TEXAS: An Introduction to Litigation: General Commercial
Commercial Litigation in Texas
The federal pandemic emergency orders may have ended on May 11, 2023, but in Texas courts, the pandemic has been over for quite some time. Texas courts, including those in Houston, resumed business as usual in most respects in 2022. Several COVID-delayed cases went to trial, and many commercial litigation firms and practices saw record revenues in 2022. Despite the courts being open for business, many pandemic litigation practices have remained popular among Houston-area lawyers and judges. Several courts are still employing virtual hearings for simple motions, and many lawyers prefer the convenience and cost-savings of virtual mediations and depositions. The 2022 judicial elections did not markedly change the makeup of either Harris County’s (Houston) civil district courts or the First and Fourteenth Courts of Appeal (the appellate courts serving the Houston area). At the Southern District of Texas, Houston Division, though, Judge Vanessa Gilmore retired in 2022, and in 2023, Judge Lynn Hughes took senior status. As of this writing, President Biden has not yet nominated their replacements. In April 2023, however, President Biden nominated Irma Carrillo Ramirez to replace Judge Gregg Costa on the Fifth Circuit Court of Appeals.
The 2023 legislative session
The 2023 Texas legislative session will likely have a tremendous impact on state courts in the Houston area. On May 12, 2023, the legislature passed a bill creating what is being termed “business courts,” a bill that Governor Greg Abbott is widely expected to sign into law. These business courts will handle corporate governance and derivative claims, as well as disputes over business transactions worth at least USD10 million. Rather than being elected by the public to four-year terms like other state court judges, the business court judges will be appointed by the governor to two-year terms. The courts will be aligned with the 11 administrative districts in the state, but only five divisions that oversee Texas’s major metropolitan areas, which includes Houston, will begin receiving appointments and funding under the bill's enactment. Supporters of the bill, which includes much of the energy industry, argue it is necessary to have a specialized court system for complex, time-consuming and resource-intensive commercial cases and that regular district courts are not equipped for them. Opponents of the bill, which include Texas trial lawyer associations, argue the appointment process combined with term limits for these judges make them too beholden to Governor Abbott and his political allies, and will create inefficiencies should cases stretch beyond a judge’s term.
As they go into effect, the business courts will undoubtedly change the landscape for commercial litigation in Houston. These business courts may become the primary venue for most commercial litigation cases in the area. Commercial litigators will have to learn a new set of practices and procedures, as well as become familiar with a new set of judges. Some of those judges may only serve one two-year term and thus may not be able to serve through the duration of a long-running complex case. There will certainly be a learning curve as Houston area civil litigators adjust to this new judicial landscape.
High profile cases
Many of the higher profile cases being litigated in Houston in the last year relate to blockbuster news events of the past several years. In late February 2023, on the eve of trial, three major banks settled lawsuits related to their involvement with the Stanford Financial Group, the institution run by convicted Ponzi schemer Robert Allen Stanford. TD Bank, HSBC, and Independent Bank agreed to pay investors USD1.3 billion to settle claims related to their services connected to Stanford. The investors claimed the banks had ignored red flags about the Ponzi scheme. Societe Generale Private Banking and Trustmark National Bank had also been part of the same litigation, but they separately settled their cases earlier than the other three banks.
In September 2022, Baylor College of Medicine (“BCM”) became the first insurance policyholder in the nation to win a jury verdict in a pandemic-era business interruption suit. A Harris County jury awarded BCM USD48 million after it found that COVID-19 directly caused losses to the medical school. The jury found that BCM suffered approximately USD42.8 million in lost profits, USD3.3 million in extra expenses for protective equipment, and USD2.3 million in damage to BCM’s research projects. The suit was against several Lloyd’s of London syndicates, who are appealing the verdict.
The aftermath of Winter Storm Uri in February 2021 continues to reverberate in Texas courts. In June 2021, the Electric Reliability Council of Texas (“ERCOT”), which operates the state’s electrical grid, and which was widely criticized for its maintenance of the grid in the wake of the storm, was granted multidistrict litigation (“MDL”) status in Harris County. Five bellwether cases have been established, out of over 100 cases involving approximately 20,000 plaintiffs. All five bellwether cases have defendants that are electrical power generators, while four of the five cases name transmission and distribution companies as defendants.
In January 2023, Judge Sylvia Matthews, the visiting judge appointed to oversee this MDL, dismissed several power companies from claims of conspiracy and tortious interference with a contract but ruled that these companies could still face claims of negligence, gross negligence, and nuisance. These cases are currently being appealed in the First and Fourteenth Courts of Appeals. Judge Matthews previously dismissed ERCOT from the bellwether cases on subject matter jurisdictional grounds. Earlier this year, ERCOT argued before the Texas Supreme Court that it should be granted governmental immunity in cases involving power generation companies. Should ERCOT lose those appeals, it could be brought back into the Harris County MDL cases. Naturally, dozens of insurance companies are involved in litigation over damage done by Winter Storm Uri, but many of those cases have been removed to federal court. The size and scope of the Winter Storm Uri MDL and related federal insurance matters ensures that many Harris County civil litigators will be busy for the foreseeable future.