Following the Texas Supreme Court’s recent decision rejecting a constitutional challenge to the new Fifteenth Court of Appeals, the specialized state-wide intermediate appellate court, and Texas Business Court, the specialized lower court, both created by the Legislature in 2023, will begin hearing cases on September 1. While the Supreme Court’s ruling validated the Legislature’s authority to establish the Fifteenth Court of Appeals, these specialized courts effectively are without precedent, leaving many questions to be answered in the years to come.
Why Businesses May Choose the Specialized Texas Business Court
The rationale offered for these courts is that their specialized nature encourages judicial efficiency and ensures that cases within the jurisdiction of these courts will be decided by a judge (or panel of judges) competent to handle business or complex litigation, resulting in consistency in precedent. To that end, Texas Business Court judges will be required to issue written opinions in their cases, which is designed to build a stable and predictable body of precedent for Texas business law.
With the efficiency and predictability of the specialized Texas Business Court and Fifteenth Court of Appeals, advocates theorize that more businesses will choose Texas as the preferred jurisdiction for their commercial disputes. Thus, as businesses grow more confident in the new specialized Texas judicial system, advocates suggest the number of business suits filed in Texas will increase.
These Specialized Courts Are Without Precedent
Specialized courts are nothing new to Texas. For example, there are specialized family courts and probate courts. However, there is a fundamental difference between the Texas Business Court and Fifteenth Court of Appeals and other specialized courts. The jurisdiction of the specialized family courts and probate courts is county-wide, and those courts are bound by the precedents established by the intermediate court of appeals with jurisdiction over the subject county and Texas Supreme Court.
By contrast, the jurisdiction of the Fifteenth Court of Appeals is statewide. This means that with the exception of decisions of the Texas Supreme Court, the Fifteenth Court of Appeals and Business Court are not bound by the decisions of any intermediate court of appeals – they are writing on a blank slate. This is truly without precedent. While the Texas Legislature established eleven intermediate appellate courts in the Twentieth Century, in each instance the Legislature carved out or duplicated the new court’s jurisdiction from within the jurisdiction or a preexisting court, meaning the new court was bound by the precedents of the existing court.
Without Binding Precedent, What is the Rule of Decision?
Without any governing precedent, the rule of decision in the Business Court and Fifteenth Court of Appeals is governed by Section 5.001 of the Texas Civil Practice and Remedies Code. That Section provides only that “[t]he rule of decision in this state consists of those portions of the common law of England that are not inconsistent with the constitution or the laws of this state, the constitution of this state, and the laws of this state,” and “[i]n any action governed by the laws of this state concerning rights and obligations under the law, the American Law Institute’s Restatements of the Law are not controlling.”
Only Time Will Tell
So while predictability is touted as one of the primary reasons to choose the Texas Business Court, it likely will take years before a body of law is established in which the business community can have confidence. Indeed, given the Delaware Court of Chancery’s 200 plus years of judicial precedents and reputation for expertise in business law, it remains to be seen what role in the development of business law the new specialized Texas courts will play.
As co-leader of FBFK’s intellectual property practice group, Kubasta focuses on a wide array of intellectual property, with particular emphasis on patent, trademark, and trade dress litigation and licensing. He has extensive litigation experience, advising both plaintiffs and defendants, in Federal Court – both trial and through appeal – as well as in Texas state court. Kubasta is a nine-time The Best Lawyers in America honoree, recently served as a Board Member of TeXchange DFW, and works with various non-profit organizations.A three-time “Ones to Watch” honoree and an attorney and shareholder at FBFK, Smiley has more than a decade of bankruptcy and reorganization law experience, with specific expertise in all steps of the Chapter 11 reorganization process, including asset sales, plan confirmation, and post-confirmation plan administration. She also has experience litigating a variety of disputes, including contested matters and adversary proceedings. Smiley is a Member of the American Bankruptcy Institute (ABI) and the Dallas Bar Association – Bankruptcy and Commercial Law section, a Global Executive Board Member of the Turnaround Management Association (TMA) and has served as Chair of the DFW network of IWIRC (International Women’s Insolvency and Restructuring Confederation).
