There have been reports of some confusion regarding whether cases pending in Texas state courts on Aug. 31 that otherwise satisfy the jurisdictional requirements of the Texas business court can be removed to the business court after it opens its doors on Sept. 1.
The answer is clear. Attempts to remove these cases should be rejected by the business court.
Section 1 of House Bill 19, enacted by the 2023 Texas Legislature, created a new Chapter 25A of the Texas Government Code to establish the business court. The language in House Bill 19 is clear that only civil actions commenced on or after Sept. 1 are capable of being filed in, or removed to, the business court:
SECTION 5. Except as otherwise provided by this Act, the business court is created September 1, 2024.
SECTION 8. The changes in law made by this Act apply to civil actions commenced on or after September 1, 2024.
The House Research Organization’s summary of HB 19 states: “The bill would take effect September 1, 2023 and would apply to civil actions commenced on or after September 1, 2024.”
The likely culprit for any confusion is that Sections 2-8 of House Bill 19 do not appear in Texas Government Code Chapter 25A, so lawyers who consult the Texas business court’s codified statute will not see the language from Sections 5 and 8 quoted above.
Also possibly contributing to uncertainty are other provisions of Tex. Gov’t Code Sec. 25A that, read standing alone, make it appear as if transfer of pending cases is feasible. For example, Texas Government Code Sec. 25A.006 (k) provides state court judges the ability to request that a case pending in their court be transferred to the business court by applying to the presiding judge of their administrative region:
“The judge of a court in which an action is filed may 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. The judge shall notify all parties of the transfer request and request a hearing on the transfer request. After a hearing on the request, the presiding judge may transfer the action to the business court if the presiding judge finds the transfer will facilitate the fair and efficient administration of justice. The business court clerk shall assign an action transferred under this subsection to the appropriate division of the business court.”
This provision, read without awareness of Sections 5 and 8 of House Bill 19, might lead counsel to conclude that it would support the transfer to the business court of cases filed in state court before Sept. 1. The clear answer to that possibility is no.
The language used in Section 8 of House Bill 19 — “The changes in law made by this Act apply to civil actions commenced on or after September 1, 2024” — means that if an action was commenced in state court before Sept. 1, nothing in Texas Government Code Chapter 25A exists, from a legal perspective, in the laws of Texas that could direct the future course of that action to the business court.
While the confusion regarding the transfer of cases filed before Sept. 1 to the business courts is understandable, the legislative text and history make it clear that such removal isn’t authorized.
We contacted Jon Heining, general counsel of the Texas Legislative Council, to ask whether it was possible for the online codified presentation of Chapter 25A to be amended to make reference to Sections 5 and 8 of House Bill 19, possibly in the end statement: “Added by Acts 2023, 88th Leg., R.S., Ch. 380 (H.B. 19), Sec. 1, eff. September 1, 2023.” He confirmed that was not possible, and he helpfully advised that legal writing that references those provisions of House Bill 19 should cite to the published session law: “Sections 5 and 8, Chapter 380 (H.B. 19), Acts of the 88th Legislature, Regular Session, 2023,” with the electronic version of that document being made available by the Texas Secretary of State at https://webservices.sos.state.tx.us/legbills/files/RS88/HB19.pdf.
Why Didn’t the Legislature Provide for Pending Case Removal to the Business Court?
The clear intent of HB19’s authors was that pending cases in Texas state courts should not be pulled and sent to the business court Sept. 1.
With the small number of judges initially serving the business court, the limited history, precedent and resources of the business court when it opens, and the potential for constitutional challenge, it was recognized that the business court would not have the resources to respond to a possible avalanche of hundreds if not thousands of pending cases.
Almost all business cases pending Aug. 31 that would meet the jurisdictional thresholds of the business court will have been originally filed in reliance on existing law, the rules and systems supporting it and much expenditure of money and effort, including the effort of the judges of those courts. The authors of the legislation recognized that it would be inappropriate to disturb that status quo. In addition, there was practical concern that pursuing a different result would elicit stronger opposition to House Bill 19 from litigants happy with the courts their cases were in and could incite focused opposition from trial and appellate judges handling cases that might be transferred.
Since House Bill 19 was passed and signed into law in June 2023, every potential filer of new actions and their counsel has been on notice that the business court would present a potential forum for their disputes commencing Sept. 1, a date both clear and fixed well in advance.
We Really, REALLY Want to Move Our Client’s Pending Action to the Business Court. What Can We Do?
Counsel managing a case pending in Texas state court prior to Sept. 1 can explore a couple possibilities for moving it to the business court, assuming the action satisfies the court’s jurisdictional requirements. Some potential approaches might include:
- The parties can agree to nonsuit their pending action and refile in the business court.
- Assuming no counterclaim has been elicited, a plaintiff may unilaterally terminate the action and refile it in the business court. Some caution should be exercised regarding any of the plaintiff’s supplemental claims that are not within the business court’s express subject matter jurisdiction; these claims require agreement of the parties and the business court to proceed in the business court.
If a pending state court action does include counterclaims, claims within the business court’s supplemental jurisdiction or claims expressly excluded from business court jurisdiction, the situation will be much more complicated. One of the procedural innovations associated with the business court is the potential for parallel proceedings in the business court and a state court. How those will be managed in practice is at present unknown.
In considering these issues, parties should bear in mind that a key policy objective of the business court and the Fifteenth Court of Appeals is to promote efficiency in the resolution of business disputes. If parties to litigation raising these kinds of issues propose procedural solutions and case management actions not previously envisioned or allowed by Texas courts generally that promise efficiency in resolving the dispute, that should carry weight in the business court. An example of such a proposal might be a Rule 11 agreement that some, or all, of the rulings of the state court where the action was initially filed carry over into the newly filed business court proceeding.
If the experience of other states that have created business courts, and the recognized creativity and energy of Texas trial lawyers, are guides, parties in the early days of the business court may encounter instances of these matters being litigated despite the clarity of the statutory language.
Michael W. Tankersley serves as chair of the Business Court Working Group of the Texas Business Law Foundation, of which he is a founding director and former chair.
Eugene Zilberman is a partner and trial attorney at Steptoe LLP in Houston and a member of the Business Court Working Group.
The views expressed herein are those of the authors and do not necessarily represent the positions of their firms, their clients or other members of the Texas Business Law Foundation.