(The Center Square) – Two bills seeking to advance lawsuit reform in Texas failed, while two expanding the function of the Texas Business Court and implementing corporate reforms passed.
SB 30 sought to address lawsuit abuse related to personal injury and wrongful death claims. It was filed in response to current law allowing claimants’ economic damages to “include past and future medical expenses,” creating “inflated requests for awards of economic damages from past and future medical expenses, which can correlate with higher awards of noneconomic damages,” according to the bill analysis.
SB 39 would have amended state law to make commercial motor vehicle collision lawsuits more consistent with state law.
The bills were filed as part of ongoing tort reform effort in Texas and after a report published earlier this year found that tort lawsuits cost Texas households $38 billion in 2023, The Center Square reported.
More than 1,200 businesses, associations and individuals across the state represented by the Lone Star Economic Alliance supported the legislation. They argue inflationary and litigation costs have decreased the availability of insurance for individuals and businesses in Texas and have forced some businesses to increase prices, lay off employees, or close as a result of lawsuit abuse.
Despite the bills being championed by Gov. Greg Abbott, Lt. Gov. Dan Patrick and others, they failed to pass a Republican-led legislature.
“Although these bills did not pass this session, the reforms included in SB 30 and SB 39 remain vital for Texas job creators and for the Texas families they serve. The costs of inaction on lawsuit reform are massive,” a coalition of groups and cofounders of the LSEA said. “Blatant fraud on the legal system” continues to jeopardize “Texas’s longstanding reputation as the best place in the nation to do business and create jobs,” the coalition argues.
SB 30 passed both chambers of the legislature but failed to make it out of conference committee by the time the legislative session ended June 2. SB 39 passed the Senate but never got a hearing in the Texas House.
One pro-business bill already became law. The other heads to the governor for his signature.
State Sen. Bryan Hughes, R-Mineola, sponsored both; filing SB 29 and carrying HB 40 in the Senate, filed by Rep. Brooks Landgraf, R-Odessa.
They and others argue the bills will help solidify Texas as the number one state for business as a new court in Texas rivals one in Delaware where businesses are fleeing.
Historically, Delaware has been considered a legal home for business entities because of its business-focused Court of Chancery. Under the Biden administration, anti-business sentiment and rulings increased, eroding trust in that system, causing businesses to reorganize and relocate elsewhere, including to the business-friendly state of Texas, proponents of the bills argue.
SB 29 passed with overwhelming bipartisan support and became effective May 14. It creates a series of corporate reforms governing certain business entities “and enhances the predictability and efficiency of Texas entity law and governance while maintaining strong protections for entity owners and transparency,” according to the bill analysis. They include codifying the business judgment rule to allow corporations to establish a minimum ownership threshold before a shareholder or group of shareholders can pursue a derivative claim, among other provisions.
On Sunday, HB 40 was sent to the governor after a conference committee approved it. It amends state law to enhance provisions of the Texas Business Court. The legislature created the first-of-its-kind specialized trial court in Texas in 2023 to oversee complex business-to-business litigation. It first convened last September.
The bill makes changes to enhance court operations, including reducing the amount of the in-controversy requirement for filing a lawsuit in or transferring a case to the court from $10 million to $5 million; removing the sunset provisions for rural divisions of the court, enabling it to expand statewide; expanding the court’s subject matter jurisdiction to include intellectual property, enforcing arbitration agreements, among others; clarifying the court’s supplemental jurisdiction; and allowing companies to designate the court as the exclusive venue in their governing documents for dispute resolution, according to the bill language.
In the last year and a half, the court has made “a significant investment in Texas’s economic growth and development,” Texans for Lawsuit Reform president and general counsel Lee Parsley said. TLR played an instrumental role in the court’s creation.
The court has created “an efficient process to help streamline the resolution of lengthy and complicated business cases” and new enhancements “will unleash the full potential of the Texas Business Court and entice more businesses to relocate and operate in Texas,” he said.
