Texas Business Court Could Make Litigation Faster, More Efficient

Texas’ new business court, which the state hopes will make complex litigation more efficient, opens in less than four months. And while there’s still uncertainty about how the court will operate, its structure and the Texas legislature’s mandate can help answer key questions.

Will my pending cases move to the business court? The preliminarily approved rules will allow litigants in qualified cases to transfer those cases to the new court, but only for cases filed on or after Sept.1, 2024. Cases must also fit within several specific categories over which the business court has jurisdiction, including disputes exceeding $5 million that are:

• Derivate proceedings
• Related to an entity’s organizational affairs or governance
• Securities claims
• Breach of duties by an entity’s controlling person arise out of the Texas Business Organizations Code
• Related to any of the foregoing subject matters if it relates to a public company

The business court also will have jurisdiction over disputes exceeding $10 million for breaches of contract and certain violations of the state’s finance code or business and commerce code. The court won’t have jurisdiction over claims for personal injury, legal malpractice, or medical malpractice.

Proposed Rule 355 creates a procedure for transferring cases to the business court. Litigants must notify the court where the case was originally filed, specify the business court division where the litigant seeks to move the case, plead facts establishing jurisdiction and venue in the business court, and state whether any party opposes the transfer.

If opposed, then the litigant seeking removal has 30 days from the time it discovered (or should have discovered) it could move the case. A litigant seeking to oppose the removal has 30 days from the time the notice of removal is filed—or if the party hasn’t been served, within 30 days after entering an appearance.

In addition to litigants, district or county court judges may request transfer of their cases to the business court if transfer of the matter will “facilitate the fair and efficient administration of justice.”

How might the new court affect pace of litigation? Litigants should expect litigation to be faster—namely in the setting of hearings and adjudication of early motions that narrow issues or dispose of claims.

While district courts are adept at adjudicating commercial cases, large complex commercial cases can strain an already overworked judiciary. Because the new court will have a smaller caseload and specialized judges who are required to have been around the proverbial block, litigants should expect those judges to resolve disputes more efficiently.

While there’s some risk that turnover in the new court judiciary will be higher than expected, given that appointed business court judges only serve two-year terms, litigants should expect most business court judges to be reappointed. Regardless, as Travis and Bexar counties have shown with their rotating central-docket systems, litigation can still proceed even if a judge isn’t familiar with the pending dispute.

Will a larger volume of written opinions impact litigants’ strategy? The Texas Supreme Court preliminarily approved rules requiring business court judges to “issue a written opinion” in connection with a dispositive ruling when requested by a party or “on an issue important to the jurisprudence of the state, regardless of request.” As a result, litigants will see more written opinions explaining the reasoning behind rulings that may affect future cases.

It’s not clear what precedential effect a business court judge’s written opinion may have on either future Texas business court judges in cases brought before those courts, or the Texas district courts adjudicating similar commercial issues. Such cases at a minimum will have persuasive authority in both forums.

What does this mean for litigants? In addition to combing through Texas Supreme Court and Texas Courts of Appeals decisions, litigants must also be aware of the forthcoming opinions issued from business court judges.

Accordingly, early litigants may have the opportunity to impact the state’s jurisprudence for years to come—which may influence certain litigants’ interest in having disputes heard in business court as soon as possible.

Later litigants should benefit from a more robust body of law concerning commercial cases, especially surrounding the adjudication of motions to dismiss under Rule 91a and summary judgment motions, which should provide insight on strategic decisions at the outset of disputes.

Should litigants expect to have their cases heard by the business court’s specialized judges? Unlike other state commercial courts, the business court hasn’t eliminated the right to trial by jury. And in cases originally filed in a district court, litigants should expect those cases to be tried by a jury in the same county where the plaintiff filed the lawsuit.

In cases originally filed in the business court, the plaintiff will get to choose any proper county for a jury trial after pre-trial resolution by the business court. The parties and the business court judge may also choose to hold the jury trial in any other county.

The adopted bill and the proposed rules don’t specify whether the business court judge or the district court judge will preside over trials. Litigants must pay close attention to whether their business dispute involves a jury trial because it may play into a litigant’s strategy—including being the first litigant to file.

States such as Delaware and New York have implemented specialized business courts. Each state’s specialized judicial arm differs in the way it processes cases, and the Texas business court is no different. It will take time to see how the business court will affect Texas jurisprudence, but potential litigants should be aware of several strategic issues once the court opens.

Michael C. Holmes is vice chair at Vinson & Elkins with focus on M&A, securities litigation, corporate governance, directors and officer representation, and commercial disputes.

Quentin L. Smith is commercial litigation partner at Vinson & Elkins and focuses on business, energy, and petrochemical disputes.

Grant Newton is an associate at Vinson & Elkins and focuses on complex commercial litigation matters in state and federal court.

Paul Hill contributed to this article.

Write for Us: Author Guidelines