During the most recent legislative session, lawmakers passed bills to create a new system of courts in Texas that would only hear cases related to commercial matters.
These new business courts, as well as an appeals court to go with them, will open on Sept. 1. They’re set apart both by the kinds of cases they’ll take on, but also by how their judges are selected.
All summer long, Gov. Greg Abbott has announced his appointments to the courts. Most of the other judges in the state are elected.
Carliss Chatman, an associate law professor at the Dedman School of Law at Southern Methodist University in Dallas, spoke to Texas Standard about the new courts. Listen to the interview above or read the transcript below.
This transcript has been edited lightly for clarity:
Texas Standard: Give us an example of some of the kinds of cases these courts might hear.
Carliss Chatman: Well, they’re going to hear breach of fiduciary duty cases and corporate cases. I believe they’re going to have original jurisdiction on those. Which means if it is something about the internal affairs of a corporation, likenif a corporation has a merger, they’re going to hear those cases, and then they’ll also have jurisdiction on complex business cases generally. So if shell needs to sue Exxon about a lease in South Texas, it could go to that court.
And, you know, I think the hope is by taking those kind of complex, high-dollar, complicated, one-business-sues-another cases out of the other courts, it can stop some of the bogging down that happens when these mega multimillion-dollar cases happen.
I guess that’s the advantage of having this separate system of courts, at least as some of the legislative framers saw it. What about the downsides?
You know, some of the downsides: As lawyers, we all like to fight about things if we can. That’s what we’re paid to do. And so, to the extent that there’s concurrent jurisdiction where, let’s say, a regular district court has jurisdiction and the business court has jurisdiction, parties can slow things down.
There’s also concern about the fact that in Houston, Dallas, Austin, we elect our judges, right? And we have those judges that we want to hear our controversies. And if a big business doesn’t like the judge in Houston, doesn’t like the judge in Austin, they can pick this business court who may be a more favorable judge and have a jurisdictional dispute that draws it out – particularly if it’s the smaller guys.
And I think the other concern is, you know, 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? Is that really a fair way to do things?
The judges of these courts, as I understand it, will serve two-year terms. Those seem awfully brief, especially when you consider the prospect of, say, cases having progressed to a certain point and then all of a sudden you have a judicial election. I mean, it seems like this could actually slow things, perhaps, or create some confusion.
I think it could. But, you know, I like to compare it to the Delaware Court of Chancery, which operates like a well-oiled machine. Those business cases go so much faster when there’s a sophisticated judge.
And beyond the initial discovery disputes, once there’s a body of law established and parties can predict the outcomes because you’ve got specialized judges doing it, I think the hope is specialized judges will have more predictable outcomes. The sophisticated parties are going to be more likely to settle.
And, you know, I hope that we end up with a Texas rocket docket in the same way that the Delaware has with the Court of Chancery, which could then encourage businesses to relocate to Texas or to do more business in Texas if they know that they have judges they can trust. So I tend to think that turning over every two years is not a huge issue.
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Okay, let me throw out a hypothetical here. And I think it’s one that a lot of listeners have probably been thinking about as they’ve been hearing you talk, and that is a situation in which you have a major corporate entity established in Texas. They want the venue to be this new business court.
The plaintiffs themselves, they don’t want it. They would rather it be heard in district court, for example. Is this going to confound plaintiffs? Especially, perhaps, smaller-dollar plaintiffs or those who are more weakly-positioned financially than some of these big businesses. Will this put them at a disadvantage?
Well, you know, I know that they have original jurisdiction in certain types of matters that are worth $10 million or more. If it’s a small enough matter, I don’t think it’s automatically gonna go to the business court and I think a district court is going to be more likely to maintain the jurisdiction.
It’s important to note that outside of the cases where they have original jurisdiction, the plaintiff is the master of the lawsuit. The plaintiff gets to pick the jurisdiction, and if jurisdiction applies, if it’s appropriate, then courts are unlikely to send the case elsewhere. So I’m not as worried about that.
I think that when it comes to like shareholder derivative actions – which means you own stock in the company and you’re concerned about the way the company is being managed, and so you want to sue about that – now you won’t have a choice in that matter. But that type of litigation is so sophisticated that I don’t know that you want a non-expert judge handling the case. And that is why Texas is now instituting these business courts.
But there are 26 other states that have these business courts. And it does tend to make companies choose to incorporate in a state that has a business court because they want that expert judge handling those internal affair disputes. And I think it really is for the best of the shareholder. You get a resolution faster. The judge didn’t have to get up to speed.
So I think the everyday cases – like, you know, let’s say it’s a class action about a recalled vehicle or those kinds of consumer matters – I don’t think it’s going to be a concern. What this court really is about is Exxon suing Shell or those complicated corporate matters.
