House Bill 40 Approved by the Texas Legislature—Expanding Business Court Jurisdiction and Operations

• Reinstating the more restrictive requirements on the business court’s supplemental jurisdiction. The House version of H.B. 40 loosened the requirements governing the business court’s supplemental jurisdiction—i.e., a court’s jurisdiction over claims it would not normally have jurisdiction over but that form part of the same case or controversy as an action it does have jurisdiction over. In particular, the House version (1) added that the business court’s supplemental jurisdiction includes a claim that requires the joinder or intervention of an additional party; and (2) removed the requirement that the parties to the claim and the presiding judge need to all agree that supplemental jurisdiction should be exercised. The final version reverted both of these changes and held the business court’s supplemental jurisdiction to its currently restricted form.
• Removing the addition of an extra judge for the First and Eleventh Divisions. The House version of H.B. 40 required the addition of one extra judge each for the First and Eleventh Divisions of the business court—covering the areas including Dallas and Houston, respectively. The final version removed this addition for both divisions.
• Allowing for the transfer of pre-September 1, 2024 cases to the Business Court. The final version of H.B. 40 includes a provision allowing for cases filed prior to September 1, 2024 to be transferred to the Business Court when the parties and the Business Court agree. The bill requires that such transfer comply with rules to be adopted by the Texas Supreme Court governing these transfers.

Though H.B. 40 awaits Governor Abbot’s signature to be enacted, his signature is expected in the following days. However, even when enacted, H.B. 40 will not take effect until September 1, 2025. This transitional period will allow businesses to take stock of—and seek the advice of experienced counsel on—the changes mandated by H.B. 40 going forward.