Texas is ready to expedite complex commercial litigations in the state and strengthen its reputation as a business-friendly jurisdiction by launching a new system of business courts that will start to operate on September 1, 2024.

This brand new judicial structure was legally set up through House Bill 19 signed into law by Governor Gregg Abbott on June 9, 2024, and will result in the creation of five courts based in major cities within the state.

  • Houston (Eleventh Business Court Division)
  • San Antonio (Fourth Business Court Division)
  • Fort Worth (Eighth Business Court Division)
  • Dallas (First Business Court Division)
  • Austin (Third Business Court Division)

Six more courts will be created soon to cover the rural areas of the state and they are currently awaiting legislative approval and funding for the construction of their facilities and other operations expenditures.

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The creation of these courts marks a significant shift in how Texas will handle high-profile business disputes. Proponents argue that they will enhance the efficiency of the state’s legal system and attract more corporations to its territory.

Unlike most Texas judges who are elected, the judges for these new business courts will be appointed directly by the governor. This selection process has been a point of both praise and controversy, with supporters arguing that it allows Abbott to appoint judges based on their specialty while critics expressed concern about the possibility that political influences (such as the many millions of dollars in political donations from oil and gas giants) could affect the selection process.

Business Courts Will Hear Complex Corporate Cases Mostly

texas among most business friendly states

These new business courts will handle specific cases including contract disputes exceeding $10 million, legal proceedings associated with the Finance and Business Codes, quarrels involving “qualified transactions”, and corporate proceedings involving amounts of at least $5 million. It will also handle all cases where a publicly traded company is involved.

These courts will not handle probate, family, consumer, insurance, personal injury, medical malpractice, or government-related cases. Their focus is solely on complex business litigation.

Governor Abbott announced the appointment of the judges that will preside over the first five business courts. The lineup includes former and current seated judges and experienced litigators in the business field.

  • For the Houston court, Sofia Adrogué and Grant Dorfman were appointed.
  • San Antonio will see Marialyn Barnard and Stacy Sharp take the bench.
  • Jerry Bullard and Brian Stagner will preside in Fort Worth.
  • The Dallas division will be led by Andrea Bouressa and William “Bill” Whitehill.
  • Austin’s court will have Melissa Andrews and Patrick Sweeten as judges.

Many of these appointees have backgrounds in corporate law or have represented large business interests in the past, especially within the oil industry. Critics warn that these connections are major conflicts of interest and that there shouldn’t be a court solely for businesses, especially when its full of oil-friendly judges.

Are Abbott’s Business Courts Good for Democracy, Businesses, and the Little Guy?

Supporters of the new court system, including business groups and a group of legal experts, argue that it will bring several benefits. They believe that specialized judges can handle complex business cases more efficiently than people with no background in this particular field.

This should supposedly create a more predictable legal environment for corporations. This consistency in rulings, they argue, could make Texas an even more attractive destination for businesses seeking to incorporate or expand their operations.

Glenn Hamer, CEO of the Texas Association of Business, emphasized the importance of these courts, stating: “With these courts set to go into effect on September 1, 2024, it’s important to reflect on the profound positive impact they will have on business operations and expansion throughout the Lone Star State.”

Concerns About Political and Industry Biases Emerge

Despite the enthusiasm from business groups, the creation of these courts has been the subject of controversy among groups that think it is a major blow to the state’s democratic system.

One major issue cited is judicial independence. Critics worry about the governor’s power to appoint judges and their short two-year terms. This would allow Abbott or anybody who takes his seat to quickly replace judges who don’t rule favorably for certain interests. This problem is compounded by the massive political contributions Governor Abbot has received from major corporations, namely big oil and gas. Some critics are rather suspicious that Abbott happened to appoint a bunch of pro-business judges to the new business court after receiving so much money from various major lobbies.

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Anne Tucker from Georgia State University College of Law summarized the issue with appointing rather than electing as follows: “The judge essentially doesn’t have the last say if who’s on the court can be quickly changed.” This means that Abbott could potentially swap out a judge if he thinks he will make a decision harmful to the oil and gas industry (or other large donors).

Environmental advocates have also expressed particular concern that cases against state regulators, especially those involving environmental permits, will now be heard by judges who are potentially more sympathetic to industry interests. This modification in the state’s judiciary system could have significant implications for environmental protection efforts in Texas.

There are also potential constitutional challenges regarding the appointment of judges rather than their election, as required for most Texas courts. This deviation from standard practice has raised questions about the legality of the new system.

Others are worried that the specialized court system may give an advantage to large corporations over smaller businesses or individual plaintiffs. This could potentially create an uneven playing field in commercial disputes.

Adrian Shelley, director of the Texas office at Public Citizen, a progressive advocacy organization, summarized these concerns succinctly: “Greg Abbott created a boutique court for corporations where he, not the voters, gets to pick the judges. It’s that simple.”

Meanwhile, Carliss Chatman, an associate law professor at the Dedman School of Law in Dallas, argued: “why do businesses get to be special? All right. Why do they get to have judges who are experts and who are appointed when all of the rest of us are kind of at the whims of the political system?”

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However, she finds comfort in the fact that not all business cases will rely on these courts. “What this court really is about is Exxon suing Shell or those complicated corporate matters.”

Abbott’s Motives Have Been Questioned Amid His Relationship with Oil & Gas Companies

To no one’s surprise, the creation of these business courts has been strongly supported by various industry groups, particularly the oil and gas sector. The Texas Oil & Gas Association advocated for the bill, and Energy Transfer, a major oil pipeline company, testified in favor of the legislation.

This support has raised questions about potential conflicts of interest, given that several appointed judges have previously represented fossil fuel companies.

Governor Abbott has received significant campaign contributions from the oil and gas industry during his tenure, leading some critics to suggest a connection between these donations and the creation of the business-friendly court system.

As the September 1 launch date approaches, businesses, legal professionals, and advocacy groups are closely monitoring the implementation of this new court system. While proponents are optimistic about its potential to streamline complex business cases and boost Texas’ economy and legal system, critics remain concerned about issues involving fairness and judiciary independence.

The true impact of these courts on Texas’ legal landscape and business environment will only become clear as they begin hearing cases in the coming months and years. One thing is certain: this new system represents a significant shift in how Texas handles high-profile business disputes.