Legislative Blog

J.B. Williams, J.D.

HB 19 - Creation of Business Courts

A Blog about 88th Legislature Laws

A Bit of Background

The following backgrounds help summarize the author's views on both the general topic: Texas and more specifically 88th Legislature Laws as it relates to that topic.

Brief Summary of Texas

Texas is truly a Republic. There are a multitude of items that to modify the state constitution must be modified. So there are times when Constitutional amendments are on the voting ballots. While I sometimes abhor the wording, the concept that all of those legally able to vote in Texas must vote on the change is a good one. And bills in Texas are generally short, making it easier for everyone to understand.

Summary of 88th Legislature Laws

The blogs here will discuss the laws passed by Congress and signed into law, as well as those, passed by Congress and approved by the voters to become law. There are a multitude of laws and each time I post blogs I will notate here the current effective date if it is different from prior blogs. I am currently posting bills that took effect immediately - those bills total 336. I am currently posting regarding larger bills, so each blog covers a single bill.

Blog Summary

This creates business court to handle matters involving companies, including domestic and foreign corporations, limited liability companies, and limited partnerships. It will provide judges with greater background in business matters to hear and settle business cases. But since these are not at every county individually, it hopefully does not create too many additional courts.

HB 19 - Creation of Business Courts

Published: 2024-09-03

HB 19

Creation of a specialty trial court to hear certain cases

A derivative proceeding is a civil action brought in the right of a domestic or foreign corporation, limited liability company, or limited partnership. Governing documents include the following:

1. certificate of formation;
2. articles of incorporation;
3. articles of organization;
4. bylaws;
5. partnership agreement;
6. company agreement or operating agreement;
7. shareholder agreement;
8. voting agreement or voting trust agreement;
9. agreement among owners restricting the transfer of ownership interest

Organizatoins include the following:

1. corporation;
2. limited partnership;
3. general partnership;
4. limited liability partnership;
5. limited liability company;
6. business trust;
7. real estate investment trust;
8. joint venture;
9. joint stock company;
10. cooperative;
11. bank;
12. credit union;
13. savings and loan association;
14. insurance company;
15. serious of limited liability company or other entity;

A qualified transaction means a transaction other than one involving a loan or advance of money, under which a party pays or receives consideration with an aggregate value of at least $10 million or lends, advances, borrows, receives, is obligated to lend or advance, or is entitled to borrow or receive money with an aggregate value of at least $10 million.

The business court is a statutory court. The judicial district of the court is composed of all counties in Texas. It is composed of divisions. The First Business Court Division is composed of the counties composing the First Administrative Judicial Region, this includes the counties of Collin, Dallas, Ellis, Fannin, Grayson, Kaufman, and Rockwall. The Second Business Court Division is composed of counties composing the Second Administrative Judicial Region, this includes the counties of Angelina, Bastrop, Brazos, Burleson, Chambers, Grimes, Hardin, Jasper, Jefferson, Lee, Liberty, Madison, Montgomery, Newton, Orange, Polk, San Jacinto, Trinity, Tyler, Walker, Waller, and Washington. The Third Business Court Division is composed of counties composing the Third Administrative Judicial Region, this includes the counties of Austin, Bell, Blanco, Bosque, Burnet, Caldwell, Colorado, Comal, Comanche, Coryell, Falls, Fayette, Gonzales, Guadalupe, Hamilton, Hays, Hill, Lampasas, Lavaca, Llano, McLennan, Mila, Navarro, Robertson, San Saba, Travis, and Williamson. The Fourth Business Court Division is composed of counties composing the Fourth Administrative Judicial Region, this includes the counties of Aransas, Atascosa, Bee, Bexar, Calhoun, DeWitt, Dimmitt, Frio, Goliad, Jackson, Karnes, LaSalle, Live Oak, Maverick, McMullen, Refugio, San Patricio, Victoria, Webb, Wilson, Zapata, and Zavata. The Fifth Business Court Division is composed of counties composing the Fifth Administrative Judicial Region, this includes the counties of Brooks, Cameron, Duval, Hidalgo, Jimm Hogg, Jim Wells, Kenedy, Kleberg, Nueces, Starr, and Willacy. The Sixth Business Court Division is composed of counties composing the Sixth Administrative Judicial Region, this includes the counties of Bandera, Brewster, Crockett, Culberson, Edwards, El Paso, Gillespie, Hudspeth, Jeff Davis, Kendall, Kerr, Kimble, Kinney, Mason, McCulloch, Medina, Menard, Pecos, Presidio, Reagan, Real, Sutton, Terrell, Upton, Uvalde, and Val Verde. The Seventh Business Court Division is composed of counties composing the Seventh Administrative Judicial Region, this includes the counties of Andrews, Borden, Brown, Callahan, Coke, Coleman, Concho, Crane, Dawson, Ector, Fisher, Gaines, Garza, Glasscock, Haskell, Howard, Irion, Jones, Kent, Loving, Lynn, Martin, Midland, Mills, Mitchell, Nolan, Reeves, Runnels, Schleicher, Scurry, Shackelford, Sterling, Stonewall, Taylor, Throckmorton, Tom Green, Ward, and Winkler. The Eighth Business Court Division is composed of counties composing the Eighth Administrative Judicial Region, this includes the counties of Archer, Clay, Cooke, Denton, Eastland, Erath, Hood, Jack, Johnson, Montague, Palo Pinto, Parker, Somervell, Stephens, Tarrant, Wichita, Wise, and Young. The Ninth Business Court Division is composed of counties composing the Ninth Administrative Judicial Region, this includes the counties of Armstrong, Bailey, Baylor, Briscoe, Carson, Castro, Childress, Cochran, Collingsworth, Cottle, Crosby, Dallam, Deaf Smith, Dickens, Donley, Floyd, Foard, Gray, Hale, Hall, Hansford, Hardeman, Hartley, Hemphill, Hockley, Hutchinson, King, Knox, Lamb, Lipscomb, Lubbock, Moore, Motley, Ochiltree, Oldham, Parmer, Potter, Randall, Roberts, Sherman, Swisher, Terry, Wheeler, Wilbarger, and Yoakum. The Tenth Business Court Division is composed of counties composing the Tenth Administrative Judicial Region, this includes the counties of Anderson, Bowie, Camp, Cass, Cherokee, Delta, Franklin, Freestone, Gregg, Harrison, Henderson, Hopkins, Houston, Hunt, Lamar, Leon, Limestone, Marion, Morris, Nacagdoches, Panola, Rains, Red River, Rusk, Sabine, San Augustine, Shelby, Smith, Titus, Upshur, Van Zandt, and Wood. The Eleventh Business Court Division is composed of counties composing the Eleventh Administrative Judicial Region, this includes the counties of Brazoria, Fort Bend, Galveston, Harris, Matagorda, and Wharton.

The business court has the powers provided to district courts, including the power to issue writs of injunctions, mandamus, sequestration, attachment, garnishment, and supersedeas; and grant relief as the same as district courts. They have concurrent jurisdiction with district courts in actions where the amount exceeds $5 million, excluding interest, statutory damages, exemplary damages, penalties, attorney's fees, and court cost; and the matter is:

1. a derivative proceeding;
2. an action regarding the governance, governing documents, or internal affairs of an organization;
3. an action for a claim under state or federal securities or trade regulation is asserted against the following:
   1. an organization;
   2. a controlling or managerial official of an organization for an act or omission or in their capacity as a controlling or managerial official;
   3. an underwriter of securities;
   4. the auditor of an organization;
4. an action by an organization, or owner of, if the action:
   1. is brought against the owner, controlling person or managerial official;
   2. alleges an act or omission by the owner/controlling person/ managerial official in their capacity;
5. an action alleging the owner/controlling person/ managerial official breached a duty owed the organization, including the breach of duty of loyalty or good faith;
6. an action seeking to holder the owner/governing person liable for an obligation of the organization; and
7. an action arising out of the Business Organizations Code

A business court has civil jurisdiction concurrent with district courts in actions described above regardless of the amount in controversy if a party is a publicly traded company.

A business court has civil jurisdiction concurrent with district courts when the amount in controversy exceeds $10 million, excluding interest, statutory damages, exemplary damages, penalties, attorney's fees, and court cost; and the matter is:

1. a action arising out of a qualified transaction;
2. an action arising out of a contract or commercial transaction where the parties agreed in the matter that the business court has jurisdiction, except an action that arises out of an insurance contract;
3. Except when the business court does not have jurisdiction (as addressed later), an action arising out of a violation of the Finance Code or Business & Commerce Code by an organization

A business court has civil jurisdiction concurrent with district courts in an action seeking injunctive relief or declaratory judgment.

A business court has supplemental jurisdiction of any other claim related to a case or controversy within the court's jurisdiction that forms part of the same case or controversy. These matters may proceed in the business court on agreement of all parties and a judge of the division where the action is pending. This would not include jurisdiction over the following:

1. a claim arising under Chapter 74 of the Civil Practices and Remedies Code;
2. a claim where a party seeks recovery of monetary damages for bodily injury or death; or
3. a claim of legal malpractice

Unless the business court has supplemental jurisdiction, the following do not fall under the jurisdiction of a business court:

1. a civil action brought by or against a government entity; or a foreclosure on a lien on real or personal property;
2. a claim arising out of:
   1. Subchapter E, Chapter 15 and Chapter 17 of the Business & Commerce Code;
   2. Estates Code;
   3. Family Code;
   4. Insurance Code;
   5. Chapter 53 and Title 9 of the Property Code;
3. claim arising out of the production or sale of a farm product;
4. a claim related to a consumer transaction, involving a consumer in Texas, arising out of a violation of federal or state law;
5. a claim related to the duties and obligations under an insurance policy

If an action is filed in business court, and the court does not have jurisdiction, the court shall either transfer the action to a district or county court at law having proper venue or dismiss the action without prejudice. The action will be determined based upon the filing party's choice.

A party to an action filed in district or county court at law may remove the action to a business court. If the business court does not have jurisdiction, the court shall remand the action to the court with original jurisdiction.

There a specific guidelines as to how removals will be handled, including timing of them.

The Fifteenth Court of Appeals has exclusive jurisdiction over an appeal from an order or judgment of a business court. The Fifteenth Court of Appeals began operations on 9/1/2024.

To qualify as a judge the individual must be 35 years old; a US citizen; have been a resident oft he county for the division for at least 5 years before appointment; and be a licensed attorney in Texas with 10 or more years of experience in:

1. practicing complex civil business litigation;
2. practicing business transaction law;
3. serving as a judge in Texas with civil jurisdiction; or
4. any combination of the above

The governor, with advice and consent of Senate, shall appoint:

1. 2 judges to each of the First, Third, Fourth, Eighth, and Eleventh Divisions of business courts; and
2. 1 judge to each of the Second, Fifth, Sixth, Seventh, Ninth, and Tenth Divisions of business courts

The judge shall serve a term of 2 years beginning 9/1 of every even-numbered year. They may be reappointed. Within 7 days of the beginning of the term, the judges by majority shall select an administrative presiding judge. If a vacancy occurs, the remaining judges shall select a judge to serve. The judges may exchange benches and sit and act for one another in pending matters.

The salary for a business court judge is set the same as other judicial salaries, currently starting at $140,000 and adjusting based upon criteria set out. Removal and disqualification follow the same rules as district court judges. And business court judges may not have a private practice while on the bench. Qualified retired judges may serve as visiting judges for business courts.

The same rules to right to jury trial apply here. A matter brought in a business court may be held in any county for the court. A matter transferred from district court must be held in the county where it was originally filed. A contract may stipulate the county where an action is to proceed. Other rules around jury trials follow the rules in the county where the matter is pending, just as other district courts.

The clerk for all business courts office will be in Travis County. They will accept all filings for business courts and fulfill the legal/administrative functions of a district clerk. Each business court judge shall have chambers in the county the judge selects within the geographic bounders of the division of the court. The Office of Court Administration of the Texas Judicial System may contract for use of facilities within a county. Other than jury trials, matters may proceed remotely to facilitate resolution. Remote proceedings must provide for public observation.

On or before December 1 of each year, the Office of the Court Administration of the Texas Judicial System shall submit a report on the number and types of cases heard by business courts in the preceding year.

The Supreme Court shall set fees for filings and action in business courts. These shall be sufficient to cover the costs of administering them, taking into account fee waivers necessary for the interest of justice.

Portions of the Government Code were modified to include division of the business courts where district courts were previously included. As well as, the business courts being included in the retirement system.

 

J.B. Williams, J.D.

4,312 federal laws were passed from 1995 through December 2016.
Along with 88,819 federal rules and regulations.