts are divided into 11 divisions across the state, but only five of those divisions (those located in Dallas, Fort Worth, Houston, Austin, and San Antonio) will be operating. Governor Abbott appointed two judges to each of the five operating divisions, but no judges to the remaining divisions (which will be abolished on September 1, 2026 unless reauthorized and funded by the legislature).

Because there won’t be operating business courts in every county across the state, the Rules of Practice require original petitions filed in a business court and notices of removal to a business court to plead facts to establish “venue in a county in an operating division of the business court.” If the business court determines that there is not an operating division of the business court that includes a county of proper venue, the business court can dismiss the action or transfer it to a district court or county court at law in a county of proper venue.

The Rules of Practice also explain the process of removal or transfer to business courts of actions originally filed in district courts or county courts at law. The Rules of Practice do not, however, specify whether the removal or transfer must be to a business court in the same division as the originating court. It therefore remains to be seen whether filing in a county without an operating division of the business court can prevent a case from being removed or transferred to a business court.

To add yet another complication, it is unclear whether appeals from business courts will be heard by the newly created Fifteenth Court of Appeals, or by the Court of Appeals that normally has appellate jurisdiction over civil cases from that county. The bill that created business courts also directed that appeals be heard by the Fifteenth Court of Appeals. However, the Fifteenth Court of Appeals is currently the subject of a constitutional challenge pending before the Texas Supreme Court. That case is still pending, and unless and until the Texas Supreme Court says otherwise, the Fifteenth Court of Appeals will hear appeals coming from the business courts.

Written Opinions

As required by the business court bill, the Rules of Practice contain rules for the issuance of written opinions by the business court. Rule 360 states that a business court judge “must issue a written opinion: (1) in connection with a dispositive ruling, on the request of a party; and (2) on an issue important to the jurisprudence of the state, regardless of request.” Furthermore, “[a] business court judge may issue a written opinion in connection with any order.” Thus, we are likely to see far more written opinions from the business courts than we do from district courts. Those written opinions may have many implications, from developing a consistent body of law that could be a source of helpful precedent as the case law develops, to impacting how appeals are litigated when parties appeal a written, reasoned opinion rather than an unexplained judgment.

Fees

Finally, one additional difference between district courts and business courts that only recently became apparent is the filing fees. The filing fee for most cases in Texas state courts is around $350, with an additional jury fee of $10 if a party makes a jury demand. As the Texas Supreme Court announced last Friday, however, the filing fee for an action originally filed in business court will be over $2,500. Additionally, if a jury is requested, the parties will have to share the actual cost of providing the jury services, including a $300 fee for staff time, plus security fees, fees for juror pay, etc. Most of those fees will be used to cover costs for administering the court, and therefore reflect a desire to ensure that the court will have the funding to be successful.

Conclusion

The past year since Texas business courts were created has answered some questions (such as who would be appointed to the bench), but given rise to others. Still other questions, known and unknown, loom on the horizon. Navigating these questions will take skilled counsel, but hopefully will result in Texas becoming an even more attractive forum for resolving business disputes.

This post is as of the posting date stated above. Sidley Austin LLP assumes no duty to update this post or post about any subsequent developments having a bearing on this post.