New Courts Coming This Fall

by Gabrielle Smith

The 88th Legislative Session saw the creation of two new court systems in the state of Texas—business courts (See HB 19) and a Fifteenth Court of Appeals (See SB 1045). Both of these new courts are intended to address specific and complex legal matters, but their creation has raised some procedural questions for Texas lawyers and litigants alike.

Business Courts

While dedicated business courts are new to Texas, this is not a novel concept. The majority of states have some form of business court, and multiple states including Delaware, Georgia, North Carolina, and Wyoming have a state-wide business court system akin to what Texas is establishing. These courts will be located in divisions corresponding to the administrative districts in Texas, and judges will be appointed by the governor for two-year terms.

The enabling authority and governing statutory framework for the business courts in Texas are codified in chapter 25A of the Texas Government Code. The business courts will have concurrent jurisdiction with district courts for complex and high-stakes commercial disputes. Jurisdiction in the business courts is dependent upon the amount in controversy and the subject matter of the claims, and will specifically include cases where the amount in controversy exceeds $5 million and the action involves a derivative proceeding, the governance, governing documents, or internal affairs of an organization, allegations that an owner, controlling person, or managerial official breached a fiduciary duty, or claims arising out of the Business Organizations Code. The business courts also have jurisdiction over matters where the amount in controversy exceeds $10 million arising out of a qualified transaction, the parties to a contract by their contract agreed that the business court has jurisdiction (except actions arising out of an insurance contract), and an action that arises out of a violation of the Finance Code or Business & Commerce Code by an organization, or an officer or governing person acting on behalf of an organization, other than a bank, credit union, or savings and loan association. Tex. Gov’t Code 25A.004(b)(d).

One of the exceptions to the jurisdiction of the business courts is suits brought by or against a governmental entity. Tex. Gov’t Code § 25A.004(g)(1)(A). There is an exception to this exception, however, and if claims in suits involve the business court’s supplemental jurisdiction, those claims can be adjudicated in the business court. Though the statute allows the court to exercise that supplemental jurisdiction where applicable, if the parties to the claim within the court’s supplemental jurisdiction do not agree to proceeding within the business court, the matter proceeds in front of the court that has original concurrent jurisdiction. Tex. Gov’t Code § 25A.004(f).

Cases out of these courts, which will be appealed to the new appellate court, are in want of guiding precedent that will take time to develop at the intermediary level. Departing from current Texas trial court practice, the new business courts will issue written opinions rather than orders that simply grant or deny the requested relief and render judgment. With this change, the business courts will be able to develop a body of case law to guide the court in navigating interpretation of the law in these complex business disputes involving corporate governance and fiduciary duties, with a goal of creating consistency and predictability for the court and litigants alike.

Business courts will begin hearing cases on September 1, 2024.

Fifteenth Court of Appeals

New trial courts are not the only change our state will see come September 1, 2024. The new Fifteenth Court of Appeals will have exclusive intermediate jurisdiction over (1) appeals arising from the business courts, (2) appeals of cases brought by or against a state agency, board or commission, or an officer or employee of a state agency, board, or commission, and (3) appeals of cases in which a party has challenged the constitutionality or validity of a state statute or rule, and to which the attorney general is a party. Tex. Gov’t Code §§ 22.220(d), 25A.007. There are exceptions, including eminent domain cases. Tex. Gov’t Code § 22.220(d).

The Fifteenth Court of Appeals will sit in Austin, Texas, though it will decide matters across the state within its jurisdiction and may choose to hold oral argument in other counties. See Tex. Gov’t Code § 22.2151. As with the business courts, justices for the new court of appeals will be appointed by the governor. However, after appointment of the initial bench, the Fifteenth Court of Appeals justices will be elected, though candidates for the office will appear on ballots statewide unlike the other 14 courts of appeal which serve specific counties.

Examples of what this change means include a different appellate path for judicial-review actions challenging an administrative order of a state agency (like the Public Utility Commission or the Texas Commission on Environmental Quality). Judicial-review actions under the Texas Administrative Procedure Act are filed in Travis County, Texas. Currently (and soon historically), if the trial-court decision is appealed, that appeal is filed with the Third Court of Appeals, though due to docket equalization, the Supreme Court of Texas can and regularly does transfer those cases to one of the other appellate courts in the state. Starting September 1, 2024, those appeals will go to the Fifteenth Court of Appeals, and they cannot be transferred to the other appellate courts for docket equalization.

Though the Fifteenth Court of Appeals will not open its doors before September 1, 2024, processes are currently in place to redirect cases to the court. The Office of Court Administration has issued an amended docketing statement that is already live for active appeals, and for any appeals noticed after September 1, 2023, parties are required to identify whether the appeal involves matters within the Fifteenth Court’s jurisdiction. Though the other appellate courts will continue to move forward with existing cases through briefing, in an October 2, 2023 letter to the Supreme Court Advisory Committee, the Fifteenth Court of Appeals Subcommittee suggested that the other appellate courts “adopt a process for identifying and notifying parties that a particular case is designated for transfer to the Fifteenth Court of Appeals” and “should not invest significant time and other resources on the merits of these appeals unless they believe they can finally dispose of the appeal in its entirety before September 1, 2024.” And come September 1, 2024, all cases pending in other appellate courts over which the Fifteenth Court has exclusive intermediate jurisdiction will be transferred.

What Next?

These courts are being established and with that comes questions about remote versus in-person proceedings and location of facilities, who will fill these judicial appointments (though the governor’s office has already received applications), jury selection, and more.

The next few months will see some of the details of these new courts solidify as we near September 1, 2024. Stay tuned for further updates as these courts develop.

Gabrielle Smith is a Principal in the Firm’s Litigation, Appellate, Business Services, and Employment Law Groups. If you would like additional information or have questions related to this article or other matters, please contact Gabrielle at 512.322.5820 or gsmith@lglawfirm.com.