HB 19 has cleared a significant hurdle on its way to creating a specialty business court, as 30 other states currently have in some form or fashion. The bill was heavily amended on the House floor, and we know many of you are wondering how things stand at the moment. The following summary hopes to capture the major changes but forgive us for any mistakes we might have made in matching up the amendments to the committee report! The floor changes appear in blue.
As amended on the House floor, the jurisdiction of the business court was narrowed and broken down into two tiers:
- Tier 1 gives the business court concurrent jurisdiction with district courts in the following actions in which the amount in controversy exceeds $5 million:
- a derivative proceeding;
- an action regarding the governance, governing documents, or internal affairs of an organization;
- an action in which a claim under state or federal securities or trade regulation law is asserted against an organization, a controlling person or managerial official of an organization for an act or omission by the organization or by the person in the person’s capacity as a controlling person or managerial official, an underwriter of securities issued by the organization, or an auditor of an organization;
- an action by an organization against an owner, controlling person, or managerial official of the organization, if the action is brought against an owner, controlling, or managerial official of the organization and alleges an act or omission by the person in the person’s capacity as an owner, controlling person, or managerial official of the organization;
- an action alleging that an owner, controlling person, or managerial official breached a duty owed to an organization or an owner of an organization by reason of the person’s status as an owner, controlling person, or managerial official, including the breach of a duty of loyalty or good faith;
- an action seeking to hold an owner or governing person of an organization liable for an obligation of the organization, other than on account of a written contract signed by the person to be held liable in a capacity other than as an owner or governing person; and
- an action arising out of the Business Organizations Code.
- Tier 2 gives the business court concurrent jurisdiction with district courts in the following actions in which the amount in controversy exceeds $10 million:
- an action arising out of a qualified transaction;
- an action arising out of a contract or transaction agreed in the contract or a subsequent agreement that the business court has jurisdiction of the action; and
- an action arising out of a violation of the Finance Code or Business & Commerce Code by an organization or an officer or governing person acting on behalf of an organization other than a bank, credit union, or savings and loan association.
- The business court has concurrent jurisdiction with district courts in Chapter 37, CPRC, dec actions involving a dispute based on a claim within the court’s jurisdiction, as outlined above.
- The business court has supplemental jurisdiction over any other claim related to a case or controversy within the court’s jurisdiction that “forms part of the same case or controversy,” but a supplemental claim can only proceed in the business court with the agreement of the parties and the business court judge. If the parties do not agree, the other claim will proceed in the court of original jurisdiction concurrently with the claim proceeding in the business court.
- Unless the claim is within the supplemental jurisdiction of the business court and the parties agree to proceed with the claim in the business court, the following claims are not within the jurisdiction of the court:
- a civil action brought by or against a governmental entity or to foreclose a lien on real or personal property;
- a claim arising out of Subchapter E, Chapter 15, and Chapter 17, Business & Commerce Code (covenants not to compete and DTPA);
- a claim arising out of the Estates Code;
- a claim arising out of the Family Code;
- a claim arising out of the Insurance Code; and
- a claim arising out of Chapter 53 and Title 9, Property Code (mechanic’s liens and Texas Trust Code);
- a claim arising out of the production or sale of a farm product;
- a claim related to the duties and obligations under an insurance policy;
- a claim related to a consumer transaction, as defined by § 601.001, Business & Commerce Code (consumer right to cancel certain transactions), to which the consumer is a party, arising out of a violation of state or federal law.
- The business court does not have jurisdiction of a claim under Chapter 74, CPRC (health care liability), a personal injury claim, or a claim for legal malpractice.
- The business court is composed of 11 divisions corresponding with the 11 administrative judicial regions. The bill was amended to specify the establishment of each division, but some divisions will sunset on September 1, 2026, unless reauthorized by the legislature and funded through additional legislative appropriations. The following divisions are subject to the sunset provision:
- The Second Business Court Division (East Texas, based in Conroe);
- The Fifth Business Court Division (Corpus Christi and the Rio Grande Valley);
- The Sixth Business Court Division (Hill Country and southwest Texas);
- The Seventh Business Court Division (West Texas);
- The Ninth Business Court Division (Panhandle); andThe Tenth Business Court Division (Northeast Texas).
- The amendments changed the venue provision to the require the business court to assign the action to a county of proper venue located in that division. The amendment permits contractual venue.
- The amendments further provide that the business court may not transfer an action if there is not an operating division of the court that includes an action of proper venue. In that event, the party who filed the action has the option to transfer the action to a district court or county court at law in a county of proper venue (this provision will presumably become operative if the Legislature does not reauthorize the six divisions that sunset after next session).
- Similarly, the amendments provide that a party may not remove to a business court an action filed in a district court or county court at law in a county of proper venue that is not within an operating division of the court.
- The amendments allow the parties to file an agreed notice of removal to the business court at any time during the pendency of the action. If the parties do not agree, a notice of removal must be filed not later than 30 days after the party requesting removal discovered or reasonably should have discovered facts establishing the business court’s jurisdiction over the action, or not later than 30 days after the date a pending application for temporary injunction is granted, denied, or denied as a matter of law.
- The amendment clarifies that a hearing must be held on the transfer request.
- The amendments strike the provision that a law professor is qualified to serve as a business court judge.
- The amendments direct the governor to appoint two judges to each of the First (Dallas), Third (Austin), Fourth (San Antonio), and Eleventh (Houston) Divisions, and one judge to each of the remaining divisions. Senate confirmation is required. Judges serve two-year terms and may be reappointed.
- The amendment bars a business court judge from requiring a party or attorney to remotely attend a court proceeding in which oral testimony is heard, absent good cause or agreement of the parties. It further prohibits an attorney, party, or juror to attend a jury trial remotely without the parties’ consent.
- gives the proposed statewide 15th Court of Appeals exclusive jurisdiction over appeals;
- requires a business court judge to be at least 35 years of age, a U.S citizens, a Texas resident for two years preceding appointment, a Texas licensed attorney with at least 10 years of experience in Texas in practicing complex business litigation or business transaction law, teaching complex business litigation or business transaction law at an accredited Texas law school, or serving as a judge of a Texas civil court (or any combination of the above);
- provides a salary equal to the sum of a district judge’s salary and the maximum amount of county contributions and supplements allowed by law to be paid to a district judge;
- provides for filling vacancies, compensation, and removal;
- bars a business court judge from private practice while in office;
- provides for the appointment of visiting judges by the chief justice of the supreme court;
- provides that a party has a right to a jury trial where required by the constitution in the county in which venue is proper under § 15.002, CPRC, or, if the case was removed to the business court, in the county in which the case was originally filed;
- requires a jury trial in a case filed initially in business court to be held in any county of proper venue under § 15.002, as chosen by the plaintiff;
- allows the parties to agree to hold a jury trial in another county;
- requires written opinions unless the court has a well-developed body of law on the issue, is applying its own precedent, or another opinion on the issue will not significantly contribute to the development of the law;
- provides for the central administration of the business court in Travis County, with judges maintaining chambers in the county seat of their county of residence
- allows judges to hold court at any location in the state, as the court determines is necessary or convenient;
- allows parties to appear by remote proceedings;
- authorizes the business court to set filing fees;
- authorizes rulemaking;
- sets January 1, 2024 2025 as the commencement date for the court.
