On the final day of the 89th Legislative Session, the Texas Legislature passed House Bill 40 (HB 40) to expand the jurisdictional and operational framework of the Texas Business Court.1 The Bill has since been signed by Governor Abbott and becomes effective on September 1, 2025. The new law builds on Texas's 2023 initiative to establish a specialized venue for complex business litigation and makes the forum more accessible to corporate litigants. The most significant changes include amendments to reduce the monetary threshold for invoking the Business Court's jurisdiction and to expand the category of case types that may be heard.
The Bill's amendments, coupled with broader national conversations around litigation costs and court specialization, support the Business Court playing an increasingly important role in the national corporate governance and commercial litigation landscape. The new statutory changes also make now the time for Texas businesses and in-house counsel to evaluate whether their governing documents and contracts are up-to-date to take full advantage of Texas's new laws.
Reduced Monetary Threshold
HB 40 lowers the Business Court's amount-in-controversy requirement from $10 million to $5 million — and allows that threshold to be met by aggregating "the total amount of all joined parties" claims — for certain case types. These include:
- cases arising out of a "qualified transaction" (defined as any single transaction or a "series of related transactions" with consideration valued at or above $5 million);
- actions arising out of a "business, commercial, or investment contract or transaction," other than an insurance contract, in which the parties agree to Business Court jurisdiction;
- claims involving alleged violations of the Texas Finance Code or Business & Commerce Code by an organization, its officers or other governing persons; and
- certain matters relating to intellectual property rights or trade secrets disputes.
Under the initial version of the Texas Business Court Act that passed in 2023, the lower $5 million threshold applied only to fundamental internal governance and securities matters — such as derivative actions, internal affairs disputes, securities claims against an organization or related persons, fiduciary duty claims against controlling persons and managerial officials and the like. The Bill's promulgation of a lower threshold for other claim types within the Court's jurisdiction should ultimately make the Business Court more accessible to a broader array of commercial parties and increase the volume of cases.
Additional Claim Categories Within Business Court Jurisdiction
In a significant addition, HB 40 adds intellectual property and trade secrets claims to the statute’s jurisdictional coverage. While the 2023 Act did not authorize the Business Court to hear intellectual property matters, HB 40 now expressly permits the Court to hear trade secrets cases and other "action[s] arising out of or relating to the ownership, use, licensing, lease, installation, or performance of intellectual property."
HB 40 separately clarifies the Business Court's authority to render decisions on arbitration matters. Parties that otherwise have standing to file claims in Business Court will be permitted to use the forum to enforce arbitration agreements, appoint arbitrators, review arbitral awards or seek other judicial relief authorized by an arbitration agreement.
While the above amendments to the Business Court's jurisdictional scope are significant, HB 40 was almost more expansive. The initial version of the Bill would have extended the Business Court’s jurisdiction to also capture insurance and indemnity contract matters, "fundamental business transactions" involving mergers and similar large corporate asset transactions, certain large banking litigations, malpractice claims filed by corporate clients and multidistrict litigation (MDL) transfer cases. However, HB 40 was repeatedly revised in committee and through the legislative process to land on a much-narrowed change in the law, at least for now.
Other Substantive Changes to Texas State Laws
HB 40 includes other amendments to Texas state laws affecting the rights and obligations of parties seeking to litigate in the Business Court. Some of the more notable such amendments are addressed below.
- Venue: The Bill expressly permits parties to amend their governing documents to designate venue for Business Court matters involving derivative proceedings, governance or internal affairs disputes, fiduciary duty claims against certain corporate persons and other actions arising out of the Business Organizations Code.
- Exclusion of Consumer Actions: The Bill prohibits parties from filing state and federal consumer claims in Business Court, even if supplemental jurisdiction may otherwise exist. This amendment essentially prevents large consumer class actions from flooding the Court's gates.
- Expansion of Injunctive Relief Procedure: A new provision is added to the Texas Civil Practice & Remedies Code allowing parties to seek writs of injunction from another Business Court judge if the appointed judge is unavailable to timely consider and implement the writ's purpose.
- Montgomery County Moves Division: Montgomery County (covering Conroe, The Woodlands and other areas north of Houston) is being transferred out of the non-operational Second Business Court Division and added to the Eleventh Business Court Division (Houston). Houston — as well as Dallas — has notably received a large share of the new case filings in the opening months of the Court's existence.
- Preserving Rural Business Court Divisions: The legislature modified statutory sunsetting language from the Business Court Act to preserve the six non-operational divisions of the Business Court — namely the Second, Fifth, Sixth, Seventh, Ninth and Tenth Divisions (color-coded in the white regions of the map below).2
Context: New Industry Pressure in Delaware Increases Appeal for Texas Court System
The Texas Legislature's passaContext: New Industry Pressure in Delaware Increases Appeal for Texas Court Systemge of HB 40 — less than a month after passing another business-friendly amendment to the Texas Business Organizations Code (SB 29) — comes at a time of significant scrutiny as to whether Delaware remains the premier state for incorporation and corporate governance.
While Delaware has long been the preferred forum for resolving internal governance and fiduciary matters, recent backlash from institutional investors and industry group advocates has highlighted perceived shortcomings in the Delaware Chancery Court. The Delaware Legislature has tried to step in to curb the noise, including by amending the Delaware General Corporation Law to add new safe harbor protections for controlling stockholder transactions, exculpating controlling shareholders from liability for alleged breaches of the duty of care, and implementing limits on shareholder books and records requests.
The national discourse continues nonetheless. In fact, the same week that HB 40 made its final rounds through the Texas Legislature, a Stanford Law School study3 also made rounds through corporate boardrooms, again questioning outcomes out of the Delaware Chancery Court. The study specifically found that the Chancery Court system has increasingly allowed large fee multipliers for plaintiffs' attorneys, often exceeding 10 times the lodestar, at higher rates than observed in cases out of the federal court system. These findings have prompted renewed criticism from corporate governance groups and further calls for reform.
The growing tension in Delaware should ultimately increase the appeal of Texas and its alternative corporate governance system.
Conclusion
The Texas Legislature was busy this session expanding corporate protections and enhancing its Business Court system. The enactment of HB 40 specifically helps Texas build out its Business Court framework by refining jurisdictional standards and procedural mechanisms to expand access to the Court. Importantly, the statutory changes this session may require corporate parties to revise their governance documents and contracts to take full advantage of these laws. Katten attorneys across multiple practice groups continue to closely monitor developments and to counsel clients on invoking new protections provided by the legislature.
[1] The Texas Legislature enacts HB 40 just weeks after passing Senate Bill 29 (SB 29) — which previously expanded the Business Court’s jurisdiction over corporate governance matters and also extended related litigation protections to domestic entities. See Texas Governor Signs New Business-Friendly Governance Law to Promote In-State Corporate Growth: Senate Bill 29 Analysis, Katten (May 14, 2025), available at https://katten.com/texas-governor-signs-new-business-friendly-governance-law-to-promote-in-state-corporate-growth-senate-bill-29-analysis.
[2] See Texas Business Court Divisions Map, Tex. Judicial Branch, available at https://www.txcourts.gov/media/1458995/texas-business-court-divisions-map.pdf.
[3] Grundfest, Joseph A. and Dor, Gal, Lodestar Multipliers in Delaware and Federal Attorney Fee Awards (April 30, 2025), available at https://papers.ssrn.com/sol3/papers.cfm?abstract_id=5237545.
