Co-author Taylor Hall*
The Texas Legislature has created a new Texas Business Court (the TBC) with jurisdiction over cases involving certain qualified (as in “big-dollar”) business transactions. HB 19 could affect large oil and gas cases; how and to what extent is to be determined. The consequences, intended and unintended, will be good and bad, depending on your point of view.
A party can opt to remove certain suits from a district or county court to the TBC, which will have concurrent jurisdiction in civil disputes, if the amount in controversy exceeds either:
- $5 million in derivative actions on behalf of an organization, business-related actions alleging a breach of duty, or actions regarding governance and other internal affairs of an organization, or
- $10 million in minimum aggregate value (but not for loans by financial institutions).
The court would have the authority to grant the same relief as a district court but would not have jurisdiction over suits for legal malpractice, personal injury and against government entities without government consent.
The Governor, with the advice and consent of the Senate, will appoint the judges to the TBC. There will be two judges from certain appeals courts and one from certain others. Each judge will serve a term of two years and must be:
- at least 35 years old,
- a U.S. citizen,
- a resident of the county within the division of the TBC to which the judge is appointed, for a minimum of five years before appointment, and
- licensed in Texas with at least ten years of experience either (1) practicing complex civil business litigation or business transaction law, (2) serving as a judge of a Texas court with civil jurisdiction, or (3) a combination thereof.
The Act will apply to suits filed after September 1, 2024.
Comparison with the Delaware Court of Chancery
The new court has been compared to the Delaware Court of Chancery. One difference is that in the TBC, juries rather than the judge would decide questions of fact. In Delaware, fact questions are resolved by the court. Query: Is that a bug or a feature?
The Delaware court was established in 1792 and has over 200 years of precedent to rely upon. The TBC will take years to develop firm and consistent precedent. And TBC judges only serve two-year terms, contrasting with Delaware court’s twelve-year terms.
This bill creates a Fifteenth Court of Appeals that operates independently from other state appellate courts. This court will hear all appeals from the TBC unless the Texas Supreme Court has concurrent or exclusive jurisdiction.
There are more than a few opponents of this new system who see the purpose of the new court of appeals as protection of business cases from Democratic judges that now preside in existing appellate courts in Dallas and Houston. This contrasts with the Delaware court, where direct appeals are taken solely to the Delaware Supreme Court.
Ultimately, the TBC does not directly emulate the Delaware court because it adopts a jury system, lacks centuries of precedent, adopts shorter terms for judges, and has a separate court of appeals. It will take time to see the full effect of this law.
For more on the Act, see this more detailed report, prepared before the Act became final and signed by the Governor. DISCLAIMER: This post and the attached report do not reflect the opinions of Gray Reed or any of its clients.
*Taylor is a rising 3L at University of Houston School of Law and a Gray Reed summer associate.
PS: The title wasn’t clickbait. We have no better idea than you how the new court will affect oil and gas suits. What do you think?