Governor Abbott had signed into law a groundbreaking piece of legislation reshaping Texas' Court system for addressing business disputes. Under the provisions of House Bill 19 (H.B. 19), new trial and appellate courts will be established, with judges appointed by the governor subject to Senate approval. Effective September 1, 2023, the law will only apply to cases initiated on or after September 1, 2024.
The journey towards establishing the Texas Business Courts has been marked by obstacles, with previous attempts stalling in legislative sessions for various reasons. However, with the enactment of H.B. 19, any challenges regarding the constitutionality of these courts will be adjudicated by the Texas Supreme Court, which now holds exclusive jurisdiction over such disputes.
This bipartisan-supported legislation responds to the mounting demand for specialized courts capable of managing intricate business litigation. The newly established courts will handle diverse commercial disputes, spanning contract disagreements, fiduciary duty claims, and corporate governance issues. By providing a dedicated forum for these matters, policymakers aim to streamline proceedings, bolster expertise, and furnish businesses with more predictable legal outcomes.
Key provisions of the Texas Business Courts bill include:
Establishment of Specialized Courts and Court of Appeals: The legislation establishes specialized Business Courts in major metropolitan areas throughout Texas. Concurrently, the Texas Legislature has formed a new 15th Court of Appeals to handle appeals originating from the Business Courts.
Case Assignment Procedures: The bill delineates procedures for filing cases in the Business Courts or transferring cases from other Texas trial courts. Complex business disputes meeting specific criteria, such as monetary value or subject matter, qualify for assignment to these specialized courts. Eligible cases generally involve amounts exceeding $5 million for derivative proceedings, breach of fiduciary duty claims, corporate governance matters, claims for piercing the corporate veil, and securities claims. Additionally, the Business Courts have jurisdiction over disputes exceeding $10 million in business transactions, such as purchase agreements or mergers, where parties consent to Business Court jurisdiction.
Judges with Specialized Expertise: Business Courts will be staffed with judges appointed by the Governor, subject to Senate approval, possessing specialized knowledge in complex commercial disputes. Judicial candidates must have a decade or more of experience in complex civil business litigation or business transaction law. Alternatively, they should have presided over such matters as judges. These judges, assisted by staff attorneys, serve initial two-year terms and may be reappointed by the Governor. The emphasis on judicial expertise aims to enhance decision quality and foster confidence in the judiciary's ability to handle intricate business disputes.
Issuance of Written Opinions: Business Courts judges are expected to provide written opinions elucidating their decisions, a departure from the usual practice in most Texas civil district courts. This practice is anticipated to improve predictability in legal matters for Texas businesses and offer clear guidance on crucial issues related to corporate governance, fiduciary duties, and interpretation of complex business documents.
With the introduction of a novel Texas court system, freshly appointed trial court judges, and a newly established court of appeals, several unresolved issues warrant attention as the Business Courts embark on their initial stages. Notable initial concerns include:
Establishment of Special Procedures: The legislation foresees the implementation of streamlined procedures within the Business Courts. These measures might encompass simplified filing protocols, expedited scheduling, and advanced case management strategies tailored to the specific demands of commercial litigation. The aim is to mitigate delays, enhance efficiency, and furnish litigants with more predictable and prompt dispute resolutions. However, the precise structure and content of the Texas Business Courts' procedural rules remain undetermined.
Jury Considerations: The Business Courts bill stipulates that parties involved in actions before the business court retain the right to a trial by jury "when required by the constitution." How the Business Courts address jury-related matters will be subject to close scrutiny.
Case Selection and Classification: Questions and disputes are expected to arise regarding which lawsuits qualify for inclusion in the Business Courts. Despite the Texas Legislature's efforts to define and restrict the scope of eligible cases, the uniqueness of each dispute means that some parties will contest inclusion (or exclusion) from the Business Courts.
Business Attraction and Economic Stimulus: By offering a specialized venue for resolving commercial disputes, Texas aims to bolster its reputation as a jurisdiction that prioritizes the interests of the business community. Observing how the Business Courts foster a conducive environment for businesses to establish or expand their presence in the state, knowing they have access to an adept judicial system for addressing legal matters, will be intriguing.
IN CONCLUSION
The establishment of the Business Courts represents a significant milestone in the state's legal framework. Advocates contend that these specialized courts will not only enhance efficiency but also attract more businesses to Texas by providing an environment conducive to resolving commercial disputes. As the Business Courts commence operations and adjudicate their initial cases, their impact on commercial dispute resolution and the broader business climate in Texas will be closely monitored and analyzed.
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