Thought Leadership

Will Business Courts Come to Texas in 2022? After Passing Committee, H.B. 1875 Becomes Must-Monitor Legislation

Client Updates

Introduced on March 11, 2021, H.B. 1875—Business Court and Court of Business Appeals—proposes significant changes that could usher in a new era of bet-the-company business litigation in the Texas state court system.1  As introduced, H.B. 1875 proposes a business court, consisting of seven appointed judges meeting certain criteria, to adjudicate business disputes where at least $10 million is at stake and all derivative actions. Governor Abbott included the proposal in his budget priorities for 2022,2 and it passed committee without amendment by a vote of 6-3 on April 16, 2021.  The bill, however, still has a long way to go—it must be voted on by the full House and make it through the Senate—but if Governor Abbott’s priorities and the committee vote are any indication, Texas could have a new business court system as soon as 2022.

A key threshold question is what disputes would fall into the new business court system.3 The business court proposed by H.B. 1875 is essentially a special district court,4 with limited jurisdiction over two classes of disputes: “(1) a derivative action on behalf of an organization; and (2) an action in which the amount in controversy exceeds $10 million, excluding interest, statutory damages, exemplary damages, penalties, attorney’s fees, and costs, that arises against, between, or among organizations, governing authorities, governing persons, members, or owners, relating to a contract transaction for business, commercial, investment, agricultural, or similar purposes.”5  In addition, the business court would have supplemental jurisdiction over “all matters arising out of or related to” the disputes subject to its original jurisdiction, with the important caveat that certain claims must be severed from the proceedings in the absence of an agreement by the parties to litigate in business court, including suits against governmental entities, personal injury claims, DTPA claims, and claims under the Family Code, Estates Code, and Title 9 of the Property Code.6  Plaintiffs would have the right to file directly in the business court, whereas a defendant wishing to litigate in business court would have the right to remove the case from the district or county court where it was originally filed. Although this process is akin to removal procedures in federal court, a key difference is that subject matter jurisdiction would be immediately appealable as a matter of right.7

H.B. 1875 proposes that the business court consist of seven judges appointed by the Governor and confirmed by the Senate to two-year terms.  Each judge must have at least ten years of experience in complex civil business litigation or business transactions, either as a practitioner, professor, or civil court judge (in any combination).8 There are no term limits, and once appointed, these judges could potentially be a resource to any other federal or state court judge, as “[t]he business court may answer a question regarding a matter in the court’s jurisdiction that is certified to the business court by another court.”9  Business court judges may hold pre- and post-trial proceedings anywhere in the state, including remotely, and H.B. 1875 contemplates that judges will implement cutting edge legal technology.10  

Public comments on H.B. 1875 show a mixed reaction to the proposal.11 Proponents advocate that Texas is lagging behind the 25 other states with business courts and losing out to states like Delaware that have a special court for business disputes,12 whereas opponents argue the $6 million annual cost associated with the legislation is an expensive solution in search of a problem.13 Critics have also raised the specter that H.B. 1875 would erode the right to a jury trial.  Unlike Delaware’s non-jury Court of Chancery, H.B. 1875 does contain detailed procedures for jury trials, although such trials would be limited to those “required by the constitution.”14  Whether this would result in any practical differences in an average business dispute is an open question, considering that the Texas Supreme Court has at times placed great importance on the right to a jury trial.15

As for pre-trial proceedings, H.B. 1875 does not create any new procedures for summary judgment or early disposition of cases. Of course, the purpose of creating a court of narrow jurisdiction is to give judges more time to dissect complicated cases16—additional time that, for better or worse, could result in higher rates of granting pre-trial dispositive motions.

For cases that do go to trial, the statewide nature of the proposed business court would be reflected in special venue provisions. Cases originally filed in business court would be tried in the place specified by the general venue statute, “as chosen by the plaintiff”; for cases removed to business court, venue is the county of the original filing, so long as it was proper.17  Interestingly, the parties and the judge may agree to hold the jury trial in any other county.18  

Finally, H.B. 1875 creates a seven-judge Court of Business Appeals that reviews cases just like any other Texas Court of Appeals.19  As with the other Texas Courts of Appeals, the Court of Business Appeals would preside in three-judge panels.  The major difference would be that the appointment procedure, required qualifications, and term limits for judges on the Business Court of Appeals match those for judges of the trial business court.

Legislative observers give varied odds on H.B. 1875’s chances of passing the full House, making its way through the Senate committee process, passing the full Senate, and ultimately becoming law.  If passed, mastering the use of the Business Court and Business Court of Appeals—or figuring out how to avoid them, as the case may be—will become the hottest topic in Texas business litigation.  And, even if H.B. 1875 fails, momentum for a business court in Texas may continue to grow.  Whether it is this session, in 2023, or beyond, it may be only a matter of time before business courts eventually arrive in Texas.



1 Texas Legislature Online - 87(R) Text for HB 1875. All references to H.B. No. 1875 are to the bill as introduced.

2 Texas Governor's Budget FY 2022-2023 at 24 (“I recommend the 87th Legislature approve the creation of business courts, including the court of business appeals, to ensure that complex business disputes will be heard by judges with specialized expertise and knowledge.”).

3 H.B. No. 1875 § 24A.051(b) (“The business court has statewide jurisdiction . . . .”).

4 H.B. No. 1875 § 24.051(c) (“The business court may grant any relief available in a district court.”); also compare Texas Gov’t Code § 24.011 (“A judge of a district court may, either in termtime or vacation, grant writs of mandamus, injunction, sequestration, attachment, garnishment, certiorari, and supersedeas and all other writs necessary to the enforcement of the court's jurisdiction.”), with H.B. No. 1875 § 24A.053 (“The business court may issue any writ necessary for the enforcement of the court's jurisdiction, including a: (1)  writ of injunction; (2)  writ of mandamus; (3)  writ of sequestration; (4)  writ of attachment; (5)  writ of garnishment; and (6)  writ of supersedeas.”).

5 H.B. No. 1875 § 24A.051(a), (b) (“Jurisdiction”).

6 H.B. No. 1875 § 24A.051(d).

7 H.B. No. 1875 § 24A.052 (b) (“A party to an action filed in a district court or county court at law that is in the subject matter jurisdiction of the business court may remove the action to the business court by filing a notice of removal with the business court and the court in which the action was originally filed.  If the business court does not have jurisdiction of the action or part of the action, the business court shall remand the action, or the part in which the business court does not have jurisdiction, to the court from which the action was removed.  A party may appeal an interlocutory order of the business court that grants or refuses a remand under this subsection to the court of business appeals.”).

8 H.B. No. 1875 § 24A.054 (“Qualifications of Judge”). To be clear, serving as a judge of any civil court in Texas counts towards the 10-year requirement; serving as a criminal judge does not.

9 H.B. No. 1875 § 24A.053(b).

10 H.B. No. 1875 § 24A.064(c), (d).

11 House Committee on Judiciary & Civil Jurisprudence, Public Comments regarding April 6, 2021 Hearing, available at ActiveReports Document (texas.gov) (Published on April 18, 2021).

12 Texas Governor's Budget FY 2022-2023 at 24 (“Businesses often choose to incorporate and litigate in states like Delaware so that their disputes will be resolved by judges with expertise in business law.”).

13 Supra note 11 (containing public comments); see also H.B. No. 1875, Fiscal Note (April 5, 2021), available at https://capitol.texas.gov/tlodocs/87R/fiscalnotes/html/HB01875I.htm (financial analysis of bill).

14 H.B. No. 1875 § 24A.063 (“Jury Practice and Procedure”).

15 See, e.g., General Motors Corp. v. Gayle, 951 S.W.2d 469, 476 (Tex. 1997) (“The right to a jury trial is one of our most precious rights, holding a sacred place in English and American history.”); Tex. Const. art. I, § 15 (“The right of trial by jury shall remain inviolate.”).

16 See, e.g., Mark Curridan, Has the time come for business-only courts in Texas?, Dallas Business Journal (March 23, 2021) (reporting that proponents of the bill say “current district judges have overcrowded dockets and don’t have the time or expertise to deal with large complex commercial lawsuits in a speedy manner”).

17 H.B. No. 1875 § 24A.063(b).

18 H.B. No. 1875 § 24A.063(e).

19 H.B. No. 1875 § 24A.101; Id. § .106.

20 H.B. No. 1875 § .106 (“The court of business appeals shall render judgments and hand down opinions in the same manner as any other court of appeals under Chapter 22.”).

 

ABOUT BAKER BOTTS L.L.P.
Baker Botts is an international law firm of approximately 650 lawyers practicing throughout a network of offices around the globe. Based on our experience and knowledge of our clients' industries, we are recognized as a leading firm in the energy, technology, and life sciences sectors. Since 1840, we have provided creative and effective legal solutions for our clients while demonstrating an unrelenting commitment to excellence. For more information, please visit bakerbotts.com.

Related Professionals