The Judges of Y’all Street: Riding with the New Texas Business Court

Delaware—where most big, sophisticated companies choose to incorporate—is under attack. Sensing weakness, Texas is trying to wrestle state corporate law into submission.

With a shiny new Business Court, recent legislative amendments designed to make shareholder litigation more difficult for plaintiffs, and trading set to begin on the new Texas Stock Exchange in 2026, it’s almost more excitement than I can take.

But will Texas really take Delaware’s crown and replace it with a 10-gallon Stetson? Or will the cowgirls and cowboys promoting Texas as the next big thing in state corporate law prove to be all hat and no cattle? 

Interestingly, for now, Nevada seems to be capitalizing more than Texas on anti-Delaware sentiment—but we are working with a small sample size, so I wouldn’t read too much into these early trends. 

Nevada has largely branded itself as a liability-free zone for directors and officers. Texas seems to be positioning itself as a more sophisticated place to set up shop – friendlier than Delaware but perhaps a bit more rigorous than Sin City. But does corporate law rigor really matter to founders and controlling shareholders who are primarily attracted by Nevada’s ultra-D&O-friendly laws?

For corporate law geeks (me), the most interesting thing about the new Texas Business Court is that it is starting to publish long, dry opinions jam-packed with legalese. These opinions may not be particularly interesting to founders and controlling shareholders, but they should matter to corporate lawyers who are trying to figure out how to advise clients thinking about incorporation or reincorporation.

In an environment of promotion, speculation, and slow-moving trends, we’ll be keeping close tabs on what the Texas Business Court is doing on both process and substance. 

Here are some early notes from the frontier.

The Texas Business Court: A Bold Project

The Texas Business Court has 10 judges. Here is a nice group photo. As you might expect, they are all lifelong Texas lawyers with distinguished Texas backgrounds.

Note the emphasis on Texas. A commercial lawyer in Texas may deal with a variety of complex disputes but may not be frequently confronted with the type of cases that are the bread and butter of the Delaware Chancery Court, i.e., high-stakes shareholder derivative and M&A litigation. Based on what I can tell about the backgrounds of the new Business Court judges, it looks like they have handled a variety of difficult and high-stakes commercial litigation, but I don’t see indications that they are specialists in the same way that Delaware practitioners and judges tend to be. 

Is there something particularly novel or difficult about derivative or merger litigation that requires specialist judges who have had a career-long focus on this space? Some Delaware litigators might say yes, but I don’t really think so. A smart judge with a strong background in complex litigation and familiarity with transactions, investments, and corporate governance should generally be well-positioned to make good decisions. Also, a lot of the cases that the Business Court will hear are general commercial disputes, not shareholder litigation.

Still, when a smart judge is dealing with an issue of first impression (i.e., one that has never been decided in the state)—as many corporate law issues will be if the Business Courts ultimately ends up with an active derivative and M&A litigation docket—they usually look to other states to see how judges in those jurisdictions have handled similar issues. The law in other jurisdictions isn’t controlling, but it is a helpful way to get your bearings in uncharted territory. A judge can look at how another smart judge in another state decided a similar issue and feel comfortable that, even if they see things differently, at least they are covering all the angles.

The new Texas Business Court judges, however, will need to tread carefully when considering how Delaware judges have handled similar issues in the past. Included in a bucket of D&O-friendly amendments passed by the Texas state legislature in May was a provision stating: “The plain meaning of the text of [the Texas Business Code] may not be supplanted, contravened, or modified by the laws or judicial decisions of any other state.”

This is a truism. One state’s laws are never “supplanted, contravened, or modified” by another state’s laws. 

To me, this really just reads as a warning sign to the Texas Business Court, and the sign says: “Don’t start quoting Delaware Chancery Court decisions, giving daylight to plaintiffs’ lawyers, and causing problems for directors and officers.” This warning is backed up by a two-year tenure for Business Court judges, which would allow the governor to replace any judges who go offside.

This is a bold project, and it will be very interesting to see how it plays out over the years. It has taken Delaware a long time to build up a large and well-defined body of corporate case law decisions. Even if companies rush in, it will take Texas a long time to do the same. 

At the time of this writing, the Texas Business Court has published 30 opinions. That sounds like a lot, but the opinions have almost all been focused on jurisdictional issues. In one of the most substantive cases to date, the Business Court wrestled with whether a promissory note in an original amount of less than $10 million could meet a $10 million jurisdictional requirement when including accrued interest. 

In a lengthy and careful opinion, the Business Court concluded that the jurisdictional requirement was satisfied. While it’s not a blockbuster corporate law decision, the case shows how the Business Court will be working to demonstrate that it is ready for the big leagues.

Unbalancing the Equilibrium of Corporate Law?

Most of Delaware’s corporate law is very D&O-friendly. Historically, the business world has been mostly comfortable with robust, difficult-to-penetrate protections for directors and officers, with some narrow avenues remaining for shareholder recourse in exceptional cases. 

Will Texas (and Nevada, and maybe Delaware in light of recent amendments) unbalance this traditional equilibrium? How will the judges on the Texas Business Court grapple with edge cases and tricky situations never before seen in the state? Will they implicitly or explicitly consider Delaware cases? What if they agree with the Delaware approach? How will institutional shareholders react if states really shut the door on shareholder litigation, even in cases involving significant potential misconduct? 

Count me in for season tickets to the rodeo.