close
close

Texas Business Court can learn a few lessons from other states

Texas will be the last state to launch a business court on September 1. About half of all states, from Delaware to Wyoming, have adopted some form of chancery or business court, broadly defined as a specialized court for hearing civil and commercial cases. disputes.

What can Texas learn from the successes and challenges of other states’ business courts? Here are some key lessons about consent to jurisdiction, judicial term length, and feedback surveys.

Consent to Jurisdiction

Many states require that all parties to a dispute consent to jurisdiction before filing in a business court. For example, in Wyoming, the Chancery Court must dismiss a case without prejudice if a party files a timely objection to jurisdiction. And a party may not refer a case to that court without the written consent of all parties.

In New Hampshire, the Superior Court refused to transfer a dispute to business court without plaintiffs’ consent because the applicable statute and rule “expressly exclude the jurisdiction of the business court over a matter when either party objects.”

It is perhaps not surprising that business courts in states that require universal consent to jurisdiction often dismiss cases after a party objects. In Wyoming, litigants filed thirteen unique cases in Chancery Court within the first eleven months of existence. In 25% of cases, a defendant has objected to jurisdiction, resulting in dismissal.

Georgia’s Business Court, which also requires universal consent for jurisdiction, has experienced similar roadblocks: of 86 cases filed with the Business Court between its opening in August 2020 and April 2023, almost 25% were dismissed after one party refused to proceed in the business court.

Texas largely avoids the consent problem faced by Georgia and Wyoming. The jurisdiction of the new Texas business court will depend on the nature of the dispute and the amount in question. Generally, the court will have jurisdiction over administrative disputes worth more than $5 million, and commercial disputes worth more than $10 million. Such claims can be brought in the corporate court regardless of the consent of the other party.

However, the additional jurisdiction of the corporate court is a much more difficult issue. The court can only exercise additional jurisdiction over a related claim if it exists parties and the judge agree to it. If this is not the case, the relevant claim may be brought simultaneously in a court of the original jurisdiction.

Thus, where a plaintiff has multiple lawsuits and only some of them fall within the original jurisdiction of the business court, a defendant or the judge can nullify the additional jurisdiction in the business court by withholding consent.

Based on data from Wyoming’s Chancery Court and Georgia’s State-wide Business Court, litigants can expect that a defendant or the judge will withhold consent about 25% of the time. This will certainly complicate matters and increase costs for litigants, who will be forced to consider abandoning their claims and litigating in multiple courts.

Length of the judicial term

A common element among business courts is that each case is assigned to one judge, who presides over the case from start to finish. The single-judge system is designed to help business courts manage their cases efficiently and fairly. To that end, many states prescribe relatively long terms for judges in business courts.

For example, judges on Georgia’s State-wide Business Court serve five-year terms, and judges on Wyoming’s Chancery Court serve six-year terms. In North Carolina, Business Court judges serve terms of eight years, and in Delaware, Court of Chancery judges serve terms of as many as twelve years.

In contrast, the 16 judges appointed to the Texas business court will serve only two years at a time. Few cases are resolved within two years, especially when they involve complex business issues. By comparison, Texas district court judges are elected to four-year terms.

A two-year term creates uncertainty and increases the chance that a new judge will take over a case in the middle of a trial, perhaps even more than once. A change of judge during ongoing legal proceedings will not help the corporate court to manage its tasks efficiently and reasonably.

Some observers argue that the length of a judge’s tenure in a business court is one of the most critical factors in establishing confidence among litigants. If so, a two-year appointment may not be enough to inspire trust.

Get feedback

As a final lesson, Texas should take a page from Wisconsin’s playbook. Wisconsin created a Commercial Docket Pilot Project in 2017 and extended it through July 2024.

All attorneys with a case on the commercial docket received a survey asking them to evaluate their experiences with case management, discovery disputes, and other topics. The commercial docket judges reported the research results – which were generally positive – in a 2020 progress report.

Texas should consider a similar survey of litigants in business courts. Whether positive or negative, the results could inform future changes in the court.

This article does not necessarily reflect the views of Bloomberg Industry Group, Inc., the publisher of Bloomberg Law and Bloomberg Tax, or their owners.

Author information

Ryan Sullivan is an attorney in the Austin office of Reichman Jorgensen Lehman & Feldberg, where he focuses on complex commercial litigation for both plaintiffs and defendants.

Write for us: Author Guidelines

Back To Top