July 1, 2025

Texas House Bill 40 Boosts Statewide Business Courts

News Summary

Texas has passed House Bill 40, lowering the threshold for cases in Business Courts from $10 million to $5 million. This change aims to make these courts more accessible to smaller businesses and expand their jurisdiction to include intellectual property disputes. The bill signals a significant shift in Texas’s business landscape, enhancing its appeal as a location for commercial activities. The Business Courts have already shown promising results, and further reforms may be on the way to streamline operations and promote efficiency.

Texas has officially passed House Bill 40 (HB 40), bringing significant changes to its statewide Business Courts, which were introduced less than a year ago. The new law will lower the threshold for cases to qualify for the Business Court from $10 million to $5 million and will expand its jurisdiction to include disputes related to intellectual property (IP), trade secrets, and the enforcement of arbitration agreements. This legislation is expected to take effect on September 1, 2025, after receiving bipartisan approval in the Texas House of Representatives with a vote of 99-40 on May 13, 2025, and being signed into law by Governor Greg Abbott on June 20, 2025.

The legislative initiatives behind HB 40 aim to enhance the clarity and efficiency of the Texas Business Court system. This specialized court was established to address complex commercial disputes, with a focus on expediting the litigation process and maintaining consistency in rulings. In its first 100 days of operation, the Business Court received 53 case filings, with the Eleventh Division in Houston handling the majority of them. To optimize management and case flow, the court has also set local rules regarding motion practices and corporate disclosures.

Previously, only commercial disputes exceeding $10 million were eligible for adjudication in the Business Court. The reduction of this threshold to $5 million is designed to make the court more accessible to a larger number of businesses, potentially solidifying Texas as an attractive destination for business incorporation, similar to what Delaware and New York have achieved.

In addition to the lowered threshold, HB 40 will enable the Business Court to address cases involving IP and trade secrets, areas increasingly relevant in today’s technology-driven market. This expanded jurisdiction reflects a growing recognition of the importance of intellectual property rights in corporate disputes. Furthermore, the law obliges the Texas Supreme Court to adopt rules to determine jurisdiction in Business Court cases, streamlining the legal process even further.

Since its inception, around one-third of the pending cases have involved removals from district courts, highlighting the need to transition these complex cases into a more specialized forum. However, there have been some complications; some judges have ruled that cases filed before the establishment of the Business Courts on September 1, 2024, are not eligible for removal. Nonetheless, the Business Court has managed to effectively close eleven cases from its docket during its initial operational phase, suggesting that the mechanism is starting to work as intended.

As the Business Court continues to evolve, there are ongoing discussions about future reforms. These include potential further reductions in the amount in controversy required to access the court and possibly extending the terms for judges to ensure stability and continuity in handling business cases. Such reforms are essential as they adapt to the dynamic needs of businesses within Texas.

The establishment of the Business Court and the approval of HB 40 mark a significant milestone in Texas’s effort to improve its legal framework regarding business operations. By providing a streamlined, specialized court system, Texas aims to foster a business-friendly environment, thus encouraging growth and investment across various sectors.

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Author: STAFF HERE GEORGETOWN

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