Texas Business Court: What you need to know on day one

In June 2023, the Texas Legislature enacted legislation creating a new trial court and a new court of appeals with jurisdiction over certain complex business disputes. The trial court, called the Texas Business Court, aligns Texas with Delaware and Georgia as states with specialized forums for litigation involving internal corporate affairs, significant corporate transactions and publicly traded companies. The Business Court and its dedicated court of appeals, the Fifteenth Court of Appeals, open their doors on September 1, 2024. Here’s everything you need to know to hit the ground running.

Where can I find the statutes and rules governing the Business Court?

The statute governing the Business Court is the new Chapter 25A of the Texas Government Code. The Rules of Practice for the Business Court are found in Rules 354 to 359 of the Texas Rules of Civil Procedure. All of the information in this guide is drawn from these sources, as well as from the enacted versions of the bills that created the Business Court and the Fifteenth Court of Appeals (HB 19 and SB 1045, respectively).

Where is the Business Court located?

The Business Court is one statewide court with eleven judicial divisions located throughout Texas. However, only five of the divisions have been funded by the Legislature and will be operational September 1: Dallas, Austin, San Antonio, Fort Worth and Houston. The six remaining divisions (the Second, Fifth, Sixth, Seventh, Ninth and Tenth administrative judicial regions set out in Section 74.042 of the Government Code) will be abolished in 2026 unless reauthorized by the Legislature and funded through appropriations.

What is the jurisdiction of the Business Court?

The Business Court has concurrent jurisdiction with Texas district courts in four sets of cases:

1. Cases where (i) the amount in controversy exceeds US$5 million (excluding interest, statutory damages, exemplary damages, penalties, attorney’s fees and court costs) and (ii) the action involves any of the following:

   1. A derivative proceeding¹

   2. An action regarding the governance, governing documents² or internal affairs³ of an organization⁴

   3. An action in which a claim under a state or federal securities or trade regulation law is asserted against:

      1. An organization;

      2. A controlling person⁵ or managerial official⁶ 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;

      3. An underwriter of securities issued by the organization; or

      4. The auditor of an organization

   4. An action by an organization, or an owner⁷ of an organization, if the action:

      1. Is brought against the owner, controlling person or managerial official of the organization; and

      2. Alleges an act or omission by the person in the person’s capacity as an owner, controlling person or managerial official of the organization

   5. An action for breach of fiduciary duties owed to an organization by an owner, controlling person or managerial official of the organization

   6. An action to pierce the corporate veil

   7. An action arising out of the Texas Business Organizations Code

2. Cases where (i) a party to the action is a publicly traded company⁸ and (ii) any of the above claims are involved, regardless of the amount in controversy

3. Cases where (i) the amount in controversy exceeds US$10 million (excluding interest, statutory damages, exemplary damages, penalties, attorney’s fees and court costs) and (ii) the action involves any of the following:

   1. An action arising out of a qualified transaction (essentially, a transaction in which a party pays or receives consideration of US$10+ million or lends or borrows money or credit of US$10+ million)⁹;

   2. An action arising out of a commercial transaction or a contract (but not an insurance contract) where the parties have agreed to jurisdiction in the Business Court;

   3. An action arising out of a violation of the Texas Finance Code or the Texas Business & Commerce Code by an organization or an officer¹⁰ or governing person¹¹ acting on behalf of an organization (other than a bank, credit union or S&L)

4. Cases where (i) the action involves a dispute based on a claim within the court’s jurisdiction and (ii) the action seeks injunctive relief or a declaratory judgment

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, except for claims for medical malpractice, legal malpractice or bodily injury or death, which are expressly excluded from the Business Court's jurisdiction in all circumstances.

Warning: A claim within the Business Court’s supplemental jurisdiction can only proceed in the Business Court if all parties and the Business Court judge agree. Otherwise, that claim may proceed concurrently in another court.

The Business Court has no jurisdiction over the following types of claims, unless they fall within the court’s supplemental jurisdiction:

• Actions against a governmental entity;
• Actions to foreclose on a lien on real or personal property;
• Claims arising out of Business and Commerce Code (i) Subchapter E (covenants not to compete), (ii) Chapter 15 (antitrust) and (iii) Chapter 17 (deceptive trade practices);
• Claims arising out of (i) the Estates Code, (ii) the Family Code, (iii) the Insurance Code or (iv) the Property Code Chapter 53 (mechanic’s, contractor’s or materialman’s liens) and Title 9 (trusts);
• Claims arising out of the production or sale of farm products;
• Claims related to a consumer transaction, to which a consumer in Texas is a party, arising out of a violation of federal or state law; or
• Claims related to the duties and obligations under an insurance policy

What are the requirements to file a case in the Business Court?

The party filing the action must plead facts to establish jurisdiction in the Business Court and venue in a county in an operating division of the Business Court. Venue may be established as provided by law or by contract. The filing of an action is subject to Section 10.001 of the Texas Civil Practice & Remedies Code (the Texas equivalent of Federal Rule of Civil Procedure 11) and the pleading requirements in the Texas Rules of Civil Procedure. The filing fee for an action originally filed in the Business Court is US$2,500. (By contrast, the filing fee for an action originally filed in a district court is US$350.)

What if jurisdiction or venue is lacking in the Business Court?

If the Business Court lacks jurisdiction, the filing party can elect to (i) transfer the action to a proper district or county court or (ii) dismiss the action without prejudice.

If the Business Court lacks venue, the court must (i) transfer the action to a division with venue or (ii) if no such division exists, transfer the action to a proper district or county court at the filing party’s election.

A party may move to dismiss an action filed in the Business Court on the ground that the court lacks authority to hear the action, or the Business Court may make that determination on its own initiative. Under Texas Rule of Civil Procedure 354, any motion challenging the Business Court’s authority to hear an action must be filed within 30 days of the movant’s appearance. Additionally, if the Business Court acts on its own initiative, it must provide at least 10 days’ notice of its intent to transfer or dismiss the action and an opportunity to be heard on any objection.

What are the requirements to remove a case to the Business Court?

There are several important requirements for, and restrictions on, removal:

• The case must have been filed in a county within an operating division of the Business Court
• The removing party, which can be any party to the action, must timely file a notice of removal in the Business Court and in the court where the action was originally filed:
  • if agreed by all parties, at any time during the pendency of the action; or
  • if not agreed by all parties, (i) not later than the 30th day after the date the party requesting removal discovered, or reasonably should have discovered, facts establishing jurisdiction in the Business Court (the Jurisdiction Date) or (ii) if an application for a temporary injunction is pending on the Jurisdiction Date, not later than the 30th day after the date the application is granted, denied or denied as a matter of law
• The notice of removal must, per Texas Rule of Civil Procedure 355:
  • State whether all parties agree to removal;
  • Plead facts to establish (i) the Business Court’s authority to hear the action and (ii) venue in a county in an operating division of the Business Court; and
  • Contain a copy of the district court or county court’s docket sheet and all process, pleadings and orders in the action
• The removing party must pay a filing fee of US$2,500
• The removal of a case to the Business Court is not subject to the statutes or rules governing the due order of pleading
• The removal of a case to the Business Court does not waive a defect in venue or constitute an appearance to determine personal jurisdiction
• We anticipate there will likely be litigation over the removal to the Business Court of cases that are already pending as of September 1, 2024

What are the requirements to seek remand of a case from the Business Court?

A party may move to remand for improper removal or the Business Court may make that determination on its own initiative. Under Texas Rule of Civil Procedure 355, a motion to remand must be filed (i) within 30 days after the notice of removal is filed or (ii) within 30 days after the movant enters an appearance, if the movant is served with process after the notice of removal is filed. In addition, if the Business Court acts on its own initiative, it must provide the parties 10 days’ notice of its intent to remand and an opportunity to be heard on any objection. Importantly, there is no provision for an award of costs in the event of a remand.

Can a district or county court transfer a case to the Business Court on its own initiative?

Yes, provided that the conditions set forth in Texas Rule of Civil Procedure 356 are met. The district or county court first must issue a transfer request to the presiding judge for the administrative judicial region where the court is located. The court then must notify all parties of the request and, if any party objects, set a hearing at which the regional presiding judge will rule on the request. To grant the request, the presiding judge must find that transfer will facilitate the fair and efficient administration of justice. A party may challenge the denial of a motion to transfer by filing for mandamus in the court of appeals district for the requesting court’s county.

Does the limitations clock continue running on an action or claim that is dismissed from the Business Court?

No, as long as the action or claim is timely refiled in another court with jurisdiction. Under Texas Rule of Civil Procedure 357, if the Business Court dismisses an action or claim and the same action or claim is filed in a different court within 60 days after the dismissal becomes final, the limitations period is suspended for the period between the filings.

Are there jury trials in the Business Court?

Yes. This is one of the key distinguishing features of the Business Court. Unlike in the Delaware Court of Chancery, where all cases are tried to the bench, a party in an action pending in the Business Court has the right to a trial by jury when required by the Texas Constitution. The location of a jury trial in Business Court depends on whether the case was initially filed in the Business Court or removed to the Business Court, whether the parties have agreed to venue by contract and whether the parties and the Business Court judge agree to a different venue. In all cases, however, the drawing of jury panels, selection of jurors and other jury-related practice must follow the procedures in the district court in the county where the trial is held.

Can I designate the Business Court as a venue for dispute resolution in contractual forum-selection clauses?

Yes, but that doesn’t necessarily mean any dispute will remain in the Business Court. The Business Court must have authority to hear the action or claim as provided in Section 25A.004 of the Government Code. If the action arises out of the contract, and the amount in controversy exceeds US$10 million, there is a strong case for Business Court jurisdiction under Section 25A.004(d)(2). We expect the Business Court and the Fifteenth Court of Appeals to develop a body of case law delineating the ability of parties to agree to Business Court jurisdiction.

Other considerations for forum-selection clauses include stipulations to jurisdictional facts, consent to supplemental jurisdiction and jury trial waivers. For instance, the parties to a contract (including one for a “qualified transaction”) who want to resolve any ensuing disputes in the Business Court should consider adding language memorializing the parties’ agreement that the consideration meets the jurisdictional thresholds in Section 25A.004 and that the parties consent to supplemental jurisdiction in the Business Court. Similarly, a party who wants any disputes in the Business Court to be tried to the bench should press for conspicuous language waiving any right to a jury trial. And, importantly, parties can amend their contracts to fix venue in the Business Court or enter new agreements to that effect.

Another species of forum-selection clause that merits consideration is a corporate charter provision or bylaw mandating venue in the Business Court. Companies organized in Texas may want to consider amending their charters and/or bylaws, or adopting new bylaws, to designate the Business Court as the exclusive venue for covered claims (including derivative claims, securities claims, corporate governance-related claims and other types of claims delineated in Section 25A.004) and, if desired, specify that disputes will be resolved by the court rather than a jury.

In all cases, parties should take care to specify venue in a county in an operating division of the Business Court. Otherwise, if venue is only proper in a county in one of the six judicial divisions that is not—and may never be—operational, the selection of the Business Court may be futile. Parties should also consider designating a fallback venue, whether a court or an ADR setting, in the event that jurisdiction cannot be established in the Business Court.

Who are the judges in the Business Court and how are they selected?

The Business Court judges are appointed by the Governor, with the advice and consent of the Senate. They serve two-year terms and may be reappointed. The minimum qualifications for a Business Court judge are listed in Sections 25A.008 and 25A.009 of the Government Code and include: (i) at least 35 years old; (ii) a US citizen; (iii) a resident of a county within the division of the Business Court to which the judge is appointed for at least five years before appointment; and (iv) a licensed attorney in Texas with 10+ years of experience practicing complex civil business litigation, practicing business transaction law or serving as a Texas civil court judge.

The inaugural appointees for the operational divisions of the Business Court are:

• Dallas (First Division): Andrea Bouressa and William “Bill” Whitehill
• Austin (Third Division): Melissa Andrews and Patrick Sweeten
• San Antonio (Fourth Division): Marialyn Barnard and Stacy Sharp
• Fort Worth (Eighth Division): Jerry Bullard and Brian Stagner
• Houston (Eleventh Division): Sofia Adrogué and Grant Dorfman

In addition, Business Court judges are subject to the same standards and procedures for removal, disqualification and recusal as district court judges.

What law will apply in disputes before the Business Court?

As in any venue, it depends. The Texas Rules of Civil Procedure, including the Rules of Practice in the Business Court and other Texas statutes properly categorized as procedural in nature, will govern matters of procedure. Substantive law is a separate issue. The causes of action asserted, a contractual choice of law provision, the internal affairs doctrine or a conflicts of law analysis, among other things, may dictate the outcome. At least initially, the only directly binding precedent on the Business Court will be the decisions of the Texas Supreme Court, and even once the operating divisions of the Business Court begin issuing decisions, those decisions will not be binding on other divisions (although they will be persuasive). In a way, litigation will proceed on a clean slate—the parties and the courts will be making new law for a new court. We expect, however, that the Business Court will look to other bodies of law for guidance on similar issues (for example, federal law on removal and remand), particularly where the Texas Supreme Court has found that law persuasive (for example, Delaware law on business organizations).

Will the Business Court judges issue written opinions?

Yes, and this is key to developing a body of Texas business law and creating the predictability that is expected to draw businesses to Texas, much as Delaware law has driven incorporation in that state. Under Texas Rule of Civil Procedure 359, the Business Court judges are required to issue a written opinion (i) in connection with a dispositive ruling, when requested by a party, and (ii) on an issue important to the jurisprudence of the state, regardless of request. The Business Court judges are also permitted, in their discretion, to issue written opinions in connection with any order.

Where are Business Court decisions appealed?

The Fifteenth Court of Appeals, a new intermediate appellate court with statewide jurisdiction, has exclusive jurisdiction over appeals from an order or judgment of the Business Court or an original proceeding related to an action or order of the Business Court. The procedure governing an appeal or original proceeding from the Business Court is the same as the procedure for an appeal or original proceeding from a district court. Importantly, the Texas Supreme Court has upheld the constitutionality of the Fifteenth Court of Appeals, clearing the path for the court to open on September 1, 2024 as planned.

Who are the judges on the Fifteenth Court of Appeals and how are they selected?

The judges on the Fifteenth Court of Appeals are elected on a statewide basis. However, due to the timing of the enactment of SB 1045 and its effective date, which resulted in pre-election vacancies, the Governor appointed the first set of judges, who will then stand for election in 2026. The inaugural judges are Hon. Scott Brister, Hon. Scott Field and Hon. April Farris.

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Our litigation teams in Dallas, Austin, San Antonio and Houston have been preparing for the launch of the Business Court and the Fifteenth Court of Appeals, and we stand ready to answer your questions and advise you on handling matters in these new courts.

1 “Derivative proceeding” means a civil action brought in the right of a domestic or foreign corporation, a domestic or foreign limited liability company or a domestic or foreign limited partnership, to the extent provided by the Business Organizations Code.

2 “Governing documents” means the instruments, documents or agreements adopted under an organization’s governing law to govern the organization’s formation and internal affairs. The term includes (A) a certificate of formation, articles of incorporation and articles of organization; (B) bylaws; (C) a partnership agreement; (D) a company agreement or operating agreement; (E) a shareholder agreement; (F) a voting agreement or voting trust agreement; and (G) an agreement among owners restricting the transfer of ownership interests.

3 “Internal affairs” means: (A) the rights, powers and duties of an organization’s governing persons, officers, owners and members; and (B) matters relating to the organization's membership or ownership interests. “Ownership interest” means an owner’s interest in an organization, including an owner’s economic, voting and management rights.

4 “Organization” means a foreign or domestic entity or association, regardless of whether the organization is for profit or nonprofit. The term includes 15 listed types of entities, including corporations, LPs, GPs, LLP, LLCs, REITs, banks, credit unions, insurance companies and “a series of a [LLC] or of another entity.”

5 “Controlling person” means a person who directly or indirectly controls a governing person, officer or organization.

6 “Managerial official” means a governing person or officer.

7 “Owner” means an owner of an organization. The term includes a shareholder, a GP or LP or an assignee of a partnership interest, a member of (or assignee of a membership interest in) a LLC and a member of a nonprofit.

8 “Publicly traded company” means an entity whose voting equity securities are listed on a national securities exchange registered with the SEC under Section 6 of the Securities Exchange Act of 1934 (15 U.S.C. Section 78f) and any entity that is majority owned or controlled by such an entity.

9 “Qualified transaction” means a transaction, other than a transaction involving a loan or an advance of money or credit by a bank, credit union or savings and loan institution, under which a party: (A) pays or receives, or is obligated to pay or entitled to receive, consideration with an aggregate value of at least US$10 million; or (B) lends, advances, borrows, receives, is obligated to lend or advance, or is entitled to borrow or receive money or credit with an aggregate value of at least US$10 million.

10 “Officer” means a person elected, appointed or designated as an officer of an organization by the organization's governing persons or governing documents.

11 “Governing person” means a person who is entitled, alone or as part of a group, to manage and direct an organization’s affairs under the organization’s governing documents and governing law. The term includes: (A) a member of the board of a corporation or other organization; (B) a GP of a partnership; (C) a manager of a manager-managed LLC; (D) a member of a member-managed LLC; (E) a trust manager of a REIT; or (F) a trustee of a business trust.