Bills have now been introduced on both sides of the Capitol expanding the jurisdictional reach of the business courts and, most importantly for the judges, fixing an oversight in last session’s legislation that left those judges without the supplemental compensation afforded to their compatriots on district court benches.
The House version, HB 40 by Rep. Landgraf (R-Odessa), is the full-meal deal, both activating the six divisions left on the table last time and pretty substantially expanding the court’s jurisdiction. On the Senate side, SB 2883 and SB 2884 by Chairman Bryan Hughes (R-Tyler) take a more conservative approach, the former making only minor jurisdictional changes and pushing out the activation of the dormant courts another two years, and the latter addressing the compensation problem.
More specifically, HB 40 makes numerous substantive changes to Chapter 25A, Government Code. The bill:
- Expands the definition of “qualified transaction” to include a series of related transaction applying to one or more parties;
- Adds a definition of “fundamental business transaction” to mean a merger, interest, exchange, conversion, or sale of all or most of an entity’s assets;
- Makes active the Second, Fifth, Sixth, Seventh, Ninth, and Tenth Divisions, and includes Montgomery County in the Eleventh Division;
- Adds to the jurisdiction of the court an action arising out of the Business Organizations Code, including an action over which a district court has original or exclusive jurisdiction by the BOC; actions involving insurance, reinsurance, indemnification, or hold harmless provisions, actions involving fundamental business transactions (including related insurance contracts) and actions to enforce covenants not to compete related to a fundamenal business transaction;
- Reduces the amount in controversy threshold from $10 to $5 million;
- Adds an action to enforce an arbtration agreement or review an arbitral award involving an amount over $5 million;
- Adds actions arising or related to intellectual property and trade secrets;
- Adds actions arising out of legal malpractice or malfeasance by other licensed professionals if the client is an organization;
- Grants jurisdiction to the court for injunctive and other equitable relief, declaratory judgments, and other relief that may be granted by a district court;
- Expands the court’s supplemental jurisdiction;
- Gives a business court jurisdiction over MDL pretrial matters if it otherwise has jurisdiction;
- Instructs SCOTX to adopt rules of civil and judicial procedure for the court;
- Provides for assignment of a judge or transfer of a case on recusal;
- Entitles a business court judge to reimbursement for expenses;
- Makes various changes related to the administration of the business court system;
- Allows counties to seek reimbursement from the state for providing counrtoom space;
- Requires OCA to report on the case activity of a court during the prior year;
- Provides that actions commenced on or before 9/1/24 that are within the business court’s jurisdiction may be transferred to and heard by the court on a motion of a party;
- Entitles a business court judge to additional compensation from the state in the amount of the district judges’ county supplement;
- Makes conforming changes; and
- Provides for appointments of judges to the new divisions.
As you can see, this presents a hefty menu of items, some of which generated controversy last session. One might say that it’s even a second business court creation bill, since it establishes a truly statewide system with a lot more for the judges, new and old, to do.
By contrast, SB 2883 more modestly: (1) extends the sunset date of the 2nd, 5th, 6th, 7th, 9th, and 10th from 2026 to 2028; (2) reduces the amount in controversy threshold from $5 million to $4.5 million; (3) reduces the amount in controversy threshold for contract actions from $10 million to $9.5 million; (4) lowers the residency requirement for a business court judge from 5 to 4 years residency in a county within the division of the business court; and (6) entitles a business court judge who serves as an administrative presiding to additional compensation (this provision is also in SB 293). SB 2884 entitles a business court judge to an annual salary supplement from the state in an amount equal to the difference between the judge’s annual base salary from the state and the maximum combined base salary from all state and county sources paid to a district judge.
Of course, the low bill number on the House side indicates a significant level of priority, and we would expect it to get a hearing in the near future. The skeletal nature of the Senate version seems to indicate an open mind on how far to push the envelope, with all options on the table. In any event, we are likely to see some of the same battles from last session playing out again, this time against the backdrop of a major effort to fix the 2019 trucking legislation and reform medical and noneconomic damages. And keep in mind that about one-fifth of the House consists of brand new members with their own priorities that have little to do with the courts or the civil justice system but everything to do with the issues on which they ran for office (the incredible number of bills filed certainly testify to that). Suffice it to say that getting sustained attention to everything that needs it will not be easy.
