By Ethan Lennon
Since opening its doors September 1, one key issue surrounding the new Texas Business Court is whether cases that were pending in Texas state courts as of August 31 may be removed to the Business Court.
The principal question appears to be whether Section 8 of House Bill 19, which created the Texas Business Court, supports removal. The wording of the relevant section of the Bill is as follows: “the changes in law made by this Act apply to civil actions commenced on or after September 1, 2024.”
Earlier this month, four judges in six different pending cases issued orders requesting that the parties submit briefings on this exact issue (i.e. whether the cases may be removed). The first couple of briefs to be submitted — Synergy Global Outsourcing, LLC v. Hinduja Global Solutions, Inc., and Energy Transfer LP v. Culberson Midstream et al — seem to weigh in favor of the conclusion that attempts to remove pre-September 1, 2024 cases should be denied by the Business Court.
The argument by the “anti-removal” parties in these cases is simple; the wording of Bill 19 is clear and definitive, and prohibits cases filed before September 1, 2024 from being removed to the new court system. Additionally, the “anti-removal” parties in both cases noted that the Business Court’s memoranda stated that such cases should not be removed.
The “pro-removal” parties are attempting to argue that the Texas Legislature did not intend the wording of House Bill 19 to prohibit removal of pending cases and, if it had, the Legislature would have used more definitive wording such as “no cases filed before September 1, 2024, can be removed to the Business Court.” Additionally, the “pro-removal” parties argue that removal of the cases in question aligns with all policy objectives of House Bill 19 in creating the Business Court.
A more recently filed brief takes a different approach. The parties in Lone Star NGL Product Services LLC v. Eagleclaw Midstream Ventures, LLC and CR Permian Processing, LLC, are the first to file a Joint Brief in Support of Removal. Although this brief lays out a few different arguments for why the case should be removed, the most novel is the assertion that if removal is not approved, the parties will just proceed with an agreed nonsuit and refiling in the Business Court.
Essentially, this means both parties will agree to dismiss the current case, which originally was filed in Texas district court before September 1, and then proceed to refile the case, this time in the Texas Business Court. Although this process would be admittedly more complex and time-consuming, the parties use that fact to their advantage. The Court is certainly no more eager to engage in a lengthy “nonsuit and refiling” process, so why not save everyone the time/effort and simply approve the removal?
This strategy poses an interesting variation to the “pre-September 1, 2024 removal” issue. Although it only applies to cases where plaintiff and defendant agree to removal, this option could change the opinions of many judges on the overall matter.
This article is provided for educational purposes only and does not constitute legal advice. Cantey Hanger LLP encourages you to consult with an attorney to assist you in making any changes to your company’s entity structure.
Ethan Lennon is an attorney in Cantey Hanger’s Business Transactions practice area. He can be reached at elennon@canteyhanger.com.