Recently, several law firms prevailed in a case that demonstrates the need for some common-sense reforms to the Texas legal system. A jury in an oil and gas investment case in Fisher County (population 3,800) was given a 70-page jury charge with 230 distinct and complex business questions. Even though every investor plaintiff had already turned a handsome profit in the deal, the jury awarded the plaintiffs $90 million dollars in damages on a transaction that netted the defendant only $5 million in profits. Sadly, this type of outcome under the current system happens more often than one might think.
Many times, jurors in these cases have a daunting task understanding intricate business laws. In addition, we expect trial judges to also acquire knowledge of business-litigation concepts: financial statements, borrowing facilities, secured interests, operating agreements, derivative actions, qualified transactions, licensure and more.
As you can see, our state’s legal system is in serious need of an intervention. Thankfully, Governor Abbott has suggested a plan for such intervention in the form of House Bill 1875 that was recently introduced in the Texas Legislature. To be clear, the plan does not eliminate jury trials or make it more difficult or expensive to hold wrongdoers accountable.
The plan would position seven business-trained judges in various parts of the state; no more than four of them could come from the same political party. These business court judges would oversee only derivative actions (i.e., shareholder lawsuits against officers or directors) and commercial disputes exceeding $10 million in controversy. The judges would not oversee personal injury or death cases, or smaller business disputes. When handling large business cases, the judges would “use the most advanced technology feasible . . . to facilitate expeditious proceedings in matters brought before the court.”
The plan does not do away with juries or minimize their historical functions; rather, it expressly preserves “the right to a trial by jury” and envisions that a business court judge would travel to the plaintiff’s chosen county for any jury trial. A “Court of Business Appeals” would oversee appeals from the business courts, consisting of the seven business-trained judges from various parts of the state.
Most businesspeople do not wish to be involved in litigation. When forced to litigate, they dislike the delays and inefficiencies encountered in a general-jurisdiction court. Businesspeople will benefit greatly from the Governor’s plan.
Attorneys representing both plaintiffs and defendants who want consistent, predictable results should welcome specialized business courts, unburdened by a general docket.
Specialized business courts would give jurors better instructions on how to reach verdicts and would correct jurors’ mistakes before rendering judgments. Most jurors do not enjoy making ultimate-liability findings or damages awards in business cases. The dollar numbers and the complexity confound and intimidate most well-intended, conscientious jurors. Jurors usually hope their verdicts are merely advisory, believing trial judges make the final decisions.
Only two groups benefit from our current system: strategic litigants, who are business participants engaging in business with plans of becoming plaintiffs in entrepreneurial litigation, and powerhouse plaintiffs’ firms that reap large contingency fees from entrepreneurial litigation. Businesspeople trying efficiently to resolve their disputes and business lawyers trying to get straightforward answers to legal questions do not benefit from our current system. And jurors don’t like it.
House Bill 1875 is a win-win for the Texas judicial system. Business courts will allow for a more efficient and fair litigation process that will also drastically benefit other general docket courts to also move cases more expeditiously.
James Holmes is an attorney practicing commercial litigation and oil and gas law in Dallas.