Texas Business Court Can Learn a Few Lessons From Other States

Texas will become the latest state to launch a business court on Sept. 1. Roughly half of all states, from Delaware to Wyoming, have adopted some form of chancery or business court, broadly defined as a specialized trial court for handling civil business and commercial disputes.

Many states require all parties to a dispute consent to jurisdiction before proceeding in a business court. For example, in Wyoming, the Chancery Court must dismiss a case without prejudice if any party files a timely objection to jurisdiction. And a party may not remove a case to that court without written consent of all parties.

In New Hampshire, the Superior Court refused to transfer a dispute to the business court without the plaintiffs’ consent because the applicable statute and rule “expressly bar business court jurisdiction over a case when one of the parties objects.”

Perhaps unsurprisingly, business courts in states that require universal consent to jurisdiction often end up dismissing cases after a party objects. In Wyoming, litigants filed 13 unique cases in the Chancery Court within its first 11 months of operation. A defendant objected to jurisdiction in 25% of those cases, resulting in dismissal.

Georgia’s State-wide Business Court, which also requires universal consent to jurisdiction, has experienced similar roadblocks: Of the 86 cases filed in the business court between its opening in August 2020 and April 2023, nearly 25% were dismissed after a party refused to proceed in the business court.

Texas largely avoids the consent problem faced by Georgia and Wyoming. Jurisdiction in Texas’ new business court will depend on the nature of the dispute and the amount in question. Generally, the court will have jurisdiction over governance disputes valued at over $5 million, and commercial disputes valued at over $10 million. Such claims may be filed in the business court regardless of an opposing party’s consent.

The business court’s supplemental jurisdiction, however, is a much thornier issue. The court may exercise supplemental jurisdiction over a related claim only if all parties and the judge consent. If not, the related claim may proceed concurrently in a court of original jurisdiction.

Thus, where a plaintiff has multiple causes of action and only some are within the business court’s original jurisdiction, a defendant or the judge can defeat supplemental jurisdiction in the business court by withholding consent.

Based on data from Wyoming’s Chancery Court and Georgia’s State-wide Business Court, litigants should expect a defendant or the judge to withhold consent about 25% of the time. This will certainly complicate and increase cost of matters for litigants, who will be forced to consider abandoning claims and proceeding in multiple courts.

Judicial Term Length

A common element among business courts is the assignment of each case to one judge, who presides over the case from beginning to end. The single-judge system is designed to help business courts manage their dockets efficiently and reasonably. To that end, many states prescribe relatively long terms for business court judges.

For example, judges in Georgia’s State-wide Business Court serve five-year terms, and judges in Wyoming’s Chancery Court serve six-year terms. In North Carolina, Business Court judges serve eight-year terms, and in Delaware, judges in the Court of Chancery serve terms of a whopping 12 years.

In contrast, the 16 judges appointed to Texas’ business court will serve only two years at a time. Few cases resolve within two years, especially when complex business issues are involved. Texas district court judges, by comparison, are elected to four-year terms.

A two-year term creates uncertainty and increases the likelihood a new judge will take over a case mid-litigation, perhaps even more than once. A change of judge during ongoing litigation won’t help the business court manage its docket efficiently and reasonably.

Some observers argue the length of a business court judge’s term is one of the most critical factors to instilling confidence among litigants. If so, a two-year appointment may not be enough to instill confidence.

As a final lesson, Texas should take a page from Wisconsin’s playbook. Wisconsin created a Commercial Docket Pilot Project in 2017 and extended it through July 2024.

All attorneys with a case in the commercial docket received a survey asking them to evaluate their experiences with case management, discovery disputes, and other topics. The judges of the commercial docket reported the survey results—which were generally positive—in a 2020 progress report.

Texas should consider a similar survey of business court litigants. Whether positive or negative, the results could inform future changes to the court.

This article does not necessarily reflect the opinion of Bloomberg Industry Group, Inc., the publisher of Bloomberg Law and Bloomberg Tax, or its owners.

Author Information

Ryan Sullivan is counsel in Reichman Jorgensen Lehman & Feldberg’s Austin office, focusing on complex commercial litigation for both plaintiffs and defendants.

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