The new Texas business courts opened on September 1, 2024, at least for some businesses. The Texas Legislature created the Texas Business Courts in 2023 to provide a court with judges more familiar with certain business issues who could adjudicate cases more efficiently than traditional courts. This will provide an established legal framework to draw in bigger businesses to the state, much like the Chancery Courts in Delaware. These courts have a strong history of shaping business law and settling corporate governance and similar business disputes. The hope is that by removing some of the cases from Texas’s traditional courts, their dockets would also become efficient.

Understanding whether the new business courts will achieve these goals or affect the traditional courts as hoped requires an analysis of the limited jurisdiction of these new business courts – the kinds of cases that these courts will hear and adjudicate. The Texas business courts will hear:

• Certain derivative and internal governance cases where the amount in controversy is $5,000,000 or more;
• Certain derivative and internal governance cases regardless of the amount in controversy, if the entity is a publicly traded company;
• Certain cases involving commercial transactions, financial institutions, the Texas Finance Code, or the Texas Business & Organizations Code, where the amount in controversy is $10,000,000 or more;
• Supplemental jurisdiction over related claims, subject to a number of exceptions.

As a result, the Texas Legislature designed the business courts to manage particular types of matters that either involve larger companies, larger claims, or both. According to the Office of Advocacy of the US Small Business Administration (SBA), Texas has approximately 3.2 million businesses, 99.8% of which are small businesses. The SBA defines a small business as a business with fewer than 500 employees.

It would be rare that such businesses would be involved with claims that would qualify for treatment in the new Texas business courts. Further, it remains to be seen whether the business courts will make a meaningful impact in reducing the caseload for other civil courts. Harris County is the largest county in Texas and its civil caseload is one of the largest in the nation. For the past 5 years, the Harris County Civil Courts have averaged over 70,000 active cases. In September 2023, the last month reporting period, over 91,000 cases were pending. Texas courts do not report cases in terms of whether they qualify for the business courts, but reporting does allow for some conclusions. Harris County District Courts reports several categories only five could possibly qualify for business courts: “Other Real Estate” (non-eminent domain), “Consumer/Commercial/Debt”, “Other Contract”, and “Other Civil.” Over the 91,000 active cases, 26,789 (29.2%) fall into categories that might qualify for business court treatment. The reality is the vast majority of these cases do not qualify for business courts.

All that being said, the business courts serve a useful purpose as they provide a dedicated court system for larger companies and larger business disputes. This will support the significant number of large companies headquartered or operating in Texas by providing a legal framework to adjudicate those disputes benefitting all businesses in Texas.

If you are a small or medium-sized business, it is likely these courts will not be available to you.

If you are a larger business or may be involved in disputes that involve amounts over the minimum threshold, the business courts will provide you with an opportunity to have your case adjudicated by judges who are familiar with the unique issues facing businesses. Many wrinkles will need to be ironed out in the coming months, including how the courts will handle supplemental jurisdiction (those claims that do not qualify for business courts but are related to or factually intertwined with those claims). If the business courts cannot hear those claims, their efficiencies are reduced as supplemental claims and may have to proceed in a separate forum. The good news is the appointments for the judges for these courts include some very distinguished jurists who are more than capable of navigating the unexplored waters of the business of the Texas business courts.