Texas House Rep. Brooks Landgraf (R-Odessa) introduced House Bill 1875 on March 11 proposing to create a new statewide business court system in which the governor appoints the judges who would handle company v. company disputes of $10 million or more.
Rep. Landgraf did not respond to requests for an interview, but two prominent Texas corporate lawyers – Evan Young and Jason Villalba – helped draft the legislation and support it. Both make strong arguments why a separate business trial court and appellate court would be good for Texas.
Young is an appellate partner at Baker Botts, and Villalba is a transactional lawyer at Foley. Both lawyers made it clear that they are speaking for themselves and not on behalf of their respective law firms.
The Texas Lawbook discussed with both lawyers the reasons behind the call for a separate business appeals court, the constitutional questions involved and the likelihood of the legislation passing this year.
Texas Lawbook: Why does Texas need a business court?
Jason Villalba: When you are dealing with billions of dollars and thousands of jobs are on the line, you don’t want to be rolling the dice. There needs to be a judicial ecosystem in place that better handles these type of cases. Having predictable outcomes is crucial in these large business disputes. Texas needs something like Delaware Chancery Courts to put us on the same global scale.
Evan Young: By now, the majority of states have business courts. Those courts promptly resolve complex business or commercial disputes and develop reliable precedents—all while reducing the burden on judges who must preside over the important civil, criminal, and family-law cases that make up the rest of the docket. Delaware’s Court of Chancery is the most famous business court, of course — and, along with business courts in several other states, it often resolves major business disputes involving Texas companies. Why shouldn’t Texas courts be deciding those cases using Texas law and with the advocacy of Texas lawyers?
Texas is, after all, home to an astonishing number of national and international businesses. Why are they often incorporated in Delaware and not in Texas? It isn’t because of the charms of Wilmington or even Rehoboth Beach. It is for legal reasons that go back deep in history. It isn’t even that Delaware (or other states’) law is so good or clear—Texas business and commercial law is excellent, now more than ever. A big part of it is the long-term confidence that Delaware has earned by having invested in a court that allows a small group of truly world-class business judges to focus on business cases. Those judges have developed expertise and meaningful precedents, and they can resolve cases with blinding speed.
In Texas, by contrast, we have spread this jurisdiction over hundreds of district and county-court-at-law judges. Our judges are generally excellent, but because so many have the same jurisdiction, none of them has the time or opportunity to develop the kind of specialization that other states’ business-court judges can hone. They may not get another case like it for a long while — and if they do, they will have many other important matters crying for attention at any given moment. Indeed, Texas law requires all sorts of matters to be given priority, so it’s no surprise that a really complex business dispute can often take far, far longer to resolve here than elsewhere.
Texas deserves to have what other states have. If we had a business court with a small number of judges specializing in that narrow category of cases, that court could begin to generate precedent and would begin to experience efficiencies of scale that could accelerate the resolution of cases. That speed, efficiency, and predictability, in turn, would reduce the incentive to bring complex cases to other states. The rest of the docket would benefit, too. Judges who otherwise might groan at a whale of a case that suddenly appeared, and wonder how they’ll address the other pressing matters before them, would be able to manage their case load without such a disruption. There’s real upside for all Texas courts and all Texas lawyers if we make a modest investment that has been so beneficial elsewhere.
Lawbook: Why is the separate business court of appeals necessary?
Young: In a state that does not have any intermediate court of appeals (like Delaware) or one that has only a single panel (Nevada has only three intermediate judges for the entire state), a specialized panel would be puzzling. But Texas is a big state and we have nearly 100 intermediate appellate justices. Being able to proceed rapidly through the appellate process, and not just the trial court, is essential to the goal of proving that Texas courts can expeditiously resolve business-law cases. Likewise, developing clear precedent is of outsized importance; spreading appeals among many dozens of justices will be less effective than having a smaller panel able to give greater focus on business appeals.
Villalba: Our current judges are highly qualified. We have brilliant judges.This is not about our current court being unfair to businesses. This is about a specialty court that has the experience to deal with very complicated lawsuits.
Lawbook: Some people – including supporters of a business court – have suggested that the Texas Constitution’s requirement that state judges be elected could be an issue. Do you agree? How does the legislation get around it?
Young: The Texas Constitution certainly does not require that all judges be elected. Our Constitution expressly and specifically identifies those judges who are subject to election—and it also expressly authorizes the Legislature to create new courts when the Legislature finds that doing so would be in the state’s interest. The Texas Supreme Court long ago approved the Legislature’s creation of non-elected courts with jurisdiction that overlaps that of existing courts.
Lawbook: Why the decision to create a new business court instead of the method most states have of designating two judges in the district courts with expertise in complex commercial litigation as the “business court judges” and shift the complex cases to those judges?
Young: Delaware has three counties. Texas has 254. Business disputes can arise anywhere, not just Houston or Dallas. Having a judge or two in those big counties that focused on business-court disputes would be better than nothing, but it would not help in a county with a single judge—or a county that must share its judge with other counties. A single court with statewide jurisdiction will best serve our state and avoid creating enclaves, but instead help generate the benefits that come with uniformity and speed, allowing the business court judges to divvy up the cases equally and randomly. Doing so will eliminate as many variables as possible that would impair either rapid processing of cases or the development of a stable, reliable, principled, Texas-wide jurisprudence.
Lawbook: What are the chances of this legislation passing this year?
Villalba: The headwinds are strong. It is an uphill battle. This session is going to be difficult. A great part of this legislative session is occupied by issues regarding the pandemic and the power issues from the winter storm. But I think this is absolutely critical to the development of the Texas economy. We need this as part of our future growth.