BILL ANALYSIS

Senate Research Center	C.S.H.B. 19
88R28742 AMF-F	By: Murr et al. (Hughes)
	Jurisprudence
	5/9/2023
	Committee Report (Substituted)

AUTHOR'S / SPONSOR'S STATEMENT OF INTENT

Texas' judicial system is highly specialized from top to bottom. Texas is one of only two states with specialized high courts. Texas has the Supreme Court of Texas, which hears civil and juvenile cases, and the Texas Court of Criminal Appeals, which hears criminal cases. According to the Office of Court Administration of the Texas Judicial System, the state has over 200 specialized courts, from probate courts in some counties to specialized district courts designated to hear family cases, juvenile cases, or veterans' cases. Texas, however, does not have a court specializing in resolving complex business disputes. In this respect, Texas lags behind other states. H.B. 19 creates a specialized business trial court, allocates the assignment of business court judges to align with the state's Administrative Judicial Regions, and sets up specific jurisdictional parameters for the court. This bill is intended to streamline resolutions of business disputes and ensure the court is staffed by qualified and skilled judges, ideally giving businesses confidence in Texas' legal system and encouraging them to incorporate and headquarter in Texas.

(Original Author's/Sponsor's Statement of Intent)

C.S.H.B. 19 amends current law relating to the creation of a specialty trial court to hear certain cases and authorizes fees.

RULEMAKING AUTHORITY

Rulemaking authority is expressly granted to the Supreme Court of Texas in SECTION 1 (Sections 25A.006, 25A.016, and 25A.020, Government Code) of this bill.

SECTION BY SECTION ANALYSIS

SECTION 1. Amends Subtitle A, Title 2, Government Code, by adding Chapter 25A, as follows:

CHAPTER 25A. BUSINESS COURT

Sec. 25A.001. DEFINITIONS. Defines "controlling person," "derivative proceeding," "governing documents," "governing law," "governing person," "governmental entity," "internal affairs," "managerial official," "officer," "organization," "owner," "ownership interest," "publicly traded company," and "qualified transaction."

Sec. 25A.002. CREATION. Provides that the business court is a statutory court created under Section 1 (Judicial Power Vested in Courts; Legislative Power Regarding Courts), Article V (Judicial Department), Texas Constitution.

Sec. 25A.003. BUSINESS COURT JUDICIAL DISTRICT; DIVISIONS. (a) Provides that the judicial district of the business court is composed of all counties in this state.

(b) Provides that the business court is composed of divisions as provided by this section.

(c) Provides that the First Business Court Division is composed of the counties composing the First Administrative Judicial Region under Section 74.042(b) (relating to the composition of the First Administrative Judicial Region).

(d) Provides that the Second Business Court Division is composed of the counties composing the Second Administrative Judicial Region under Section 74.042(c) (relating to the composition of the Second Administrative Judicial Region), subject to funding through legislative appropriations. Provides that the division is abolished September 1, 2026, unless reauthorized by the legislature and funded through additional legislative appropriations.

(e) Provides that the Third Business Court Division is composed of the counties composing the Third Administrative Judicial Region under Section 74.042(d) (relating to the composition of the Third Administrative Judicial Region).

(f) Provides that the Fourth Business Court Division is composed of the counties composing the Fourth Administrative Judicial Region under Section 74.042(e) (relating to the composition of the Fourth Administrative Judicial Region).

(g) Provides that the Fifth Business Court Division is composed of the counties composing the Fifth Administrative Judicial Region under Section 74.042(f) (relating to the composition of the Fifth Administrative Judicial Region), subject to funding through legislative appropriations. Provides that the division is abolished on September 1, 2026, unless reauthorized by the legislature and funded through additional legislative appropriations.

(h) Provides that the Sixth Business Court Division is composed of the counties composing the Sixth Administrative Judicial Region under Section 74.042(g) (relating to the composition of the Sixth Administrative Judicial Region), subject to funding through legislative appropriations. Provides that the division is abolished on September 1, 2026, unless reauthorized by the legislature and funded through additional legislative appropriations.

(i) Provides that the Seventh Business Court Division is composed of the counties composing the Seventh Administrative Judicial Region under Section 74.042(h) (relating to the composition of the Seventh Administrative Judicial Region), subject to funding through legislative appropriations. Provides that the division is abolished on September 1, 2026, unless reauthorized by the legislature and funded through additional legislative appropriations.

(j) Provides that the Eighth Business Court Division is composed of the counties composing the Eighth Administrative Judicial Region under Section 74.042(i) (relating to the composition of the Eighth Administrative Judicial Region).

(k) Provides that the Ninth Business Court Division is composed of the counties composing the Ninth Administrative Judicial Region under Section 74.042(j) (relating to the composition of the Ninth Administrative Judicial Region), subject to funding through legislative appropriations. Provides that the division is abolished on September 1, 2026, unless reauthorized by the legislature and funded through additional legislative appropriations.

(l) Provides that the Tenth Business Court Division is composed of the counties composing the Tenth Administrative Judicial Region under Section 74.042(k) (relating to the composition of the Tenth Administrative Judicial Region), subject to funding through legislative appropriations. Provides that the division is abolished on September 1, 2026, unless reauthorized by the legislature and funded through additional legislative appropriations.

(m) Provides that the Eleventh Business Court Division is composed of the counties composing the Eleventh Administrative Judicial Region under Section 74.042(l) (relating to the composition of the Eleventh Administrative Judicial Region).

(n) Provides that this subsection and Subsections (d), (g), (h), (i), (k), and (l) expire September 1, 2026.

Sec. 25A.004. JURISDICTION AND POWERS. (a) Provides that the business court, subject to Subsections (b), (c), (d), (e), and (f), has the powers provided to district courts by Chapter 24 (District Courts), including the power to:

(1) issue writs of injunction, mandamus, sequestration, attachment, garnishment, and supersedeas; and

(2) grant any relief that is authorized to be granted by a district court.

(b) Provides that the business court, subject to Subsection (c), has civil jurisdiction concurrent with district courts in the following actions in which the amount in controversy exceeds $5 million, excluding interest, statutory damages, exemplary damages, penalties, attorney's fees, and court costs:

(1) a derivative proceeding;

(2) an action regarding the governance, governing documents, or internal affairs of an organization;

(3) an action in which a claim under a state or federal securities or trade regulation law is asserted against:

(A) an organization;

(B) a controlling person or managerial official of an organization for an act or omission by the organization or by the person in the person's capacity as a controlling person or managerial official;

(D) the auditor of an organization;

(4) an action by an organization, or an owner of an organization, if the action:

(A) is brought against an owner, controlling person, or managerial official of the organization; and

(B) alleges an act or omission by the person in the person's capacity as an owner, controlling person, or managerial official of the organization;

(5) an action alleging that an owner, controlling person, or managerial official breached a duty owed to an organization or an owner of an organization by reason of the person's status as an owner, controlling person, or managerial official, including the breach of a duty of loyalty or good faith;

(6) an action seeking to hold an owner or governing person of an organization liable for an obligation of the organization, other than on account of a written contract signed by the person to be held liable in a capacity other than as an owner or governing person; and

(7) an action arising out of the Business Organizations Code.

(c) Provides that the business court has civil jurisdiction concurrent with district courts in an action described by Subsection (b) regardless of the amount in controversy if a party to the action is a publicly traded company.

(d) Provides that the business court has civil jurisdiction concurrent with district courts in the following actions in which the amount in controversy exceeds $10 million, excluding interest, statutory damages, exemplary damages, penalties, attorney's fees, and court costs:

(1) an action arising out of a qualified transaction;

(2) an action that arises out of a contract or commercial transaction in which the parties to the contract or transaction agreed in the contract or a subsequent agreement that the business court has jurisdiction of the action, except an action that arises out of an insurance contract; and

(3) subject to Subsection (g), an action that arises out of a violation of the Finance Code or Business and 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.

(e) Provides that the business court has civil jurisdiction concurrent with district courts in an action seeking injunctive relief or a declaratory judgment under Chapter 37 (Declaratory Judgments), Civil Practice and Remedies Code, involving a dispute based on a claim within the court's jurisdiction under Subsection (b), (c), or (d).

(f) Provides that the business court, except as provided by Subsection (h), has supplemental jurisdiction over any other claim related to a case or controversy within the court's jurisdiction that forms part of the same case or controversy. Authorizes a claim within the business court's supplemental jurisdiction to proceed in the business court only on the agreement of all parties to the claim and a judge of the division of the court before which the action is pending. Authorizes the claim, if the parties involved in a claim within the business court's supplemental jurisdiction do not agree on the claim proceeding in the business court, to proceed in a court of original jurisdiction concurrently with any related claims proceeding in the business court.

(g) Provides that the business court, unless the claim falls within the business court's supplemental jurisdiction, does not have jurisdiction of:

(1) a civil action:

(A� brought by or against a governmental entity; or

(B) to foreclose on a lien on real or personal property;

(2) a claim arising out of:

(A) Subchapter E (Covenants Not to Compete), Chapter 15, and Chapter 17 (Deceptive Trade Practices), Business and Commerce Code;

(B) the Estates Code;

(D) the Insurance Code; or

(E) Chapter 53 (Mechanic's, Contractor's, or Materialman's Lien) and Title 9 (Trusts), Property Code;

(3) a claim arising out of the production or sale of a farm product, as that term is defined by Section 9.102 (Definitions and Index of Definitions), Business and Commerce Code;

(4) a claim related to a consumer transaction, as that term is defined by Section 601.001 (Definitions), Business and Commerce Code, to which a consumer in this state is a party, arising out of a violation of federal or state law; or

(5) a claim related to the duties and obligations under an insurance policy.

(h) Provides that the business court does not have jurisdiction of the following claims regardless of whether the claim is otherwise within the court's supplemental jurisdiction under Subsection (f):

(1) a claim arising under Chapter 74 (Medical Liability), Civil Practice and Remedies Code;

(2) a claim in which a party seeks recovery of monetary damages for bodily injury or death; or

(3) a claim of legal malpractice.

Sec. 25A.005. JUDICIAL AUTHORITY. Provides that a business court judge has all powers, duties, immunities, and privileges of a district judge.

Sec. 25A.006. INITIAL FILING; REMOVAL AND REMAND. (a) Authorizes an action within the jurisdiction of the business court to be filed in the business court. Requires the party filing the action to plead facts to establish venue in a county in a division of the business court, and requires the business court to assign the action to that division. Authorizes venue to be established as provided by law or, if a written contract specifies a county as venue for the action, as provided by the contract.

(b) Requires the business court, if the court does not have jurisdiction of the action, to, at the option of the party filing the action:

(1) transfer the action to a district court or county court at law in a county of proper venue; or

(2) dismiss the action without prejudice to the party's rights.

(c) Requires the business court, if, after an action is assigned to a division of court, the court determines that the division's geographic territory does not include a county of proper venue for the action, to:

(1) if an operating division of the court includes a county of proper venue, transfer the action to that division; or

(2) if there is not an operating division of the court that includes a county of proper venue, at the option of the party filing the action, transfer the action to a district court or county court at law in a county of proper venue.

(d) Authorizes a party to an action filed in a district court or county court at law that is within the jurisdiction of the business court to remove the action to the business court. Requires the business court, if the court does not have jurisdiction of the action, to remand the action to the court in which the action was originally filed.

(e) Prohibits a party to an action filed in a district court or county court at law in a county of proper venue that is not within an operating division of the business court or the judge of the court in which the action is filed from removing the action to the business court.

(f) Authorizes a party to file an agreed notice of removal at any time during the pendency of the action. Requires that the notice of removal, if all parties to the action have not agreed to remove the action, be filed:

(1) not later than the 30th day after the date the party requesting removal of the action discovered, or reasonably should have discovered, facts establishing the business court's jurisdiction over the action; or

(2) if an application for temporary injunction is pending on the date the party requesting removal of the action discovered, or reasonably should have discovered, facts establishing the business court's jurisdiction over the action, not later than the 30th day after the date the application is granted, denied, or denied as a matter of law.

(g) Requires that the notice of removal be filed with the business court and the court in which the action was originally filed. Requires the clerk of the court in which the action was originally filed, on receipt of the notice, to immediately transfer the action to the business court in accordance with rules adopted by the Supreme Court of Texas (supreme court), and requires the business court clerk to assign the action to the appropriate division of the business court.

(h) Provides that the filing of an action or a notice of removal in the business court is subject to Section 10.001 (Signing of Pleadings and Motions), Civil Practice and Remedies Code.

(i) Provides that removal of a case to the business court is not subject to the statutes or rules governing the due order of pleading.

(j) Provides that removal of a case does not waive a defect in venue or constitute an appearance to determine personal jurisdiction.

(k) Authorizes the judge of a court in which an action is filed to request the presiding judge for the court's administrative region to transfer the action to the business court if the action is within the business court's jurisdiction. Requires the judge to notify all parties of the transfer request and request a hearing on the transfer request. Authorizes the presiding judge, after a hearing on the request, to transfer the action to the business court if the presiding judge finds the transfer will facilitate the fair and efficient administration of justice. Requires the business court clerk to assign an action transferred under this subsection to the appropriate division of the business court.

(l) Requires the business court judge on establishment of jurisdiction and venue over an action to by order declare the county in which any jury trial for the action will be held as determined under Section 25A.015.

Sec. 25A.007. APPEALS. (a) Provides that the Fifteenth Court of Appeals, notwithstanding any other law and except as provided by Subsection (b) and in instances when the supreme court has concurrent or exclusive jurisdiction, has exclusive jurisdiction over an appeal from an order or judgment of the business court or an original proceeding related to an action or order of the business court.

(b) Requires that an appeal from an order or judgment of the business court or an original proceeding related to an action or order of the business court, if the Fifteenth Court of Appeals is not created, be filed in the court of appeals with appellate jurisdiction of civil cases for the county declared in an order under Section 25A.006(l).

(c) Provides that the procedure governing an appeal or original proceeding from the business court is the same as the procedure for an appeal or original proceeding from a district court.

Sec. 25A.008. QUALIFICATIONS OF JUDGE. (a) Requires a business court judge to:

(1) be at least 35 years of age;

(2) be a United States citizen;

(3) have been a resident of a county within the division of the business court to which the judge is appointed for at least five years before appointment; and

(4) be a licensed attorney in this state who has 10 or more years of experience in:

(A) practicing complex civil business litigation;

(B) practicing business transaction law;

(D) any combination of experience described by Paragraphs (A)-(C).

(b) Prohibits a business court judge from having had the judge's license to practice law revoked, suspended, or subject to a probated suspension.

Sec. 25A.009. APPOINTMENT OF JUDGES; TERM; PRESIDING JUDGE; EXCHANGE OF BENCHES. (a) Requires the governor, with the advice and consent of the senate, to appoint:

(1) two judges to each of the First, Third, Fourth, Eighth, and Eleventh Divisions of the business court; and

(2) one judge to each of the Second, Fifth, Sixth, Seventh, Ninth, and Tenth Divisions of the business court.

(b) Requires a business court judge to serve for a term of two years, beginning on September 1 of every even-numbered year.

(d)� Requires the business court judges by majority vote, not later than the seventh day after the first day of a term, to select a judge of the court to serve as administrative presiding judge for the duration of the term. Requires the remaining business court judges, if a vacancy occurs in the position of administrative presiding judge, to select a judge of the court to serve as administrative presiding judge for the remainder of the unexpired term as soon as practicable.

(e) Requires a business court judge to take the constitutional oath of office required of appointed officers of this state and file the oath with the secretary of state (SOS).

(f) Authorizes the business court judges, to promote the orderly and efficient administration of justice, to exchange benches and sit and act for each other in any matter pending before the court.

Sec. 25A.010. VACANCY. Requires the governor, with the advice and consent of the senate, if a vacancy occurs in an office of a business court judge, to appoint, in the same manner as the original appointment, another person to serve for the remainder of the unexpired term.

Sec. 25A.011. JUDGE'S SALARY. Provides that the salary of a business court judge is the amount provided by Section 659.012 (Judicial Salaries) and is required to be paid in equal monthly installments.

Sec. 25A.012. REMOVAL; DISQUALIFICATION AND RECUSAL. (a) Authorizes a business court judge to be removed from office in the same manner and for the same reasons as a district judge.

(b) Provides that a business court judge is disqualified and subject to mandatory recusal for the same reasons a district judge is subject to disqualification or recusal in a pending case. Requires that disqualification or recusal of a business court judge be governed by the same procedure as disqualification or recusal of a district judge.

Sec. 25A.013. PRIVATE PRACTICE OF LAW. Requires a business court judge to diligently discharge the duties of the office on a full-time basis and prohibits a business court judge from engaging in the private practice of law.

Sec. 25A.014. VISITING JUDGE. (a) Authorizes a retired or former judge or justice who has the qualifications prescribed by Section 25A.008 to be assigned as a visiting judge of a division of the business court by the chief justice of the supreme court. Provides that a visiting judge of a division of the business court is subject to objection, disqualification, or recusal in the same manner as a retired or former judge or justice is subject to objection, disqualification, or recusal if appointed as a visiting district judge.

(b) Requires a retired or former judge or justice, before accepting an assignment as a visiting judge of a division of the business court, to take the constitutional oath of office required of appointed officers of this state and file the oath with SOS.

Sec. 25A.015. JURY PRACTICE AND PROCEDURE; VENUE FOR JURY TRIAL. (a) Provides that a party in an action pending in the business court has the right to a trial by jury when required by the constitution.

(b) Requires that a jury trial in a case filed initially in the business court, subject to Subsection (d), be held in any county in which the case could have been filed under Section 15.002 (Venue: General Rule), Civil Practice and Remedies Code, as chosen by the plaintiff.

(c) Requires that a jury trial in a case removed to the business court, subject to Subsections (b) and (d), be held in the county in which the action was originally filed.

(d) Requires that a jury trial for a case in which a written contract specifies a county as venue for suits be held in that county.

(e) Authorizes the parties and the business court judge to agree to hold the jury trial in any other county. Prohibits a party from being required to agree to hold the jury trial in a different county.

(f) Requires that the drawing of jury panels, selection of jurors, and other jury-related practice and procedure in the business court be the same as for the district court in the county in which the trial is held.

(g) Provides that practice, procedure, rules of evidence, issuance of process and writs, and all other matters pertaining to the conduct of trials, hearings, and other business in the business court are governed by the laws and rules prescribed for district courts, unless otherwise provided by this chapter.

Sec. 25A.016. WRITTEN OPINIONS. Requires the supreme court to adopt rules for the issuance of written opinions by the business court.

Sec. 25A.017. COURT LOCATION; STAFFING. (a) Defines "remote proceeding."

(b) Requires the administrative presiding judge of the business court to manage administrative and personnel matters on behalf of the court. Requires the administrative presiding judge of the business court to appoint a clerk, whose office is required to be located in Travis County in facilities provided by this state. Requires the clerk to:

(1) accept all filings in the business court; and

(2) fulfill the legal and administrative functions of a district clerk.

(c) Requires each business court judge to maintain chambers in the county the judge selects within the geographic boundaries of the division to which the judge is appointed in facilities provided by this state. Authorizes the Office of Court Administration of the Texas Judicial System (OCA), for purposes of this section, to contract for the use of facilities with a county.

(d) Authorizes a business court judge, subject to Section 25A.015, to hold court at any courtroom within the geographic boundaries of the division to which the judge is appointed as the court determines necessary or convenient for a particular civil action. Requires a county using existing courtrooms and facilities, to the extent practicable, to accommodate the business court in the conduct of the court's hearings and other proceedings.

(e) Authorizes the business court to conduct a proceeding other than a jury trial as a remote proceeding to facilitate the resolution of a matter before the court. Prohibits the business court from requiring a party or attorney to remotely attend a court proceeding in which oral testimony is heard, absent the agreement of the parties.

(f) Requires the business court to conduct a remote proceeding from a courtroom or the facilities provided to a business court judge by this state.

(g) Requires the business court to provide reasonable notice to the public that a proceeding will be conducted remotely and an opportunity for the public to observe the remote proceeding.

(h) Requires the sheriff, in a county in which a division of the business court sits, to attend in person or by deputy the business court as required by the court. Provides that the sheriff or deputy is entitled to reimbursement from this state for the cost of attending the business court.

(i) Authorizes the business court to appoint personnel necessary for the operation of the court, including:

(1) personnel to assist the clerk of the court;

(2) staff attorneys for the court;

(3) staff attorneys for each judge of the business court;

(4) court coordinators; and

(5) administrative assistants.

(j) Provides that the court officials are required to perform the duties and responsibilities of their offices and are entitled to the compensation, fees, and allowances prescribed by law for the offices.

Sec. 25A.0171. REPORT. Requires OCA, not later than December 1 of each year, to submit to the legislature a report on the number and types of cases heard by the business court in the preceding year.

Sec. 25A.018. FEES. Requires the supreme court to set fees for filings and actions in the business court in amounts sufficient to cover the costs of administering this chapter, taking into account fee waivers necessary for the interest of justice.

Sec. 25A.019. SEAL. Provides that the seal of the business court is the same as that provided by law for a district court except that the seal is required to contain the name "The Business Court of Texas."

Sec. 25A.020. RULES. (a) Requires the supreme court to adopt rules of civil procedure as the court determines necessary, including rules providing for:

(1) the timely and efficient removal and remand of cases to and from the business court; and

(2)� the assignment of cases to judges of the business court.

(b) Authorizes the business court to adopt rules of practice and procedure consistent with the Texas Rules of Civil Procedure and the Texas Rules of Evidence.

SECTION 2. Amends Sections 659.012(a) and (e), Government Code, as follows:

(a) Provides that, notwithstanding Section 659.011 (Salaries Set in Appropriations Act) and subject to Subsections (b) (relating to the salary of certain judges and justices) and (b-1) (relating to providing that certain limitations on the combined base salary from all state and county sources apply to certain judges or justices):

(1) a judge of a division of the business court is entitled to an annual base salary from the state as set by the General Appropriations Act in an amount equal to at least $140,000, except that the combined base salary of a judge of a division of the business court from all state and county sources, including compensation for any extrajudicial services performed on behalf of the county, is prohibited from exceeding the amount that is $5,000 less than the maximum combined base salary from all state and county sources for a justice of a court of appeals other than a chief justice as determined under this subsection; and

(2)-(4) makes no changes to these subdivisions.

(e) Requires the Comptroller of Public Accounts of the State of Texas, for the purpose of salary payments by the state, to determine from sworn statements filed by the business court judges that the required salary limitations provided by Subsection (a) are maintained. Makes a nonsubstantive change.

SECTION 3. Amends Section 837.001(a), Government Code, as follows:

(a) Provides that membership in the Judicial Retirement System of Texas Plan Two is limited to persons who have never been eligible for membership in the Judicial Retirement System of Texas or the Judicial Retirement System of Texas Plan One and who at any time on or after the effective date of this Act are judges, justices, or commissioners of certain courts, including the business court. Deletes existing text creating an exception under Subsection (b). Makes nonsubstantive changes.

SECTION 4.� (a) Provides that the supreme court has exclusive and original jurisdiction over a challenge to the constitutionality of this Act or any part of this Act and is authorized to issue injunctive or declaratory relief in connection with the challenge.

(b) Requires the business court, if the appointment of judges by the governor to the divisions of the business court under Section 25A.009, Government Code, as added by this Act, is held by the supreme court as unconstitutional, to be staffed by retired or former judges or justices who are appointed to the court as provided by Section 25A.014, Government Code, as added by this Act.

SECTION 5. Provides that the business court, except as otherwise provided by this Act, is created September 1, 2024.

SECTION 6.� (a) Requires the governor, as soon as practicable after the effective date of this Act, to appoint judges to the First, Third, Fourth, Eighth, and Eleventh Business Court Divisions as required by Section 25A.009, Government Code, as added by this Act.

(b)� Requires the governor, on or before September 1, 2026, but not before July 1, 2026, to appoint judges to the Second, Fifth, Sixth, Seventh, Ninth, and Tenth Business Court Divisions as required by Section 25A.009, Government Code, as added by this Act.

SECTION 7. (a) Provides that the business court, notwithstanding Chapter 25A, Government Code, as added by this Act, is not created unless the legislature makes a specific appropriation of money for that purpose. Provides that a specific appropriation, for purposes of this subsection, is an appropriation identifying the business court or an Act of the 88th Legislature, Regular Session, 2023, relating to the creation of a specialty trial court to hear certain cases or of the business court.

(b) Provides that a court of appeals, notwithstanding Section 25A.007(a), Government Code, as added by this Act, retains the jurisdiction the court had on August 31, 2024, if the business court is not created as a result of Subsection (a) of this section.

SECTION 8. Provides that the changes in law made by this Act apply to civil actions commenced on or after September 1, 2024.

SECTION 9. Effective date: September 1, 2023.