Selecting the Texas Business Court as the forum for a lawsuit

The Texas Business Court (the Business Court) has attracted litigants interested in the Business Court’s business expertise and promised efficiencies. The Business Court’s enabling statute grants the Business Court civil jurisdiction concurrent with the district courts to hear qualifying controversies. Tex. Gov’t Code § 25A.004(b)-(h).

Under certain circumstances, the statute allows parties to agree that the Business Court will be the forum to hear their disputes—a decision that implicates considerations of both subject matter jurisdiction and venue.

Subject matter jurisdiction

Although parties cannot normally agree or waive matters of subject matter jurisdiction (see Tex. Ass'n of Bus. v. Tex. Air Control Bd., 852 S.W.2d 440, 443 (Tex. 1993), the Business Court reflects a unique acknowledgment from the Texas Legislature that parties may agree to confer subject matter jurisdiction on the Business Court where an “action arises out of a contract or commercial transaction” and the amount in controversy exceeds “US$10 million, excluding interest, statutory damages, exemplary damages, penalties, attorneys’ fees and court costs.” Tex. Gov’t Code §§ 25A.004(d)(2). The parties’ subject matter jurisdiction agreement may occur at the time of contracting or in a subsequent agreement. Id. 

And if an agreement exists, the Business Court may also exercise supplemental jurisdiction over any other related claim “that forms part of the same case or controversy,” as long as the parties and the Business Court judge agree to the Business Court’s jurisdiction. Tex. Gov’t Code § 25A.004(f). 

The Business Court’s supplemental jurisdiction is not unlimited, though. The Business Court cannot use supplemental jurisdiction to hear legal malpractice claims, health care liability claims arising under Chapter 74 of the Civil Practice and Remedies Code or claims in which a party seeks to recover monetary damages for bodily injury or death. Tex. Gov’t Code § 25A.004(h).

Venue

In addition to agreeing that the Business Court will have subject matter jurisdiction in a qualifying case, parties may also agree on the proper venue by written contract. See Tex. Gov’t Code § 25A.006(a). But in this context, selecting a venue by agreement may be more complicated than it sounds.  

The Business Court does not currently serve all counties in Texas. The enabling statute created eleven divisions, each of which covers the counties in the corresponding administrative judicial region. For example, the First Business Court Division—like the First Administrative Judicial Region—comprises Collin, Dallas, Ellis, Fannin, Grayson, Kaufman and Rockwall Counties. Compare Tex. Gov’t Code § 25A.003(c), with Tex. Gov’t Code § 74.02(b). 

Six of the state’s eleven Business Court divisions (accounting for 174 of 254 counties) were created but not funded and, thus are not currently operating. Only five divisions (the First, Third, Fourth, Eighth and Eleventh, which encompass Dallas, Austin, San Antonio, Fort Worth and Houston, respectively) are currently operating. 

Thus, when selecting a particular county as the venue for a dispute within the jurisdiction of the Business Court, parties should consider whether they have chosen a venue covered by the currently-operating divisions. The enabling statute envisions that a case cannot proceed in the Business Court if its venue is not serviced by an operating division. See Tex. Gov’t Code § 25A.006(c). That means that suits with venue in West Texas, East Texas and much of the Rio Grande Valley do not currently have a division of the Business Court within which to litigate. To avoid ending up in a district court instead of the Business Court, parties to a “major transaction” (as defined by Section 15.020 of the Texas Civil Practice and Remedies Code) could agree to a venue in the counties covered by the First, Third, Fourth, Eighth or Eleventh Divisions, since those courts are not at current risk of abolition. 

Conclusion

Under statutorily-authorized circumstances, parties may confer jurisdiction on the Business Court via a written agreement. Where parties make such an agreement, they must also take care to ensure an operating division of the Business Court sits in their venue of choice.