Recap from the 88th - Changes to Texas Courts

The new Texas “Chancery” Business Court, H.B. 19 is an interesting development in the state’s judiciary. Several other states already have a similar business focused court system.

Texas has over 200 specialized courts, from probate courts 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. H.B. 19 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.

The types of cases that can go to this newly created court are civil cases (nothing criminal) with jurisdiction concurrent with district courts if the amount in controversy exceeds $5 million, and is:

• a derivative proceeding;
• an action regarding the governance, governing documents, or internal affairs of an organization;
• an action in which a claim under a state or federal securities or trade regulation
• act or omission by an owner, controlling person, or managerial official of the organization;
• an action alleging that an owner, controlling person, breached a duty owed to an organization, including the breach of a duty of loyalty or good faith;
• 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
• an action arising out of the Business Organizations Code.

There are additional jurisdictions for cases with amounts in controversy exceeding $10 million and that are either:

• a contract or commercial transaction in which the parties agreed that the business court has jurisdiction of the action, except an action that arises out of an insurance contract; and
• an action that arises out of a violation of the Finance Code or Business & Commerce Code by an organization or an officer other than a bank, credit union, or savings and loan association.

Disputes dealing with foreclosure or enforcing a lien on real property are specifically excluded from the business courts’ jurisdiction.

The law is effective on September 1, 2023.

S.B. 1259 is a straightforward bill that increases the total “amount in controversy” for JP courts from $10,000 up to $20,000.

Under current law, residential rental disputes can only be settled for up to $10,000. S.B. 1259 would increase the maximum amount a JP court may award for residential rental disputes to $20,000, which is on par with the existing amount people can sue for in justice court.

This law takes effect on September 1, 2023.

H.B. 1382 property tax sales and resales can be conducted either through an in-person auction or an online auction, but a sale of real property taken in the execution of a judgment may only be offered through an in-person auction. This law change expands upon the prior law for tax sales and applies it to judgment sales.

The law allows a county commissioners court the option to authorize the officer charged with conducting a public sale of certain real property taken in execution of a judgment to conduct an online auction as an alternative to conducting an in-person sale.

However, this law change does NOT apply to the real property foreclosure process (including deed of trust or other contract liens on real property). Sales governed by Section 51.002, Property Code (i.e. real property foreclosure) are excluded, which means these sales are still in-person on the courthouse steps the first Tuesday of the month.

The law goes into effect September 1, 2023.