Open for Business: Texas Launches New Business Court and Court of Appeals

Last year, the Texas State Legislature created a new trial court — the Texas Business Court — and a new intermediate appellate court — the Fifteenth Court of Appeals. Both will begin operating on September 1, 2024, and are intended to create a statewide, specialized court system to adjudicate complex business disputes.¹ Additionally, the Fifteenth Court will provide an exclusive, statewide track for appeals in many cases by or against the state, or involving challenges to the constitutionality or validity of state laws. Companies are weighing how these new courts impact litigation strategy, forum selection clauses for major contracts and transactions, and corporate governance decisions.

The Business Court

Jurisdiction. The Business Court is a specialized trial court created to hear complex business cases. Its judges have the same powers as their district court counterparts,² and its jurisdiction is concurrent with the district courts but extends only to certain types of cases:

1.  Actions greater than $5 million or involving publicly traded companies. The Court has jurisdiction over the following if either the amount in controversy is greater than $5 million or a party to the case is a publicly traded company:

• Derivative proceedings
• Actions involving a business’ governance, governing documents, or internal affairs
• Certain actions brought under state or federal securities or “trade regulation” law
• Certain actions by a business or its owners against its management or other insiders
• Certain veil-piercing and similar actions
• Actions arising out of the Texas Business Organizations Code³

2.  Actions greater than $10 million. The Court has jurisdiction over the following if the amount in controversy is greater than $10 million:

• Actions arising from transactions of at least $10 million, other than certain loans by financial institutions
• Certain actions for which the parties agreed to jurisdiction in the Business Court
• Certain actions involving violations of the Texas Finance Code or Texas Business and Commerce Code⁴

3.  Injunctive and declaratory relief. The Court can hear actions seeking injunctive or declaratory relief involving a dispute that is otherwise within its jurisdiction.⁵

4.  Supplemental jurisdiction. The Court has supplemental jurisdiction over claims that are part of the same case or controversy as one or more claims within its original jurisdiction, but only where all parties and the presiding judge agree for the Court to hear those supplemental claims.⁶

The Business Court’s jurisdiction expressly excludes certain matters unless they fall within its supplemental jurisdiction, such as claims (1) under the Family, Estates, or Insurance Codes or the Deceptive Trade Practices Act; (2) related to obligations under an insurance policy; or (3) regarding certain non-compete agreements. The Court has no jurisdiction to hear health care liability claims, legal malpractice suits, or claims for damages over bodily injury or death.⁷

Removal. The Business Court’s jurisdiction is concurrent with that of other Texas courts, meaning a claim within its jurisdiction could be filed in the Business Court or in a district court. However, cases that are not filed in the Business Court, but that are within its jurisdiction, may be removed to the Business Court (1) by any party within 30 days of when it discovers, or reasonably should have discovered, facts establishing the Business Court’s jurisdiction,⁸ (2) by agreement of the parties,⁹ or (3) at the request of the originating court.¹⁰

Organization. The Court is organized into 11 divisions located within each of Texas’ Administrative Judicial Regions; however, only five divisions (based in Dallas, Austin, San Antonio, Fort Worth, and Houston) will become operational on September 1, 2024, with the remaining divisions to open in 2025.¹¹

The Fifteenth Court of Appeals

Background. The Fifteenth Court is a specialized intermediate appellate court with statewide jurisdiction over specific types of civil appeals. It differs from Texas’ other 14 intermediate appellate courts, which have jurisdiction over appeals within limited geographic regions but which hear appeals of all types, both civil and criminal.

Jurisdiction. Beginning September 1, 2024, the Fifteenth Court will have exclusive intermediate appellate jurisdiction of:

1.  Business Court appeals. Appeals from the Texas Business Court.¹²

2.  Cases by or against the state. With certain limitations, cases brought by or against the state (including state agencies, boards, commissions, and universities) or an officer or employee of the state, arising out of a state officer or employee’s official conduct.¹³

3.  Challenges to state law. Cases in which a party asserts a challenge to the constitutionality or validity of state law and the Texas Attorney General is a party.¹⁴

The Fifteenth Court will also have exclusive jurisdiction over original proceedings (e.g., mandamus) arising out of matters over which it has exclusive appellate jurisdiction.¹⁵

Transfer of Existing Appeals. In addition to hearing new appeals filed within its exclusive jurisdiction, all such appeals that were filed in another court on or after September 1, 2023 will be transferred to the Fifteenth Court on September 1, 2024.¹⁶ Approximately 80-90 currently pending appeals will be impacted by the transfer.¹⁷

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These new courts will significantly impact the fora and decisionmakers available in complex business and other high-stakes disputes and give rise to new strategic considerations for parties that may become involved in those cases. Companies are already considering whether to incorporate the Business Court into forum selection clauses for major contracts and transactions, and weighing the Business Court’s potential impact on corporate governance and securities matters. For questions, please contact the authors or your regular Arnold and Porter advisor.

© Arnold & Porter Kaye Scholer LLP 2024 All Rights Reserved. This Advisory is intended to be a general summary of the law and does not constitute legal advice. You should consult with counsel to determine applicable legal requirements in a specific fact situation.