Y'all Street Law Podcast

The Scale LLP Y'all Street Law podcast is

intended to be your go to podcast for legal and

business developments in the state of Texas. You'll

stay informed about the latest developments that impact your

business, plus get insights on market trends and

strategies tailored to the Texas landscape. We also

share actual case studies of local businesses and

provide expert insights from our Texas based attorneys.

Y'all Street Law is here to help you thrive in the lone star

state. You can find more about Y'all Street Law content at

www.scalefirm.comforward/yalldashstreet,

also linked in our bio. Now let's get into

today's topics. Brian, let's start with the big question.

Why do we need business courts in Texas? Yeah. Great

question, really. You know, the business courts Texas

Business Courts were created to address the growing complexity

of business litigation. I mean, that's at the basis. You know, over the last

few years, Texas has become the headquarter of headquarters.

More businesses are moving here, and, major

companies are looking, you know, for and they demand, you know,

services that are commensurate with moving their their businesses to to the

state of Texas. So the idea is to create a court that can

handle efficiently high stakes litigation and

sophisticated business matters. And it's a, it's a move,

I think that's in the right direction. It's a it's a move to,

you know, to take the best elements out of

other business courts that exist around the country and to replicate the same here in

the state of Texas. Interesting. So what types of cases

specifically are going to end up in this business court

as as opposed to the the existing civil

courts? Yeah. There are 3 types of cases that

the business Texas Business Court will handle, and the first is corporate

governance disputes. Right? It's the, that are gonna be

these are disputes that are based in the, business

organization code that are in excess of $5,000,000.

The second set of cases are gonna

be general business matters. These are going to be cases that have

qualifying transactions that exceed $10,000,000

There are some exceptions to those. And then there's also

supplemental jurisdiction that can apply and that's

when both parties agree that

other other claims that aren't that don't wouldn't, that don't

fall into the, like a business governance dispute or a transaction

dispute can also be heard in the business court. Interesting. So the first

bucket, just to go into a little more detail, sounds like the first bucket could

be breach of fiduciary duty claims, could be shareholder

claims against the company, possibly derivative claims,

those sorts of sort of internal

matters. But it sounds like the unifying ideas that the

Texas Business Organization Code is implicated

and is the governing statute. Correct. Yeah.

And it's not for all corporate governance disputes. Right? It's only

for those that have an amount of controversy exceeding $5,000,000. So it's gonna

be something significant. Right? But you can imagine that it will be,

you know, shareholder derivative suits, and, investor

disputes and and other other matters. Got it. And then the 2nd

bucket, sort of more traditional adversarial.

One business, has a commercial dispute with another

where the threshold, amount of controversy is double,

what it was in the first bucket, $10,000,000. Yeah. Again,

and the idea here is to say this isn't for all business

disputes. This is for the largest of the business disputes. Right? You know, so

so looking at qualifying transactions, under

the jurisdictional statute, excludes even things

like loans from banks and credit unions and savings and

loans. So you're looking at transactional disputes

that are going to be complex in nature and are going

to require a sophisticated court to look at the issues. Interesting.

And I think, I think I heard that the

initially, anyway, we're only launching some of these courts.

Eventually, there's going to be maybe 11, but but

now there's there's only a few that have been launched. Is that right? Yeah. 11

districts have been created, for for the business courts around the

state. They originally launched in on

September 1st in 5 major cities, right, Dallas,

Fort Worth, Houston, San Antonio, and Austin.

Each of those locations have 2 appointed business court

judges to start and the although the

timeline isn't clear, the intention is to

expand and, you know, build out the business courts throughout the rest of

the jurisdictions. How should we think about the

decisions that will be rendered by this new business court as opposed

to the traditional courts in terms of precedent and

speed and some of these other things? Yeah. So,

obviously, you know, speed is is part of it. Right? So part of this whole

idea is to create a court that brings to to it complex

business efficiency, whatever that means, right? What we're looking for

really is a development of business

precedent, business law precedent in the court system we don't really have

today. Right now, in our system, we

the judges aren't required to, they sometimes do, but they're not required to

create written opinions on on

decisions. So often we will bring a case and,

you know, argue it for, you know, weeks and

get a decision that just says, you know, granted or denied and

without any basis or reasoning that we can use then to

to to take further. And it doesn't provide any, you know,

sort of feedback to our clients, not direct anyway, on on

exactly what they can expect next time. So what we're

expecting the the business court to do is over time, and this will take some

time, right, but but by bringing these cases,

complex business matters and by having a system that

written decisions are required, you know, to create this

body of business law precedent that folks can

look at and rely on and then give guidance to their

clients. Yeah. That's really interesting. I hadn't focused on

that initially, but, you know, there's been lots of comparisons between this business

court and the Delaware Chancery Court, and I know we're gonna get into that. You

know, one of the I think one of the things I think about

coming in is if you're practicing in

Delaware or have a Delaware client, you both need to be very familiar

with the DGCL, Delaware General Corporation Law, but you also need to look

at the decisions because so much of the nuance is found

in those decisions. So I guess coming in, it sounds like it's quite

different with the state of Texas. You just don't have that that

same body of of law to interpret what the statute says.

Right. And and that's that's really been a a criticism

of Texas business law. Right? So when when you look at places that

you want to have, you know, you go for predictability and

certainty, right, we we can't provide that here. We're not gonna get that

overnight in Texas, but the idea is to is that over time, we'll

build that system of case law that should provide that guidance that

we're looking for. Interesting. So while we're talking about Delaware Chancery

Court, how how does the structure of the court in Texas compare

to that as an example? Yeah. A couple of couple of big differences,

really. You know, one is the the judges. Right? The judges

in Delaware Chancery Court are appointed for 12 year

terms. In Texas, they're appointed for initially appointed for 2 year

terms, and they're up eligible for reappointment at the end of 2 years.

And that's a significant difference. The other big

difference is Delaware transitory courts don't permit jury

trials. We're gonna have jury trials in Texas. That's constitutionally

guaranteed. So we're going to continue with jury trials provided

that, you know, the the business dispute didn't otherwise waive the right

to a jury trial or or other other things. But the potential for jury

trials will exist in the Texas business court system where it

doesn't exist in the Delaware transfer court. Yeah. That's

interesting. And so thinking about these

judges, so appointed, when I

think of Texas judges, I think of them running for

election, talk about that decision,

the business court to have them appointed and how that'll

be different. Yeah. So part of it is to the

you know, because the qualification for a Texas business court judge

is that you have to have at least 10 years of experience and that that

experience has to be in either as a, as a

practicing lawyer in complex business matters or as a former jurist.

And the the idea is to set the the bar high and to make

sure we get a high quality of judges at the Texas Business

Court is, you know, part of the reason why

they're being appointed. We'll have to see how that plays

out because the Texas Constitution, you

know, requires that judges be elected. So we'll

see if that gets challenged and and we'll report back. Yeah. That's interesting.

Do you think that ultimately, if this business

court gets once it gets up and running, do you think there'll be more conversation

about competition between Texas Business

Courts and Delaware courts or just

generally, more choice of jurisdiction

discussions? Yeah. I think those discussions are already

happening. Right? But it's sort of the, you know, having a,

an enhanced business court option in the State of Texas seems to

me like table stakes these days. Right? If you want to if the if the

State of Texas wants to continue to attract,

headquarters and Fortune 500 companies to move into the state and create jobs

and things like that, that's great. We can continue to do that. But

then it's another another step to have them, you

know, localize their incorporation in in the state of Texas. And

we see that happening more and more with some high profile examples recently

redomiciling in Texas. And I think that in

order to continue that trend and to have the state of

Texas, you know, be a a legitimate,

you know, alternate choice to Delaware, we just have

to have this business court system. Got it. This

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podcast bio. Let's shift gears and talk about how

this impacts the traditional Texas courts. How do you

think the Texas business courts will interact with the rest

of the judicial system in Texas? Yeah. I mean,

you know, start off with there's overlapping jurisdiction. Right? So you've

got a, a system where you have to qualify

your case to get into the Texas Business Court, but you might have

companion claims that don't qualify. So there could be

strategic reasons to still bring a case that would

otherwise be a Texas Business Court qualifying case

into the regular system, and we're gonna have to see how people, you

know, make the decisions on where to bring cases.

It's a complex matter. Right? And it also it gives

you not only access to different judges and different kinds of judges, but a

different path to get to the Texas Supreme Court. So it's a wait and see,

as it folds out. Interesting. Any prognostication

about strategy and taking a complex case that's sort of half in the

courts and half half not and and how

that could be to your advantage? Yeah. Well, I think they

you know, from from a you also have to look at geography, I think, is

is part of it. Right? You you know, they these business courts are only in

the the 5 major cities right now. Right? And that there could be a reason

to, to bring your case in a smaller venue, right? So, if you have

the opportunity to bring a case in Midland or,

you know, another place that doesn't have a business court, that could

be to your advantage if you're looking for a jury that's gonna be, you know,

comprised, of folks in that area. So I think these

are it's gonna continue. This is one of the the the areas that we're gonna

watch closely as it unfolds, see how how people take advantage of

the the different seats, that they can have, access to.

Yeah. That's interesting. You know, we're recording this, today just outside of Fort

Worth in the city of Granbury. Lots of small business here. How should

small businesses think about the business courts? I mean, there's not

there's not a designation for for more rural areas.

Fort Worth would be the closest. How should small businesses here or

across the state think about the business courts? Yeah. I think I think that over

time, what what it's gonna the business court system in Texas

is gonna benefit all businesses of every size, right? So, even if you don't

have the big 5000000 dollars, $10,000,000 disputes, you still

have a body of case law that's being developed that is going to give

guidance to how you run your business. So, I think that's a

gonna be a crucial, you know,

advantage for small businesses throughout the state, whether or not they have

access to these 5 courts today or even the jurisdictional

limits going forward. I guess that's right. Are there other examples of this when

we look you know, we talked about Delaware. Are there other examples of states

standing up, separate business courts either successfully or

unsuccessfully? And, you know, how long have they been

at it, and what what lessons can we learn from all of that? Yeah. Sure.

I I think I mentioned before there, you know, more than 20 specialized business courts

throughout the the country. A couple that I've practiced in, including,

Georgia and Nevada have, business courts, And

they those 2 states did it a little bit differently.

Nevada's business court emphasizes speed, speed to decision,

and they try to it's a rocket docket, get things through very quickly.

The criticism has been that it ends up with, you know, perhaps,

not be not well thought out decisions that

are overturned on appeal quite often. So, that's a criticism

of that court. In Georgia, when they stood up their business

court, they used a feedback from the business

community and tried to design a

system that would work well for Georgia. Included in that are some

things like more

advanced case management, techniques, including, you know,

monthly or at least regular check ins with, you know, status conferences with

the court to keep things on track, right, and emphasizing

resolution. And that seems to have worked quite well for Georgia. I think

the the examples across the country, the the best examples

are the ones that take advantage of of the business

climate in their area and try to develop a judicial system

that matches what the needs of that state are. And do you see do you

see a bar developing, you know, similar to other states like Delaware where you

have specialized trial attorneys that kinda specialize in that? Or do

you do you think it'll be more, general,

based on what you've seen in other states where you're a civil litigator,

you're sometimes in business court, you're sometimes in in other courts?

How do you how do you see that playing out? I think there will be

specializations. I I think there there already are. If you look at

industry, you know, we've got, you know, lawyers who specialize, for instance, in

the in the energy, industry. Right? And that's gonna be a big part

of of the Texas Business Courts is gonna be resolving disputes with

energy companies. I think that's gonna continue. But I think, certainly, there'll be,

specialists who hold themselves out, in that regard. Alright.

Before we wrap up, are there any recent business court or

litigation updates we should know about? Yeah. So, it's brand

new still. Right? We've we've only had the business courts open for a couple of

weeks. Things are are, you know, progressing slowly.

There aren't you know, we don't have this huge volume of cases that

meet these jurisdictional thresholds right away, probably a

couple of dozen cases have been filed so far. From the ones that I looked

at, some of them are, you know, questionable whether or not they actually meet the

jurisdiction. So, you know, we'll see people are testing like what

is going to be accepted and what's not going to be accepted in a business

court. The one development I think is that the

Texas Supreme Court recently looked at the constitutional

challenge to the business, the appeals section of the

business court and gave that the green light and and affirmed that

the that the 15th Court of

Appeals can continue. We expect that there'll be, you

know, additional challenges to things like we spoke before about

judicial appointments and and, you know, the 2 year term and things of

that nature, so we'll have to see how that comes out. I think the

other things that we're looking for we don't have complete answers to are

exactly where these courts are going to practice. There aren't buildings

dedicated to these new courts. So, currently, they're using the existing

infrastructure, of the other courts, and we know that that was a little dicey when

it came, as it came down to the wire on September 1st. It's exactly,

you know, what the address of the court was gonna be and where should we

show up and and things of that nature. But those are all things that are

getting worked out, and, and they'll be worked out in the coming months as as

well. Finer details like where is this court? Where where are we gonna meet? Just

just details. Got it. So we're at the beginning stages, but it

sounds like there's there's much more to come. It will be interesting to see how

things evolve. Yeah. It's an exciting time for

Texas. This is a positive development for for

Texas courts and Texas businesses, and I think that,

we'll, we'll as it we'll be back with more

as as we get more updates. Awesome. I can't wait to discuss

the the first decision. Yeah. Let's do it. Thanks, Brian.

Thanks for tuning in to the Scale LLP Y'all Street Law

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