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Editorial 6 MIN READ

Texas wants a Chancery of its own

HB 19 is on the governor's desk, five divisions are planned, and the $5 million threshold does most of the work

The Editors
Staff, Incorporator.org
6 min read Updated
Contents 6 sections
  1. What the court actually is
  2. Why Texas is doing this now
  3. The funding and staffing picture
  4. Practical effect before 2025
  5. What remains unclear
  6. Sources

he Texas Business Court bill, HB 19, cleared the Senate on May 19 and is now awaiting Governor Abbott's signature. If he signs, Texas gets a specialized trial court for high-dollar commercial disputes with five regional divisions and a September 1, 2024 opening date.

This is the second time Texas has tried this. The 87th Legislature passed an HB 19 in its second special session in 2021 that sketched the court but failed to fund or fully staff it. The 2023 bill, from the 88th Legislature's regular session, is the operational version: funding, jurisdictional thresholds, judge-selection mechanics, and a dedicated appellate track through a new Fifteenth Court of Appeals authorized in companion bill SB 1045.

What the court actually is

HB 19 adds Chapter 25A to the Texas Government Code, creating a statewide business court with original and concurrent jurisdiction over defined categories of commercial disputes. The court is not a separate constitutional court; it sits inside the existing Texas trial-court system and its judges are appointed by the governor for two-year terms, with advice-and-consent from two-thirds of the Senate. A judge must be a Texas-licensed attorney with at least ten years of experience in complex civil business matters or as a civil trial judge.

Five divisions are provided for at the outset, seated in the First (Dallas), Third (Austin), Fourth (San Antonio), Eighth (Fort Worth), and Eleventh (Houston) Administrative Judicial Regions. Six more divisions across the rest of the state are authorized on paper but not funded in this bill. The operative five cover, between them, the dominant share of Texas corporate headquarters and commercial filings.

The amount-in-controversy floor is $5 million for most categories of case, with a lower $10 million floor for derivative suits and actions involving publicly traded companies. Cases below the threshold stay in district court. Cases above it may be filed in the business court directly or removed there on motion, with the regular trial court retaining concurrent jurisdiction if the parties prefer.

The substantive jurisdiction is the list you would expect: derivative actions, actions on securities and business-entity statutes, disputes among owners of a business, internal-affairs claims, and contract disputes where every party is a business organization and the amount in controversy exceeds the threshold. The court does not take personal injury, family, probate, or consumer-protection work.

Why Texas is doing this now

The Delaware Court of Chancery hears on the order of 1,900 new matters a year and has, by the state's own calculation, sixty-plus years of cumulative case law that transactional lawyers rely on when drafting around fiduciary duty, appraisal, and controller transactions. Any state that wants institutional capital to incorporate at home needs an answer to that.

Delaware's answer is a single court with statewide equity jurisdiction, five sitting judges as of 2023, no juries, and written opinions issued within weeks of argument in most matters. Texas is proposing something architecturally different: five regional divisions rather than one central court, civil juries available on request, and an appellate track through a new Fifteenth Court of Appeals rather than straight up to the state supreme court.

The bet is that proximity plus specialization beats a single far-away venue for Texas-headquartered companies that already prefer to litigate in-state. It is also, implicitly, a pitch to companies considering reincorporation. The Delaware franchise-tax bill for a mid-cap public company runs well into the six figures annually; Texas has no franchise tax on the Delaware model, and a credible specialized court would remove the most common reason the decision is not seriously considered.

Whether that pitch works depends on things HB 19 cannot legislate: whether the Texas Supreme Court and the new Fifteenth Court of Appeals produce opinions at a pace and with the reasoning density that makes out-of-state lawyers comfortable citing them, and whether the bench attracts judges with the kind of complex-commercial background that Chancery has assembled over decades.

The funding and staffing picture

SB 1045, which moved in parallel, creates the Fifteenth Court of Appeals with statewide jurisdiction over business-court appeals and appeals against the state in civil matters. Five justices, elected statewide. This is the piece that was missing in 2021 and is the reason the 2023 package has a chance of actually opening for business.

The appropriations pattern in the bill funds an initial judicial complement across the five operative divisions, court staff, and the administrative overhead to run a docket on the complex-commercial pattern (early case management, expert deadlines set at filing, written opinions as the norm). The bill directs the Office of Court Administration to publish rules and forms, and the Texas Supreme Court to promulgate any procedural rules the business court will use that depart from the general Rules of Civil Procedure. Those rules are due before the September 1, 2024 opening.

Judges are appointed, not elected, a departure from the Texas norm for trial judges. The two-year term (renewable) is short by any measure; it keeps the governor and Senate in the loop more often than a Delaware chancellor's twelve-year term, and it is one of the trade-offs the Legislature made to get the bill through. It is also one of the items most likely to be revisited in a future session if the court starts to produce material opinions and bench stability becomes an issue.

Practical effect before 2025

For a founder forming a Texas entity this spring, HB 19 does essentially nothing yet. The court does not open until September 2024. Cases filed before then stay in district court. The pleading standards, discovery rules, and jury availability the business court will use are still to be written, and the Supreme Court will likely not publish them until mid-2024.

The practical signal is about the next redomestication decision, not today's formation. If you are a Texas-headquartered company considering whether to sit in Delaware for deal reasons, the calculation for a 2024 or 2025 decision looks different than it did a year ago. Not different enough to move yet. Different enough to watch the first year of docket statistics when they start to appear in late 2025.

For Delaware, the effect is also mostly prospective. Chancery's franchise value does not disappear because a second state stands up a specialized court; Delaware's case law is cumulative and its bench is the best in the country at what it does. The risk to Delaware is the slow one: if Texas produces credible opinions for a decade, the reincorporation math for Texas-based companies shifts, and the defaults that law firms drop into term sheets start to acknowledge an alternative.

What remains unclear

Three things are genuinely open.

The first is whether the $5 million threshold is the right knob. Set too high, the court starves for cases and precedent accumulates slowly; set too low, the court drowns in mid-size disputes and loses the complex-commercial focus. HB 19 gives the Legislature room to revisit this in future sessions, which it probably will.

The second is whether the five-division structure produces one body of law or five. Chancery's coherence comes from a small bench that sits together and reads each other's opinions. Five divisions across Texas may produce divisional differences that take years to reconcile through the Fifteenth Court of Appeals, and until they reconcile, the predictability story is weaker than Delaware's.

The third is enforcement outside Texas. A Delaware Chancery opinion travels; sister-state courts treat it as persuasive on questions of Delaware corporate law. A Texas business-court opinion on Texas corporate law will travel the same way in time, but the first decade is quiet. The court has to produce before anyone cites it.

If Abbott signs this bill in the next two weeks, which is expected, the Texas Business Court moves from proposal to countdown. The next useful date is mid-2024, when the procedural rules should be public and the first judicial appointments announced. Everything before then is anticipation.

Sources

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